PTD 2007 Judgments

2007 P T D (Trib.) 1490

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafarul Majeed, Member (Technical)

Appeal No. STA 255/LB of 2004, decided on 21st December, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 2(46)(d), 33(2)(cc) & 33(3)(b)---Value of supply---Sale of imported steel sheets---Value of supplies were determined after making value addition of 10% and demand was raised besides additional tax and penalties on account of non-maintenance of proper record of imports i.e. insurance bills, clearing, handling, transportation, storage charges etc.---Value addition was reduced to 5% by the First Appellate Authority on the basis of other identical cases---Validity---No provision existed to empower the department to fix a percentage of value addition and compel the registered person to calculate and ,pay sales tax on the value so fixed---If the department had reasons to believe that the value of supply was not correctly declared, the Sales Tax Act, 1990 vide S.2(46)(c) and S.2(46)(e) had provided mechanism to be followed in such situation but the department had not resorted to any of these provisions---In absence of any evidence, plea of the registered person was accepted by the Appellate Tribunal that since the goods were sold at the port, they were not required to maintain record relating to transportation, handling and storage charges---Appeal was accepted and order as well as order in original were set aside by the Appellate Tribunal.

Sales Tax Appeal No.157/LB/2002 GST 2002 CL.44 rel.

Iyaz Ahmad, C.A. for Appellant.

Khalid Mehmood, D.R. for Respondents.

Date of hearing: 11th December, 2.006.

2007 P T D (Trib.) 1557

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.A. No. 86/LB of 2006, decided on 23rd December, 2006.

Sales Tax Act (VII of 1990)---

----Ss.2(41) & 3---Taxable supply---Difference between the credit balance in the registered person's bank account and the sales declared in the sales tax return was treated as sales to unregistered persons---Taxation---Validity---Registered person though had not been able to prove through any documentary evidence except minutes of the meeting that the differential amount, received through bank transfer or in cash, was a loan from their sister concern and directors, the department too had not been able to prove from sales tax record or from any other documentary evidence that the receipts were linked with supply of taxable goods made by the registered person---Credit entries in the books of account could not be treated as taxable unless proved to be linked with supplies and that the tax imposed on the basis of some assumption of presumption was not warranted in law---Department having not been able to prove that the credit balance in the registered person's account was linked with taxable supplies, demand of tax on that account was not maintainable.

Messrs Al-Hilal Motors v. The Collector Sales Tax and Central Excise (East) Karachi 2004 PTD 868 rel.

M. Farooq Sh. for Appellant.

Khalid Mahmud, D.R. and Gulzar A. Bhatti, Inspector, for the Respondent.

Date of hearing: 21st December, 2006.

2007 P T D (Trib.) 1574

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.A. No. 1430/LB of 2005, decided on 23rd December, 2006.

Sales Tax Act (VII of 1990)---

----Ss.3A, 22 & 23---S.R.O. 583(I)/98, dated 12-6-1998, R.6---Turnover tax---Tax payable was worked out at standard rate of 15% on estimated sales adopted by relying on income tax assessment order---First Appellate Authority reduced the sales which changed the very basis of standard tax regime of 15% instead of turnover tax scheme---Non-payment of tax was admitted but it was established that amount of tax payable was worked out @ 2% to which the appellant became entitled in the wake of revised sales tax estimation and deposited the amount of tax in terms of amnesty granted by the government---Amount so determined and deposited was not disputed but the application of amnesty was objected in view of condition (b) of S.R.O. 583(I)/98, dated 12-6-1998, R.6 which denies the benefit of amnesty in cases of evasion---Validity---Plea of the department was not very well-founded as the case of tax evasion framed against the appellant was not entirely correct---Application of amnesty granted by the government was allowed---Rest of the charges i.e. non-maintenance of record, non-issuance of invoices and non-filing of returns automatically stood dropped in consequence thereof---Appeal was accepted and order was set aside by the Appellate Tribunal.

Malik M. Arshad for Appellant.

Khalid Mehmood, D.R. and M. Asif, Auditor for Respondent.

Date of hearing: 11th December, 2006.

2007 P T D (Trib.) 1600

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Syed Sultan Ahmed, Member (Judicial)

Appeal No. 122/CE/IB of 2005, decided on 12th February, 2007.

Central Excise Act (I of 1944)---

----Ss. 3, 3(b), 2(8) & 15---Central Excise Rules, 1944, Rr. 7, 9, 197 & 210---S.R.O. 1195(I)/90, dated 17-12-1990---S.R.O.1195(I)/90, dated 17-11-1990---Duties specified in the First Schedule to the Act to be levied---Audit by party of Director General of Revenue Receipts (Audit)---Raw material was found short accounted for---Levy of duty and penalty with the observation that procedural lapses i.e. RT-3 was not properly maintained---Appellant was warned to be careful in future with the direction to properly maintain Central Excise record---Validity---Audit party was the staff of Director General of Revenue Receipts Audit, it was branch of Auditor General of Pakistan, and its officers were neither Central Excise Officers under Cl.(8) of S.2 of the Central Excise Act, 1944 nor they were authorized by the Collector or Central Excise concerned under R. 197 of the Central Excise Rules, 1944 to have access to premises, equipments, stocks and accounts of any licensed premises---Said party did not even fall in the category of officer mentioned in S.15 of the Central Excise Act, 1944 who were required to assist Central Excise Officers in execution of the Central Excise Act, 1944---Staff of Director General of Revenue Receipts (Audit) was not existent authority under the Central Excise Rules, 1944---Such an non-existent authority could not have access to the books of accounts and other record under the Central Excise Laws---President of Pakistan under the given notification had required the Auditor General of Pakistan to audit the receipt of Federal Government and not the record of the residential units licensed under the Central Excise Laws---Whole exercise conducted by the Director General of Revenue Receipts Audit was quorum non-judice---Appeal was accepted and order was set aside by the Appellate Tribunal.

Arif Afzal for Appellant.

Amjad Rehman, Dy. Collector for Respondent.

Date of hearing: 21st November, 2006.

2007 P T D (Trib.) 1728

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Excise Appeals Nos. 1366/LB, 1656/LB, 1658/LB to 1660/LB, 1662/LB, 1676/LB, 1677/LB to 1681/LB, 1684/LB, 1685/LB, 1687/LB of 2002 and Sales Tax Appeals Nos.1367/LB, 1661/LB, 1676/LB, 1683/LB, 1686/LB and 1687/LB of 2002, decided on 15th August, 2005.

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

----S. 14---S.R.O. 543(I)/75, dated 8-5-1975---Power to summon persons to give evidence and produce documents in inquiries under Central Excise Act, 1944---Determination of assessable value of the products---Office of Directorate General of Intelligence and Investigation (Customs and Excise), not below the rank of a Deputy Superintendent, was authorized under the notification---Respective officers had exercised their lawful jurisdiction while inquiring into the assessable value of the products---Investigation agency had gathered information and recorded evidence with regard to the assessable values of excisable goods which was well within the ambit of S.14 of the Central Excise Act, 1944---No further inquiry for purposes of sales tax was needed because additional liability of sales tax was only consequential.

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

----S. 4(1)-Determination of value for the purposes of duty---Open market price---Assessable value---Determination---Provisions of S.4(1) of the Central Excise Act, 1944 were based on the notional concept of equalized wholesale cash prices---Where wholesale cash prices declared by manufacturers of exciseable products were of doubtful character, the actual assessable values could be ascertained either on the basis of retail prices and if there was no body of retail traders, the general consumer prices could be used for the purpose---Where the assessable values were ascertained on the basis of retail prices or alternatively the consumer prices, the incidence of excise duty and sales tax was to be deducted therefrom---Mechanism of "work-back method" explicitly provided for in the text of S.4(1) of Central Excise Act, 1944---Scope---Retail prices or consume). prices of a product or the product of a like kind or quality could validly be used for determination of the assessable values---Open market prices, where so needed, could be relied upon by the authorities for assessment of the fair values.

Messrs Paramount Paper Board v. Deputy Directory, Intelligence and Investigation 2003 PTD (Trib.) 1751 rel.

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

----S. 4(1)---Determination of value for the purposes of duty---Notional assessable price under S.4(1) of the Central Excise Act, 1944 could validly be ascertained by deducting the element of central excise duty and sales tax from the open market price of an article or the article of a like kind and quality by employing the work-back method and such exercise, as a matter of fact, would conform to the spirit and content of the statute.

Messrs Paramount Paper Board v. Deputy Director, Intelligence and Investigation 2003 PTD (Trib.) 1751 rel.

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

----S. 4(1)---Determination of value for the purposes of duty---Open market prices---Determination of assessable values---Evidence---Open market prices determined on the basis of prices/information provided by the President of Anjuman-i-Tajran and other dealers formed a reliable basis for determination of assessable values of respective products through work-back method.

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

----S. 4(1)---Central Excise Rules, 1944, Rr. 53-B & 53-BB---Determination of value for the purposes of duty---Criteria for working out the correct assessable values of the manufactured products---Secondary and supportive evidence that was relied upon by the Adjudicating Officer was primarily based on "cost of manufacture" of paper and paper-board products---Pulp, various types of waste paper and wheat straw were the basic material which were utilized by the manufacturers in the process---Energy inputs such as electricity and gas were also consumed in the process of conversion---Some expenses were also incurred on wages and salaries of labourers and their supervisors in addition to the administrative overheads---Prices of such "factors of productions" could be added together after giving due allowance for the "wastage" in order to determine the cost per unit of the manufactured products---Such exercise forms a reasonable criterion for working out the correct assessable values of the manufactured products provided that the prices of input factors were fairly ascertained---Such secondary or corroborative evidence relied upon was valid and supported the fair assessable values that had been determined on the basis of open or retail market prices---Relevant aspect of the assessable values of the products had been examined in detail---Input/Output ratios of raw materials vis-a-vis finished products had been computed with due care---Assessable values so computed had been correctly applied for working out the liabilities of central excise duty and sales tax--Recovery of additional duty, additional tax and penalties had been correctly ordered---Order of Adjudicating Officer was upheld in toto by the Appellate Tribunal in circumstances.

(f) Central Excise---

----Documentary evidence regarding cost of manufacture of paper and paper-board products was exhaustive as the prices of waste paper (street picking, corrugated carton waste, old and used cement sacks/bags etc.) were confirmed from several sources including waste paper dealers and sales tax invoices of many registered persons.

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

----S. 4(1)-Determination of value for the purposes of duty---Prices of only two input factors (leaving aside the remaining factors) i.e. raw material and electricity consumed, when added together, were found higher than the declared assessable values of the products---Cost of manufacture worked out far higher if the costs of the remaining factors of production were also added---Such logic could not be ignored for determining the assessable value.

Naveed Sohail Malik and Saud Nasrullah Cheema for Appellants.

Miss Kausar Akhtar assisted Jamshed Yousaf S.I.O. for Respondents.

Dates of hearing: 25th April, 2002, 1st April and 17th May, 2005.

2007 P T D (Trib.) 1751

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.As. Nos. 653/LB to 678/LB of 2006, decided on 23rd December, 2006.

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

----S. 13(1) & Sixth Sched., S. No.42(b)---Exemption---Exemption in terms of S.13(1) of the Sales Tax Act, 1990 as stipulated at S. No.42(b) of the Sixth Schedule to the Sales Tax Act, 1990 relates to supplies made by retailers whose annual turnover from supplies, whether taxable or otherwise, made in any-tax 'period during the last twelve months does not exceed Rs.one million---Exemption was not relevant as the issue was not levy of tax on supplies made by retailers but by the distributors making supplies to the retailers.

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

----S. 3(1A)--Finance Act (IV of 1999), Preamble---Further tax---Amendment in S. 3(1A) of the Sales Tax Act, 1990 through Finance Act, 1999 was declared ultra vires of the Constitution by the High Court---Appeal against such decision of High Court was pending---Collector in view of the judgment while raising the demand of further tax, additional tax and penalty had ordered to withhold recovery thereof until the final decision of the Supreme Court on the issue---Appellate Tribunal did not interfere with the order to the extent of amount of further tax adjudged at such stage.

Messrs Northern Bottling Co. (Pvt.) Ltd. v. Federation of Pakistan 2004 PTD 2267 rel.

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

----Ss. 34, 33 & 3(1A)---Default surcharge---Penalties--Controversy about interpretation of legal provisions---If there was a controversy about interpretation of legal provisions and the default was not wilful, imposition of additional tax and penalty was not justified---Controversy related to interpretation/vires of S.3(1A) of the Sales Tax Act, 1990 and default on the part of appellant was not wilful or mala fide---Additional tax and penalty was remitted in all the appeals by the Appellate Tribunal.

Tandlianwala Sugar Mills v. Federation of Pakistan 2001 PTD 2094; 2002 PTD (Trib.) 300 and 2004 SCMR 456 = 2004 PTD 1179 ref.

Raza Qureshi and Hassan Naveed for Appellants.

Khalid Mahmood, D.R. and Dr. Faisal Bukhari D.C.S.T. for Respondents.

Date of hearing: 20th December, 2006.

2007 P T D (Trib.) 1775

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.A. No. 527/LB of 2006, decided on 23rd December, 2006.

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

----S. 2(41)---C.B.R. Letter C. No.1 (117) STJ/2004, dated 9-9-2004---Taxable supply---Demand of sales tax on disposal of fixed assets---Validity---Department conceded that appellant did not claim input tax adjustment on such items as electricity, was not chargeable to sales tax at the time of import of the items in question---No justification existed to demand tax on that account--Demand along with additional tax was remitted by the Appellate Tribunal.

2001 PTD (Trib.) 2590 rel.

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

----Ss. 34A, 34 & 33---S.R.O. 520(I)/2005, dated 6-6-2005---Exemption from penalty and default surcharge---Demand was deposited on account of excess input tax adjustment---Additional tax and penalty for late payment of tax were insisted as amount was deposited before issuance of S.R.O. 520(I)/2005, dated 6-6-2005---Validity---Lenient view was taken by the Appellate Tribunal by following the judgment of High Court and demand of additional tax and penalty was remitted.

2006 PTD 336 rel.

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

----S. 34A---S.R.O. 520(I)/2005, dated 6-6-2005--Exemption from penalty and default surcharge---Demand of additional tax on account of late payment of tax---Benefit of S.R.O. 520(I)/2005, dated 6-6-2005 was not admissible as the amount was paid before issuance of the said S.R.O.---Validity---Principal amount of tax having been deposited, the amount of additional tax was remitted by the Appellate Tribunal by following the principles laid down by the High Court.

2006 PTD 336 rel.

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

----Ss.2(41) & 8---Taxable supply---Disposal of vehicle---Demand of sales on disposal of vehicles was not justified as no input tax was claimed by the registered person against them in view of the bar imposed under S.R.O. 578(I)/78 dated 12-6-1998---Sales tax collected on disposal of one vehicle had been deposited along with return---Demand of sales tax additional tax and penalty on that account was also remitted by the Appellate Tribunal.

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

----Ss. 2(41)---Taxable supply---Electricity consumption---Demand of sales tax on electricity consumed in the Housing Colony was upheld by the Appellate Tribunal as the same fell under the definition of `taxable supply' as provided under 5.2(41) of the Sales Tax Act, 1990 and was chargeable to tax---Registered person was directed to pay the demand of sales tax along with additional tax and penalty on this account.

Ghandara Nassau Limited, Karachi v. Collector LTU, Karachi 2006 PTD 2066 ref.

Nadeem Ayaz, C.A./A.R. for Appellant.

Khalid Mahmud, D.R. and Pervez Alam, Auditor for Respondent.

Date of hearing: 12th December, 2006.

2007 PT D (Trib.) 1828

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.851/LB of 2005, decided on 24th November, 2005.

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

----S.4(1)---Determination of value for the purposes of duty---Appellant was engaged primarily in the marketing and distribution of liquefied Petroleum Gas (LPG)---Network of 800 distributors and over 800000 household consumers could not possibly be supplied the LPG by circulation of merely 3468 cylinders---Neither any plausible explanation was provided nor any information about source of supply of a very large quantity of cylinders which were in circulation for maintaining the regular supply of LPG---Plea of appellant was decidedly devoid of merits and version of the department appeared logical.

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

----S. 4(1)-Determination of value for the purposes of duty---Assessment of evaded amount of excise duties on the basis of information contained in the Information Memorandum prepared by the Chartered Accountants---Disclaimer thereof---Validity---Statement of the disclaimer confirmed that the material contained in the Information Memorandum had been compiled from information provided by the registered person and auditors were responsible for its accuracy or validity---Statement made in the disclaimer could not be used by the registered person to their advantages because the information contained in the Information Memorandum was primarily supplied by their Chartered Accountants for compiling the document---Nothing was available on record to suggest that the appellant/registered person ever disowned the information contained in the document nor did they proceed against Chartered Accountants for printing wrong or inaccurate information---Information, in fact was supplied by the appellant/ registered person it was printed on their behalf and it was never disowned by them at a subsequent stage before any other forum--Information contained in Information Memorandum was correctly and validly relied upon by the Adjudicating Officer for assessment of the evaded amount of excise duty.

1990 PTD 1088 rel.

(c) Words and phrases---

----"Heinous"---Meaning---Word "heinous" means a massive and phenomenal evasion of revenues which is done intentionally by employing fraudulent methods such as misdeclaration and manipulation of documents or records.

(d) Words and phrases---

----False documents---Meanings---Expression "false documents" refers to untrue declarations; wrong statements or returns and incorrect maintenance of prescribed records with the intention to evade revenues.

(e) Central Excise Rules, 1944---

----Chap. XV, Rr. 7, 9, 52, 52-A, 53, 53-B, 53-BB, 226, 237, 238, 241, 243 & 244---S.R.O. 328(I)/2002, dated 15-6-2002---Show-cause notice--Legality---Large scale malpractices, misuse of the facilities of Chapter XV of the Central' Excise Rules, 1944, massive evasion of excise duties and violation of the said rules were specifically alleged against the appellant---Most of the said rules warranted the correct maintenance of the prescribed central excise records and submission of correct returns and statements to the Central Excise Department---When violation of these rules was alleged, it obviously meant a reference to the maintenance of incorrect records and submission of incorrect or false returns or statement---Show cause sufficiently conveyed the allegations of massive evasion of duties by employing the fraudulent methods and it appeared to have validly been issued within the parameters of R.10(3) of the Central Excise Rules, 1944.

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

----S. 36-A---Power to rectify mistakes in orders---Show-cause notice---Amendment---Validity---Amendment in show-cause notice was made by substituting the words "rule 10" with rule 10(3)---Department had adequately explained that the amendment was made only for the purpose of clarification and for correction of a clerical error----Such amendment was made when the matter was sub judice and hearings were in progress---Appellants were duly informed about the amendment---Such rectification of record was otherwise permissible under S.36-A of the Central Excise Act, 1944 and there was no illegality in such action.

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

----Ss. 4(1), 3 & 3-B---Determination of value for the purposes of duty---Appellant was engaged primarily in the marketing and distribution of Liquefied Petroleum Gas (LPG)---Assessment of value of cylinders---Value of cylinders were determined by relying upon sale vouchers or purchase receipts issued by the distributors of the appellant having separate business locations in the city---Names of the buyers of cylinders were specifically indicated on each of the vouchers---Buyers of cylinders were also produced for cross-examination---Sale/purchase price as shown in the vouchers varied in the range of Rs.1500 per cylinder to Rs. 1750---Adjudicating Officer had objectively applied his mind for determination of the fair and normal value of cylinder on the basis of reliable documentary evidence---Incidence of excise duty and sales tax was deducted from the said price in order to work out the assessable value---Such mode of assessment was in line with the parameters prescribed in S.4(1) of the Central Excise Act, 1944---Assessable value of cylinders was correctly determined at the original stage---Appellants were appropriately heard at the original stage and were provided adequate opportunity to defend the allegation of evasion of duties---Liability of central excise duty and that of additional duty under S.3-B of the Central Excise Act, 1944 had been correctly and, judiciously determined against the appellants---Penalty was rightly imposed---Appeal was rejected by the Appellate Tribunal being devoid of merit.

(h) Central Excise---

----Business relationship---Scope---Independent business entity was not tenable for the reasons that appellant and another concern were located on the same premises; that both businesses had consolidated income tax returns; that one owner of the other concern was actually an employee of the appellant and that said concern was merged into the appellant in the past.

Ali Sibtain Fazali and Nasar Ahmad Mirza for Appellant.

Miss Kausar Akhtar and Khalid Mahmood D.R. for Respondent.

Dates of hearing: 18th and 20th October of 2005.

2007 P T D (Trib.) 1853

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeals Nos. 467/LB, 468/LB, 481/LB to 484/LB, 728/LB and 729/LB of 2003, decided on 29th August, 2005.

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

----S.11---Assessment of tax---Manufacturers of polypropylene---Massive evasion of sales tax by misdeclaring and suppressing actual production--Audit was completed by using formula relating to production profile as laid down by the Central Board of Revenue and assumptive values of various factors as provided in Central Board of Revenue's formula were replaced by the actual values of respective factors---Evasion of substantial amounts of sales tax was observed---Appellant contended that no concept of a formula under the Sales Tax Act, 1990 could possibly be used for calculating the sales tax liabilities for determination of the evaded amounts---Validity---Sales Tax payment on part of appellants were ridiculously low---Level of suppression of taxable supplies was self-evident as the average payment of sales tax was Rs.3,000 per month---Action was initiated by the auditors in pursuance of some of the guidelines issued by the Central Board of Revenue---Production profiles of manufacturers were worked out---Criteria used for purposes of exercise were objective, logical and comprehensive---Sales Tax law did not bar either of the methods for detection of the evaded revenues provided that amounts so assessed were based on convincing reasons and sound logic--Liabilities had been calculated on sound merits and logical reasons---Arithmetical errors of the audit staff had been duly rectified---Period of actual production had been properly accounted for---Tolerance in calculations, was liberally allowed---Ground agitated by the appellant manufacturers being devoid of merits, appeals were rejected by the Appellate Tribunal.

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

----S.11---Assessment of tax---Manufacturers of polypropylene---Department contended that assessment was made on sole assumption that manufacturing units were working single shifts operation whereas these units had actually been working round the clock and assessment should have been made on the basis of three shifts operation---Validity---Assertion of department was not accepted for the simple reason that no evidence was adduced in support of such contention either at the original stage or before the appellate forum---Adjudicating Officer had dealt with the issue at considerable length and recorded adequate reasons---Appeal was not accepted by the Appellate Tribunal.

Muhammad Akram Nizami for Appellants.

Abdul Nasir, Auditor for Respondent.

Dates of hearing: 11th and 13th May, 2005.

2007 P T D (Trib.) 2049

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal No. 88/CU/IB of 2004, decided on 30th October, 2006.

Customs Act (IV of 1969)---

----S.35---Drawback of the export on imported goods---Rejection of drawback claims and imposition of penalty for indulging in mis­declaration anal over-invoicing---Appellant contended that Adjudicating Officer, while acting as a quasi Judicial Officer, assumed the role of the investigator and after issuance of the show-cause notice started the investigation of the case through various letters to provide support to the case .of the prosecution and as such the order under appeal was void being biased---Validity---Adjudicating Officer had indulged himself in collecting evidence and this fact alone was sufficient to ignore the order-­in-original and set aside the same---Appeal was accepted, order-in-­original was set aside and the case was remanded with the direction that Collector should take up the case afresh and alter hearing both the sides decide the same on merits.

PLD 1966 SC 536 and PLD (sic) Pesh. 169; PLD 1968 Dacca 49; Black's Law Dictionary, Sixth Edition and Secretary to Government Transport Department v. Munuswamy AIR 1988 SC 2232 ref.

Mian Abdul Ghaffar for Appellant.

Dr. Kamal Azhar Minhas, Additional Collector/D.R, along with Sardar Manzoor Ahmed, Superintendent for Respondent.

Date of hearing: 2nd August, 2006.

2007 P T D (Trib.) 2065

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member (Judicial) and Hafiz Muhammad Anees, Member (Technical)

Customs Appeals Nos.610, 609, 608, 607 and 606/LB of 2004, decided on 24th August, 2006.

Customs Act (IV of 1969)---

----S.156---Minutes of the Collectors Conference (2006)---Punishment for offences---Import of vehicles---Allegation that vehicles were stolen in Japan---Matter was referred for adjudication in view of fake documents mis-declaration and on account of violation of different provisions of law---Vehicles, were confiscated by the Adjudicating Authority, however, allowed to redeem the vehicles on payment of redemption fine equal to 30% of assessable value of the vehicles in addition- to payment of duty and taxes leviable thereon under the law---Validity---On any sort of apprehension or an allegation of theft the Customs Authorities had no competency to resist in release, of the vehicle on payment of customs and duty and redemption fine which Customs Authorities had to realise---Allegation of theft was not an obstacle before the Customs Authorities to release the vehicles in accordance with law and at the most the competent authority i.e. Federal Investigation Authority be informed in this connection and the Federal Investigation Authority at their own may take into custody such vehicles---Order of First Appellate Authority was set aside by the Appellate Tribunal and order-in-original passed by the Adjudicating Authority remained intact according to which vehicles shall be released in accordance with law.

Mian Abdul Ghaffar and Malik Muhammad Arshad for appellant.

Mehmoodul Hassan, D.R. for Respondent.

Date of hearing: 24th August, 2006.

2007 P T D (Trib.) 2098

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

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

Sales Tax Appeal No.30/LB of 2003, decided on 3rd September, 2005.

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

----Ss. 3(1A) & 13---S.R.O. 207(I)/98, dated 31-3-1998---S.R.O.208(I)/98 dated 31-3-1998---Further tax---Exemption---Sugar Mill---Exemption of sales tax granted to sugar mills was not available in respect of "further tax" as it was a separate and distinct levy---Further tax levied was chargeable on market price of the sugar that was supplied to unregistered person---Sugar Mills were directed to pay the adjudged amounts of liability along with additional tax and penalty.

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

----Ss.8(1)(a) & 7---Tax credit not allowed---Adjustment or deduction of input tax of electricity or gas consumed in housing colony---Validity---Provision of Cl. (a) of S.8(1) of the Sales Tax Act, 1990 bars the deduction of input tax on those goods which either did not contribute in the process of production of taxable goods directly or did not become a constituent or integral part of the taxable products---Electricity or gas consumed in housing colony of a Sugar Mill did not contribute to the production process of sugar; it only contributed to the comfort of the residents of colony in which case the adjustment or deduction of input tax was barred under S.8(1)(a) of the Sales Tax Act, 1990.

Messrs Pioneer Cement v. The Collector of Sales Tax, GST 2002 CL 106 distinguished.

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

----S.7(1),'First proviso---Sales Tax General Order No.2 of 2004 dated 27-5-2004---Determination of tax liability---Limitation---Adjustment of input tax in violation of bar of limitation was not permitted---Appellant contended that provision of S.7 of the Sales Tax Act, 1990 was directory in nature, it only embodied a procedural requirement a bona fide lapse in observing the procedure was not liable to punitive action---Validity---Show-cause notice or the judgment did not disclose the detailed working of those amounts which the appellants had adjusted out of the respective tax periods---Consolidated figure of such adjustment had been shown but period wise break up of the figures had not been indicated---Appellants too had not denied such allegation in toto---System or mechanism for seeking waiver of the liability accruing purely on account of a procedural lapse was fortunately, available and was in force which the appellants did not avail---Appellate Tribunal advised the appellant to approach the Collector and seek the needed relict' in terms of first proviso to S.66 of the Sales Tax, 1990 read with General Order No.2 of 2004 dated 27-5-2004---Respective part of the judgment relating to recovery was set aside and the case to the extent was remanded for de novo consideration in the light of C.B.R's Sales Tax General Order No. 2 of 2004 dated 27-5-2004 and to pass fresh orders.

Coca Cola Export Corporation v. The Additional Collector PTCL 2002 CL. 95 and 2002 PTCL 49S ref.

Imran Ahsan for Appellant.

Jamshed Yousaf, S.T.O. for Respondent.

Date of hearing: 20h May, 2006.

2007 P T D (Trib.) 2208

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.619/LB of 2002, decided on 26th September, 2005.

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

----S. 32A---Special Audit by Chartered Accountants or Cost Accountants---Double audit---Appellant/taxpayer contended that department had no jurisdiction to conduct double special audit and therefore second special audit under S.32A of the Sales Tax Act, 1990 was without jurisdiction and of no legal effect---Validity---Double special audit of a registered person was not specifically barred or prohibited under the sales tax law although a single special audit should ordinarily be considered sufficient---In absence of any bar or prohibition, no illegality could be attributed to the department with reference to the double special audit of a largely overlapping period---Question of jurisdiction loses significance particularly in view of the fact that the amounts adjudged consequent to the first special audit were settled and scored out in the orders thus nullifying the element of double jeopardy---Question of jurisdiction had no legal force and it was not sustainable.

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

----S.66, first proviso---Sales Tax General Order No.02 of 2004 dated 27-5-2004---Refund to be claimed within one year---Inadmissible adjustment of input tax---Part of liability was adjudged on account of "out of tax period" adjustment whereas remaining part of liability was held recoverable because of the adjustment of input tax before issuance of invoices---Appellant/taxpayer asserted that "out of the tax period adjustment of input tax did not involve any loss of revenue to the government exchequer---Respective provisions of the Sales Tax Act, 1990 were merely procedural in nature whereas the denial of input tax adjustment tantamount to double taxation---Validity---Mechanism prescribed in Sales Tax General Order No.2 of 2004 read with first proviso to S.66 of the Sales Tax Act, 1990 empowered the Collector (Sales Tax) of respective. jurisdiction to all the out of tax period adjustment of input tax subject to certain conditions---Special arrangement had been devised by the Central Board of Revenue to dispose of the cases of similar nature---Appellant/taxpayer had not availed the facility of first priviso to S.66 of the Sales Tax Act, 1990 read with Sales Tax General Order No.2 of 2004 dated 27-5-2004 whereas the Adjudicating Officer had not taken due cognizance of the case law as per judgments of superior forums---Appellant/taxpayer was advised to approach the respective Collector of Sales Tax and seek the needed relief---Part of the orders so far as it related to the "inadmissible adjustment of input tax" was set aside and the issue in question was remanded to the Collector of Sales Tax for de novo consideration in terms of first proviso to S.66 of the Sales Tax Act, 1990 read with Sales Tax General Order No.2 of 2004 dated 27-5-2004.

Appeal No.746 of 2001 ref.

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

----S.2(46)(e)---Value of supply---Sale of molasses at less than actual prices---Amount of tax was specifically adjudged by the Adjudicating Officer and simultaneously, the determination of liability was left open to the valuation committee i.e. the valuation committee could give its own verdict with regard to the sale price of molasses---Validity---Adjudicating Officer could not delegate his statutory functions to a committee for adjudging a liability although he could adopt or ignore the findings of such committee for the reasons to be recorded---Nothing was available on record to suggest as to whether a committee was subsequently constituted and whether or not the committee ever gave its findings---Such part of the order was infirm and lacked clarity; suffered from inconsistency and needs to be re-considered---Order relating to "sales of molasses at less than average prices" was set aside and case was remanded to Collector of Sales Tax with a specific direction that the value of supply of molasses be re-ascertained under S.2(46) of the Sales Tax Act, 1990 and the amount of liability, if any be adjudged on priority.

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

---S.3---Scope of tax---Non-payment of sales tax on unrecorded sales of sugar, molasses, baggasse and mud---Appellant/taxpayer contended that allegation was factually incorrect and it was primarily based on miscalculation and misperception---Request for reconciliation of figures with: regard to allegation was neither entertained nor the opportunity of reconciliation was ever allowed---Validity---Allegation of unrecorded sales of sugar, molasses, baggasse and mud were levelled specifically in the show-cause notice---Order was passed after several hearings---Despite Appellant/taxpayer's claim that the matter needed reconciliation, neither the matter was reconciled with the auditors, nor such a report was provided---Adjudication proceedings continued over a period of four months or so---Such time span was sufficient for appellant to reconcile the figure with the audi, they could put up other documentary evidence before Adjudicating Officer in support of their contention---No such effort was visible from the records of appeal except for a plain and simple denial of the allegation---Adjudicating Officer, in circumstances was justified in adjudging the liability and this part of orders called for no interference---Judgment relating to the unrecorded sales of sugar, molasses baggasse and mud was upheld by the Appellate Tribunal and Appellant/taxpayer was directed to pay the adjudged amount along with additional tax and penalty.

Shahid Pervaiz Jami for Appellant.

Sajid Raza Mirza Senior Auditor for Respondent.

Date of hearing: 14th April, 2005.

2007 P T D (Trib.) 2218

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member Judicial and Hafiz Muhammad Anees, Member Technical

Sales Tax Appeal No.646/LB of 2004, decided on 20th November, 2006.

(a) Sales Tax Act (VII of 19901---

----Ss.36, 2(37), 4, 7, 8(1)(a), 10 & 23---Recovery of tax not levied or

short-levied or erroneously refunded---Refund against fake/flying invoices---Recovery of---Input tax adjustment was not admissible against invoices without physical supply of the goods; without use of the same in taxable supplies and further input tax must have been -paid against such goods---Invoices issued by the fake unit did not admit any possibility of adjustment being hollow from within---Such was nothing but a tax fraud as defined under S.2(37) of the Sales Tax Act, 1990---Under the Self-Assessment Scheme, it was the exclusive responsibility of the registered person to substantiate that he claimed and availed input tax adjustment against valid sales tax invoices---Input adjustment against fake/dying invoices being illegal, contention of the appellant was rejected by the Appellate Tribunal.

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

----S.36---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Section 36(1) of the Sales Tax Act, 1990 provides that where by any reason of some collusion or a deliberate act airy tax or charge had been erroneously refunded, the person liable to pay the amount of refund erroneously made shall be served with a notice within five years of the relevant date requiring him to show cause for the payment of the amount specified.

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

----S.36---Recovery of tax not levied or short-levied or erroneously refunded---Object, form and substance of a notice---Effect---Object of every notice, including the notice contemplated by S.36 of the Sales Tax Act, 1990 was to afford the opportunity of hearing and defence---Form of notice had not been prescribed either in he statute or in the rules---Even otherwise the substance was more important than form---Non­-mention or wrong mention of section did not affect the nature of a document which was determined on the basis of its contents.

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

----Ss.3(3), 7(1), 8(1)(a) & 36---Scope of tax---Liability to pay tax---Fake invoices---Provisions of S.3(3) of the Sales Tax Act, 1990 were misconceived by contending that payment of input tax was to be made by the supplier as S.3 speaks of valid sales tax invoices and adjustment could be made only against valid invoices---Appellant had, conclusively, neither received the goods, nor input tax had been paid thereagainst and the supplier was a suspicious/fake unit---Fraudulently claiming the refunds and still contending that sales tax was to be paid by the so-called supplier was not covered under S.3(3) of the Sales Tax Act, 1990 read with S.7(1) and 8(1)(a) of the Sales Tax Act, 1990---Appellant, in connivance with the so-called supplier, obtained the invoices and claimed refund thereagainst which was recoverable along with consequential liabilities.

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

----Ss.2(37) & 36---Tax fraud---Fake invoices---Contentions of the appellant that there was no justification to take action against him and action against the fake unit had been taken was devoid of legal force---Validity---Both the buyer and the so-called supplier had jointly as well as separately caused severe injury to the Government exchequer which amounted to tax fraud as defined under S.2(37) of the Sales Tax Act, 1990 and it did not amount to double taxation.

Nemo for Appellant.

Dr. Kamal Azhar Minhas, D.R. and Saleem Akhtar Superintendent for Respondent.

Date of hearing: 14th November, 2006.

2007 P T D (Trib.) 2230

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal No. 113/CU/IB of 2006, decided on 5th March, 2007.

Customs Act (IV of 1969)---

----S.25(a)(i)---Customs Rules, 2001, R.113(1)---Value of imported and exported goods---Assessment of duty and taxes---Realization of short revenue on the ground that at the time of assessment lesser freight .was included instead of actual freight paid. on the airway bill as the freight amount shown in the invoice of the supplier was less meaning that the customs duty and other taxes on the differential amount of freight on the imported goods had not been paid---Validity---Freight amount shown in the invoices was the correct amount of 'freight paid on the goods imported---No evidence was available to the effect that the foreign supplier had charged more than the amount of freight shown in his invoice from the importer on account of freight and the appellants had, in turn; paid greater amount than what had been shown in the invoice; it was unthinkable that a foreign supplier would pay greater amount of freight and charge lesser amount on that account from the importer where the invoice value was inclusive of freight---Allegation based on the DRRA observation had no supportive evidence to prove that the appellants had suppressed value of import---Freight was already included in the price and the assessment of duty and taxes had been made on the basis of that. price---Assessment of duty and taxes was in accordance with the provisions of S.25(a)(i) of the Customs Act, 1969 and R.113(1) of the Customs Rules, 2001 made thereunder---Order of the lower forums were set aside by the Appellate Tribunal.

2006 PTD 1876 and Messrs Radaka Corporation and others v. Collector of Customs and another 1989 SCMR 353 ref.

Farrukh Jawad Panni for Appellants.

Amjud-ur-Rehman, Deputy Collector/D.R, for Respondent.

Date of hearing: 27th February, 2007.

2007 P T D (Trib.) 51

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Customs Appeal No.K-371 of 2000, decided on 23rd October, 2000.

Customs Act (IV of 1969)---

----Ss.195 & 32---Sales Tax Act (VII of 1990), Ss.45-A (4) & 34---Income Tax Ordinance, (XXXI of 1979), S.86---S.R.O. 815(I)/93, dated 16-9-1993---S.R.O. 825(I)/93, dated 20-9-1993---C.B.R. Letter C. No. 2 (9)/Tax-II/93, dated 16-9-1993---S.R.O. 1105(I)/93, dated 18-10-1993---S.R.O. 490(I)/93---Power of Central Board of Revenue or Collector of Customs to pass certain orders---Case was re-opened and appellants were called upon to meet the charges' levelled against them on the same facts as contained in the earlier show-cause notices and further it was contended that the case was not examined in its true perspective---Order was passed and liability was enforced plus mark-up at 14% and additional tax---Appellant contended that goods were cleared in November, 1994-January, 1994, @ 5% duty and no sales tax---First show-cause notice was in time but second assessment order was passed on 3-11-1994 and reopened vide show-cause notice, dated 3-10-1996 was clearly barred by limitation period of six months-Limitation mentioned under S.32 of the Customs Act, 1969 prevailed over limitation period stated in S.195 of the Customs Act, 1969---Duty was not recoverable under S. 32(3) of the Customs Act, 1969 if show-cause notice was not served within six months of clearance of goods or order of assessment unless untruly stated or misdeclared by the importer on the face of it---Validity---Ample time was available with the Collector to proceed if he was dissatisfied with the adjudicating order, dated 3-11-1994, time spent elsewhere, and the order was allowed to attain finality---Things were to be done as prescribed or permitted by law otherwise not---Order was set aside by the Appellate Tribunal holding that the adjudicating order, dated 3-11-1994 passed in Order­-in-Original shall remain in the field and appellant shall pay duty and taxes in terms of S.R.O. 815(I)/93, dated 16-9-1993, if not already paid.

Syed Wasey Zafar v. Government of Pakistan PLD 1994 SC 621 and Messrs Muhammad Hussain v. The Collector of Customs (Preventive) and 2 others 1991 MLD 1959 rel.

Ellahi Cotton Mills 1997 SCMR 582; 1999 SCMR 1442; Sheikh Spinning v. Fed. of Pakistan PLD 1993 SC 1232; 1984 CLC 490; AIR Cal. 258, Rev Order No.1(III) Cus-Appeal/86 under section 196 of CA); PLD 2000 Lah. 1; Farhat Azeem v. Waheed Rasul PLD 2000 SC 18; Gadoon Textile v. WAPDA 1997 SCMR 641; Appeal No. 1740 of 1999 and 1741/99 Pak Suzuki v. Collector, dated 13-3-2000 ref.

Aziz A. Sheikh for Appellant.

Ghayassuddin Shaikh for Respondent.

2007 P T D (Trib.) 127

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Hafiz Muhammad Anees, Member (Technical)

Customs Appeal No.344/LB of 2006, decided on 26th July, 2006.

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

----S. 179(3)---Sales Tax Act (VII of 1990), S.36(3)---Income Tax Ordinance (XXXI of 1979), S. 79(4)---Power of adjudication---Limitation---Objection was raised that order passed was barred by limitation in terms of S.179(3) of the Customs Act, 1969 read with S.36(3) of the Sales Tax Act, 1990---Validity---Objection was devoid of force because the provisions were directory in nature and not mandatory---Consequences of non-observance of the provisos to subsection (3) of S.36 of the Sales Tax Act, 1990 and subsection (3) of S.179 of the Customs Act, 1969 have not been given as compared to the provisions of S.79(4) of the Income Tax Ordinance, 1979---Objection was not maintainable in the eyes of law because delay in passing the judgment did not vitiate the proceedings---No order could be scrapped or annulled or set aside, only on the ground that the same had been passed with unreasonable delay.

AFU Airport, Lahore v. Messrs Tripple-M (Pvt.), Lahore and others PLD 2006 SC 209 = 2006 PTD 769 rel.

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

---Ss. 32(2), 202 & 156(1)(14)---Sales Tax Act (VII of 1990), Ss. 3, 6, 13(1), 14, 36(1) and 34---Income Tax Ordinance (XXXI of 1979), S.50(5)---S.R.O. 582(I)/98, dated 12-6-1998---C.B.R. letter C. No.1/62-STT/98, dated 7-9-1998---Untrue statement, error, etc.---Limitation---Limitation provided under S.32(2) of the Customs Act, 1969 and S.36(1) of the Sales Tax Act, 1990 for the recovery of evaded amount of customs duty/sales tax was five years---Show-cause notice admittedly had been issued after expiry of five years and the same was barred by limitation and no recovery could be effected on that account---Appeal was accepted and order of Deputy Collector (Adjudication) was set aside by Appellate Tribunal.

2006 PTD 271 and Federation of Pakistan v. Messrs Ibrahim Textiles Mills Pvt. Ltd 1992 SCMR 1898 rel.

Mumtaz-ul-Hassan A.R. for Appellant.

Mehmood-ul-Hassan, D.R. for Respondent.

Date of hearing: 25th July, 2006.

2007 P T D (Trib.) 206

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal C.A. No.1380/LB of 2005, decided on 2nd May, 2006.

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

---S. 25---Valuation of imported and exported goods---Opportunity of hearing---Finalization of assessment without affording opportunity of hearing was not in accordance with law.

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

---S.25(4) & (5)(d)---Customs Rules, 2001, Chap. IX [Rr.107 to 125]---Valuation of imported and exported goods---Valuation on the basis of valuation data made available by the Controller of Customs Valuation by taking highest value---Validity---Basis of assessment in present case was valuation data furnished by the Controller of Customs Valuation wherein some of the values given were provisional values---Customs Authorities had also taken highest value for assessment purposes ignoring all the lower values without any justification---No evidence of actual import/transactional value was confronted before finalization of provisional assessment---Goods were imported in different grades and qualities while in the evidential data which formed basis for the finalization of assessment, no grades were given---Value of goods varies according to grade and quality---Application of highest value in the evidential data was not justified---Documents produced authenticated by .the Chamber of Commerce of the exporting country were not considered by the Customs Authorities before finalization of assessment---Customs Authorities failed to follow all the steps required to be taken for the finalization of value---Contentions of the appellant having not been properly examined by the First Appellate Authority the orders were set aside and the case was remanded for re-consideration and fresh decision on merit after affording opportunity of hearing.

Malik M. Arshad for Appellant.

Ms. Zeba Hayee, D.R. for Respondent.

Date of hearing: 27th February, 2006.

2007 P T D (Trib.) 229

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Customs Appeal No. K-300 of 2004, decided on 10th May, 2004.

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

----S. 18-B---C.B.R. Circular No. 9 (20)/99-CB, dated 13-12-1999---Service charges---Levy of---Claim of refund of such levy was rejected on the ground that no original Bill of Entry documents was available on record and refund without original documents would attract an audit objection---Appellant contended that claim had been rejected on assumed grounds and there was nexus in between the facts assumed by the Department and evidence available on record---Original documents were supplied but their claim application was lost or destroyed and a duplicate set was provided---Since documents were lost while in possession of department's functionaries, the appellant could not be blamed for Court's mistake---Such-like, number of other claim had already been allowed by the customs and the appellant was being discriminated---Validity---Issue of admissibility or inadmissibility of Chartered Accountant's certificate was misconceived---Adjudication Officer could go for fact-finding inquiry and could record evidences---If so was needed he could have done that---No such effort was ever made---Rejection of claim on assumed grounds was not based on sound legal footings---Number of such claims had been allowed by the Customs Authorities--Said claims involved the same issue and all the documents presented in the case were the same as presented in other claims---Representative of the department had no answer to a query as to why a deviation and discrimination was being made---Appellate Tribunal deprecated the situation where a taxpayer was being victimized for no rhyme or reason--Order passed in flagrant violation of law was set aside by the Appellate Tribunal and the department was directed to decide the claim in accordance with law.

Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402 ref.

(b) Act of Court---

----Error of Court---No party can be made to suffer for the error of the Court and the respondent/department was bound to follow the requirements laid down in the law of evidence where in absence of original record photocopies were admissible as a piece of evidence.

Aziz A. Shaikh for Appellant.

Azhar Merchant Deputy Collector for Respondent.

2007 P T D (Trib.) 305

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.Q-251 of 2003, decided on 9th February, 2005.

Sales Tax Act (VII of 1990)---

----S. 46---Appeal to Appellate Tribunal---Principles of natural justice, violation of---Appellant was served with show-cause notice, wherein a number of irregularities were attributed to him and on the basis of alleged irregularities, appellant was charged for violating various provisions of Sales Tax Act, 1990---Records of appellant being in possession of department, appellant sought time for submitting reply to the show-cause notice and also demanded supply of their records, but case was decided by the Department much before supply of said records to the appellant---Representative of Department had conceded that record was not made available to appellant (luring adjudication proceedings and that impugned order against appellant was passed ex parse---Validity---Nobody should be condemned unheard and before trial all materials on the basis of which accusations had been made, must be revealed to accused---Ex parte proceedings against appellant, in circumstances suffered from procedural impropriety as no fair opportunity was afforded to appellant to represent his view point before Adjudication Officer---Case being of unfair trial, impugned order was set aside and case was remanded for de novo trial after providing a fair opportunity of hearing to appellant.

Khawaja Shams-ul-Islam for Appellant.

Tahir Zafar, Sr. Auditor/D.R. for Respondent.

Date of hearing: 9th February, 2005.

2007 P T D (Trib.) 339

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.K-108 of 2000, decided on 17th October, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 2(46), 26, 34, 36 & 46---Appeal to Appellate Tribunal---Recovery of short levied sales tax---Main charge levelled against appellant was that he subtracted direct expenses including insurance, freight and forwarding, packing charges etc---Plea of Department was that tax paid by appellant was not on the actual value of supply as defined in S.2(46) of Sales Tax Act, 1990---Clause (c) of subsection (46) of S.2 of Sales Tax Act, 1990 had provided that where for any special nature or transaction, it was difficult to ascertain the value of a supply, supplies made would be assessed on the open market price---Law had further provided vide clause (e) of subsection (46) of S.2 of Sales Tax Act, 1990 that where there was sufficient reasons to believe that value of supply had not been correctly declared in the invoices, value would be determined by Valuation Committee comprising representative of Trade and Sales Tax Department constituted by the Collector---No such steps as provided by said provisions of statute were ever taken by the Department and procedure adopted by Adjudication Officer to revise the value declared in the sales invoices was contrary to legal provisions on the subject---Impugned order being not in accordance with law, was set aside. app. 341, 342, 344, 3451 A, B, C & D

Muhammad Usman Sheikh for Appellant.

Manzoor Hussain Memon, D.R. along with Zahid-ul-Bari for Respondents.

Date of hearing: 13th October, 2005.

2007 P T D (Trib.) 366

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.K-81 of 2001, decided on 1st October, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 2(16)(c), (31), (33), (46)(F), 46 & 72-Appeal to Appellate Tribunal---Sales Tax on service charges---Record showed that appellant's factory was engaged in providing services by laminating plastic coating on textile supplied by their Principals and goods before and after conversion continued belonging to their Principal---Appellant was only a vendor duly registered under Sales Tax Act, 1990 and charging Sales Tax on conversion charges only---Issue related to demand or Sales Tax on service charges, whereas Department was demanding duty on the total value of goods---Question for determination was whether or not a supply of taxable goods made by appellant was a service or consisted of manufacturing product---Said moot point was considered by Central Board of Revenue and Sales Tax General Order No.1 of 1998 was issued and clarification was made for information and guidance in that regard---Said instructions were binding on department in terms of S.72 of Sales Tax Act, 1990, but it failed to abide by the instructions and considered instructions and orders which had already been withdrawn or cancelled---Board had clearly stated that value of supply would be the consideration of money so received by the vendor-Findings given by the department, in circumstances were against the spirit of law---Allowing appeal, impugned order was set aside and Department was directed to finalize assessment in accordance with law and keeping in view latest instructions issued by the Government on the subject.

Muhammad Usman Sheikh for Appellant.

Habib Akhtar, D.R. for Respondent.

Date of hearing: 20th September, 2005.

2007 P T D (Trib.) 380

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member Judicial and Hafiz Muhammad Anees, Member Technical

Sales Tax Appeals Nos. 328/LB, 330/LB to 332/LB of 2000, decided on 8th August, 2006.

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

----Ss.3, 2(12), 2(16), 2(17)(e), 2(33), 13 & Sixth Sched.---Scope of tax---Exemption---Girders, construction of and its use in the construction of bridges---First Appellate Authority found that production and self-consumption of girders falling under PCT heading 6810.9100 was not subject to payment of sales tax---Validity---Girders pre-cast by the taxpayer at the site were not marketable, could not be sold in the open market nor could be used in other bridges or building because they were constructed or pre-east by the department according to design, specification and drawing of the particular bridge in which they were to be used---,Said girders were not pre-cast at a different place from where they were transported or shifted to the site where the bridge was under construction---Plea of the department that these pre-cast girders fell in the definition of "manufacture" was not sufficient ground for taxability of girders in view of their exclusion from the definition of "goods" under S.2(12) of the Sales Tax Act, 1990 being not moveable, marketable or capable of being put to other uses---Construction of pre-cast girders being not marketable/transportable and not liable to be Out to any other use, did not constitute `goods', the same were not liable to sales tax---Appeal of the department being bereft of legal force was not maintainable and was dismissed by the Appellate Tribunal and the order in appeal was maintained.

Messrs Ghulam Rasool and Company Gujranwala's case Appeal No. 151 of 1995 and Sheikhu Sugar Mills and others v. Government of Pakistan 2001 PTD 2097 = 2001 SCMR 1376 ref.

Usmani Associates v. Central Board of Revenue PTCL 2003 CL 416 and Messrs Sawar & Co. (Pvt.) Ltd., Lahore v. Collector of Sales Tax, Multan and others PLD 2006 SC 787 = 2006 PTD 2502 rel.

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

---Ss. 3, 13 & Sixth Sched.---Scope of tax---Exemption---Scheme of sales tax is such that all items are liable to sales tax unless exempted under any notification issued in terms of S.13 of the Sales Tax Act, 1990 or finds it mentioned in the Sixth Schedule of the Sales Tax Act, 1990 or it does not come within the ambit of S.3 of the Sales Tax Act, 1990.

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

---S.3---Scope of tax---Essential ingredients of S.3 of the Sales Tax Act, 1990 for levy and charge of sales tax are taxable supply; in the course or furtherance of any taxable activity and the supply should be that of goods.

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

----Ss. 2(33) & 3(l)(b)---"Supply"---Definition of supply under S.2(33) of the Sales Tax Act, 1990 read with S.3(l)(b) of the Sales Tax Act, 1990 includes self-use or self-consumption.

Sheikhu Sugar Mills and others v. Government of Pakistan 2001 PTD 2097 = 2001 SCMR 1376 rel.

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

---Ss. 2(12) & 3---Goods---For goods to he liable to sales tax, two conditions must be fulfilled it should be taxable supply and should be in course of furtherance of taxable activity.

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

----Ss. 2(41), 2(12), 3, 13 & Sixth Sched.---Taxable supply---Bridges---Taxability---"Taxable supply" under S.2(41) of the Sales Tax Act, 1990 had been defined as a supply of goods made by an importer, manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which was exempt under S.13 of the Sales Tax Act, 1990---Taxable supply speaks of supply of taxable goods the word goods' had been defined under S.2(12) of the Sales Tax Act, 1990 to include every kind of moveable property other than actionable claims, money stocks, shares and securities---Said definition revealed that for a thing or property to be agood' movement/transportation capability was essential e.g. a building was not a goods; a bridge was not a goods because of their inability to be transported---By virtue of the very definition of goods the bridges were not liable to sales tax irrespective of the fact whether any notification under S.13 of the Sales Tax Act, 1990 existed or the same found their mention in the Sixth Schedule of the Sales Tax Act, 1990.

Mehmood-ul-Hassan, D.R. assisted by Pervaiz Alain, Auditor for Appellants.

Syed Nasir Ali Shah Gilani for Respondent.

Date of hearing: 8th August, 2006.

2007 P T D (Trib.) 423

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No. 1738 of 1999, decided on 14th September, 2005.

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

----S. 8(1)(a)---S.R.O. 1053(I)/93, dated 30-10-1993---S.R.O. 556(I)/96, dated 1-7-1996---C.B.R. Letter C. No.1(4) GST-193, dated 10-7-1993---Tax credit not allowed---Input tax adjustment in respect of a fork lifter and spare parts was not allowed being not admissible---Validity---Goods used for a purpose other than production of taxable supplies or the goods specified by the Federal Government as not qualified for input tax adjustments were prohibited for claiming the input tax adjustment---Goods in question were spare parts which were necessary for the production of taxable goods-Spares imported were part and parcel of machinery meant for producing taxable supplies---Installed machinery was accepted to be meant for the purpose of making goods for taxable supplies---Each item adjunct to the machinery was useable to fulfil the same purpose and to the same' extent---Tax paid on the goods used for the purpose for producing taxable supplies was deductible--Appeal was allowed and the orders passed by the. Adjudicating Officer as well as by the First Appellate Authority were set aside by Appellate Tribunal.

Chowgule and Co. (Pvt.) Ltd. v. Union of India AIR 1961 SC 113; Attock Cement Pakistan Ltd. v. Collector of Customs, Quetta (1999) 80 Tax 30 (SC Pak) and Broadhead Peel and Co. v. The Commissioners (1984) VATTR 195 rel.

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

----S.7(2)(i)---Determination of tax liability---Adjustment of input tax---Principles---If any item or goods were purchased by a taxpayer with intention to use same as "machinery, plant, equipment, tool, spare parts etc." for the production of goods meant for taxable supply, they would be eligible for extension of benefit of input tax adjustment.

Chowgule and Co. Pvt. Ltd. v. Union of India AIR 1961 SC 1013 ref.

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

----S.7(2)(i)----Determination of tax liability---Adjustment of input tax---Effect of operations on the commodity was material to determine nature of processes and the intention that for what purpose such goods were purchased and whether or not anything required for processing directly contributes to the production of taxable goods---All such materials qualify for claim of input tax if the tax on such materials was already paid.

Muhammad Jawaid Khurram for Appellant.

Habib Akhter, Auditor for Respondent.

Date of hearing: 14th September, 2005.

2007 P T D (Trib.) 439

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mumtaz Haider Rizvi, Member (Technical)

Appeal No. S.T. 169/PB of 2006, decided on 31st October, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 8, 10, 33, 34, 36 & 46---Rejection of export refund claim---Appeal to Appellate Tribunal---Export refund claim of appellant had been rejected by the Department on the solitary ground that appellant's suppliers, were not found at their given address---Validity---"Non­ availability" of a supplier could have many dimensions each of which would vary in its gravity---Situation would be far more serious if it was found that given address was bogus or even the place (building, plot, locality, etc.) did not exist---Investigation and its report must specify the nature of non-availability or absence of the suppliers, so that appropriate conclusion could be drawn, accordingly---Rejection of a refund claim on alleged non-availability of a supplier "alone", was absolutely arbitrary, which sounded arrogantly whimsical as different treatments were meter out to different applicants under exactly the same circumstances and that too by the same adjudicating officer---Impugned order was set aside, with direction to Deputy Collector of Sales Tax (Refunds) to re-examine, appellant's claim.

Abdul Rauf Rohaila, Khalid Sultan; Managing Partner and Moeen-ud-Din, Accountant for Appellant.

Syed Mir Gayas Ali Shah and Wasiullah, Senior Auditors for Respondents

Date of hearing: 9th October, 2006.

2007 P T D (Trib.) 445

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No. K-171 of 2005, decided on 8th October, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 36 & 46---Wilful or deliberate evasion of tax---Imposition of additional tax and penalty---Appeal to Appellate Tribunal---Appellant was. served with a show-cause notice wherein various charges for violation of Sales Tax Act, 1990 including wilful or deliberate evasion of tax, were alleged---Collector was responsible to show that appellant/tax payer by reason of some collusion had deliberately acted for non-payment of tax---Show-cause notice, failed to reflect whether alleged act of non-payments were the result of collusion or same was a deliberate step to deceive the government---Onus to prove the allegations of collusion or deliberate act lay on the department---Thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all---Pre-requisite of show-cause notice as required by law having not been followed, no straightforward demand notice for payment of alleged short levy could be issued to the appellant; it was necessary under subsection (1) of S.36 of Sales Tax Act, 1990 to show that taxpayer had the knowledge or had the reason to believe that his acts were the result of a collusion or were deliberate, otherwise allegation would be vague and would not be in accordance with law---Was not ascertainable from the grounds and reasons given in the notice whether appellant knowingly and deliberately withheld the payment of Sales Tax or it was the result of a bona fide mistake; it could not, in circumstances be definitely said that case would fall under subsection (1) of Sales Tax Act, 1990---In absence of charge of collusion or of a deliberate action, levy of additional tax and penalty, was not called for as show-cause notice did not disclose whether there was a wilful default on the part of appellant---Demand of additional tax and penalty, in circumstances, was not justified---Allowing appeal, impugned order was modified accordingly.

Syed Muhammad Alam for Appellant.

Shafique Ahmed, Deputy Collector for Respondents.

Date of hearing: 3rd October, 2005.

2007 P T D (Trib.) 456

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No. K-267 of 2004, decided on 27th September, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 3, 14, 22, 23, 36 & 46---Appeal to Appellate Tribunal---Allegation of non-payment of Sales Tax---Issuance of show-cause notice---Auditors observed that during relevant financial period, appellant was involved in taxable activity, but no Sales Tax was paid by it during said period---Department issued show-cause notice to appellant wherein it was alleged that it had violated provisions of Ss.3, 14, 22 & 23 of Sales Tax Act, 1990---Said show-cause notice was silent about sub-clauses of S.36 of Sales Tax Act, 1990---Effect---Analysis of subsections (1) & (2) of S.36 of Sales Tax Act, 1990 had shown that. Authority who had to issue such a show-cause notice, would have to indicate in the notice itself under which provision of law the case would fall and would also have to incorporate the grounds and reasons in his show-cause notice very clearly and explicitly, so that it could be ascertained whether show-cause notice issued fell under subsections (1) & (2) of S.36 of Sales Tax Act, 1990---Failure on the part of Authority issuing show-cause notice, would render show-cause notice invalid and illegal---Authority issuing show-cause notice, having failed to disclose such grounds and reasons, impugned order was set aside and show-cause notice was declared as not warranted by law and also being time-barred.

Abdul Rahim Lakhani for Appellant.

Shakeel Ahmed, D.R. for Respondent.

Date of hearing: 13th September, 2005.

2007 P T D (Trib.) 459

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeals Nos.2111, 2112, 2113/LB of 2002, decided on 10th May, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 33(5) & 46---Abetment in the evasion of Sales Tax---Imposition of additional tax and penalty---Appeal to Appellate Authority---Three business firms made supplies of substantial quantities of taxable goods to appellant Department---Said supplies were allegedly made by the firms without payment of several millions rupees of Sales Tax and without their registration with Sales Tax Department---Said firms were proceeded against and liabilities of Sales Tax and additional tax and also penalties, were adjudged against said firms by Adjudicating Officer through separate orders---Appellant was also impleaded in those proceedings as a party on the charges that being a Government Agency, it was under obligation to receive taxable supplies only from those persons who were registered under Sales Tax Act, 1990 in terms of Cabinet Division's decision in their letter; it was alleged that by receiving taxable supplies from unregistered persons, appellant department was guilty of abetment in the evasion of Sales Tax and was liable to punitive action under S.33(5) of Sales Tax Act, 1990---Penalties were imposed on Appellant Department through impugned orders---Contention of appellant Department was that penalty could be imposed on appellant only when there was a clear and transparent intention of. fraud to the government and that no element of fraud existed in the present case and that penalty could only be imposed when there was deliberate cause of loss to the tax department and that no loss had been caused by appellant department to the government---Validity---Appellant department was not aware of Cabinet Division's decision as contained in letter---If appellant department had known said decision, it would have included the element of Sales Tax in the tender documents, because of that lack of knowledge, appellant department could not appreciate full implication of entire episode and unwillingly became oblivious to the requirements of the Law of Sales Tax---Appellant department could not have had any deliberate intention to defraud the government of her legitimate revenues---Imposition of heavier penalties on appellant, however was unwarranted because such penalties would ultimately be paid by appellant out of public funds---Accordingly penalties imposed on each of impugned orders were reduced to Rs.50,000.

Hamad Aslam for Appellant.

Zulqarnain, Deputy Superintendent for Respondent.

Date of hearing: 21st April, 2005.

2007 P T D (Trib.) 468

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No. K-7 of 2005, decided on 1st October, 2005.

Sales Tax Act (VII of 1990)---

----Ss, 2(37), 40-A & 46---Appeal to Appellate Tribunal---Tax fraud---Proof of---Show-cause notice issued by Authority to appellant, alleged that appellant supplied taxable goods during relevant period without payment of Sales Tax and that by so doing appellant had committed fraud in terms of S.2(37) of Sales Tax, 1990---Revenue Officers, except discovering certain cash credit entries in the books of appellant, had not been able to produce any material to show that said amounts were in any way linked with the taxable supplies; or with any taxable activities or represented an amount on account of any business activity---No case of any tax fraud had been made out whereby burden of proof could be shifted to appellant---Forum below had misdirected itself in placing burden of proof on appellant in terms of provisions contained in S.2(37) of Sales Tax Act, 1990 defining expression "tax fraud" without realizing that in order to attract said provision of law, initial burden lay on Department to show; that the assessee, knowingly, dishonestly or fraudulently and without any lawful excuse, had done any act in contravention of duties or obligations imposed on him under Sales Tax Act, 1990 or Rules or instructions issued thereunder---Once that burden was discharged by Department, only then, the burden would shift to assessee to establish that act done was without any knowledge on his part or without any intention of dishonesty or fraud and was done with some lawful excuse---Appellant/assessee had submitted that evidence on the basis of which case was made out against him, was 'never disclosed--Failure to abide by principles of law by the Authority, would make proceedings, suffering from procedural impropriety---Allowing appeal, impugned order was set aside and case was remanded to Collector (Adj.) to decide the matter afresh according to law.

Abdul Sattar Silat for Appellant.

Saeed Imam and Mujeeb Ahmed Nasir, D.R. for Respondent.

Date of hearing: 20th September, 2005.

2007 P T D (Trib.) 473

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Anwar Ali Member (Technical)/Chairman

Sales Tax Appeal No.239/ST/IB of 2005., decided on 28th January, 2006.

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

----Ss. 2(35), 7, 8, 36, 45 & 46---Adjustment of input tax---Appeal to Appellate Tribunal---Appellant claimed that input tax against electricity consumed in residential colony, could be adjusted as per provisions of S.7(1) of Sales Tax Act, 1990---Section 7(1) of Sales Tax Act, 1990 in juxtaposition to S. 8(1)(a) of said Act provided that a registered person would be entitled to deduct input tax in the manner specified in said S.7(1) of the Act, paid on goods to be used for any purpose for the manufacture or production of "taxable goods" or for "taxable supplies" made or to be made by him---Once a registered person established that the goods in question of which input tax had been paid were used 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 the output tax that was due from him in respect of particular tax period---Section 7 of Sales Tax Act, 1990 was a beneficial provision of law in nature providing a facility to a registered person to adjust input tax at the time of making payment of output sales tax---Manufacturer of finished goods at the time of' their sale, had been given the right to adjust against the Sales Tax payable on such goods which had been described as output tax, the input tax already paid---Relevant provisions of Sales Tax Act, 1990 were enacted with the object of providing safeguard against double tax and provisions regarding "input" as well as "output tax" as defined in definition clauses of the Act read with Ss.7 & 8 thereof, were only modalities prescribed to protect the interest of exchequer against any pilferage, evasion or fraud---Input adjustment of Sales Tax paid on electricity bills consumed in the labour colony of appellant's factory, was allowed, in circumstances.

PTCL 2004 CL 224; Messrs Premier Sugar Mills Ltd. Mardan v. Collector of Sales Tax, Peshawar GST 2005 CL 434; Messrs Sheikh Spinning Mills Ltd. v. Federation of Pakistan and others 2002 PTD 2959; Sheikhoo Sugar Mills Ltd. v. Government of Pakistan and others 2001 PTD 2097 = 2001 SCMR 1376; PTCL 1995 CL. 415; PTCL 2002 CL 115; GST 2002 CL. 106 and 2002 PTD (Trib.) 300 rel.

(b) Words and phrases---

----"Entitled", meaning and connotation of.

2003 PTD (Trib.) 928 rel.

Muhammad Rafiq, Consultant for Appellant, Senior Auditor.

Umar Sadiq, Senior Auditor for Respondent.

Date of hearing: 18th January, 2006.

2007 P T D (Trib.) 481

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.Q-79 of 2001, decided on 4th October, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 3, 6, 7, 13, 23, 26 & 46---S.R.O. 561(1)/94, dated 9-6-1994---Exemption from payment of Sales Tax---Appeal to Appellate Tribunal---Issue in the present case was as to whether or not after June 1999, Industrial Unit was entitled for exemption in the light of Notification S.R.O.561(I)/94 dated 9-6-1994---Charge against the unit was that after June 1999, exemption being availed, it had ceased to exist--Notification had provided exemption to the Units which were set up between 1st July, 1991 and 30th June, 1994---Another Unit was set up on 1-12-1994, but delay in its setting beyond 30-6-1994 was waived by competent authority and it was allowed to set up its Unit on or before 30-6-1996 and according to record it started production on 1-12-1994---Said other Unit, in circumstances was entitled to enjoy exemption for a period of five years from the date of its setting up---Availing of exemption up to November, 1999 was perfectly is order as the other Unit had started production on or around 1-12-1994---No reason to interfere with orders existed being unexceptionable.

Habib Akhtar, D.R. for Appellant.

Memo for Respondents.

Date of hearing: 13th September, 2005.

2007 P T D (Trib.) 518

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.K-443 of 2000, decided on 30th September, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 7(1), 8(1)(b), 33, 34, 36 & 46---Evasion of sales tax on ground of wrong adjustment of input tax---Appeal to Appellate Tribunal---Authority vide its order-in-original directed appellant to deposit amount under S.36 of Sales Tax Act, 1990 along with unspecified additional tax chargeable under S.34 of the Act---Appellant was also imposed penalty under S.33(7) of Sales Tax Act, 1990 Validity---Central Board of Revenue, had no authority under S.8(l)(b) of Sales Tax Act, 1990 to prohibit input tax adjustment on the disputed goods since same were not specified in notification and provisions of S.8 of Sales Tax Act, 1990 were to be construed strictly---Initiation of action against appellant was ab initio wrong and not warranted by law---Allowing appeal, impugned order was set aside.

Saleemul Haq Siddiqui, Consultant for Appellant.

Manzoor Memon, D.R. for Respondent.

Date of hearing: 27th September, 2005.

2007 P T D (Trib.) 550

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ali Sain Dino Metlo, Member (Judicial and Hafiz Muhammad Anees, Member (Technical)

Sales Tax Appeal No. 591 of 1998, decided on 7th June, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 34, 36 & 46---S.R.O. 553(I)/94, dated 9-6-1994---S.R.O. 600(I)/83, dated 11-6-1983---Non-payment of sales tax---Exemption, claim for---Appeal to Appellate Tribunal---Appellant-company was found having supplied seamless pipes and tubes without payment of sales tax for relevant period---Appellant claimed exemption vide Notification S.R.O.553(I)/94 dated 9-6-1994---Validity---S.R.O. 553(1)/94 dated 9-6-1994 had provided exemption of sales tax on the supply of parts and components of respective heading, if used as original equipment in the manufacture or assembly of capital goods and machinery specified in the Schedule to the Ministry of Finance and Economic Co-ordination's Notification of S.R.O.600(I)/83 dated 11-6-1983---Goods supplied to those units which did not manufacture capital goods and were not enlisted as manufacturer of capital goods and machinery were not entitled to exemption of sales tax---Parts and components supplied to those units which were manufacturer of sugar and cement were not entitled to exemption of sales tax because those were not manufactures of cement plants or sugar plants, but were producers of cement and sugar---Appellant supplied the parts and components for maintenance purposes as replacement parts and not as original equipment because the buyers were not the manufacturers of capital goods or machinery as specified in S.R.O.600(I)/83 dated 11-6-1983---Appellant was not entitled to exemption as claimed.

Pervez Iqbal Kansi, Consultant for Appellant.

Sanaullah Suharwarthi, Dy. Supdt. for Respondent.

Date of hearing: 31st March, 2005.

2007 P T D (Trib.) 611

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No. H-163 of 2005, decided on 7th October, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 7, 36, 46 & 72---C.B.R. Letter No. 2(I)/STP 2001 (Pt. III), dated 23-4-2001, Para. 4---Collection and Payment of Sales Tax on Natural Gas Rules, 1999, R.6---Adjustment of input tax---Appeal to Appellate Tribunal---Show-cause notice issued to appellant showed that allegation was levelled that appellant being registered person had adjusted unpaid amount of input tax involved on gas bills from the payable amount of Sales Tax, which adjustment was not admissible in terms of S.7 of Sales Tax Act, 1990 and R.6 of Collection and Payment of Sales Tax on Natural Gas Rules, 1999---In view of Central Board of Revenue's instructions contained in letter No. 2(1). STP/2001(Pt. III), dated 23-4-2001, action of department was illegal---In view of clear instructions contained in sub-paras (i),(ii), (iii) & (iv) of Para 4 of Letter No.2(i) STP(200)(Pt.I1I) dated 23-4-2001 tax functionaries were bound to follow them in the light of S.72 of Sales Tax Act, 1990---When the competent Authority had given relief to the taxpayers, same could not be denied by deviating from the decision so made---Vide Para (4) of said letter, department was directed not to frame contravention in respect of deductions of input tax under S.7 of Sales Tax Act, 1990, however, not conforming to said direction demand in the case was raised---Raising of demand in the matter, in circumstances, was ab initio void and illegal being violative of provisions of S. 72 of Sales Tax Act, 1990.

Riazuddin Shaikh for Appellant.

Mumtaz Ahmed, D.R. for Respondent.

Date of hearing: 3rd October, 2005.

2007 P T D (Trib.) 614

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal No. Old 7(310)AT/IB of 1999, New 101/ST/IB of 2005, decided on 26th January, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 2(33), 3, 34, 36 & 46---Liability to pay sales tax on scrap---Appellants had challenged levy of sales tax on scrap which included broken empty glass bottles, broken wooden cases, damaged crown cork and poly bags of sugar---Appellants were manufacturing various brands of aerated beverages and scrap was arising out of that exercise and appellants were selling said inserviceable items and not storing them---Such could not be termed as "taxable supply" and an attempt to sell said discarded goods would not necessarily lead to inference that business was intended to be carried on in those items and charge of Sales Tax, was not leviable on said items of scrap---Appeal filed by appellants was accepted by holding that Sales Tax , could not be charged on scrap as same was not leviable thereon.

Collector of Customs, Central Excise and Sales Tax, Karachi v. Novartis Pakistan Ltd. PTCL 2002 CL 50; State of Tamil Nadu and another v. Board of Trustees of the Port of Madras 1999 114 STC 520 (SC); State of Andhra Pradesh v. if Abdul Bakshi and 'Bros. (1964) 15 STC 644 (SC); AIR 1965 SC 531; Board of Revenue v. A.M. Ansari (1976) 38 STC 577 (SC); (1976) 3 SCC 512); Commissioner of Income Tax v. Messrs Habib Insurance Co. Ltd. 1969 PTD 278 and The State of Gujarat v. Raipur Manufacturing Company AIR 1967 SC 1066 rel.

Zaheer Ahmed for Appellant.

Dr. Kamal Azhar Minhas, Addl. Collector/D.R. for Respondents.

Date of hearing: 28th November, 2005.

2007 P T D (Trib.) 620

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No. K-153 of 2000, decided on 16th September, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 2(12), (32), (33), (35), 3 & 46---Sales Tax on leased goods and on money received from Insurance Company for the loss of Motor Bike---Appeal to Appellate Tribunal---Appellant was held liable to pay Sales Tax on leased goods and on money received by appellant from Insurance Company for loss of its Motor Bike---Goods in the present case, were leased out to appellant by the lessor---Leased goods' did not fall under the definition of sale, but of a lease and after expiry of lease agreement, leased goods did not transfer from one person to another, but remained with lessor and no Sales Tax was liable thereof---Transaction of lease could not be treated as supplies---When ownership of property was not transferred from one person to another person, no Sales Tax was payable---Representative of Department could not explain under what section of Sales Tax Act, 1990, insurance amount received by appellant on account of loss of its Motor Bike, was liable to Sales Tax---Such money did not come under the definition of "goods" under S.2(12) of Sales Tax Act, 1990, it also did not fall under S.2(35) of said Act which defined "taxable activity"---Appellant, in circumstances was not liable to pay any Sales Tax on amount received by it from the Insurance Company on account of loss of Motor Bike---No Sales Tax was chargeable on leased goods and on the money received by appellant from Insurance Company.

Abdul Ghaffar for Appellant.

Azam Nafees for Respondent.

Date of hearing: 12th September, 2005.

2007 P T D (Trib.) 634

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.K-163 of 2004, decided on 27th September, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 3(3), 7, 8, 10, 11 & 46---Deduction and adjustment of input tax---Claim for---Appeal to Appellate Tribunal--Drugs and medicines manufactured locally were liable to a levy of sales tax at the rate of 5% with effect from 1-7-1996 to 21-10-1996---Appellant who paid sales tax accordingly, claimed input tax adjustment in respect of' those raw materials which were purchased during the relevant tax period and were consumed for making taxable supplies---Section 7 of Sales Tax Act, 1990, provided that a registered person was entitled to deduct input tax paid during the tax period for the purpose of taxable supply made or to be made by him from the output tax---Facts were not disputed to the extent that appellant had correctly adjusted tax paid on raw materials upto 21-10-1996, as at that time, all the raw materials purchased were meant for consumption in production of taxable supply---Input tax . adjustment at the relevant tax period was perfectly in order---Any change in law would not affect the accrued rights and past and closed transactions---Appeal filed by appellant was allowed to the extent that claim of input tax in respect of raw materials available in stock on 21-10-1996; was perfectly in order and respondent's demand in that regard was not justified in law.

Adnan Ahmad Mufti, A.C.A. for Appellant.

Manzoor Memon and Shafique Ahmad, D.R. for Respondents.

Date of hearing: 27th September, 2005.

2007 P T D (Trib.) 643

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Justice (Recd.) Mian Muhammad Jahangier, Member Judicial and Hafiz Muhammad Anees, Member Technical

Appeal No.69/LB of 1998, decided on 28th June, 2006.

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

----Ss. 2(s), 16, 156(1), Cls. (8) & (89), 157(2) & 178---Imports and Exports (Control) Act (XXXIX of 1950), Ss. 3(1) & 3(3)---Foreign Exchange Regulation Act (VII of 1947), S.8 Cls. (1), (2) & (3)---Criminal Procedure Code (V of 1898), S. 103---Smuggling---Punishment for offences---Confiscation of gold along with vehicle used in commission of offence and imposition of penalty on each person involved in the case---Appellant contended that search and seizure was illegal as it was made by Assistant Commissioner who was not authorized to do so as he was not declared as `appropriate officer'; that search and seizure being illegal, the subsequent proceedings were illegal and could not sustain in the eye of law; that no independent witness was cited in proceedings which was a violation of S.103, Cr.P.C.; that extension in time for issuance of show-cause notice was allowed by the Collector of Customs without assigning any reason, even it was granted after expiry of first two months and that no notice under S.171 of the Customs Act, 1969 was issued and no police officer was competent in that regard---Validity---Recovery of gold in huge quantity from two places was admitted which meant that there was no dispute between the parties on the aspect of recovery; in such situation leaving aside the legal formalities for example who had recovered the smuggled gold, who were the witnesses or whether the provision of S.103, Cr.P.C. had been violated or not, the basic burden of proof was on the person from whose custody the smuggled goods had been recovered---In case of raid when there was apprehension that the alleged illicit articles may be disposed of, then the police witnesses or an officer (Assistant Commissioner) assisting the raiding party, (marginal witnesses) were the relevant witnesses and to their extent on participation in apprehending the fraud there would be no illegality---No need to examine the large number of witnesses to prove the act of smuggling---Appellant had to prove their defence plea in which they totally failed and contentions of appellant were devoid of any force and impugned order called for no interference---Appeal being without merit was dismissed in circumstances.

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

----S. 156---Appreciations of evidence---Defence plea reflecting on a fraud carries no importance in the eye of law either the civil aspect of the matter or purely criminal in nature.

Malik Muhammad Arshad for Appellant.

Mehmood Hassan, D.R. assisted by Idrees Saeed, D.S. for Respondent.

Date of hearing: 29th May, 2006.

2007 P T D (Trib.) 664

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal No.131 of 2003, decided on 31st January, 2006.

Sales Tax---

----Appeal---Appeal was dismissed by the Appellate Tribunal on the ground that the same had not been competently and authorisedly filed and the appearance of Advocate claiming himself to be counsel for the appellants/company was without any legal authorization.

Government of Pakistan v. Premier Sugar Mills PLD 1991 Lah. 381 rel.

Nemo for Appellant.

Dr. Kamal Azhar Minhas for Respondent.

Date of hearing: 31st January, 2006.

2007 P T D (Trib.) 728

[Customs, Excise and Sales Tax Appellate Tribunal]

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

Appeal No.7(153)ST/IB/2003 and Old No.7(88)ST/IB/2002, decided on 31st May, 2006.

(a) Sales Tax Act (VII of (990)---

----Ss. 34, 33(2)(cc), 10(3), 3(3)(a) & 67---Additional tax and penalty---Adjustment of claimed refund---Levy of additional tax along with penalty on the ground that opening balance of carry forward amount of input tax was incorrectly shown and tax payable was converted into refundable/carry forward amount and remained unpaid for a certain period---Such amount of sales tax payable for those months was adjusted later do from the refund claims of other months but additional sales tax was neither assessed at the time of adjustment nor paid by the taxpayer---Appellant/taxpayer contended that refund of excess amounts of input tax within time was in utter disregard to statutory provisions of Sales Tax Act, 1990 as well as clear-cut directions of the authorities---Adjustment was made under compulsion and the same was intimated to the Department---Validity---Neither the Department had brought any evidence to the effect that the principal amounts of sales tax in the form of refunds were not due to the appellants not such an order for the recovery for the same had been passed by the Adjudication Officer---Input tax and adjustment thereof was a substantive right of the taxpayer and could not be taken away or withheld on mere technical grounds---Valid and due refunds were withheld by the Department without any objection' and were not released even after furnishing of bank guarantees---Show-cause notice issued without mentioning of relevant sections 10 and 36 of the Sales Tax Act, 1990 was illegal---Any demand in consequence thereof in the form of additional tax and penalty was also illegal and was set aside by the Appellate Tribunal---Appeal was accepted and the show-cause notice as well as the Order-in-Original were held to be illegal and of no consequence.

Messrs Pfizer Ind. v. Federation of Pakistan PLD 1998 SC 64 and Messrs Trade Link v. Collectorate of Sales Tax, Lahore 2003 PTD (Trib.) 928 rel.

The Coca Cola Export Corp. v. The Additional Collector (Appeal S.T.A. No.748/LB of 2001; 2002 PTD (Trib.) 1455; Messrs Blue Horizon (Pvt.) Ltd, v. Collector (Appeals) PTCL 1999 CL. 162; The Collector v. Messrs Novartis 2002 PTD 976; 1992 SCMR 1898; 1992 SCMR 1898; PTCL 1993 CLC 532; 1992 CLC 841; NLR 1991 Tax 11; 1901 MLD 1459 and KLR 1991 Tax 65 ref.

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

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Issuance of show-cause notice without mentioning Ss. 36 & 10 of the Sales Tax Act, 1990 under which the amounts were being demanded to be recovered---Validity---Show-cause notice was issued in consequence to an audit objection without even mentioning S.36 of the Sales Tax Act, 1990---Demand notices in absence of statutory show-cause notices were without lawful foundation---Thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all---Prerequisite show-cause notice as required by law having not been served on the appellants, no straightforward demand notice for payment of alleged short levy could be issued---Neither S.10 nor S.36 of the Sales Tax Act, 1990 had been mentioned in so many words---Show-cause notice was vague and not in conformity with the law, on this point alone the same was considered to be of no legal effect.

Asstt. Collector Customs v. Khyber Electric Lamps Ltd. 2001 SCMR 838 and Messrs Zamindara Paper Mills v. Collector 2003 PTD 1257 rel.

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

----Ss. 10 & 67---Refund of excess amount of input tax---Limitation for payment of refund---Department was bound to refund the excess amounts of input tax within ninety days of the filing of tax returns of non zero-rated supplies and within thirty days of filing of the returns in ease of zero-rated supplies---Under S.67 of the Sales Tax Act, 1990 the Department was bound to pay in addition to the actual refunds, a further sum of fourteen per cent per annum beyond the specified period of allowing refunds.

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

---Ss. 10 & 67---Refund---Withholding of a citizens money by a public functionary on the plea of limitation or on any other technical plea if it was not legally payable by him deprecated.

Messrs Pfizer Ind. v. Federation of Pakistan PLD 1998 SC 64 rel.

(e) Sales Tax---

---Refund---Claims for the refunds of the amounts paid as a tax or other levy on account of mistake as to want of constitutional/legal backing pr because of exemption are at par.

Farhat Nawaz Lodhi for Appellant.

Irfan-ur-Rehman, Deputy Collector/D.R. for Respondent.

2007 P T D (Trib.) 763

[Customs, Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.1207/LB of 2003, decided on 6th March, 2006.

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

----Ss. 46 & 73---Bar of limitation---Condonation of---Appeal to Appellate Tribunal--Liability of Sales Tax along with additional tax and penalty was adjudged by Adjudicating Officer against assessee for violation of S.73 of Sales Tax Act, 1990---Payments in the case were not transferred by appellant to the seller within prescribed period of time, but such payments were transferred thereafter---Limitation prescribed in S.73 of Sales Tax Act, 1990 left no discretion with the Authority and bar of limitation in section 73 was specific and absolute in character and it could not be condoned---No adjustment of input tax was admissible in cases involving the infringement of the provisions of S.73 of Sales Tax Act, 1990---No mistake of law having been made by Adjudicating Officer in interpretation of S.73 of Sales Tax Act, 1990, infringement was correctly construed; liability was rightly adjudged and penalty was correctly imposed.

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

----Ss. 2(46) & 46---Non-inclusion of 'permit duty' in value of taxable supplies--Appeal to Appellate Tribunal---Appellant had challenged Sales Tax for not including 'permit duty' in value of taxable supplies along with Additional Tax and 3% penalty---Contention of appellant was that Permit Fee on movement of spirit was a Provincial levy; it having not been recovered from the customers by appellant, could not be included into the value of supply in terms of S.2(46) of Sales Tax Act, 1990---Validity---Adjudicating Officer had rightly not included the permit duty in value of taxable supplies---Tribunal declined to interfere with order of Adjudicating Officer.

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

----Ss. 8(I)(b) & 46---Input claim on wire and cable---Admissibility---Appeal to Tribunal---Appellant had challenged Sales Tax on account of inadmissible input along with additional tax and 3% penalty---Records had indicated that contention of appellant was partly accepted at the original stage and audit objection to the extent of some amount was settled--Demand for remaining amount, however was enforced along with Additional Tax and penalty---Input claim of appellant to the extent of such wire and cable, etc., was disallowed as those were not the "stock-in-trade"---Prohibition of S.8(1)(b) of Sales Tax Act, 1990, was rightly applied and the liability and penalty was correctly adjudged by Adjudication Officer against the appellant which was maintained by the Tribunal.

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

----Ss. 8(1)(a) & 46---Inadmissible input on telephones bills---Appeal to Tribunal---Adjudicating Officer had levied Sales Tax on appellant being inadmissible input on telephone bills along with additional tax and penalty---Interpretation of Adjudicating Officer was that S.8(1)(a) of Sales Tax Act, 1990 barred the claim of input tax on those goods which were not used for the manufacture of taxable goods or taxable supplies---Was difficult to assume that entire telephonic facility, as claimed by appellant, was exclusively used in furtherance of taxable activities; or it directly contributed to the production or supply of goods---As manufacture of sugar was only a seasonal activity and Sugar Mills, for about 8 months in a year, remained closed, any reasonable apportionment of the input claim on that account was also not possible--Sales Tax law was correctly applied by Adjudicating Officer according to the Departmental practice and impugned order with regard to the input claimed on telephone bills was correctly passed in accordance with law.

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

----Ss. 3, 8 & 46---Levy of Sales Tax on electricity bills along with additional tax---Appeal to the Tribunal---Sales Tax on electricity bills with additional tax and penalty---Inadmissible adjustment of amount against electricity bills relating to a period of 20 months was initially alleged in the show-cause notice---Certain amount was settled, whereas remaining amount was held recoverable along with additional tax and penalty---Liability was rightly ascertained by Adjudicating Officer by applying the principle of law and equity and in line with the Departmental practice---Same rule of apportionment was applied in the cases as had been applied in the cases of other Sugar Mills in the past---No discriminatory or illegal treatment was meted out to the appellant, in circumstances.

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

----Ss. 3, 8 & 46---Levy of Sales Tax on sale of vehicle---Appeal against---Appeal against judgment of High Court filed by Sales Tax Department, was sub judice with the Supreme Court wherein said issue was in question---Adjudicating Officer, in circumstances passed order that amount in question could be recovered subject to the outcome of said appeal and decision of Supreme Court---Cause of appeal against said order of Adjudicating Officer, would not arise as no adverse action had apparently been ordered---Tribunal, for satisfaction of the appellant, directed that amount in dispute be not recovered until appeal of Department was decided upon by the Supreme Court and that same would only be recovered if said appeal was decided in favour of the Revenue.

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

----Ss. 3, 8 & 46---Levy of Sales Tax on supplies made to Fair Price Shops---Appeal against---Fair Price Shop of appellant Mills, was not a separate person under the law and it could not have a separate Registration Number because it was a part of the Mills and was located on the same premises---Said Fair Price Shops were established compulsorily under S.3 of Punjab Fair Price Shops Factories Ordinance, 1971 for sales of articles of daily use to the workers on cheaper rates---No further tax was ever recovered on the sales made from those shops to the workers in the past---To that extent appeal filed by appellant was accepted and orders of Adjudicating Officer for recovery of amount on supplies made for Fair Price Shops along with additional tax and penalty, were set aside.

Mudassar Shuja for Appellant.

Khalid Mehmood D.R. assisted by Abdul Khaliq, Auditor for Respondents.

Date of hearing: 14th November, 2005.

2007 P T D (Trib.) 840

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Wali Khan, Member (Technical)

Appeals Nos. 1541ST/IB of 2005 and 155/ST/IB of 2005, decided on 28th November, 2005.

(a) Interpretation of statutes---

----Mandatory or directory provisions---Principles stated.

Messrs Zamindara Paper and Board Mills v. Collector, Central Excise and Sales Tax 2002 PTD 1257 not relevant.

Messrs Pace International v. C.B.R./Sales Tax Department 2006 PTD 340 and Messrs Sandal Dye Stuff Industries (Pvt.) Ltd. v. Collector of Sales Tax, Faisalabad and Additional Collector of Sales Tax (Adjudication), Faisalabad ref.

Sutherland Statutory Construction 5th Edition (read with 2000 Cumulative Supplement by Norman, J. Singer, Principles of Statutory Interpretation" Ninth Edition, 2004 by Justice G.P. Singh; Canons of Construction and Interpretation of Statutes", Third Edition, 2005 by M. Mahmood and "Principles of Interpretation of Statutes", First Edition, 1990 by Messrs Shaukat Mehmood and Nadeem Shoukat rel.

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

----S.36(3), proviso---Income Tax Ordinance (XXXI of 1979), S.79(4)---Recovery of tax not levied or short-levied or erroneously refunded---Non-adherence to proviso to S.36(3) of the Sales Tax Act, 1990---Consequences---No consequences of non-adherence to the proviso to S.36 (3) of the Sales Tax Act, 1990 had been laid down in the Sales Tax Act, 1990 as compared to the provisions of S.79(4) of the Income Tax Ordinance, 1979---Neither there was anything in S.36 of the Sales Tax Act, 1990 itself or in the other provisions of the Sales Tax Act, 1990 that specified the consequence of nullification of the order of the Adjudicating Officer for non-compliance therewith, which was generally a hallmark of the statutory provisions mandatory in character.

State through DAG, Peshawar v. Panda Gul PTCL 1994 CL. 322 (SC) rel.

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

----S.36(3), proviso---Constitution of Pakistan (1973), Art.254---Recovery of tax not levied or short-levied or erroneously refunded--Proviso, mandatory or directory---Time limit prescribed in the proviso to S.36(3) of the Sales Tax Act, 1990 was not mandatory but was a directory proviso.

M/s. Innovative Trading Co. Messrs Falcon Corporation, Messrs Moon Enterprises and Messrs Bull Agencies rel.

(d) Sales tax---

----Effectiveness of Appellate Tribunal's order---Unless the decision of the Appellate Tribunal was set aside by the competent appellate forum or struck down by the superior Courts, the same shall prevail and remain effective.

(e) Sales Tax Act (VII of 1990)

----S. 2(12)(16)-Islamabad Capital Territory (Tax on Services) Ordinance (XLII of 2001)---Goods---Manufacture or produce---Supply of food by restaurants---Islamabad Capital Territory (Tax on Services) Ordinance, 2001 provided that supply of food by restaurants was "supply of goods"---Omission of service provided by restaurants from the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 was obvious i.e. sales/supply of food was supply of goods for the purposes of the Sales Tax Act, 1990 and it remained so prior to and after the issuance of Islamabad Capital Territory (Tax on Services) Ordinance, 2001.

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

----Ss.13 & 2(41)---Exemption---Supply of food---Food items fell in the definition of goods as well as in the definition of manufacture or produce---Supplies of food items were not exempt from sales tax under S.13 of the Sales Tax Act, 1990---Such supplies were taxable supplies in terms of S.2(41) of the Sales Tax Act, 1990---Said supplies were made in the course or furtherance of taxable activity i.e. manufacture and business in sale/supply of food carried on by them whether or not for a pecuniary profit---Appellant got registration under the Sales Tax Act, 1990 filing of sales tax returns for three months showed that they knew their legal obligation---Despite knowing their legal obligations they did not pay the sales tax due on such supplies and also failed to file sales tax returns which amply showed that they had knowingly, deliberately and wilfully failed to discharge their tax liabilities and avoided and evaded payment of tax---Food supply was nothing but supply of goods for the purposes of Sales Tax Act, 1990 and such supplies were not exempt from sales tax.

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

----Ss.2(12)(16) & 71---Central Excise Act (I of 1944), Preamble---Special Procedure for Supply of Food Rules, 1999, R.2(f)----S.R.O. 1029(I)/99 dated 14-9-1999---S.R.O. 922(I)/99 dated 16-8-1999---Goods---Supply of food---Supply of food items by restaurants was treated as service under Central Excise Act, 1944, it was not so under the Sales Tax Act, 1990---Under the Sales Tax Act, 1990 it was sale/supply of goods because food items were nothing but "goods" within the meaning of subsection(2) of S.2 of the Sales Tax Act, 1990 and preparation of food was nothing but "manufacture or produce" within the meaning of subsection (16) of S.2 of the Sales Tax Act, 1990.

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

---S.2(19) & First Sched., Chap. 98---Sales Tax Act (VII of 1990), S.2(12)---Excisable goods---Services---Contrary to definition of goods given in the Sales Tax Act, 1990, the Central Excise Act, 1944 did not define the term "goods" but defined "excisable goods" to mean goods specified in the First Schedule thereof which also included service under Chapter 98 of Central Excise Act, 1944, First Schedule---For purposes of Central Excise Act, 1944 services falling in Chapter 98 of First Schedule of the Central Excise Act, 1944 were also "excisable goods"---Definition of "goods" under the Sales Tax Act, 1990 had a wider scope to cover all movable property other than actionable claims, money stocks, shares and securities.

Tata Consultancy Services v. State of Andhra Pradesh (2004) 137 STC 620 (SC) rel.

(i) Constitution of Pakistan (1973)---

----Fourth Sched., Serial Nos. 44 & 49---Central Excise Act (I of 1944), Preamble---Sales Tax Act (VII of 1990), Preamble---Two Acts were distinct legislations enacted in terms of Serials Nos.44 and 49 of Fourth Schedule of the Constitution and were independent of each other.

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

----S.2(12)(16)---Goods---Manufacture or produce---Food items---Since food items fell within the mischief of "goods" and "manufacture or produce" in the Sales Tax Act, 1990, the treatment thereof as goods in the Sales Tax Act, 1990 was absolutely lawful and in order.

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

----Ss.3 & 2(12)(16)---Central Excise Act (I of 1944), S.12-A---Scope of tax---Food items, taxation of---Validity---Appellants had the option either to avail conditional exemption of central excise duty and pay sales tax on foodstuff sold supplied by them with added benefit of input tax adjustment under the Sales Tax Act, 1990 or if this was not acceptable to them then they were required to pay the central excise duty---Having registered themselves under the Sales Tax Act, 1990, assessees had accepted the conditional exemption from central excise duty and were bound to pay the sales tax which they knowingly, deliberately and willfully did not pay.

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

----S.3---S.R.O. 1039(I)/99 dated 14-9-1999---Food items-,-Scope of tax---Parallel legislation---S.R.O. 1039(I)/99, dated 14-9-1999 neither imposes a tax nor exempts it and lays down procedure for collection and payment of sales tax on food items---Neither S.R.O. 1039(I)/99 dated 14-9-1999 was parallel to the Sales Tax Act, 1990 nor sales tax had been levied under S.R.O. 1039(I)/99 dated 14-9-1999.

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

----Ss.30(1)(b) & 45---S.R.O. 448(I)/2000 dated 10-7-2000---Appoint­ment of officer---Jurisdiction---Contention was that clause (b) was added to S.30 of the Sales Tax Act, 1990 in 2001 and S.R.O. 448(I)/2000 dated 10-7-2000 was ab initio illegal and void because clause (b) to S.30 of the Sales Tax Act, 1990 could not be operated retrospectively to give legal cover to this notification, therefore, Adjudicating Officer had no jurisdiction to adjudicate the case---Validity---Central Board of Revenue had the power to appoint any person to be an officer of sales tax with any of the designations mentioned in S.30 of the Sales Tax Act, 1990 in relation to any area, any case or class of cases specified in the notification and such officers, while exercising the powers of adjudication shall follow the dictates of S.45 of the Sales Tax Act, 1990---Central Board of Revenue through Notification S.R.O. No.448(I)/2000 dated 10-7-2000 in exercise of its powers under S.45 of the Sales Tax Act, 1990 read with S.30 of the Sales Tax Act, 1990, had appointed Collectors in various Collectorates of (adjudication) to adjudicate the cases relating to the area of their jurisdiction---Collectors, Collectorates of Customs, Sales Tax and Central Excise (Adjudication) so appointed had been given the authority to specify the jurisdiction of the Additional Collectors and Deputy Collectors of Customs, Sales Tax and Central Excise (Adjudication) in their Collectorates with the prior approval of Central Board of Revenue---Order of Adjudicating Officer had not been proved void ab intio---Amendment being clarificatory in nature had no other bearing on the provisions of Ss.30 and 45 of the Sales Tax Act, 1990---Adjudicating Officer was competent to adjudicate the cases covered by the appeals within the meaning of S. 45 of the Sales Tax Act, 1990 read with S.R.O. 448(I)/2000 dated 1-7-2000.

Messrs Pir Stone and Sand Supplier, Rawalpindi v. The Additional Collector, Sales Tax, PNCA Building Rawalpindi Appeal No.1745 of 2001 rel.

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

----Ss.30, 3, 6, 11(2), 26, 33, 34 & 36---Appointment of officer---Jurisdiction---Appellants contended that Adjudicating Officer did not have jurisdiction to invoke a number of provisions of the Sales Tax Act, 1990 and that Adjudicating Officer could not take cognizance of the violations of Ss.3, 6, 26, 33 and 34 of the Sales Tax Act, 1990 since he had no powers to take cognizance of violations of these provisions for imposition of penalty and additional tax---Validity---Adjudicating Officer was vested with the power under S.11(2) and S.36 of the Sales Tax Act, 1990 regarding assessment of tax, charging of additional tax, imposition of penalty and recovery of amount erroneously refunded or any other contravention under the Sales Tax Act, 1990 or the Rules made thereunder---Sales tax in the present case, was paid on the self-assessment basis---Where a registered person had not paid tax due on supplies made by him or had made short payment or had claimed input tax credit or refund which was not admissible, S.11(2), Sales Tax Act, 1990 empower the Adjudicating Officer to make an assessment of sales tax actually payable by that person and to impose penalty under S.33 along' with additional tax due under S.34 of the Sales Tax Act, 1990---Non-payment or short payment or erroneous deduction of input tax from output tax or refund thereof arising out of violations of a number of the provisions of law including Ss.3, 6, 7, 22, 23, 25 and 26 of the Sales Tax Act, 1990 and S.11(2) and S.45 of the Sales Tax Act, 1990 from which the Adjudicating Officer derived the power encompassed all such violations---If a person did not pay the tax in accordance with the provisions of the Sales Tax Act, 1990 he violated the provisions of Ss.2(9), 3, 6 and 26 of the Sales Tax Act, 1990---When Adjudicating Officers invoked these provisions of the Sales Tax Act, 1990 in the shoe-cause notice to determine the tax liability of the person he acted in accordance with the provisions of Ss.11(2) and 45 of the Sales Tax Act, 1990 because unless violations of these provisions was proved or disproved he could not make assessment of the tax due under Ss.11 and 36 of the Sales Tax Act, 1990--Adjudicating Officer could invoke the provisions of Ss.2(9), 3, 6 and 26 of the Sales Tax Act, 1990 since he enjoyed powers under these provisions.

D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456 = 2004 PTD 1179 rel.

(o) Sales tax---

----Omission of date of hearing in the order---Effect---Non-mentioning of the date of hearing in the order was a clerical error, which could be ignored as typographical error and did not vitiate the order of the Adjudicating Officer.

Messrs Millat Tractors Ltd., Lahore v. Collector of Sales Tax and Central Excise, Lahore 2003 PTD 1445 rel.

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

----S.11---Assessment of tax---Assessment of sales tax on the basis of Income Tax Assessment documents---Validity---Sales tax authorities were justified to rely upon the record of appellants which they filed with the Income Tax Department in the form of Income Tax Assessment Returns---While relying upon those documents due care appeared to have been taken by the sales tax authorities to determine the value of supplies made by them for determination of their sales tax liabilities as the calculation of sales tax determined in the order indicated that the allowances due to the appellants had been given---No illegality could be attributed to the orders passed by the Adjudicating Officer on the basis of the Income Tax Assessment documents of the appellants as the appellants were not cooperating and disclosing their actual sales in accordance with the provisions or the Sales Tax Act, 1990.

Mir Ahmad Ali for Appellant.

Dr. Naeem Ijaz Qureshi, Additional Collector/Departmental Representative (D.R.)

2007 P T D (Trib.) 910

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Pir Muhammad Anwar Ali, Member (Technical)/Chairman

Appeal No.231/STAB of 2005, decided on 5th January, 2006.

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

----Ss. 3, .6, 26, 36(3) & 45---S.R.O. 674(I)/97, dated 29-8-1997---S.R.O. 675(I)/97, dated 29-8-1997---C.B.R. Letter C. No.3 (2)/M. Audit/2002, dated 12-6-2002---C.B.R. Letter No.5(10)-CEJ 2000, dated 11-6-2005---Scope of tax---Non-charging of sales tax on supply of goods imported before January, 1998---Levy of tax---Validity---Both the parties were directed by the Tribunal to sit together and to reconcile the figures of final sales tax liability by charging the sales tax on the supplies of goods after 31-12-1997 and to allow the adjustment of input tax paid at the stage of import which was prepared by both the parties after consulting the sales tax records---Appellants were legally bound to pay sales tax on supplies of imported goods from 1-1-1998 and onwards when the exemption provided under S.R.O. 674(I)/97, dated 29-8-1997 up to 31-12-1997 was no longer available---Department was duty bound to allow adjustment of input tax paid at the import stage---Sales tax payable calculated in the audit exercise was the real liability of sales tax payable by the appellants---Department could only recover such amount of sales tax along with additional tax and 3% penalty---Appeal was partly allowed and orders were modified to that extent only.

PTCL 2002 CL. 115; 1997 SCMR 1093 and 1997 PTD 641 ref.

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

----Ss. 7(1) & 8(1)(a)---Determination of tax liability---Plain reading of provisions of Ss.7 and 8 of the Sales Tax Act, 1990 leads to the conclusion that under S.7(1) in juxtaposition to S.8(1)(a) of the Sales Tax Act, 1990 a registered person shall be entitled to deduct input tax in the manner specified in S.7(1) of the Sales Tax Act, 1990 paid on the goods used or to be used for any purpose for the manufacture or production of "taxable goods" or for "taxable supplies" made or to be made---Once a registered person established that the goods in which input tax had been paid were used for taxable supplies made or to be made by him then subject to terms of S.7 of the Sales Tax Act, 1990 he became entitled to the deduction of input tax from the output tax that was due from him in respect of particular period.

2002 PTD 2959 rel.

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

----S. 7---Determination of tax liability---Section 7 of the Sales Tax Act, 1990 was a beneficial provision of law in nature providing a facility to a registered person to adjust input tax at the time of making payment of output sales tax.

Sheikhoo Sugar Mills Ltd. v. Government of Pakistan and others 2001 SCMR 1376 = 2001 PTD 2097 rel.

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

----S.7---Determination of tax liability---Word "entitled" used in S.7 of the Sales Tax Act, 1990 means "to give a right to".

2003 PTD (Trio.) 928 rel.

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

----S. 7---Determination of tax liability---Adjustment of input tax---Under the provisions of S.7(1) of the Sales Tax Act, 1990, manufacturer of finished goods at the time of their sale had been given the right to adjust against the sales tax payable on such goods which had been described as output tax, the input tax already paid---Provisions of S.7 of the Sales Tax Act, 1990 were enacted with the object of providing safeguard against double taxation on the same goods---Only input tax already paid on the component and constituent part of the sales taxable supplies could be adjusted.

PTCL 1995 CL 415 rel.

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

----S.7---Determination of tax liability---Provisions regarding "input" as well as "output tax" as defined in the definition clause of the Sales Tax Act, 1990 read with Ss.7 and 8 of the Sales Tax Act, 1990 were only modalities prescribed to protect the interest of the exchequer against any pilferage, evasion or fraud.

PTCL 2002 CL 115 rel.

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

----Ss. 7, 8 & 3---Determination of liability---Provisions of Ss.7 & 8 of the Sales Tax Act, 1990 were only machinery provisions to crystallize the liability to pay the sales tax as contemplated in charging provisions of S.3 of the Sales Tax Act, 1990.

Riffat Hussain Malik for Appellant.

Dr. Naeem Khan, Addl. Collector/D.R. and Zahid-ur-Rehman, Sr. Auditor for Respondent.

Date of hearing: 15th December, 2005.

2007 P T D (Trib.) 1037

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeals Nos.470-473/LB of 2002, decided on 15th February, 2006.

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

----Ss.2(37), 4, 7(2)(i), 8(1)(b)(d), 10, 33(4), 34 & 36---Tax fraud---Show-cause motive for. recovery of illegally received refund in violation of Ss.4, 7, 8 & 10 of the Sales Tax Act, 1990 along with additional tax and penalty---Validity---Allegations primarily related to the input tax invoices which were purported to have been issued by some of the business firms---Report divulged that neither such firms were available at their given addresses nor such units had produced their records for audit---No evidence was on' record to believe that any of the business transactions purported to have been made by such firms were genuine---Liability had already been adjudged against some of the units and owner thereof had been booked in F.I.R. for prosecution on the charge of tax fraud---Adjudicating Officer had rightly applied his mind to the facts and evidence that was produced and had passed a speaking order and liability was correctly enforced---Appellants were not able to discharge the burden of proof at the original stage in terms of S.2(37) If the Sales Tax Act, 1990---No records were produced to show the physical transfer of goods from the suppliers to the recipient---Mandatory conditions claiming for refund of input tax were never met and the appeals were rejected and disposed of accordingly by the Appellate Tribunal.

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

---S.8(1)(d)---Finance Act (II of 2004), Preamble---Tax credit not allowed---Clause (d) of S.8(1) of the Sales Tax Act, 1990 pertaining to the prohibition on claims against fake invoices was added to the statutes vide Finance Act, 2004 but it did not mean that prior to this amendment, the refund or adjustment of input tax could lawfully be claimed against the fake invoices as well---When any of the documents including a return or invoice etc. was prescribed under a fiscal law, it only implied a genuine and correct document and not a fake or bogus document---Existence of a genuine and correct invoice for claiming a refund or adjustment was always a requirement of the legal process irrespective of the amendment that was made in 2004---Said amendment could be construed as an enactment of clarificatory nature which reiterated a legal principle and could not be used to provide immunity to the defaulters who had claimed refunds of input tax on the basis of fake or non-genuine documents.

S.T.As. Nos. 2043/LB of 2001; 1545/LB of 2002; 334-48/LB of 2002 and 39/LB of 2004 rel.

Ali Sibtain Fazli for Appellant.

Saleem Akhtar, Superintendent for Respondents.

Date of hearing: 4th January, 2006.

2007 P T D (Trib.) 1069

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Customs Appeal No.120/ST/IB of 2004, decided on 30th January, 2006.

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

----Ss.2(46)(a), 3, 6 & 32A---S.R.O. 579(I)/1990 dated 17-5-1999---S.R.O. No.206(I)/2001 dated 2-4-2001---C.B.R. Letter C.No.1(18)ST/ AIU/98 dated 26-9-1998---Special Audit Rules 1998, Rr.2(3), 4 & 5---Value of supply--Scope of tax---Exchange rate difference---Levy of sales tax on differential amount arising due to exchange rate---Validity---Consideration was received in U.S. dollars---Between the time of receipt of consideration and its realization after 45 days exchange rate fluctuated---Sales tax authorities demanded sales tax by taking the value of supply by including the difference accruing due to exchange rate difference on the date of actual realization of the consideration---Record was silent about the information whether the date of supply was earlier or the date of realization of the consideration preceded the date of supply for determining the tax liability as the same was not provided by both the parties---Appropriate forum for such determination was the original Adjudicating Officer to determine as to which date preceded i.e. the date of supply or the date of actual realization of the consideration---If the date of supply was earlier, the assessees shall not be liable to pay the demanded tax in terms of S.2(44) of the Sales Tax Act, 1990 and if the date of realization was earlier they will pay the said tax.

2002 PTD 387; Karachi Sugar Mills Ltd. Sales Tax Appeal No.185 of 2001 and Tax Appeal No.4 of 2003 ref.

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

----Ss.3 & 6---S.R.O. 578(I)/98, dated 12-6-1998---C.B.R. letter C.No.1(30)STR/99(Vol.I) dated 21-9-2004---Scope of tax---Movable assets, Office equipments i.e. photocopying machine---Sale of---Non­payment of sales tax---Levy of tax along with additional tax and penalty---Validity---Under S.R.O. 578(I)/98 dated 12-6-1998, there was a bar on claiming input tax adjustment in respect of a number of items listed therein including vehicles and office equipments---Photocopying machine was nothing but an office equipment--- In the presence of ban on making adjustment of input tax the question of adjustment of input tax paid on such machines and vehicles did not arise---Onus lay on the department to prove that appellant claimed input tax adjustment on vehicles and photocopying machine---Such onus had not been discharged, to imposition of sales tax on sale of such items would amount to taxing these items twice which could not be allowed---Demand of sales tax on sale of fixed assets on which input tax had either not been proved to have been claimed or was not allowed under the law, was not justified---Orders passed by the lower forums on this count was set aside by the Appellate Tribunal.

2002 PTD (Trib) 1455 and 2002 PTD 976 rel.

(c) Sales tax---

----Appeal---Estoppel---Show-cause notice---Written as well as oral submissions were made on the basis of facts of the case before the Adjudicating Officer in response to show-cause notice at original stage of adjudication---Assessees were clear in their minds as to the charges framed against them and submitted their reply to the notice and contested the case---Assessees, now could not agitate that the show-cause notice was vague or bad in law or that the appointment of auditors was not legal as by their own conduct and record they were estopped to agitate these points and the law of estoppel ran against them.

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

----S. 2(46)---Value of supply---Taxable supply---Exchange rate difference---"Supply" was a "taxable supply" made in "furtherance of", "taxable supply" and the sales tax to be paid @ 15% of the "Value of the supply"---Contention that any loss or gain on account of exchange rate was of no consequence of sales tax, had no legal force since the difference in exchange rate was an integral part of the value of supply.

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

----Ss.33 & 34---Penalty and additional tax---Imposition of penalty and additional tax was not justified as the liability with the reference to difference in exchange rate was yet to be determined and demand of sales tax on disposal of fixed assets was not justified.

Farukh Jawad Panni for Appellant.

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

Date of hearing: 12th December, 2005.

2007 P T D (Trib.) 1361

[Customs, Excise and Sales Tax Appellate Tribunal]

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

Appeal No. 23/ST/IB of 2004, decided on 31st January, 2006.

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

----Ss.3(1) & 33(2)(cc)---C.B.R. Letter C. No.2(1)-M(Audit)/2002; dated 8-7-2002---Scope of tax--Suppression of sales---22.88 % wastage in CNG was determined by the Hydrocarbon Development Institute of Pakistan---Appellant claimed over 25% wastage---Adjudicating Officer did not accept such losses in absence of any authority or notification and directed to pay up the sales tax on entire quantities shown in the gas bills and had also adjudged 3% penalty of evaded amount---Validity---Issue was settled by Appellant with Collector of Sales Tax on the basis of Central Board of Revenue Letter C. No. 2(1)-M(Audit)/2002 dated 8-7-2002 wherein 13% wastage had been allowed---No judgment was passed by the Appellate Tribunal in view of such written assertion on the issue.

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

----Ss.7(1) & 33(2)(cc)---Determination of tax liability---Adjustment of input tax---Disallowance of input tax claimed on gas and electricity bills used in office premises situated at CNG station being used was other than `taxable activity' and ordered to pay up the demanded tax along with additional tax and 3% penalty---Validity---Appellate Tribunal, in another case had directed that "appellants be allowed input tax credit/adjustment on account of consumption of electricity in their administrative offices located on the plot/premises of the appellants producing taxable cement":-Such judgment had attained finality and accordingly the appeal on this issue was accepted and the order passed by the Adjudicating Officer was set aside by the Appellate Tribunal.

GST 2002 CL. 106 rel.

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

----Ss.7(1), 33 & 34---Determination of tax liability---Adjustment of input tax---Claim of input tax one month prior to actual payment of gas and electricity bill---Levy of additional tax and penalty---Additional tax was paid but not penalty as there was no criminal intent and thus no criminal liability---Validity---Since the appellant had paid additional tax, they had accepted the untimely adjustment of input tax i.e. prior to the "tax period" which then becomes a clear-cut contravention of provision of S.7(1) of the Sales Tax Act, 1990---Order passed by the Adjudicating Officer was upheld on the issue by the Appellate Tribunal.

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

----First Sched., Chap. 74---CNG cylinder was specifically classifiable under Chap. 74 against Heading 7311.0000.

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

----Sixth Sched. Sr. No.57---Customs Act (IV of 1969), First Sched., Chap. 74---CNG cylinders could be called, articles of iron or steel as per heading of Chap. 74 and not machinery of Chap. 84 or 85 of the First Schedule of the Customs Act, 1969---No exemption of sales tax thus was available to supply of CNG cylinders against Serial No.57 of the then Sixth Schedule of the Sales Tax Act, 1990.

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

----S.10---S.R.O. No.714(I)/2000 dated 30-9-2000---S.R.O. 232(I)/2001, dated 19-4-2001---Excess amount to be refunded---CNG cylinders---S.R.O. No.714(I)/2000 dated 30-9-2000 was to be deemed to have taken effect from the 30th September, 2000 but shall not entitle any person to claim refund of any amount of sales tax already paid on cylinders and valves for CNG kits.

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

---Ss.13 & 10---S.R.O. 232(I)/2001 dated 19-4-2001---Exemption---Supply of CNG kits for automotive vehicles were granted exemption from 30-9-2000 onwards and by virtue of Notification 232(I)/2001 dated 19-4-2001, the cylinders and valves for CNG kits were granted exemption on 19-4-2001 with retrospective effect i.e. 30-9-2000 but the entitlement of refund of the already paid sales tax was disallowed.

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

---S.13---Exemption---Supply of CNG kits for automotive vehicle as well as cylinders and valves for CNG kits were exempt from levy of sales tax w.e.f. 30-9-2000 to date.

(i) Interpretation of statutes---

----No wording in the' taxing statute, rules or notification issued under statute could be treated as surplus or redundant.

Muhammad Nasim Ahmad v. Azra Feroz PLD 1968 SC 37 rel.

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

---S. 13 & Sixth Sched., Sr. No. 57---S.R.O. No. 714(I)/2000 dated 30-9-2000---S.R.O. 232(I)/2001 dated 19-4-2001---Exemption---Supply of CNG cylinders were not exempt from the levy of sales tax against Sr. No.57 of the Sixth Schedule from 1-7-2000 to 29-9-2000 but sales tax exemption was available to CNG kits for automotive vehicles, cylinders and valves for CNG kits for the period 30-9-2000 till date vide S.R.O. No.714(I)/2000 dated 30-9-2000 as amended by S.R.O. 232(I)/2001 dated 19-4-2001---Order passed by the Adjudicating Officer was modified to that extent---Appeal was partially accepted---Demand of principal amount of sales tax was ordered to be recalculated accordingly--Additional tax and penalty adjudged by the Adjudicating Officer were upheld by the Appellate Tribunal.

Muhammad Hanif v. C.B.R. PLD 1971 SC 252; PTCL 2001 266 and 1993 PTD 306 ref.

Shaukat Ali for Appellant.

Dr. Naeem Khan, Additional Collector/D.R. along with Zahid­-ur-Rehman, Sr. Auditor for Respondent.

Date of hearing: 15th December, 2005.

2007 P T D (Trib.) 1394

[Customs, Excise and Sales Tax Appellate Tribunal]

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

Appeal No. 121/ST/IB of 2004, decided on 13th February, 2006.

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

----S.3(1A)---Further tax---Levy of---Appellant/taxpayer claimed that supply of bitumen was made to end users who being end users were not liable to be registered and further tax was not chargeable-.-Department contended that supplies were made to contractors-Validity--Adjudicating Officer had failed to determine as to in whose names invoices for supplies of bitumen were issued by the taxpayer and whether those supplies were made on the basis of agreement with Government agencies who were end users and whether the consideration for those supplies were made by the Government agencies not liable to registration or the recipients themselves---Both parties failed, to substantiate their rival claims with documentary evidence or otherwise---Facts whether supplies were actually made to Government organizations as end users or to the contractors need to be verified to determine whether further tax was chargeable or not---Order of Adjudicating Officer was set aside and case was remanded for de novo decision after ascertaining as to from whom the supplies of bitumen were made i.e. to Government organizations or other persons, if any, not liable to registration or to contractors or other persons who were liable to registration as claimed by the sales tax authorities and then decide the case on merit and according to law after affording both the parties adequate opportunity of hearing and enabling them to lead evidence in support of the respective claims.

2004 SCMR 456; 2003 PTD (Trib.) 2165; 2002 PTD 2440; 2002 PTD 2771 Appeal No.1866 of 1996 and Tax Appeal No.4 of 2003 ref.

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

----Ss.2(44), 3, 33 & 34---Time of supply---Non-payment of sales tax on advances received against taxable 'supplies---Demand of principal amount along with penalty and additional tax---Validity---Appellant/taxpayer claimed that on non-payment of advances, it could be a case of deferred payment of sales tax on which the Adjudicating Officer could have considered imposition of penalty and additional tax and demand of principal amount along with penalty and additional tax was not justified---Department claimed that principal amount was not paid and the Adjudicating Officer had rightly ordered the recovery thereof along with penalty and additional tax---Validity---Adjudicating Officer did not determine as to whether it was late payment of sales tax advances received by the appellants or non-payment of sales tax on such advances at all---Both the parties failed to assist in determination of this fact with relevant documentary evidence---Case was set aside and remanded back with the direction to first ascertain whether it was a case of delayed payment of sales tax on advances received by the appellants or it was a case of non-payment of sales tax on advances justifying recovery thereof along with additional tax and penalty and then decide the case on merit and according to law after affording adequate opportunity of hearing to both the parties and enabling them to produce evidence in support of their claims.

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

----Ss.7(1) & 66---Determination of tax liability---Non claiming of input tax within tax period or non-filing of refund claim under S.66 of the Sales Tax Act, 1990---Validity---Section 7(1) of the Sales Tax Act, 1990 entitles a registered person to deduct input tax paid on supplies received by him in a tax period from the output tax due from him on supplies made or to be made in that period---Word "entitled" means "to give right to"---Subsection (1) of S.7 of the Sales Tax Act, 1990 gave right to the registered person to adjust the input tax towards his output tax liabilities---Such right could not be denied for procedural lapses, if any, of not claiming the same within tax period or not filing of refund claim under S.66 of the Sales Tax Act, 1990 because such a denial would amount to double taxation which was not allowed under the value added taxation system.

(1973) 89 ITR 45 (SC); 1998 PTD 1945; (1980) 122 ITR 545; PLD 1990 Lah. 1; PLD 1990 Lah. 461; 1994 PTD 716; PLD 1977 Lah. ,292; PLD 4992 SC 980; 1993 SCMR 274 = 1993 PTD 69; 1996 PTD 489; 1991 PTD 783 and (1985) 51 Tax 79 ref.

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

----S.7(1)---Determination of tax liability---Input tax---Adjustment of input tax carried forward to the next tax period under a valid order could not be questioned---Additional tax and penalty imposed on such account was remitted by the Appellate Tribunal.

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

----Ss.32A(3), 25, 33 & 38---Finance Act (III of 1998), Preamble---Finance Act (IV of 1999), Preamble---Special Audit Rules, 1998, R.4---S.R.O. 579(1)/99 dated 17-5-1999---Special Audit by Chartered Accountants or Cost Accountants---Terms of reference of special auditors---Non-notification of---Validity---Chartered Accountants of a firm including the Chartered Accountants of its branch offices were appointed auditors by Central Board of Revenue for conducting special audit of records of registered persons and in doing so they were officers of sales tax within the meaning of subsection (3) of S.32A of the Sales Tax Act, 1990 to exercise powers of an officer of sales tax under Ss.25, 37 & 38 of the Sales Tax Act, 1990---Rule 4 of the Special Audit Rules, 1998 gave the scope of special audit---Section 32A of the Sales Tax Act, 1990 did not require nor there was requirement of S.R.O. 579(1)/99 dated 17-5-1999 or Special Audit Rules, 1998 to notify the terms of reference of the special auditors.

Appeal No.444/IB of 2002; 2002 PTD 387; W.P. No. 1391 of 2000 and Appeal No.185 of 2001 ref.

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

----S.32A---Special Audit Rules, 1998, R.4---S.R.O. 579(I)/99 dated 17-5-1999---Special Audit by Chartered Accountants or Cost Accountants---Audit report---Show-cause notice and the order of Adjudicating Officer on the basis of audit report of the special auditors---Validity---Appellant failed to establish as to where the special auditors went beyond their mandate while auditing their record---Alleged violation of decision of High Court was also not proved---In absence of any material evidence on record, contention of taxpayer could not be accepted---No illegality existed in the audit report of the special auditor, the show-cause notice and order passed by the Adjudicating Officer on this account---No legal infirmity was found in the show-cause notice and the order of Adjudicating Officer on the basis of audit report of the special auditors---Contention of taxpayer was repelled in circumstances.

2002 PTD 387; W.P. No. 1391 of 2000; Appeals Nos.93 of 2002 and 101 of 2002 ref.

Farukh Jawad Pannl for Appellant.

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

Date of hearing: 12th December, 2005.

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2007 P T D (Trib.) 2234

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

S.T.A. No.763/LB of 2006, decided on 14th February, 2007.

Sales Tax Act (VII of 1990)---

----Ss.34(1) & 33(5)(a)---Default---Penalties---Payment of arrears of sales tax in easy instalments after due permission---Assistant Collector accepted the payment but ordered that the said arrangement was provided to facilitate in the discharge of sales tax liability only and there was no specific order regarding waiver of additional tax and penalties; consequently, taxpayer was ordered to deposit additional tax along with penalty---Validity---Additional tax and penalty were imposed simply on the ground that there was no specific order regarding waiver of additional tax and penalty---Admittedly, there was no specific order that additional tax and penalty should be recovered in instalments---Absence of any such specific order regarding recovery of additional tax and penalty would go in favour of appellant/taxpayer---Competent authority having allowed the appellant/taxpayer to pay the due sales tax in instalments, it meant that the competent authority had waived the additional tax and penalty--:Had the appellant/taxpayer failed to pay the due sales tax as per schedule of instalments allowed, then he could have been burdened with additional tax and penalty---Appellant/taxpayer having discharged the liability in instalments as allowed by the competent authority so the appellant/taxpayer could not be burdened with additional tax and penalty.

Omar Arshad for Appellant.

Nemo for Respondent.

2007 P T D (Trib.) 2259

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar-ul-Majeed, Member (Technical)

S.T.A. No. 1278/LB of 2005, decided on 1st March, 2007.

Sales Tax Act (VII of 1990)---

----S.3AAA---Enlistment Tax---Department alleged that registered person was required to pay tax @ 15 % along with further tax on sales to unregistered persons being wholesalers registered with the sales tax department whereas he charged sales tax @ 1 % as turnover tax without getting prior permission from the Collectorate of Sales Tax---Validity---Admittedly, appellant was doing retail as well as wholesale business---When Sales Tax Collectorate, on the basis of survey, compulsorily registered the appellant as wholesaler, he moved an application for deregistration and enlistment as retailer in terms of provisions of S.3AAA of the Sales Tax Act, 1990 which was duly received by the Collectorate of Sales Tax---Instead of verifying the contents of application and a decision on its on merit, department made out a contravention case and raised demand of tax and penalty treating the appellant as wholesaler---Admittedly, the department did not make any effort to establish that the appellant was actually engaged in wholesale business after compulsory registration nor the department could prove it from the record, on the contrary, department had all along been accepting the nil returns filed by the appellant against his registration as wholesaler which proved the appellant's case that he was not doing any wholesale business---Order was not maintainable under the law---Appeal was accepted and order was set aside by the Appellate Tribunal.

Hassan Imdad for Appellant.

Khalid Mehmood D.R. and M. Haroon, Auditor for Respondent.

Date of hearing: 21st February, 2007

2007 P T D (Trib.) 2262

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Hafiz Muhammad Anees, Member (Technical)

S.T.A. No. 99/LB of 2002, decided on 22nd March, 2007.

Sales Tax Act (VII of 1990)---

----S.7---S.R.O. 1040(I)/99, dated 14-9-1999, R.4(5)---S.R.O. 124(I)/ 2000 dated 15-3-2000, R.7(5)---S.R.O. 698(I)/96 dated 11-8-1996---Determination of tax liability---Input tax was adjusted on consumption of electricity and sui gas bills---Not a single bill was in the name of owner of the unit and no GST number was mentioned on the bills---Supplies were also taxable and exempt---Even if bills met the requirements of law the adjustment of input tax on bills would have been partially adjustable---Taxpayer contended that electricity/gas were exclusively used .for the manufacture of bakery products---Input tax credits on account of sui gas and electricity consumption in exempt supplies was made just due to ignorance of law otherwise there was no mala fide intention---Validity---Input tax on consumption of electricity and sui gas was inadmissible because no GST number was mentioned on the bills and both the meters were not in the name of registered person---Sales tax was recoverable along with additional tax---Further, electricity and sui gas were used both in manufacturing taxable and exempt supplies and even if the requirements were fulfilled by applying. the apportionment formula the sales tax became payable by the registered person---Net liability of principal amount of sales tax was worked out---Since input tax adjustment was allowed as there .was no dispute that the gas and electricity were used in production of taxable supplies, the balance amount after allowing the adjustment by applying apportionment formula may be recovered along with consequent liabilities of additional tax and penalties---Order of Adjudicating Officer was modified accordingly by the Appellate Tribunal.

Yasin Ahmed, A.R. for Appellant.

Ghulam Sarwar Shah, Assistant Collector for Respondent.

Date of hearing: 22nd March, 2007.

2007 P T D (Trib.) 2273

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar-ul-Majeed, Member (Technical)

Appeal C.A. No. 684/LB of 2004, decided on 1st March, 2007.

Customs Act (IV of 1969)---

----S.156---Punishment for offences---Import of Phosphor Bronze---

Weight of goods was found to be 21.5 Kg instead of 18 Kg declared---Charge of misdeclaration---Confiscation of excess quantity of goods weighing 3.5 kg involving duty and taxes with option to redeem the goods on payment of fine equivalent to 100 % of the duties and taxes attempted to be evaded in addition to duty and taxes payable--Validity---Quantity of 3.5 Kg of goods admittedly was found in excess of quantity declared in the bill of entry which was because of some mistake on the part of foreign supplier---Supplier, rectified the mistake by issuing a revised invoice and advice for necessary amendment in the letter of credit---Importer was entitled to import goods at concessionary rate of 5 % duty in terms of form S' issued by the Central Board of Revenue---Amount of duty worked out was only Rs.924 which was too. small to induce an industrial importer to indulge in wilful misdeclaration---Order of confiscation of goods was set aside by the Appellate Tribunal with the direction that goods may be released on payment of duty and taxes at the rate provided in the relevant concessionary S.R.O. and in accordance with the conditions/quantities provided in the FormS' issued by the Central Board of Revenue.

M. Rizwan for Appellant.

Khalid Mahmood, D.R. and Waqar Ahmad, Appraiser for Respondent.

Date of hearing: 26th February, 2007.

2007 P T D (Trib.) 2286

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar-ul-Majeed, Member (Technical)

S.T.A. No. 814/LB of 2006, decided on 31st January, 2007.

Sales Tax Act (VII of 1990)---

----Ss. 7, 10 & 33(2)(cc)---C.B.R. Letter C. No. 2(1)STP/97 dated 3-10-2002---Determination of tax liability---Adjustment of arrears recoverable from assessee along with additional tax involved was made from verified amount of carry-forward input tax credit but the demand was adjudged on the basis of C.B.R. letter C. No.2(1)STP/97 dated 3-10-2002 whereby the Collectorates had been directed to discontinue the practice for adjustment of arrears against the amount carry-forward---Validity---Admittedly, adjustment of sales tax was allowed by the Sales Tax Collectorate against verified amount of input tax carried forward---Deposit of said amount separately and then claiming refund of the same as carry forward would be an exercise in futility as the Government will not stand to gain anything---No loss of revenue being involved and that the demand had been raised only in the light of instructions of Central Board of Revenue, there was no restriction in law prohibiting adjustment of arrears against an amount due to assessee/registered person---Even if there was some irregularity involved in the light of instructions of Central Board of Revenue, the same was condoned' being a procedural lapse as no loss of revenue was involved---Appeal was accepted and .the order was set aside by the Appellate Tribunal.

Ch. Abdul Razaq for Appellant.

Ashiq Hussain Duggal, Supdt. for Respondent.

Date of hearing 31st January, 2007.

2007 P T D (Trib.) 2289

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial) and Zafar ul Majeed, Member (Technical)

S.T.A. No. 1318/LB of 2005, decided on 7th March, 2007.

Sales Tax Act (VII of 1990)--

----Ss.34(1) & 26---S.R.O. 247(I)/2004 dated 5-5-2004---Additional tax---Reduced rate---Contention was that admittedly, rate or additional tax at the relevant time was 2%, but rate of tax having been reduced to 1% subsequently, the assessee was entitled to reduced rate---Validity---Held, there was absolutely no controversy about the levy but the assessee wilfully and on purpose defaulted in payment or' a self-assessed amount of sales tax which had been recovered from the buyers and required to be deposited in government exchequer by due date---Assessee was guilty of withholding illegally the amount of tax collected on behalf of government and, as such it was not entitled to any dispensation---Assessee was liable to pay additional tax at the rate as it existed at the relevant time and it was not authorized to change it on its own. by applying lower rate of tax---Assessee having failed to pay correct amount of tax in accordance with the provisions of S.R.O. 247(I)/2004 dated 5-5-2004, it was not entitled to the amnesty granted thereunder either---Assessee was directed to pay additional tax at the rate of 2% per month as prescribed under S.34(1) of the Sales Tax Act, 1990, as it existed at the relevant time---Order was modified by the Appellate Tribunal accordingly.

Messrs Chistia Sugar Mills Lahore v. Collector of Customs, Lahore GST 2004 CL 95 and 2004 SCMR 456 distinguished.

Ijaz Ahmad Awan for Appellants.

Faisal, S.A. for Respondent.

Date of hearing: 22nd February, 2007.

2007 P T D (Trib.) 2295

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

S.T.A. No. 754/LB of 2006, decided on 12th February, 2007.

Sales Tax Act (VII of 1990)---

----S.45A(4)---Power of the Central Board of Revenue and Collector to call for record---Legality or propriety of the decision/order---Collector though had ample powers to call for and examine the record and to pass any order as he may deem fit but for that purpose the Collector was bound to first satisfy himself as to the legality or propriety of the decision/order made by any officer subordinate to him---Case was reopened in order to adjudge its legality and propriety which was against the very spirit of the provisions contained in S.45A(4) of the Sales Tax Act, 1990.

Masood Ishaq for Appellant.

Nauman Yaqoob, Auditor for Respondent.

Date of hearing: 12th February, 2007.

2007 P T D (Trib.) 2299

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial) and Zafar ul Majeed, Member (Technical)

S.T.A. No. 564/LB of 2006, decided on 14th March, 2007.

(a) Sales tax---

----Limitation---Setting aside of order---Remanded case was decided after over 12 years--Validity---Admittedly, proceedings concluded were badly delayed but this did not vitiate the proceedings, as there was no express provision in the Sales Tax Act, 1990 providing any limitation in this behalf---Contention that period provided for maintenance of record was five years and assessee was unable to produce same as it was not tenable as the matter being in dispute, they were required to maintain the record until the issue was finally resolved.

(b) Sales Tax Act (III of 1951)---

----S.27---Sales Tax Act (VII of 1990), Preamble---Case related to the period when Sales Tax Act, 1951 was in field but demand of tax, additional tax and penalty adjudged under the provisions of Sales Tax Act, 1990 was totally incorrect---Order was upheld by the First Appellate Authority in a mechanical way without applying its mind---order-in-original as well as order-in-appeal being erroneous/defective were not sustainable in law.

(c) Sales Tax Act (III of 1951)---

----S.27---Sales Tax Act (VII of 1990), Preamble---C.B.R. Circular No.2 of 1990---Adjustment of input tax paid on goods used for packing/wrapping was not admissible because wrapping material did not constitute raw material of the finished product--Validity---Matter needed to be examined afresh in the light of relevant record/provisions of Sales Tax Act, 1951---Order was set aside and the case was remanded fora fresh decision on merit and in accordance with law after giving the parties proper opportunity of hearing and allowing them to bring up any fresh evidence that the appellant may fresh to add---As the matter had been inordinately delayed, Collector (Appeals) was directed to decide the case at an early date, but within the period of two months.

Asim Zulfiqar, C.A. for Appellant.

Khalid Mehmood, D.R. and Javed Shah, S.A. for Respondent.

Date of hearing: 25th February, 2007.

2007 P T D (Trib.) 2308

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member Judicial

Sales Tax Appeal No. 2816/LB of 2001, decided on 11th May, 2007.

Sales Tax Act (VII of 1990)---

-----S.8---Tax credit not allowed---Inadmissibility of invoices---Record was requisitioned by the invoices issuing unit---Direction was not complied with on which. basis it was observed that the unit was involved in issuing fake invoices---Observation did not cover the period in which the invoices were issued---Had the said unit been indulging in issuing .fake invoices then the matter should have been taken up in that relevant period as the invoices had to be manifested in the monthly return to be submitted by the registered person---Order passed was not sustainable in the eye of law in circumstances.

Mudassar Shujah for Appellant.

Dr. Akhtar Hussain, D.R. for Respondent.

Date of hearing: 9th May, 2007.

2007 P T D (Trib.) 2312

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial) and Zafar ul Majeed, Member (Technical)

S.T.A. No. 874/LB of 2004, decided on 14th March, 2007.

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

----Ss.36(3), 3, 6, 22, 23, 25, 35 & 38---Recovery of tax not levied or short-levied or erroneously refunded---Supply against various contracts without payment of sales tax in violation of the provisions of Sales Tax Act, 1990---During the proceedings after remand, department after conducting necessary enquiries established that the supplies against the contracts listed in the order actually comprised of goods manufactured by him, which was evident from documents produced and placed on record---Taxation---Assessee contended that demand of tax was raised in respect of over 11 years old period which was barred by time having crossed the limitation period of 3 years or 5 years---Validity---Demand was raised by issuing show-cause notice on 13-10-1993, i.e. within the period of 5 years prescribed under S.36(1) of the Sales Tax Act, 1990, the orders passed in consequence thereof were not hit by limitation---Plea that "order having been passed after a period of 90 days provided under S.36(3) of the Sales Tax Act, 1990 was illegal" was not accepted by the Appellate Tribunal---Such provisions of Sales Tax Act, 1990 being directory in nature and not mandatory, did not render an order passed after the period provided therein as illegal---Order not suffering from any illegality or infirmity, appeal was rejected by the Appellate Tribunal being devoid of merit.

(b) Sales tax---

----Exemption---Cottage Industry Scheme---Supply in huge quantities, valuing about Rs.21.14 Million, belies the claim for exemption under Cottage Industry Scheme, which provided for capital employed below Rs.1,00,000 to be entitled to it---Exemption certificates under Cottage Industry Scheme, even if issued by the Department, would be void having been issued by basing same on incorrect information given by the appellant.

Syed Afzal Hussain, Consultant for Appellant.

Khalid Mehmood, D.R. and Muhammad Ikram, Auditor for Respondent.

Date of hearing: 12th February, 2007.

2007 P T D (Trib.) 2391

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zia-ud-Din Khattak, Member (Judicial) and Mumtaz Haider Rizvi, Member (Technical)

Appeal No. (Remand) 18S/PB of 2006 (Old-7(197)ST/IB of 2000), decided on 21st May, 2007.

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

----Ss.8(1)(a) & 7---Customs Act (IV of 1969), First Sched., Chap. 84---S.R.O. 1307(I)/97, dated 20-12-1997---S.R.O. 578(I)/98 dated 12-6-1998---Tax credit not allowed---Input tax adjustment in relation to sales tax paid on machinery spare parts and a Fork-lift truck was not permissible in terms of S.R.O. 1307(I)/97 dated 20-12-1997 as such S.R.O. permitted only such adjustments, which were made in relation to goods, which formed integral part of the taxable supply i.e. raw materials consumed in making of the taxable goods---Validity---Once a registered person established that the goods in question on which input tax had been paid were used or to be used directly or indirectly for the purpose of manufacture or production of taxable goods or for taxable supplies made or to be made by him, then he became entitled to the deduction of the said input tax paid by him for the said purpose from the output, tax that was due from him in respect of a particular tax period and if no output tax was due then he was entitled to refund of input tax---Adjustment of input tax in relation to Fork-lift Truck was lawful being an item used for purposes of making taxable supplies and not listed in any notification ever issued under S.8(1)(b) of the Sales Tax Act, 1990---Fork-lift trucks were for special purpose vehicles used for lifting the manufactured goods right from the production hall to the factory warehouse. and were classified under Chapter 84 of the First Schedule to the Customs Act, 1969 and not under Chapter 87 of said Schedule, vehicles of which were not eligible for input tax adjustment under S.R.O. S78(I)/98 dated 12-6-1998---Input adjustment claimed on machinery spare part andFork-lift truck' was lawful in terms of the provisions of S.7 read with S.8(1)(a) of the Sales Tax Act, 1990---Order­-in-original was set aside and appeal was allowed by the Appellant Tribunal.

S.A.Os. Nos.32 and 34 of 2002; 2002 PTD 2959; Central Board of Revenue v. Sheikh Spinning Mills Limited 1999 PTD 2174; Attock Cement Pakistan Limited v. Collector of Customs and Central Excise Quetta 1999 PTD 1892; Sindh Alkalis Limited and 6 others' case 2002 PTD (Trib.) 475; Dhan Fibres. Limited's case 2003 PTD Journal 12; 2005 PTD 2012 and Messrs Mayfair Spinning Mills Limited v. Customs, Central Excise and Sales Tax Appellate Tribunal and 2 others PTCL 2002 CL 115 rel.

(b) Sales tax---

---Input tax adjustment---Principles---Any item may not have directly contributed in the production of a taxable supply but if it is indirectly relatable to production process or is normal accessory in the industrial activity in question then input tax paid on such an item is adjustable against the output tax.

Farrukh Jawad Panni for Appellant.

Jahanzeb Mahmood, D.R. and Naveed Alam, Auditor for Respondent.

Date of hearing: 16th April, 2007.

2007 P T D (Trib.) 2399

[Customs, Central Excise and Sales 'tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member (Judicial) and Hafiz Muhammad Anees, Member (Technical)

Sales Tax Appeal No.692/LB of 1999, decided on 14th September, 2006.

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

----Ss.31-A, 30 & 31---S.R.O. 454(I)/96, dated 13-6-1996---S.R.O. 1051(I)/99, dated 16-9-1999---Effective rate of duty---Filing of ex-bond bills with benefit of S.R.O. 454(I)/96 dated 13-6-1996---Clearance was allowed only after payment of leviable Central Excise Duty as the goods became liable to 15% Central Excise Duty after having been warehoused in pursuance of S.R.O. (sic)(I)/99 dated 15-9-1999 which was paid under protest---Validity---Petitioner was entitled to the benefit of S.R.O. 454(I)/96 dated 13-6-1996 and was not liable to pay Central Excise Duty under S.R.O. (sic)(I)/99 dated 16-9-1999---Appellant was entitled to claim the refund of the Central Excise Duty already paid under protest in case the decision of Supreme Court was in their favour.

Al-Samrez Enterprises v. Federation of Pakistan 1986 SCMR 1917; Messrs M.Y. Electronics Industries (Pvt.) Ltd, v. Government of Pakistan 1998 SCMR 1404 and Assistant Collector Customs Central Excise and Sales Tax, Mardan v. Messrs Gadoon Textile Mills Ltd. Swabi 1994 SCMR 712 ref.

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

----Ss. 30 & 104---Import duty---State for determination of rate---Section 30 of the Customs Act, 1969 provides that the rate of duty applicable to any imported goods shall be the rate of duty in force in the case of goods cleared from a warehouse under S.104 of the Customs Act, 1969 on the date on which a bill of entry for clearance of such goods was manifested under that section and in case of non-payment of duty within seven days from the date of manifestation of the bill of entry, the applicable rate of duty would be the date on which the duty was actually paid.

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

----Ss.31-A & 30---Effective rate of duty---Section 31-A of the Customs Act, 1969 read with S.30 of the Customs Act, 1969 provides that the crucial date for determination of the rate of duty etc. was the date of filing of ex bond bill of entry in case the duty was paid within seven days after manifestation otherwise the crucial date would be the date of payment of duty and taxes and would include the amount of duty that might have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement from the sales of goods or opening of a letter of credit in respect thereof.

Kohinoor Textile Ltd. v. Federation of Pakistan 2002 PTD 121 rel.

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

----S.37(2)(i)---Central Excise Rules, 1944, R.9, fifth proviso---Power of Central Board of Revenue to make rules---Delegation conferred through S.37(2)(1) of the Central Excise Act, 1944 on the Central Board of Revenue, was only with regard to "assessment and collection" and not imposition or "charge" of the duty---Central Board of Revenue in notifying the fifth proviso to R.9 of the Central Excise Rules, 1944 had travelled far beyond the delegation conferred upon it since the said proviso had been extended to the creation of a "charge along with collection"---Central Board of Revenue had not been given the power to introduce the charge.

Malik Muhammad Din v. Trustees of the Port of Karachi PLD 1966 Kar. 518 and Chairman, Railway Board v. Wahabuddin Sons PLD 1990 SC 1034 rel.

(e) Central Excise Rules, 1944---

----R.9, fifth proviso---Central Excise Act (I of 1944), S.37(2)(i)---Time and manner of ,payment of duty---Use of word "charge" in the fifth proviso to R.9 of the Central Excise Rules, 1944 was ultra vires the power conferred on Central Board of Revenue under S.37(2)(i) of the Central Excise Act, 1944.

Malik Muhammad Din v. Trustees of the Port of Karachi PLD 1966 Kar. 518 and Chairman, Railway Board v. Wahaduddin Sons PLD 1990 SC 1034 rel.

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

----S.37(2)---Power of Central Board of Revenue to make rules---Even if the subject or item of rule making mentioned in S.37(2) of the Central Excise Act, 1944 were not exhaustive, the general rule making power had to be read as ejusdem generis with the items or subject listed in S.37(2) of the Central Excise Act, 1944.

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

----S.37---Central Excise Rules, 1944, R.9, fifth proviso---Power of Central Board of Revenue to make rules---Assessment and collection---Charge---"Assessment and collection" were completely opposed to "charge" and the two were not ejusdem generis by any stretch of imagination---General rule making power delegated under S.37 of the Central Excise Act, 1944 could not be extended to creation of a charge'---Even if S.37 of the Central Excise Act, 1944, hypothetically speaking had delegation to Central Board of Revenue the power to introduce acharge' or a `levy' the said delegation would be bad since it was now much settled that the power to impose or introduce a tax, levy or a fee was only legislative function which could not be delegated---Term "charge" used in the fifth proviso of R.9 of the Central Excise Rules, 1944 was found to be unenforceable.

M. Afzal and Sons v. Federation of Pakistan PLD 1977 Lah. 1327 and Abdul Rahim v. U.B.L. PLD 1997 Kar. 62 rel.

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

---S.31-A,---Central Excise Act (I of 1944), Preamble---Central Excise Rules, 1944, R.9---Effective rate of duty---Section 31-A of the Customs Act, 1969, could not be extended to Central Excise Act, 1944 and the fifth proviso to R.9 of the Central Excise Rules, 1944 did not alter the position i.e. that it could not in any way be interpreted to take away the vested rights of a person.

Kohinoor Textile Mills Ltd. v. Federation of Pakistan 2002 PTD 121 rel.

Umer Arshad for Appellant.

Mahmood Hussain, D.R. and Farrukh Ghulam Abbas, Inspector for the Respondent.

Date of hearing: 7th September, 2006.

2007 P T D (Trib.) 2407

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.A. No. 1073/LB of 2005, decided on 23rd February, 2007.

Sales Tax Act (VII of 1990)---

----Ss.8(1)(b) & 33(2)(cc)---C.B.R. Letter C.No.1(117)STJ/2004 dated 9-9-2004---Tax credit not allowed---Levy of sales tax on disposal of old and used plant and machinery, vehicles and scrap---Validity---Appellant had not claimed input tax adjustment against the goods in question at the time of their purchase---Central Board of Revenue had clarified that tax was not chargeable on disposal of vehicles as adjustment of input tax was not admissible at the time of their purchase under S.8(1)(b) of the Sales Tax Act, 1990---Sales Tax Collectorates were directed not to file appeals in cases relating to levy of sales tax on disposal of fixed assets against which input tax adjustment had not been allowed/claimed at the procurement stage due to bar/restriction imposed by an order or notification issued under S.8 of the Sales Tax Act, 1990---Disposal of goods in question was not liable to sales tax as the appellant, as confirmed by the Department, did not claim input tax adjustment at the time of their acquisition---Appeal was accepted and the order was set aside by the Appellate Tribunal.

2001 PTD (Trib.) 2590 and Appeals Nos. 1806-1819/LB of 2001 ref.

Omer Arshad and M. Naeem for Appellant.

Khalid Mahmud, D.R. and Irfan Ahmad, S.A. for Respondent.

Date of hearing: 21st February, 2007.

2007 P T D (Trib.) 2456

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member Judicial

S.T.A. No. 797/LB of 2005, decided on 21st June, 2007.

Sales Tax Act (VII of 1990)---

----Ss. 21(4) & 7---De-registration, blacklisting and suspension of registration---Black listed unit---Input tax adjustments were treated as inadmissible as the units had been black listed---Validity---Department failed to produce any independent evidence showing that appellants were ever informed that the firms with whom they were dealing were declared as fake units---Provisions of S.21(4) of the Sales Tax Act, 1990 were never adhered to before declaring the units as fake---Show-cause notice issued to appellant was ambiguous and vague in material particulars---Appellant remained filing monthly returns during the audit period with the department showing purchases from the units so declared fake but neither raised any objection nor informed the appellants that the invoices issued by those units were not acceptable---Information down loaded from website could not be held as reliable information and after obtaining such information the department was duty bound to establish through independent evidence that the units with which the appellants were dealing were take and the appellants were duly appraised about these facts---Order to the extent of disallowing input tax adjustment against such invoices was not justifiable in circumstances---Appeal was accepted by setting. aside the order to the extent of claim of input tax against invoices issued by such suspected units and show-cause notice to this extent was also set aside holding that the appellants were entitled to the input tax adjustment against such invoices.

Mudassar Shuja for Appellant.

Dr. Akhtar Hussain, D.R. with Ghulam Shabbir for Respondent.

Date of hearing: 19th June, 2007.

2007 P T D (Trib.) 2467

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial) and Zafar ul Majeed, Member (Technical)

Appeal S.T.A. No. 2713/LB of 2001, decided on 23rd May, 2007.

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

----S.7---Determination of tax liability---Adjustment of input tax paid on electricity bills---Electricity was used iii the office at the site and in the project office, which dealt with production as well as sales of the coal---Appellant was entitled to adjustment of input tax paid thereon and demand of sales tax along with additional tax raised in this account was dropped by the Appellate Tribunal.

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

----S.7---Determination of tax liability---Adjustment of input tax paid on telephones installed in the appellant's business/name was admissible under the rules.

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

----S.8(1)(b)---S.R.O. 578(I)/98 dated 12-6-1998---Tax credit not allowed---Adjustment of input tax against purchase of tyres for jeep---Validity---Assessce was directed to pay sales tax adjusted against purchase of tyres or the jeep iii violation of the provisions of S.R.O. 578(I)/98 dated 12-6-1998.

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

----Ss.34 & 33---Additional tax (Default surcharge)---Late filing of return---Penalty was paid on account of late filing of sales tax return in compliance with the directions of the department---No justification was available to charge additional tax in addition to that and demand of additional tax on this account was dropped by the Appellate Tribunal.

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

----S.34---Additional tax (Default surcharge)---No wilful or mala fide default---Issue regarding chargeability of sales tax on bauxite having remained in litigation for quite some lime, the default on this account could not be treated as wilful or mala fide---Demand of additional tax was set aside by the Appellate Tribunal.

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

----S.34---Additional tax (Default surcharge)---Demand of additional tax on advances was set aside by the Appellate Tribunal as the issue remained in dispute during the period in question, until finally decided by the Supreme Court, and the default on this account was held to be not willful.

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

----Ss.33(2)(c) & 34---Offences and penalties---Additional tax (Default surcharge)---Non-payment of tax at the enhanced rate of 181 and late payment of differential amount could not be treated as wilful or mala fide in view of explanation given by the appellant--Demand of additional tax raised on this account was dropped and penalty imposed was remitted by the Appellate Tribunal keeping in view the overall circumstances of the case.

Miss Munaza for Appellant.

Khalid Mehmood, D.R. for Respondent.

Date of hearing: 25th April, 2007.

2007 P T D (Trib.) 2481

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial) and Zafar ul Majeed, Member (Technical)

Appeal S.T.A. No. 806/LB of 2006, decided on 23rd May, 2007.

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

----S.8(1)(b)---S.R.O. 578(I)/98 dated 12-6-1998---Tax credit not allowed---Deisel oil having been included in the list of items contained in S.R.O. 578(I)/98 dated 12-6-1998 issued under S.8(1)(b) of the Sales Tax Act, 1990 was not entitled to input tax credit.

Messrs Sheikh Spinning Mills Ltd v. Federation of Pakistan 2002 PTD 2959 not relevant.

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

----S.3---Scope of tax---Empty drum---Chargeability---Issue regarding chargeability of sales tax on fixed assets/scrap etc. had since been .decided by the Supreme Court in favour of the Revenue, finding of the Collector regarding sales of empty drums were upheld by the Appellate Tribunal.

Collector of Customs, Central Excise and Sales Tax Karachi, (West) v. Novartis Pakistan Ltd. 2002 PTD 976 distinguished.

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

----Ss.3 & 33---Scope of tax---Department having not been able to produce any evidence in support of the charge demand of sales tax and penalty on account of disposal of sludge was set aside.

Shamail Pirachi for Appellant.

Khalid Mehmood, D.R. with Israr Khan, Auditor for Respondent.

Date of hearing: 9th May, 2007.

2007 P T D (Trib.) 2494

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

Before Abdus Salam Khawar, Member (Judicial)(Chairman)

Sales Tax Appeals Nos. 181 to 185 and 127 of 2003, decided on 16th May, 2007.

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

----S.46---Appeal to Appellate Tribunal---Finance Act (III of 2006), Preamble---Filing of appeal by Assistant Collector prior to amendment in the statute S.46--'Validity---Amendment in S.46 of the Sales Tax Act, 1990 had been made by the Finance Act, 2006 whereby in subsection (1) of S.46 of the Sales Tax Act, 1990 for the word "the Sales Tax Department", the words "an officer of Sales tax not below the rank of Additional Collector" had been substituted and it was to be decided as to who was competent to file appeal on behalf of the Sales Tax Department at the relevant time---No authorization or general delegation of powers giving the specific authorization to file the appeals had been given to the Assistant Collector in the absence of which, it shall be safe to presume that the Assistant Collector had not been delegated the powers of filing the appeals before the Appellate Tribunal---Assistant Collector of the relevant time was not competent to file the appeal on behalf of the Sales Tax Department---Appeal was not maintainable within the provisions of S.46 of the Sales Tax Act, 1990 as it stood at the relevant tune.

PTCL 1999 CL 638, C.P. No; Civil Petition No. 675-K of 2005 in Civil Appeal No.2036 of 2004; Re-Superintendent of Customs v. S.L. Hayat Industry Civil Appeal No.60 of 2002; Directorate General of Intelligence and Investigation and others v. Al-Hafiz Industry (Pvt.) Ltd. 2006 SCMR 129; Collector of Sales Tax, Faisalabad v. Messrs Al-Hadid Engineering Works, Faisalabad S.T.A. No.1 655/LB of 2003; Collectorate of Sales Tax and Central Excise Rawalpindi v. Messrs Attock Refinery Limited Morgah, Rawalpindi in Miscellaneous Application No.38/ST/IB of 2005 in Appeal No.2292 of 2001 and Sales Tax Appeal No.L-686 of 2004 ref.

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

----Ss.45, 46 & 47---Sales Tax General Order No.4/98 dated 12-8-1998--Power of adjudication---Sales Tax General Order No.4/98 bearing C.No. 3(23)STP/98 dated Islamabad, the 12th August, 1998 provided. that the Collectors were made responsible to receive, monitor and scrutinize each and every order-in-original, order-in-appeal, appellate order/decision of, passed by the Tribunal for the purpose of determination of propriety and justification of filing of appeal under Ss.45, 46 & 47 of the Sales Tax Act, 1990 and thus impliedly the Collectors were responsible and authorized to file the appeal.

Mian Abdul Ghaffar for Appellant.

Dr. Akhtar Hussain, D.R. for Respondent.

Date of hearing: 16th-May, 2007.

2007 P T D 415

[Federal Tax Ombudsman]

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

Messrs PAKISTAN FRUIT JUICE CO. (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION ISLAMABAD

Complaint No. 390-L of 2006, decided on 15th June, 2006.

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

----Ss. 11(4), 33(2)(cc), 36(3), 45A, 45B & 46---Federal Excise Act (VII of 2005), S.35---Central Excise Act (1 of 1944), S.33(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment of tax---Limitation---Complainant contended that show cause notice was issued on 24-9-2005 and the order was passed on 20-3-2006, (177 days after issuance of show cause notice) whereas the prescribed period for deciding the case had expired on 23-12-2005 and that order was hit by time limitation as provided in law and was null and void---Validity---Order-in-Original needed to he reopened under S.35 of the Federal Excise Act, 2005 and S. `45A of the Sales Tax Act, 1990 to quash demand of central excise duty/additional duty and penalty imposed because the Collector allowed extension in the period for deciding the case under S.33(3) of the Central Excise Act, 1944, without having jurisdiction to do so and remit penalty levied under the Sales Tax Act, 1990 because the show cause notice did not confront the intention to impose penalty under S.33(2)(cc) of the Sales Tax Act, 1990 before it was imposed in the Order-in-Original---No proceedings could be undertaken or initiated for reopening a decision or order passed under Sales Tax Act, 1990 in a case where appeal under Ss.45B and 46 of the Sales Tax Act, 1990 was pending and an appeal was indeed pending before the Collector of Appeals---Complainant, for its part, shall have to withdraw the appeal---Federal Tax Ombudsman recommended that the Revenue Division direct the competent authority to reopen the impugned Order-in-Original, dated 20-3-2006 under S.35 of the Federal Excise Act, 2005 and S.45A of the Sales Tax Act, 1990 so as to quash demand of central excise duty/additional duty and penalty created in the impugned order hit by time limitation, remit penalty imposed under the Sales Tax Act, 1990 for failure to confront the complainant with specific provision of S.33(2)(cc) of the Sales Tax Act, 1990 and may proceed in accordance with the provisions of law---Complainant, on its part, shall have to withdraw the Appeal filed before the Collector of Customs, Excise and Sales Tax (Appeals).

Complaint Nos. 805 of 2003; 940 of 2005; 113-L of 2005 and No.1 19-L of 2006 rel.

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

----S. 33(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Power of adjudication---Limitation---Extension allowed under the provisions of S.33(3) of the Central Excise Act, 1944 after repeal of the same as on 1-7-2005 was void ab initio.

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

----S. 33(3)---Sales Tax Act (VII of 1990), S.36(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Power of adjudication---Under the provisions of S.33(3) of Sales Tax Act, 1990, it was only the Central Board of Revenue, and not the Collector, who was competent to extend the time limit under `exceptional circumstances'---Collector did ,,not extend the period prescribed for deciding the ease under S.31(3) of the Federal Excise Act, 2005---Collector Under S.36(3) of the Sales Tax Act, 1990, was empowered to allow extension in time for another 90 days but only after recording reasons for such extension in writing.

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

----S.33(3)---Sales Tax Act (VII of 1990), S.36(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Power of adjudication---Limitation---Extension by Collector---Validity---Period prescribed for deciding the case was extended for further 90 days by the Collector under S.33(3) of the Central Excise Act, 1944 and S.36(3) of the Sales Tax Act, 1990---Collector allowed extension of 90 days under Central Excise Act, 1944 on 5-12-2005---Central Excise Act, 1944 was repealed on 1-7-2005 and was replaced by Federal Excise Act, 2005---Firstly the extension was allowed under the defunct Central Excise Act, 1944 and secondly, as per the provisions of S.33(3) of Central Excise Act, 1944, only the C.B.R. under Central Excise Act, 1944 was competent to grant extension and not the Collector---Extension granted by the Collector in terms of the provisions of Central Excise Act, 1944 was not legally sustainable---Order-in-Original related to determination of liability of excise duties and imposition of penalty under Excise Law was hit by time limitation.

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

----S. 33(2)(cc)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Offences and penalties---Penalties without confrontation---Show cause notice showed that complainant was charged with evasion of both excise duty and sales tax which were shown as recoverable---Show cause notice did not disclose department's intention to levy penalty under the Sales Tax Act, 1990---Order-in-Original also imposes penalty, since complainant was not confronted with the specific penal provision of the Sales Tax Act, 1990 the imposition of penalty vide Order-in-Original could not legally stand.

Omar Arshad Hakeem and Waseem Ahmad for the Complainant.

Muteen Alam, A.C., Sales Tax, Multan for Respondents.

2007 P T D 430

[Federal Tax Ombudsman]

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

Messrs SABIR DAUD EXPORTS, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 541 of 2006, decided on 21st August, 2006.

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

---S. 36(3)-Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Customs General Order No.12 of 2002---C.B.R. letter No.6 (6)S/Adj/2005, dated 12-12-2005---Law, Justice and Human Rights Division's letter No.191 of 2005-Law (FTO), dated 22-5-2006---Law, Justice and Human Rights Division's letter No.196 of 2005-Law (FTO), dated 26-5-2006---Recovery of tax not levied or short-levied or erroneously refunded-Limitation-Extension--Exceptional circumstances---Levy of tax on the ground that invoices through which input tax was claimed were declared suspicious by the Central Board of Revenue and also for non-payment of' sales tax on supply of empty bags and paper cones---Order-in-Original was passed late by 382 days after obtaining extension from Central Board of Revenue---Extension was granted by the Central Board of Revenue after the expiry of limitation provided by S.36(3) of the Sales Tax Act, 1990---Validity---Order-in-Original could not be held to have any legal effect because the time granted by the Central Board of Revenue after the expiry of the original time limitation was not legally correct; the reason given for the extension of time by the Central Board of Revenue could not be termed as exceptional circumstances and department had failed to establish that the Order-in-Original was finalized within the time period as extended by the Central Board of Revenue---Federal Tax Ombudsman commended the competent authority to reopen the impugned Order-in-Original and annul the aforesaid Order-in-Original as being hit by time limitation as provided in the law and may proceed in accordance with the provisions of law.

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

----S.36(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Customs General Order No.12 of 2002---Recovery of tax not levied or shot-levied or erroneously refunded---Limitation---Extension of time period after expiry of original time limitation---Validity---Question whether the Central Board of Revenue could extend the time for adjudication before the expiry of the statutory period was not a question of interpretation of law---Central Board of Revenue itself issued clear instructions to its subordinate officers that any extension given after the expiry of the original period did not have any force of law on the other hand by extending the time period, contradicted their own instructions---Action of Central Board of Revenue in extending the time period after the expiry of the original limitation could not be upheld.

PTCL 1983 (C.L.) 46 rel.

Complaint No.1133-L of 2005 distinguished.

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

----S.9(1)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Central Board of Revenue, which is another name of the Revenue Division, was as much within the purview of the jurisdiction of the Federal Tax Ombudsman as any other .functionary or office subordinate to it, within the meaning of S.9(1) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, which deals with the jurisdiction, functions and powers of the Federal Tax Ombudsman---Federal Tax Ombudsman can "investigate on allegation of maladministration on the part of Revenue Division".

Messrs Pangraphies (Pvt.) Ltd., Islamabad C. No. 904 of 2005 distinguished.

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

----Ss. 9 & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Maladministration---Federal Tax Ombudsman is empowered to examine any decision of the Central Board of Revenue and if it was found have suffered from maladministration, pass decision and make appropriate recommendations with regard thereto---Order of Collector based on administrative decision of the Central Board of Revenue of extension of time could very well be examined by the Federal Tax Ombudsman to decide whether the same had suffered from maladministration.

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

----S. 2(3)---Maladministration---Any order or decision based on such an order suffering from maladministration passed or made by the subordinate officer of the Revenue Division could legally be declared to have suffered from maladministration and jurisdictional defect in the same manner as was the order of the Central Board of Revenue on which it was based.

(f) Sales Tax---

----Void order---Scope---Any superstructure based on illegal or void order has no legs to stand and has to fall on the ground along with the order on which it was based.

PLD 1958 SC 104 rel.

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

----S. 36(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Extension of time limitation---Exceptional circumstances---Central Board of Revenue extended time for the reason that "hearings are being conducted regularly, it is expected that the case will be finalized within the requested time"---Such order could not be qualified for the term "exceptional circumstances" by any stretch of imagination; it only reflects on the inefficiency, neglect, inaptitude and delay on the part in of the concerned officers---Central Board of Revenue did not fulfil the requirement of law by failing to prove the existence of "exceptional circumstances" which could justify the extension.

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

----S.36(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Extension of time limitation---Extension was sought after 366 days of the issuance of show cause notice; by this time, the limitation provided by S.36(3) of the Sales Tax Act, 1990 had already expired---Power to extend time vested in Central Board of Revenue was neither absolute nor uncontrolled.

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

----S.36(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Limitation---Extension---Exceptional circumstances---Decision of Central Board of Revenue, in the absence of any reasons or findings about existence of exceptional circumstances, was not only illegal but also suffered from arbitrariness adversely affecting the rights of the taxpayers to treat the proceedings to have come to and end on the expiry of the period of limitation.

PLD 1958 SC 104 distinguished.

(j) Sales Tax---

----Limitation---An order passed on the file but not communicated to the affected party within the prescribed limit could not be treated as having been passed within the prescribed period.

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

----S. 9(2)(a)---Jurisdiction, functions and powers of the Federal Tax Ombudsman--Decision of the Customs, Sales Tax and Federal Excise Appellate Tribunal was not binding on the Federal Tax Ombudsman.

Mian Manzoor Ahmad and A.R. for the Complainant.

Muhammad Azam, D.C. Sales Tax and D.R. for Respondent.

2007 P T D 601

[Federal Tax Ombudsman]

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

Messrs DELTA INNOVATIONS LIMITED, KARACHI

Versus

SECRETARY, REVENNUE DIVISION, ISLAMABAD

Complaint No.C-307-K of 2006, decided on 1st September, 2006.

Customs Act (IV of 1969)---

----S. 81---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 22---S.R.O. 436(I)/2001, dated 18-6-2001---Provisional assessment of duty---Consignments of parts and components of motorcycles and trucks were released against bank guarantees with the undertaking to supply the Provisional and Final Certificates of the Central Board of Revenue---Such certificate had been furnished but bank guarantees had not been released and no reply had been given to several letters and applications sent to the Collector which amounted to maladministration---Department contended that provisional release of parts and components of motorcycles was allowed subject to the issuance of provisional/final certificate but the provisional certificate issued by Central Board of Revenue clearly specified "that concession shall be available prospectively from the date of issuance of the Provisional Certificate"---Since all imports of the parts and components were made prior to the issuance of the provisional certificate, the same were not entitled to any concession---Validity---Central Board of Revenue had not given any reasons/justification as to why on the application made in January, 2003 the survey was conducted in December, 2003; that why a provisional certificate was not issued till ordered by the High Court; that as to why it had been specifically mentioned in the provisional certificate that it would have only prospective effect, thus in effect, depriving the assemblers the benefit of tax concession apparently genuinely due to him and that why the Central Board of Revenue had not issued a final certificate despite the fact that more than two years had elapsed since, the date of survey and issue of the provisional certificate---Complainant had been the victim of' neglect, inattention, unnecessary delay, manifest departure from established practice without valid reasons and, surprisingly for the Central Board of Revenue, an arbitrary and unjust approach to decide the issues of the unit---Maladministration, in circumstances was established---Federal Tax Ombudsman recommended Central Board of Revenue to allow, the benefit of S.R.O. 436(I)/2001 effective from October, 2003 when the first consignment was cleared against bank guarantee under the order of the Collector of Customs; to issue a final certificate for 15000 units of motorcycles as mentioned in the survey report and the MOU between applicant and the Chinese Motorcycles company to establish a motorcycle manufacturing assembly plant with annual production of, 15000 units; and to re-examine the declaration in the Form-S survey application about the production capacity of 30,000 motorcycles per annum on double shift basis, get the unit resurveyed, and taking into consideration its past performance, may consider revising the capacity and that 17 bank guarantees out of which 8 related to trucks which reportedly were not disputed and 9 guarantees for CKD kits of motorcycles be released.

Afzal Awan, Advocate.

Manzoor Ahmad, General Manager.

Imran Iqbal, Advocate.

Imran Javaid, Consultant.

S.M. Shoaib, Secretary (I.I&T-III), C.B.R..

Irfan Javed, Deputy Collector of Customs (Appraisement).

Ms. Misbah Khatana, Deputy Collector of Customs (Appraisement).

2007 P T D 631

[Federal Tax Ombudsman]

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

Messrs SIDDIQSONS DENIM MILLS LIMITED, KARACHI

Versus

SECRETARY, REVENNUE DIVISION, ISLAMABAD

Complaint No.C-641-K of 2006, decided on 28th September, 2006.

Sales Tax Act (VII of 1990)---

----S. 67---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Delayed refund---Application for issue of refund along with delayed surcharge---Department contended that amount of refund had already been sanctioned after completion of legal proceedings and payment of surcharge was not applicable in the case till the investigation of the claim was completed---Validity---Record showed that the claim of compensation was still pending with the Department---No order on application had been passed so far without any reason/justification---Such constitutes maladministration---Federal Tax Ombudsman recommended the Central Board of Revenue to direct the concerned officer of Sales Tax Department to dispose of the complainant's claim of compensation under S. 67 of the Sales Tax Act, 1990 within 30 days of the receipt of this order and compliance be reported within a week thereafter.

Afral Awan for the Complainant.

Sajjad Rizvi Deputy Collector Sales Tax present for Respondents.

2007 P T D 787

[Federal Tax Ombudsman]

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

Messrs MUMTAZ GOODS TRANSPORT, SUKKUR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.76 in Complaint No.734-K of 2006, decided on 13th December, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessments---Review of decision---Complainant contended that clarification issued by the Central Board of Revenue on which reliance was placed by the Revenue Division on the comments submitted in the complaint were not the law as such were not binding on the Adjudication Officer who was bound to decide the case judiciously, independently and fairly in accordance with law---Validity---Held, in the notice issued under S.122(5A) of the Income Tax Ordinance, 2001 no mention had been made about such instructions issued by Central Board of Revenue---Mere reliance of such instructions in comments would not in any manner affect the legality of the said notice as they were not made the basis for the issuance of the same---Adjudication Officer shall decide the case judiciously, uninfluenced by the said clarifications mentioned in the comments filed in the complaint for, according to law no such clarifications or instructions were binding on the Authorities who were to decide the cases judiciously---Review application was disposed of by the Federal Tax Ombudsman with the observation that complainant was at liberty to raise all their pleas and points in reply to the notice issued by the Adjudicating Officer who shall after considering the said decisions and' other case-law if produced by the complainant would proceed to decide the case judiciously, independently, fairly in accordance with law.

Abdul Tahir, I.T.P. for the Complainant.

Hakim Ali Soomro, Law Officer for Respondent.

2007 P T D 927

[Federal Tax Ombudsman]

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

MUHAMMAD IMRAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 82 of 2004, decided on 17th April, 2004.

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

----S. 59(1)---C.B.R. Circular No. 7 of 2002, dated 15-6-20002, para. 8(c)---Constitution of Pakistan (1973), Art. 189---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Self-assessment---Condonation of delay---Reply of short documents notice was filed 2 days late with application for condonation of delay---Assessment was finalized under normal law without deciding the application for condonation of delay in spite of approaching the higher authorities---Validity---Taxation authorities were not justified in refusing to condone the delay of 2 days in submitting the short documents and it was case of maladministration---Federal Tax Ombudsman recommended that return of the income of the complainant for the year under consideration be accepted under Self-Assessment Scheme.

Novitas International v. Income Tax Officers and others 1991 PTD 968 rel.

(b) Income Tax---

----Condonation of delay---Medical certificate--Verification---Obligatory for the Assessing Officer to conduct necessary enquiries to conclusively establish the falsity of medical certificate produced by the complainant/assessee and mere expression of doubt did not vindicate his position.

(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---Issue relating to condonation of delay---No remedy had been provided in respect of refusal to condone delay and selection of case for Total Audit which were completely independent of assessment---Federal Tax Ombudsman overruled the objection of department regarding jurisdiction.

Muhammad Akram Sheikh for the Complainant.

Sultan Iftikhar, DCIT for Respondent.

2007 P T D 943

[Federal Tax Ombudsman]

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

Messrs A.K. TEX through Mirza M. Waheed Baig (Adv.)

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1657 of 2003, decided on 15th May, 2004.

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

----Ss.59 & 61---Income Tax Ordinance (XLIX of 2001), S.120---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10(3) & 2(3)---Self-Assessment---Setting aside of Return for Total Audit---Assessment---Limitation---Maladministration---Complaint under consideration filed on 22-11-03 was received in Federal Tax Ombudsman's Office on 25-11-03---Setting-apart of the return for Total Audit and issuance of notice under section 61 of the Income Tax Ordinance, 1979 on 3-6-03 were the causes of grievance---Competence of complaint for admission was claimed along with request for affording proper opportunity before selecting complainant's case for Total Audit---Validity---Federal Tax Ombudsman found that there were deficiencies in the proceedings as the notice conveying intention to set-apart the Return was not carefully drafted, figure of capital was picked from statement of preceding year, service of notice was not established and the estimate of sales was half of the sales shown in the Return---Limitation was counted from alleged notice actually not served---Conduct of neglect, inattention, delay amounted to maladministration---Federal Tax Ombudsman recommended order of setting-apart complainant's Return and notice issued under section 61 of Income Tax Ordinance, 1979 for Total Audit be withdrawn---Notice was not served before 30th June of that year---Complainant's Return under Self-Assessment Scheme should be treated as accepted under section 59(4) of Income Tax Ordinance, 1979.

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

----S.59---Self-Assessment Scheme, para. 9---Guidelines issued by the Central Board of Revenue---Complainant's objection that setting-apart of the return was to be made on recommendation of the Commissioner and Guidelines issued by Central Board of Revenue---Validity---Such objection was overruled by the Federal Tax Ombudsman as Central Board of Revenue had issued circular for the relevant year.

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

----S.10 (3)---Limitation---Department counted limitation from the date of notice which was not served on authorized agent of the complainant or complainant himself---Limitation was counted from the date of notice actually served when intimation was made available to the complainant---Objection as to limitation was overruled.

Mirza M. Waheed Baig and Malik Amin for the Complainant.

Qaiser Mahmood DCIT for Respondent.

2007 P T D 951

[Federal Tax Ombudsman]

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

AAMIR HASSAN, INCOME TAX PRACTITIONER, BAHAWALPUR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1628-L of 2003, decided on 25th May, 2004.

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

----Ss.9(2), 9(1) & 9(4)---Federal Tax Ombudsman Investigation and Disposal of Complaint Regulation, 2001, R.5(2)---Malpractices---Tax functionaries---Jurisdiction---Aggrieved person---Functions and Powers of the Federal Tax Ombudsman---Maladministration---Complainant had reported malpractices committed by the "tax functionaries" in some Circles of a Zone---Validity---Complaint was held to be competent for admission as Federal Tax Ombudsman could investigate allegations of maladministration "on his own motion"---Allegations of maladministra­tion may come to the notice of Federal Tax Ombudsman, from any source---Some of the allegations were found true---Federal Tax Ombudsman, as a preliminary step, recommended that Central Board of Revenue to constitute a Committee of one Officer from Central Board of Revenue, Commissioner of the Region, Inspecting Assistant Commissioner of the Zone and Inspecting Assistant Commissioner of Headquarter to probe in the allegations and to submit report for further investigation.

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

----Ss.9(4), 9(1) & 2(3)---Causes of corruption---Aggrieved person--Maladministration-Complaint by any "aggrieved person" did not mean only the person adversely affected---Scope was wide enough to include any citizen of Pakistan who feels distressed by an act of omission or commission of a tax functionary---Complaint of maladministration could be moved under section 2 clause (3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, which was enacted to ascertain causes of corruption and to recommend steps for its eradication.

Complainant himself present.

Zulqurnain Tirmizi, IAC for Respondent.

2007 P T D 963

[Federal Tax Ombudsman]

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

Messrs MUSSAIREE HOTEL (PVT.) LTD., MURREE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 975 of 2003, decided on 14th June, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.52, 62, 86 & 156---Establishment of Office of Federal Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a) & (b)---Additional tax---Limitation---Maladministration---Assessment for assessment year 1996-97 was made under section 62 of the Income Tax Ordinance, 1979 on 30-6-1998---Notice under sections 52/86 was issued by assessing office on 26-11-1998 alleging default for not deducting tax under section 50(4)---Such notice was responded on 5-12-1998---Second notice issued under sections 52/86 on the same issue and consequent assessment order passed under section 52/86 of the Income Tax Ordinance, 1979, amounted to harassment of the complainant as it was beyond the time allowed under section 156 of the Income Tax Ordinance, 1979---Action taken after the lapse of 4 years was totally invalid---Case involved definite maladministration---Federal Tax Ombudsman therefore recommended that order under sections 52/86 be cancelled by Commissioner of Income Tax under section 122-A of the Income Tax Ordinance, 2001.

CIT v. Agha's Super Market, Karachi 2003 PTD 1571 ref.

Aurangzeb, ITP for the Complainant.

Khalid Javed, DCIT for Respondent.

2007 PTD 979

[Federal Tax Ombudsman]

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

Messrs FAROOQ FURNITURE, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review No. 30 of 2004 in Review No. 195 of 2003 in Complaint No.1013-L of 2003, decided on 14th June, 2004.

Sales Tax Act (III of 1951)---

----S.11---Sales Tax Act (VII of 1990), S.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Estimation of sales---Review---Show-cause notice---Taxation Officer had expressed his intention to estimate the complainant's sales for assessment years 2001-2002 & 2002-2003 at allegedly excessive figures---Such show-cause notice caused grievance to the complainant---Complainant sought review of the order passed on the grounds that Federal Tax Ombudsman in an earlier decision had directed the Assessing Officer to assess the applicant's sales at the figure estimated by the survey team instead of the estimates of the Inspector---Validity---Second review application was rejected by the Federal Tax Ombudsman on the ground that survey team had not taken estimate of the stock available at the workshop situated at different place---Assessing Officer was not under legal obligation to adopt the estimates of the survey teams---Findings in referred complaint were not relevant---All the contentions were already considered in the findings/decision sought to be reviewed---Complainant could rebut the departments complaint during assessment proceedings---Review application was rejected in circumstances.

Muhammad Shahid Umar Khan for the Complainant.

2007 P T D 988

[Federal Tax Ombudsman]

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

MUHAMMAD ASHRAF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.511-L of 2004, decided on 14th September, 2004.

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

----S.9(2)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Complaint not against the quantum of assessed income but against the non-compliance of directions of the First Appellate Authority, did not attract the bar as per S.9(2) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000.

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

----Second Sched., cl. (86A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Exemption----Condonation of delay---Delay in-filing appeal was condoned by the Federal Tax Ombudsman considering the special circumstances, and the interest of justice because the complainants entitlement to exemption from tax under Cl. 86 of the Second Schedule of the Income Tax Ordinance, 1979 warranted consideration.

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

----Ss.61, 63 & 62/132---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Notice of production of accounts, etc---Finalization of assessment without issuance of specific notice under S.62 of the Income Tax Ordinance, 1979; ignoring the directions of First Appellate Authority and determination of income in slip-shod manner at "net" figures without attempting to determine the volume of receipts and the extent of overhead expenditures---Validity---Maladministration was committed by the Assessing Officer disregarding the directions of First Appellate Authority which resulted in framing of unsustainable assessments; creation of fictitious demand and harassment to the taxpayer--Disregard of First Appellate Authority's direction though mentioned by the Regional Commissioner of Income Tax in para­wise comments had still not be reviewed with disfavour by the senior officers of the Central Board of Revenue and the comments proposed that "the complaint be rejected being without jurisdiction and devoid of merit"---View canvassed by the Regional Commissioner of Income Tax was misconceived and would tantamount to exercise of power involving administrative excess---Maladministration on account of disregarding the directions of First Appellate Authority was proved---Federal Tax Ombudsman recommended that the Commissioner of Income Tax undertakes written counselling of both the Special Officers and the Taxation Office who framed the assessments about the neglect in duties and deficiencies in the assessments framed by them and Copies of these be placed on their personal files and that the Commissioner in discharge of his responsibility under S.122A of the Income Tax Ordinance, 2001 may call for the record of proceedings considered supra in which the said orders had been passed by the Taxation Officer working under him and proceed under subsection (2) of S. 122A as he deemed fit.

Multan v. Allahyar Cotton Ginning & Pressing Mills (Pvt.) Limited 2000 PTD 2958 rel.

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

----Ss. 14, 55, 56, 61 & Second Sched., Cl. (86A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Exemption---Return of total income--Notice for furnishing return of total income---Complainant/assessee contended that this income having been specified under Cl. (86) of Part I of the, Second Schedule, was exempted from tax under S.14 of the Income Tax Ordinance, 1979 and as income was not assessable under the Income Tax Ordinance, 1979, he was not liable to file returns of income under S.55 of the Income Tax Ordinance, 1979---Validity---Incomes as specified under Part I of the Second Schedule which were exempt from tax under S.14 of the Income Tax Ordinance, 1979 were liable to be included in the total income assessable under the Income Tax Ordinance, 1979 and then exemption from tax such income was to be claimed---Income was to be assessed under appropriate section of the Income Tax Ordinance, 1979 and them the admissible exemption from tax was to be allowed---Complainant/ assessee was liable not only to file the returns of income but to comply with the notices issued under S.56 as well as under S.61 of the Income Tax Ordinance, 1979.

Nemo for the Complainant.

Karamatullah, D-CIT for Respondent.

2007 P T D 996

[Federal Tax Ombudsman]

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

Mrs. SAMINA SHAKIRULLAH DURRANI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No.462-K of 2004, decided on 18t September, 2004.

Wealth Tax Act (XV of 1963)---

----S.17-A(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Time limit for completion of assessment and re-assessment---Time-barred assessment---Complainant/assessee alleged maladministration on the ground that order passed was antedated as the service of order after a period of 3 years 10 months; printing of orders on inkjet/laser printer, which were not issued to the circle; orders were `crisp' and did not demonstrate aging of nearly 4 years; year, 2004 was written which was overwritten as 2000 on notices of demand and no reminder for payment of demands raised was issued since their alleged date of creation etc.---Department admitted that the order were served after a lapse of considerable time and Commissioner concerned was directed to fix the responsibility for late service of orders, however, delayed service of order did not render it time barred---Fact that demand crated against such order was not included in the recovery notice was also confirmed---Order allegedly could not be served due to transfer of staff members and retirement of the concerned officer who passed the orders---Validity---Facts conclusively proved the allegation that orders were not passed on 30-6-2000 and the date shown on the orders had been tampered with and manipulated---Assessing Officer indulged in manipulation and tampering with record---Assessing Officer was reported to have retired from service in 2001---Such was a glaring example of maladministration---Involvement of Assessing Officer after his retirement in such act could be due to the reason that he either succumbed to blackmailing of Inspector and Supervisor to cover up his incompetence, inefficiency and dereliction by not completing the re-assessments in consequence of appellate orders within the prescribed time or that he aided or abetted them in harassing the complainant/ assessee---Federal Tax Ombudsman recommended that the Regional Commissioner of Income Tax, ensures institution of an enquiry against Inspector and Supervisor for their role in the whole proceedings because a retired officer alone could not manipulate the record except from subscribing his signature to antedated orders and the Commissioner concerned to consider the Wealth Tax Orders antedated 30-6-2000 relating to the assessment years 1993-94 to 1996-97 under S.25 of the Wealth Tax Act, 1963 for passing appropriate orders in view of the provisions of S.17A(3) of the Wealth Tax Act, 1963.

Abid Shaban for the Complainant.

Seema Jabeen, IAC and M. Nawaz, Special Officer for Respondents.

2007 P T D 1013

[Federal Tax Ombudsman]

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

MUHAMMAD TANVIR ELAHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No. 566-L of 2004, decided on 16th September, 2004.

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

----S.62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessments on production of accounts, evidence etc.---Estimation of sales on 'the basis of inspector's report ignoring the report of Survey team relevant to assessment year under consideration---Enquiry conducted during the irrelevant income year, though specifically taken in appeal before the First Appellate Authority, was ignored by the two tax functionaries---Department contented that complainant/assessee filed appeal before the Appellate Tribunal and since the issue of estimate of sale, is sub judice before a Court of competent jurisdiction, the bar as per clause (a) of subsection (2) of S.9 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would be applied---Validity---Scrutiny of record did not reveal any mala fide or "maladministration"---There being no specific stance of "mal­administration" and matter being still pending adjudication before the Appellate Tribunal, the complaint was filed and the case was closed by the Federal Tax Ombudsman.

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

---Ss. 5(1)(c) & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Jurisdiction---Assessment was framed under S.62 of the Income Tax Ordinance, 1979 and case was assigned to Inspecting Additional Commissioner under S.5(1)(c) of the Income Tax Ordinance, 1979---Under S.5(1)(c) Inspecting Additional Commissioner exercises the power of Assessing Officer and Commissioner exercises the power of an Inspecting Additional Commissioner---Was not correct for Inspecting Additional Commissioner to designate himself as Assessing Officer when framing an assessment particularly when S.62 of the Income Tax Ordinance, 1979 empowers only an Assessing Officer to do so---Merely mentioning "this case was assigned to this office vide worthy Commissioner of Income Tax---------Letter--------" did not clearly bring out that the transfer was under S.5(1)(c) of the Income Tax Ordinance, 1979 to frame assessment and did not simply transfer the case from one Range to another---Federal Tax Ombudsman recommended that it would be prudent if the Central Board of Revenue clarified this subtle point for future guidance of the officers.

Yousaf Siraj Khalid for the Complainant.

Behzad Anwar (DCIT) for Respondent.

2007 P T D 1023

[Federal Tax Ombudsman]

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

Messrs ALLIED IMPEX

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No. 499-K of 2004, decided on 2nd September, 2004.

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

----Ss.73 & 21(4)---S.R.O. 2(I)/2003, dated 1-1-2003---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Certain transaction not admissible--Complainant a commercial exporter---Withholding of refund claim despite fulfilling requirements of S.73 of the Sales Tax Act, 1990 and new condition of providing Bank Credit Invoice for settling the refund claim on the ground that right to claim refund was not established unless and until the suppliers fulfilled responsibility of depositing the due tax in the treasury and claim became inadmissible if the input tax against which refund had been claimed was not verifiable---Complainant's unit blacklisted on grounds that major share/portion of purchases were made from the blacklisted units, being suspected of issuing fake/flying invoices without actual transfer of goods/supplies---Validity---No further supportive document was required to be filed by the complainant---Suppliers of the complainant were alleged to be suspected units issuing fake/flying invoices and to be non/nil filers out of which one had been deleted from the blacklist and other had been blacklisted after the tax period involved---Department had not established that the transactions with the suppliers, which were duly backed by the supportive documents, did not take place---Complainant was being harassed for failure of the department to enforce compliance on non filers or nil filers despite the fact that those units were registered by them---Notion that a refund claim could not be allowed unless the supplier deposited the tax collected by law on the supplies into treasury, was misconceived because it was contrary to law and rules---Once the document of refund had been filed as required under the law it was the obligation of the department to ensure that registered supplier fulfilled his obligation under the law and rules---Maladministration was proved for failing to examine such business record and commercial documents of the other persons (suppliers) concerned with the refund claim of the complainant in any manner it was necessary to satisfy themselves about the genuineness and admissibility of the claims and proceeded not only to reject his claim but to blacklist him as well without issuing any show-cause notice---Maladministration proved due to inadequate training and knowledge of the auditors and Officers in Charge which amounted to the trait identified as incompetence---Said persons also lacked aptitude required to discharge their duties in accordance with law, rules and regulations---Proper understanding of law, rules and regulation, knowledge of binding decisions, willingness and patience to listen to the presentation of case and to give careful consideration to relevant facts as well as the provisions of law, rules and regulation and above all the commitment to do justice was required---Federal Tax Ombudsman recommended that the Collector considers the advantage of proceeding according to the remand "order of the Collector (Appeal) that the refund claim be considered/sanctioned, if the claimant fulfills the requirements of S.R.O. 417(I)/2000 (Refund Rules) according to the prevalent practices for sanctioning of refund in the Collectorate and withdraws the appeal instituted at the Tribunal which is an exercise in futility and the Officer in Charge examines or causes to be examined such business record and commercial documents of the other persons (suppliers), concerned with the refund claim of the complainant, in any manner as is necessary to satisfy him about the genuineness and admissibility of complainant's claims.

(b) Sales Tax Refund Rules, 2002---

----R. 9(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Commercial exporter---Brief comments/explanation in respect of issuance of refund.

Shoaib A. Faridi and Muhammad Aslam Shaikh for the Complainant.

S.M. Shoaib, Deputy Collector for Respondent.

2007 P T D 1044

[Federal Tax Ombudsman]

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

Dr. KHALID KAMAL, JACK AND JILL NURSERY SCHOOL LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No. 570-L of 2004, decided 14th September, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59(1) & 62---C.B.R. Circular No.4 of 2001, dated 18-6-2001---C.B.R. Circular letter C. No.7(7) S. Asst/2001, dated 14-5-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment---Salary income represented over 50% of the total income---Selection of case for total audit was claimed as illegal and against the facts of the case on the ground that case fell under `salary class'---Selection of case was confirmed by the First Appellate Authority in view of Central Board of Revenue Circular letter C. No.7(7) S. Asst/2001, dated 14-5-2002 that only those cases were immune from audit where income from 'salary alone' was over 50% of the total income and not those who, in addition to Salary, enjoyed income from some 'other head'---Validity---When reading para. 9 of the Self-Assessment Scheme dealing with Selection of cases for total audit, it was to be kept in mind that the selection was to be made "from among the Returns filed under Self-Assessment Scheme (Excluding Salary and only Property income cases)"---Since the Note to para. 1 of the Scheme was restricted only to the extent of eligibility for acceptance under Self-Assessment Scheme and had not been specifically extended to para. 9, it was difficult to ignore the relevance of the explanation by the Central Board of Revenue---Central Board of Revenue's Circular letter C. No.7(7) S. Asst/2001, dated 14-5-2002 unequivocally declared that the concession/immunity in the 'Note' appended to para. 1 of the Self-Assessment Scheme "did not extend immunity from audit to those who declared 'other income' alongside salary income"---To suppose that the concession in the 'Note' appended to para. 1 of the Self-Assessment Scheme, extends to para. 9 of the Scheme as well, was grave misreading of the Scheme---First Appellate Authority did not appear to have committed any act of "maladministration" by relying on Central Board of Revenue Circular and the Self-Assessment Scheme for the assessment year 2001-2002---Case was closed by the Federal Tax Ombudsman.

(1976) 33 Tax 1; 2004 PTD 200 and 2004 PTD 1470 ref.

2002 PTD 1895 rel.

Sirajuddin Khalid for the Complainant.

Ms. Raana Mirza CIT (Appeals) for Respondent.

2007 P T D 1065

[Federal Tax Ombudsman]

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

Messrs WEAVING AND WEAVING, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-295-K of 2004, decided on 10th July, 2004.

Sales Tax Act (VII of 1990)---

----S.21---Blacklisting of unit by Sales Tax Department---Complaint was filed by proprietor of firm that his unit had been blacklisted by Sales Tax Department without intimating and without issuing any show-cause notice to him---Since no illegalities had been committed by complainant and no charges were framed by Sales Tax Department against complainant, there was no justification to blacklist his unit---Besides unjust blacklisting, Department had raised several objections to prolong its illegality instead of providing relief to complainant who was put to hardship and his business had suffered because of alleged illegal blacklisting of his unit---Officer empowered under S.21(4) of Sales Tax Act, 1990, was supposed to observe due process of issuing a notice and giving opportunity of hearing before blacklisting a registered person or suspending his registration---Action taken by Sales Tax authorities, was arbitrary, perverse unjust, oppressive and based on irrelevant grounds--Present case was a one of maladministration as defined under sub-section (3) of S.21 of Sales Tax Act, 1990, it was recommended that C.B.R. should direct Collector of Sales Tax to cancel blacklisting of complainant within fifteen days and compliance report be sent within thirty days.

Mr. Zakari Hussain, Proprietor, S.M. Imran Saleem, Authorized Representative of Osmani and Afzal Associates for the Complainant.

Shahab Imam, Assistant Collector of Sales Tax for Respondent.

2007 P T D 1080

[Federal Tax Ombudsman]

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

Messrs DEWAN HATTAR CEMENT LTD., HARIPUR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 984 of 2006, decided on 8th January, 2007.

Customs Act (IV of 1969)---

---Ss. 202 & 195-C---S.R.O. 484(I)/92, dated 14-6-1992---S.R.O. 978(I)/95, dated 5-11-1995---S.R.O. 1050(I)/95, dated 29-10-1995---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Regulatory duty---Recovery proceedings---Complainants contended that agreement to resolve the issue through S.195-C of the Customs Act, 1969 mechanism had created an. estoppel on the Department and the Department could not approbate and reprobate at the same time, since on the one hand Department was allowing the complainants to get the issue resolved under S.195-C of the Customs Act, 1969 while on the other hand it had invoked the recovery proceedings-Validity-Complainant had raised no issue invoking maladministration that required to be settled---No intervention was called for---Record indicated that the Department previously agreed to submit the case before the Alternate Dispute Resolution Committee---Complainants themselves requested that the case may be put up for alternate dispute settlement---Federal Tax Ombudsman, under the circumstances, recommended that the case be taken up by the Alternate Dispute Resolution Committee in the Central Board of Revenue and the issue should be heard and decided by the said Committee within one month.

M. Imran Javaid and M. Afzal Awan for Complainant.

Syed Asad Raza Rizvi, D.C. (Customs) for Respondent.

2007 P T D 1088

[Federal Tax Ombudsman]

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

BASHIR AHMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.182 of 2003, decided on .14th June, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.61 & 63---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a)(b) & (c)---Ex parte assessment---Maladministration---Complainant had leased "Ata Chakki" to "S"---Both had filed returns declaring income as Rs.36,000 & Rs.50,000 respectively---Assessing Officer had treated the income declared by the lessee as income of the lessor presuming that it was collusive arrangement between the lessor and the lessee and after issuance of statutory notices assessed income at Rs.150,000---Validity---Presumption of collusion was not based on any enquiry or other independent evidence---Assessing Officer had failed to do his duty---Assessment Order was arbitrary and based on irrelevant grounds and it was a case of maladministration---Federal Tax Ombudsman recommended that Commissioner of Income Tax should amend the assessment after fully ascertaining the facts of the case, under section 122-A of the Income Tax Ordinance, 2001.

Muhammad Tasawar Mufti for the Complainant.

Muhammad Saleem, DCIT for Respondent.

2007 P T D 1099

[Federal Tax Ombudsman]

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

Messrs A.G. WORKS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-1607 of 2003, decided on 27th May, 2004.

Sales Tax Act (III of 1951)---

----Ss.36(3), 38 & 40A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Show-cause notice---Limitation---Complaint was filed against the recovery proceedings of allegedly evaded sales tax during the year 1999/2000---Complainants had alleged that Adjudicating Officer had not considered disputes, issues and queries and no private record was found in their premises---Cost of diesel was wrongly added as generator was used after the period under consideration; number of employees and the salary was arbitrarily determined, adjudication was not proper and speaking order was not issued by Adjudicating Officer---Department had controverted the allegations and supported the adjudication contending that the complaint was barred by law--Validity---Adjudicating Officer had not discussed the issues raised and had not examined the evidence issue-wise---Charges levelled in show-cause notice, the basis of the charges and validity of the defence arguments were ignored---Case was decided summarily---Adjudicating Officer had ignored all norms of legal fairness---Decision

was perverse, arbitrary, unjust and unreasonable amounting to maladministration---Federal Tax Ombudsman recommended for setting aside the order passed by the Collector (Adjudication) and entrusting the case to another officer to examine the contravention report after appropriate show-cause notice and allow the complainants to present their defence---Necessary instructions be issued to Director-General Inspection to examine quasi-judicial orders passed by officers under Revenue Division and furnish periodical reports to the Division about the quality of the orders and competence of Officers occupying the adjudication posts.

Tariq Ahmed for the Complainants.

Javed Sarwar, Assistant Collector of Sales Tax.

Mamoon Muazzam Khuhawar, Deputy Collector (Adjudication) for Respondent.

Nooruddin Ahmad, Senior Auditor.

2007 P T D 1127

[Federal Tax Ombudsman]

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

ABDUR REHMAN HAROON

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1497-K of 2003, decided on 16th January, 2004.

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

----Ss. 63, 61 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Ex parte assessment was finalized without giving due consideration to replies and document filed in response to notices under Ss.61 & 62 of the Income Tax Ordinance, 1979---Validity---Scrutiny of record revealed that day to day entries were not made on the order sheet---Documents received by the office, though entered in the Inward Register, were not placed on the record---Assessment as framed determining income at a net figure did not disclose its computation nor did it mention the extent of Receipts and the Expenses necessary to earn the income--Summary assessment was resorted to determine income in a slipshod summary manner---Inefficiency' was evident for not bringing documents on record---Inattention' was glaring from not recording day to day developments on the order sheet---Unjust treatment' was eminent in determining income by a rule of thumb at a net figure without any computation or working---Neglect' was displayed by ignoring to enquire into the source of investment---Process adopted by the Assessing Officer in making an ex parte assessment was unfair and in violation of principles of natural justice---Notices were replied but Assessing Officer insisted that no reply was available on record---Complainant/assessee was not responsible for placing the duly received reply on record--Inquiry by Commissioner or the, Assessing Officer could have revealed the negligence and maladministration on the part of the tax employee---To deny the facts available on their own record was nothing but dishonesty and mala fide---Such is high time the Department should learn to honestly admit their mistake which will make their wrong action bona fide otherwise it will be characterized mala fide and dishonest---Entire proceedings suffered from maladministration---Federal Tax Ombudsman recommended that ex parts assessment as framed on 31-3-2003 in the complainant's case for the assessment year 2002-2003 be cancelled by resort to section 122A of the Income Tax Ordinance, 2001; Assessing Officer be directed to reframe the assessment in accordance with law with due opportunity of hearing after proper enquiry/investigation and Assessing Officer (person not the office) be subjected to `Counselling' for his careless conduct in framing the assessment.

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

----S. 63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---If justification existed for ex parte action there was statutory obligation on the Assessing Officer to determine income to the `best of his' judgment' as near to the correct figure as possible; to this end it was necessary to conduct an enquiry with a view to find out the extent and volume of the activity to earn income and quantum of overheads---When framing first assessment of a new business it is essential to ascertain the initial investment and its sources.

S. Faiq Rizvi for the Complainant.

G.R. Mansoori (D-CIT) for Respondent.

2007 P T D 1141

[Federal Tax Ombudsman]

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

Messrs RECKITT BENCKISER PAKISTAN LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 329-K of 2004, decided on 20th July, 2004.

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

----Ss. 36, 33 & 34---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Recovery of tax not levied or short-levied or erroneously refunded---Show-cause notice for recovery of sales tax and initiation of penal action for violation on account of sales of Furniture and equipment; Motor vehicle; Scrap and Devaluation of Plant and other assets without payment of sales tax---Validity---Fact that information about disposal of fixed assets was picked by the audit from the annual accounts of the complainant showing the complainant disposing of depreciated furniture and depreciated motor vehicles and complainant had sufficient reasons, on the authority of decisions of judicial forums, to believe that the disposition of fixed assets made by the complainant was not in furtherance of its business and was not liable to sales tax, leads to incontrovertible conclusion that the complainant did not fail to deposit the amount of tax due or any part thereof in the time or manner laid down under the Sales Tax Act, 1990 or rules or order made thereunder as envisaged under S. 33(2)(cc) of the Sales Tax Act, 1990---Even if, in order to protect the interest of revenues till the issue was finally settled, non-levy of tax on disposal of fixed assets was deemed to be "by reason of deliberate act" and as such notice under S.36(1) of the Sales Tax Act, 1990 was considered valid, the fact that all decisions in the field were in favour of complainant's view, the notices to levy penalty under S.33 and additional tax S.34 of the Sales Tax Act, 1990 were premature if not totally unwarranted; hence without valid reasons---Maladministration was proved---Three misconceived charges of contravention of law were framed due to lack of competence and negligence in examining the account books for verification of payment of tax due---Senior officers in the Department, while handling the response of tax employee against whom mal­administration was alleged, endorsed the same---Tax employee should not disregard the settled principles of providing due and sufficient opportunity before recommending or taking any action against a tax payer---Federal Tax Ombudsman recommended that the adjudication proceedings by the Collector Sales Tax (Adjudication) be concluded within 30 days if not already concluded and remedial written counselling of the concerned auditors is done by their Officer-in-charge having regard to the findings.

2002 PTD (Trib.) 1455 and Collector of Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Limited 2002 PTD 976 rel.

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

----S. 2(3)(ii)---Maladministration---Ignorance of settled position of law is "incompetence" which amounted to maladministration.

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

----S. 2(3)(i)(a)---Maladministration---Actions unsupported by valid reasons were maladministration notwithstanding the fact that those actions might be bona fide.

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

----S. 2(3)(1)(a)---Maladministration---View that mala fide is to be proved to hold a tax employee responsible for maladministration was based on the misconceived understanding that the words "unless it is bona fide and for valid reasons" appearing at the end of sub-clause (a) of clause (1) of subsection (3) of S.2 of the Establishment of, Office of Federal Tax Ombudsman Ordinance, 2000 apply to any decision, process, recommendation, act of omission or commission which was contrary to law, rules and regulations or was a departure from the established practice or producer.

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

---S. 2(3)---Maladministration---In most general terms bad or poor management or regulation of public affairs is "maladministration"---Bad or poor management/regulation of public affairs will remain bad notwithstanding that it is bona fide and for valid reason because goals of good management or regulation of public affairs cannot be achieved without eradication of such reasons/causes.

Chambers 21st Century Dictionary, Revised Edition, at page 829 published 1999, Reprinted 2000 and Black's Law Dictionary, 7th Edition at page 967 published 1999, 6th Reprinted 2003 ref.

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

----S. 2(3)(i)(a)---Maladministration---Term "bona fide" shows that a decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations or a departure from established practice or procedure may be claimed to be done in good faith (bona fide), the concept of malice in law notwithstanding---Attributing any "valid reason" to a decision, process, recommendation, act of omission or commission which is "contrary to law" (the law as settled by the binding decisions of judicial forums) was inconceivable---Departure from established practice or procedure is the only act for which valid reasons may be offered---Rider "Departure from established practice or procedure" governs only second part of sub-clause (a) of clause (i) of subsection (3) of S.2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 i.e. the phrase, "act of omission and commission which is a departure from established practice or procedure" because it may be both bona fide as well as for valid reasons.

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

----S. 2(3)(i)(a)---Maladministration---Use of conjunction "and" in the rider "act of omission and commission which is a departure from established practice or procedure" requires the tax employee to prove that an act of omission or commission which is a departure from established practice or procedure on his part was both bona fide as well as for valid reasons---Failure to discharge the onus on any one of the two counts or both, shall not absolve tax employee of maladministration because the use of the word "unless" with the rider suggests that it is for the department to prove bona fide and valid reasons.

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

----S. 2(3)(i)(a)---Maladministration---Rider "unless it is bona fide and for valid reasons" governing the second part of sub-clause (a) of clause (i) of subsection (3) of S.2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 is an exception to the common dictionary meanings of the word "maladministration"---Exceptions seems to have been made to suggest that the Federal Tax Ombudsman did not recommend any adverse action against a tax employee who is able to prove that departure from established practice or procedure on his part was bona fide and for valid reason.

Ms. Danish Zuberi and Ms. Umera Ali Barristers for the Complainant.

Abdul Hameed Memon for Respondent.

2007 P T D 1158

[Federal Tax Ombudsman]

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

Messrs ELECTROMECH ENGINEERING SERVICES, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 135 of 2004, decided on 17th June, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.50(4), 62, 80C & 96---Income Tax Ordinance (XLIX of 2001), Ss.122 & 171---C.B.R. Circular No.12 of 1991 dated 30-6-1991---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9(2)(a)---Deduction of tax at source---Refund---Production of books of accounts---Tax on income of contractors---Maladministration---Jurisdiction---Complaint was that tax was deducted under section 50(4) of the Income Tax Ordinance, 1979 and after assessment refund was determined which was not paid even after repeated requests---Complainant also claimed additional payment for delayed refund---Regional Commissioner of Income Tax in reply denied maladministration and pleaded exclusion of the jurisdiction of Federal Tax Ombudsman and controverted the allegations---Validity---Issuance of refund was delayed for several months without any apparent reason---Federal Tax Ombudsman recommended that the refund for the assessment year concerned be issued without delay, payment of refund would not be a bar on rectification proceedings under section 122 of Income Tax Ordinance, 2001.

Nusrat Ali Malik for the Complainant.

Zar Khalil, IAC Range-I, Islamabad for Respondent.

2007 P T D 1186

[Federal Tax Ombudsman]

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

Lady Dr. GHAZALA AMJAD, ABBOTTABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 37 of 2004, decided on 17th June, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.135, 132(2), 129(2), 146 & 156---Income Tax Ordinance (XLIX of 2001), S.221---C.B.R. Circular No.10 of 1960---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Disposal of appeal---Decision in appeal---Inquiry by Inspector---Rectification of mistake,--Maladministration---Assessment and the appellate order for the year 1998-99 and subsequent assessments for the years 2000-2001 to 2002-2003 were contested as unlawful on the ground that enquiry by Income Tax Inspector was conducted without approval from the competent Authority---Appellate Additional Commissioner had enhanced the income in appeal illegally, along with other objections---Department had controverted the allegations and had alleged that complainant did not attend the proceedings therefore case was finalized on the basis of Inspector's report and subsequently effect of decision in appeal was given---Subsequent assessments were finalized keeping in view the immediate history of the case---Validity---Appellate order showed that income computed on the basis of such order exceeded the income assessed---No opportunity of showing cause for such enhancement was given---Enquiry conducted by the Income Tax Inspector was illegal---Such report was relied upon by Appellate Additional Commissioner---Federal Tax Ombudsman exercised jurisdiction to investigate the case and recommended that Appellate Additional Commissioner should rectify the appellate order under section 221 of the Income Tax Ordinance, 2001 after providing an opportunity of hearing to the complainant and Commissioner should amend the assessment orders for the assessment years 2000-2001 to 2002-2003 consequent to the appellate order.

Zafar Elahi for the Complainant.

Asif Haider Orakzai, DCIT for Respondent.

2007 P T D 1206

[Federal Tax Ombudsman]

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

GULZAR AHMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 322 of 2004, decided on 17th June, 2004.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 12 & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Maladministration---Refund was claimed by a salaried person---Voucher for actual refundable amount was issued by the Department---Federal Tax Ombudsman found that there was lot of confusion and mismanagement which resulted in undue delay in payment of refunds in salary circle---Concerned Authorities were required to pay serious attention in that matter.

None for the Complainant.

Qaiser Iqbal, IAC Range-II, Islamabad for Respondent.

2007 P T D 1207

[Federal Tax Ombudsman]

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

Messrs CORNPAK LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 185 of 2004, decided on 31st May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.96, 100, 102, 80C, 132 & 62---Income Tax Ordinance (XLIX of 2001), S.171---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Additional payment for delayed refund---Adjustment---Maladministration---Complainant alleged that assessment for the year 1996-97 was finally made on 31-8-1999 and refundable amount was determined at Rs.22,25,216 which was to be issued within three months from the said date---Request for adjustment was not acceded to---Complainant prayed that direction be issued for adjusting the determined refund and additional payment for delayed refund against the demand for assessment year 2002-2003---Validity---Additional payment for delayed refund was payable to the complainant with effect from 1-12-1999---Maladministration was established---Federal Tax Ombudsman therefore recommended that Central Board of Revenue should direct the Taxation Officer concerned to work out the amount payable for delayed refund strictly in accordance with the provisions of section 171 of the Income Tax Ordinance, 2001 after adjusting against demand for the year, 2002-2003---Excess amount to be paid within 30 days of the receipt of order.

Abdul Razzak for the Complainant.

Ansar Ali, DCIT for Respondent.

2007 P T D 1217

[Federal Tax Ombudsman]

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

HAKEEMUDDIN MUJAHID

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 488-L of 2004, decided on 16th August, 2004.

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

----Ss.170, 164(2), 168 & 235---Income Tax Ordinance (XXXI of 1979), S.96, 59(1) & 50---Income Tax Rules, 2002, R.71---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Refund---Self-Assessment Scheme---Non-issuance of refund due to failure to provide copies of "certificates on the prescribed form" regarding deduction of tax and that "additional information i.e. such as Bank Branch, of deposit date and its challan number were required" as the Assessing Officer's anxiety was to ascertain that the amount deducted by the withholding agent had actually reached the Treasury for which such information was relevant to exclusively establish such factum---Validity---Refund stood created on record---Certificate from withholding agent was furnished---Affidavit about Electric meter was filed---Since Central Board of Revenue had been vested with sufficient authority to compel the withholding agent to deposit the collected/deducted amount in the Treasury, any suspected default by the person in trust' could not be made an excuse to deprive the taxpayer of his lawful claim supported by certificate which, the law provided as "shall be treated as sufficient evidence of the collection/deduction for the purpose of S.168" of the Income Tax Ordinance, 2001---Department had given assurance that an Inspector was being deputed to personally visit the office of withholding agent to verify the veracity of the certificate issued by them and to confirm that the deducted amount had been deposited in the Government account---Representative of the Department stated that refund will be issued within a week and the representative of the complainant/assessee expressed satisfaction with such undertaking---Federal Tax Ombudsman recommended that the Central Board of Revenue issue fresh mandate totax functionaries' on the lines indicated in the present order and report compliance within one month of the receipt of this order and refund amount be issued to the complainant as undertaken by the Department.

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

----S. 170---Income Tax Ordinance (XXXI of 1979), S.96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Deduction by withholding agent---Verification of such deduction certificates/challans---Remarks of Federal Tax Ombudsman.

M. Ashraf Saqib for the Complainant.

Muzammil Hussain, DCIT for Respondent.

2007 P T D 1222

[Federal Tax Ombudsman]

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

ZAFAR IQBAL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 476-L of 2004, decided on 7th August, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 96, 50(7-E) & 50(7-F)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Deduction at source---Demand notice conveyed no refund although the same was claimed on Returns---Rectification application was filed but still no refund was issued---On complaint, department replied that refund had been issued, grievance had been redressed and thus complaint be filed-Validity---In rectification order Assessing Officer admitted that "while preparing IT-30 effect of deduction under S.50(7E) was not given", and "on perusal of record claim of the assessee was found genuine"---Department conceded that Returns available on file were accompanied by electricity and telephone bills together with details of month-wise deductions and that subsequent information was neither called for nor submitted voluntarily when seeking rectification---There being no dispute that full particulars justifying refund were furnished with the Returns filed under Self-Assessment Scheme and assessment were framed under S.59 of the Income Tax Ordinance, 1979, no bona fide reason thus existed for not determining refunds and for not dispatching the vouchers along with the notice under S.85 of the Income Tax Ordinance, 1979---Such act of neglect, incompetence and inaptitude' defined asmaladministration', could not be allowed to deprive the complainant/ taxpayer of his vested right for mandatory "Additional payment for delayed refund"---To validate the already issued refunds and to bring the assessment record in conformity with' law, Federal Tax Ombudsman recommended that the Commissioner, taking cognizance of foregoing facts to undertake written counselling of the concerned Special Officer (the person not the Office) for lapses as pointed out hereinabove and against the Inspecting Additional Commissioner (person not the office) for not having exercised supervisory functions with diligence with a copy endorsed to the Director, Compliance Monitoring Section of Federal Tax Ombudsman Office; the Commissioner ensures either further rectification of the rectified assessment order for 1999-2000 to allow credit for tax collected under S.50(7E) of the Income Tax Ordinance, 1979 of which necessary evidence is already on record or considers allowing due relief suo motu under S.122A of the Income Tax Ordinance, 2001 and the Commissioner to order release of Voucher for additional payment for delayed refund, due as per law in respect of all the four years.

Nemo for the Complainant.

Arif Malik, A-CIT for Respondent.

2007 P T D 1266

[Federal Tax Ombudsman]

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

MUHAMMAD SADIQ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1422-L of 2003, decided on 23rd January, 2004.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 62, 59(1) & 2(43)---Income Tax Ordinance (XLIX of 2001), S.122A---Workers' Welfare Fund Ordinance (XXXVI of 1971), Ss.2(ff) & 4---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment on production of accounts, evidence etc.---Return/case was excluded from the purview of Self-Assessment Scheme due to non-payment of Workers Welfare Fund---Validity---Workers Welfare Fund was payable under S.4 of the Workers' Welfare Fund Ordinance, 1971 to the Assessing Officer having jurisdiction over the industrial establishment concerned on or before the date on which a return under S.55 of the Income Tax Ordinance, 1979 was due---Assessing Officer was required under Workers' Welfare Fund Ordinance, 1971 to determine liability of Workers' Welfare Fund at the time of assessment with reference to assessed total income and any unpaid liability would be recoverable as recovery of tax demand under the Income Tax Ordinance, 1979---Such amount was not a tax or "any penalty, fee or other charges or any sum or amount leviable or charge-able under Income Tax Ordinance, 1979---Central Board of Revenue had clarified that mere non-payment of Workers' Welfare Fund would not render a case ineligible under the Self-Assessment Scheme---Act of Assessing Officer in initiating assessment proceedings under S.61 of the Income Tax Ordinance, 1979 on account of non-payment of Workers' Welfare Fund as tax payable under S.54 of the Income Tax Ordinance, 1979 was an act and process contrary to law and without any valid reason against which no appeal was provided---Investigation revealed that Assessing Officer had referred in the ex parte assessment order to the explanation offered by the complainant/assessee but he had not given same his due consideration---Assessing Officer had not mentioned a word as to what was the explanation and why was it not found satisfactory which had rendered the derision/assessment order arbitrary and perverse as well---Allegations of maladministration were proved---Federal Tax Ombudsman recommended that the Commissioner of Income Tax in view of the findings should invoke his jurisdiction under S.122A of the Income Tax Ordinance, 2001 and revise assessment order passed by the Taxation Officer as he deemed fit.

Tariq Mahmood for the Complainant.

Muhammad Ilyas, DCIT for Respondent.

2007 P T D 1271

[Federal Tax Ombudsman]

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

Messrs LATIF FIBERS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-815-K of 2006, decided on 27th October, 2006.

Sales Tax Act (VII of 1990)---

----S.66---Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), Ss.2(3) & 22---S.R.O. 578(I)/98, dated 12-6-1998---Refund---Deferment of refund without proper show-cause notice---Validity---No action was taken on the refund application---Admissible amount was adjusted against the demand of Multan Collectorate which had abated and the Deputy Superintendent sent an Objection Memo. for the remaining amount to the complainants which did not seem to have reached them--Collectorate at Karachi was very keen to deny the admissible claim and to help the Collectorate at Multan in recovery proceedings of a notice whose copy had not been submitted to the Federal Tax Ombudsman---Additional Collector (Adjudication), Multan, on the other hand had already vacated the recovery case against the complainants---Federal Tax Ombudsman recommended that Central Board of Revenue direct the Collector Sales Tax (Enforcement) to refund the sanctioned amount of Rs.184,456 to the complainants within fifteen days and decide the claim for refund of the remaining deferred amount of Rs.124,555 (whose objection memo. was sent by Deputy Superintendent on 21-9-2006 but had not reached them) after obtaining explanation and hearing their submissions within thirty days.

Imran Iqbal for the Complainant.

Amin Dangra, Manager.

Shafique Ahmad, Deputy Collector of Sales Tax.

2007 P T D 1274

[Federal Tax Ombudsman]

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

Messrs A.N. TRADERS (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1570 of 2003, decided on 23rd January, 2004.

Sales Tax Act (VII of 1990)---

----Ss.48 & 36---Establishment of Office of. Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Recovery of arrears of tax---Sanctioned refund was adjusted against amounts pointed out by the audit as recoverable without issuance of proper show-cause notice and proper adjudication order on the ground that complainant had agreed to the audit finding and given in writing to adjust the outstanding claim---Validity--Amount of tax pointed out by the audit as recoverable should first have been determined through process of show-cause notice and adjudication under the appropriate provisions of law before taking steps for adjusting the amounts for recovery in terms of the provisions of S.48 of the Sales Tax Act, 1990---Refund amount in question could not be adjusted/ rejected merely on the basis of findings/recommendations of the Audit---No doubt complainant had given in writing that since he could not deposit GST worked out on wastage, shortage of stock and' inadmissible bills during detailed audit in cash due to financial problems and had requested for adjustment/withholding the said amount of GST from the outstanding claims lying with the Department and to pay the balance amount, such an undertaking even if voluntary could not stand in the face of provisions of the statute requiring issuance of show-cause notice and proper adjudication---Mere intimation of audit observation did not constitute a show-cause notice nor could it take the form of an adjudication order---Act of adjustment of the sanctioned claims against a liability of the complainant and the rejection of the pending claim, were arbitrary, unfair, unjust and contrary to law---Maladministration was manifest inasmuch as the complainant's refunds were arbitrarily, unjustly and unlawfully adjusted/rejected for recovery against undetermined liability---Such acts of omission and commission fall within the definition of maladministration---Orders for adjustment/rejection of amounts of refunds for making a so-called recovery without adjudicating upon issues or liabilities pointed out by the audit were ab initio void---Federal Tax Ombudsman recommended Central Board of Revenue to vacate the orders under which the complainant's sanctioned/pending refunds were adjusted against so-called liability to confront the complainant with charges/contraventions intended to be framed against it through a proper show-cause notice, invoking appropriate provisions of law, and decide the case on its merit through a formal Order-in-Original after providing the complainant the opportunity of defence/hearing and amount already recovered by way of adjustment of refund claims against liability created in audit report be adjusted or refunded, as the case may be, in consequence of Order-in-Original.

Messrs United Export Company v. Pakistan and 3 others 2000 PTD 1798 and Complaint No.1344 of 2002, dated 21-3-2003 ref.

Muhammad Ashraf Hashmi for the Complainant.

Jawwad Zafar Malik, A.C., Sales Tax, Gujranwala for Respondents.

2007 P T D 1282

[Federal Tax Ombudsman]

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

Messrs S. J. INDUSTRIES, CHICHAWATNI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.645-L of 2006, decided on 2nd August, 2006.

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

----Ss. 11(4), 36(3) & 45A---Assessment of tax---Limitation--Complainant contended that Order-in-Original creating liabilities was passed after the expiry of time limit prescribed in S. 11(4) of the Sales Tax Act, 1990, which prescribed that the order should be passed within 90 days of the issuance of show-cause notice, extendable for another 90 days for reasons to be recoded in writing and the order was hit by time limitation---Validity---Order-in-Original, creating liabilities against the complainant was found to be hit by time limitation as provided in law and was liable to be annulled---Department should annul both the Order­-in-Original and Order-in-Appeal under S.45A of the Sales Tax Act, 1990---Appeal having been filed before the Appellate Tribunal to challenge the order on merits, the complainant, in the event that department reopens the case and annul the Order-in-Original and Order-­in-Appeal, as was being recommended, withdraw the appeal from the Appellate Tribunal---Federal Tax Ombudsman recommended that the Revenue Division should direct the competent authority to annul the impugned Order-in-Original being time barred, and the Order-in-Appeal for upholding a time barred void order, under S.45A of the Sales Tax Act, 1990---Authorities may, however, proceed further in the matter in accordance with the provisions of law.

Complaint No.805 of 2003; President of Pakistan's Order dated 7-5-2005 and PLD 1956 SC 104 rel.

Sales Tax Appeal No.2149/LB of 2002 ref.

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

----S.2(3)---Maladministration---Connotation---Federal Tax Ombudsman is competent to diagnose, investigate, redress and rectify any injustice done to a person through maladministration' by functionaries administering tax laws---Definition ofmaladministration' includes, inter alia, a decision, process, recommendation, act of omission and commission, which is contrary to law, rules and regulations or is a departure from established practice or procedure unless it is bona fide and for valid reason and also includes neglect, inattention, delay, inefficiency and inaptitude, in the administration or discharge of duties and responsibilities.

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

----S. 9(2)(a)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Matter sub judice before a Court of competent jurisdiction or Tribunal or Board or authority on the date of the receipt of a complaint---Filing of appeal before Appellate Tribunal after filing of complaint---Effect---Complaint was not sub judice on the day of presentation in terms of the provisions of S.9(2)(a) of we Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, because the appeal was filed before the Appellate Tribunal after that date---Affected parties had a right to file complaints before Federal Tax Ombudsman in cases involving maladministration' and to safeguard their remedy on merits, may also file appeals before appellate forums to get decision on merits in case they failed to establishmaladministration'---Only condition was that on the date of filing of complaint, the matter should not be sub judice before any Tribunal etc.---Scope of complaint was limited to the question of maladministration', which was within administrative sphere, whereas Appellate Tribunal could adjudicate the case on pure merits---Federal Tax Ombudsman was competent to investigate complaints falling within the definition ofmaladministration' in terms of the provisions of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

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

----S. 2(3)---Maladministration---Limitation---Failure to decide a case within the mandatory time limit prescribed in law, besides being illegal and unlawful, was purely an administrative issue which constitutes an administrative lapse that falls well within the definition of `maladministration', which covers not only the acts of omission and commission and acts contrary to law but also neglect, inattention, delay and inefficiency in the administration of tax laws.

(e) Sales Tax---

----Void order---Order-in-Appeal was not legally sustainable as it had upheld an order which ab initio was void as such should fall on the ground being a superstructure based on a void order.

PLD 1956 SC 104 rel.

Syed Abbas Raza Rizvi for the Complainant.

Muteen Alam, A.C. Sales Tax for Respondent.

2007 P T D 1311

[Federal Tax Ombudsman]

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

Messrs S.G. POWERS LIMITED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-63-K of 2004, decided on 12th August, 2004.

Customs Act (IV of 1969)---

----S. 33---S.R.O. 297(I)/1994, dated 2-4-1994---S.R.O. 584(I)/95, dated 1-7-1995---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Refund---Goods were allowed release against bank guarantee on interim order of High Court---Bank guarantee was encashed by the Customs Authorities before the final verdict of High Court to the effect that complainants were not liable to pay duty and sales tax---Refund of such amount was not issued on the ground that issue of exemption/concession, in the light of judgment of Supreme Court was under active consideration of Board/Law and Justice Division---Question whether the date of opening of letter of credit or that of filing of bill of entry should be the crucial date for application for tax exemption, was yet to be decided---All such cases have been kept in abeyance and the final decision from the Attorney-General was awaited---Validity---Law and Justice Division was not an adjudicating authority, it would express only its opinion---Proposition of law propounded and decided by the Supreme Court has binding on every authority, person and Ministry---Plea taken by the Customs Authority were completely irrelevant for the controversy---Such plea was merely intended to delay the proceedings for refund of the amount which had been held refundable by the High Court---Order of Supreme Court referred by the Department arose out of contempt proceedings and could not be made sheet anchor to delay the refund---Directions of the Supreme Court have not yet been complied with even after 2 years, how could the Department make it a ground for non-payment of refund---Maladministration was established as in spite of the judgment of superior Court laying down the binding law the Department had failed to pay the compensation which the claimants were entitled and also for not replying various letters of the complainant---In matters within the jurisdiction of the Federal Tax Ombudsman Or the Wafaqi Mohtasib if any Department, Division, Ministry agency or office fails to comply with the judgment of any Court without any legal or reasonable cause same was cognizable---Federal Tax Ombudsman recommended the Department to refund to amount realized through bank guarantees within 15 days.

Messrs Anoud Power Generation Limited v. Federation of Pakistan and others PLD 2001 SC 340 rel.

S.M. Ahmad, Chairman and Muneer Ahmed for Complainants.

Dr. Akhtar Hussain, Deputy Collector of Customs and Nawabzadi Aaliya Khanji, Assistant Collector of Customs (Appraisement) for Respondents.

2007 PTD1317

[Federal Tax Ombudsman]

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

Messrs QASIM COTTON GINNERS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.612 of 2006, decided on 15th August, 2006.

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

----Ss. 36(3) & 11(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Show-cause notice was issued on 11-5-2005 and order was passed on 23-11-2005 after six months and 12 days---No extension in time for deciding the case was ever obtained/granted---No finding was given by the First Appellate Authority on the plea of time limitation---Validity---Case had to be decided within 90 days of the issuance of show-cause notice---Plea that case was decided within 90 days of the receipt of the file following abolition of the Adjudication Collectorate was not tenable because the law required the case to be decided within 90 days of the issuance of show-cause notice---Since Order-in-Original creating liabilities was passed after the expiry of time limit prescribed in S.11(4) and 36(3) of the Sales Tax Act, 1990, same was hit by time limitation---Maladministration was established---Department should annul both the Order-in-Original and Order-in-Appeal---Since appeal had been filed before the Appellate Tribunal to challenge the order on merits, the complainant in the event that department reopened the case and annulled the Order-in-Original and Order-in-Appeal under S.45-A of the Sales Tax Act, 1990, as was being recommended, will withdraw its appeal from the Appellate Tribunal---Federal Tax Ombudsman recommended that Revenue Division should direct the competent authority to annul both the impugned Orders being time-barred, void orders, under S.45A of the Sales Tax Act, 1990---Department, however, should proceed further in the matter in accordance with the provision of law.

Complaint No.805 of 2003 rel.

PLD 1956 SC 104 ref.

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

----S. 9(2)(a)---Jurisdiction, functions and powers of the Federal Tax Ombudsman-Scope---Filing of appeal before the Appellate Tribunal after filing of complaint before Federal Tax Ombudsman---Validity---Complaint, which was presented in the Federal Tax Ombudsman Secretariat on 13-6-2006, was not subjudice on the day of presentation in terms of the provisions of S.9(2)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 because the appeal was filed before the Appellate Tribunal on 2-8-2006---Affected parties had a right .to file complaint before the Federal Tax Ombudsman in cases involving maladministration' and to safeguard their remedy on merits, may also file appeals before appellate forums to get decision on merits in case they failed to establish "maladministration"---Only condition was that on the date of filing of complaint, the matter should not be sub judice before any Tribunal etc.---Scope of complaint was limited to the question of 'maladministration', which was within administrative sphere, whereas Appellate Tribunal could adjudicate the case on pure merits---Federal Tax Ombudsman was competent to investigate complaints falling within the definition ofmaladministration', in terms of the provisions of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

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

----S. 2(3)---Maladministration---Time limit---Failure to decide a case within the mandatory time limit prescribed in law, besides being illegal and unlawful, is purely an administrative issue; it constitutes an administrative lapse that falls well within the definition of. `maladministration', which covers not only the acts of omission and commission and acts contrary to law but also neglect, inattention, delay and inefficiency in the administration of tax laws.

Rana Muhammad Ishaq Khan for the Complainant.

Muteen Alam A.C. Sales Tax for Respondent.

2007 P T D 1329

[Federal Tax Ombudsman]

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

NEW HOME AND LIFE, HUSSAIN AGHA ROAD, MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1622-L of 2003, decided on 31st January, 2004.

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

----S. 19---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Compulsory registration---Complainant was compulsorily and wrongly registered by the tax authorities---Request was made for correction of name and change of registration as a retailer' instead ofwholesaler-cum-retailer'---Department issued a registration certificate correcting the name but without changing its status as wholesaler-cum-retailer---Validity---Complainant's contention that he was not a wholesaler was not considered nor was an attempt made to find whether he qualified as a retailer or a wholesaler in view of the express provisions of the two terms---Objection that complainant had also been discriminated against other parties in regard to the out-of-tax-period adjustment had substance inasmuch as the decision given in other cases by the same Adjudicating Authority was at variance with decision given in the complainant's case---Order-in-Original was tainted with `maladministration'---Justice demanded that complainant's case be considered and examined de novo for passing a fresh adjudication order, covering all aspects and facts of the case, on its merits in accordance with the provisions of law after extending the opportunity of defence/hearing to the complainant---Federal Tax Ombudsman recommended Central Board of Revenue/ Collector that case be reopened and impugned Order-in-Original be set aside for de novo examination/consideration for passing a fair and speaking order covering all aspects of the case on its merits in accordance with the provisions of law after giving the complainant the opportunity of being heard and if re-adjudication of the case determines beyond doubt that the complainant had indeed taken out-of-tax­ period adjustment, he should then be extended the same treatment as allowed in other cases discussed above to remove discrimination.

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

----Ss.73, 66 & 7---S.R.O. 7(1)/2, dated 5-1-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Certain transactions not admissible---Complainant was burdened for violation of S.73 of the Sales Tax Act, 1990 for not making payments through banking channels for purchases made inspite of providing proof of payment to the Adjudicating Authority but the same was ignored---Validity---Complainant claimed that he made payment to the suppliers for purchases made from them through banking channels in conformity with the provisions of S.73 of the Sales Tax Act, 1990 but despite submissions of a statement as evidence of payment in accordance with the provisions of S.73 of the Sales Tax Act, 1990 the Adjudicating Officer did not consider the same---Complainant had during the proceedings submitted only a self-prepared statement showing that he had fulfilled the conditions of S.73 of the Sales Tax Act, 1990 and the document so submitted did reveal that payments were made to various suppliers but failed to establish, according to the Department, that he had made payments to the suppliers from his business account as required under S.73 of the Sales Tax Act, 1990---Complainant had stated during the hearing that he was prepared to submit details of relevant invoices, bank statements, counterfoils of cheques/drafts in support of his contention that payments were made in accordance with the provisions of S.73 of the Sales Tax Act, 1990--Such aspect of the case would also need fresh examination on its merit.

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

----Preamble---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Jurisdiction functions and powers of the Federal Tax Ombudsman---Process employed in the conduct of assessment or related proceedings---No remedy had been provided in respect of a process employed in the conduct of assessment or related proceedings---Since the matter related to the process employed by the Department, against which no appeal was provided in Sales Tax Act, 1990, the provisions of S.9(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 did not stand, in the way of investigation by the Federal Tax Ombudsman.

Aslam Babar and Iqtidar Alam for the Complainant.

Shafqat Hayat, D.C. (Adjudication) for Respondents.

2007 P T D 1337

[Federal Tax Ombudsman]

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

Messrs A.K. INTERNATIONAL, RAWALPINDI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.558 of 2006, decided on 27th August, 2006.

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

----Ss. 36(3) & 73---Constitution of Pakistan (1973), Art. 254---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Letter No.6(4)2S/Adj/2005, dated 19-11-2005---Law, Justice and Human Rights Division's Letter No.196-2005-Law(FTO), dated 26-5-2006---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Extension---Exceptional circumstances---Order-in-Original was barred by time as it was passed after the lapse of two years---Extension of time was granted by the Central Board of Revenue without enumerating any reason for the grant of extension and "exceptional circumstances"-Validity---Central Board of Revenue gave no reason for granting extension of time---Central Board of Revenue failed to fulfil the requirement of law by not recording the reasons of the existence of "exceptional circumstances" which could justify the said extension which reflected the inefficiency and inaptitude on the part of Collectorate---Extension was sought after 653 days of the issuance of show-cause notice, by this time, the limitation provided by S.36(3) of the Sales Tax Act, 1990 had already expired---Power to extend time vesting in the Central Board of Revenue was neither absolute nor uncontrolled and had been made subject to parameters provided by law i.e. existence of exceptional circumstances---Law had provided criteria to avoid exercise of such power by the Central Board of Revenue arbitrarily or whimsically and to provide safeguards against undue harassment to taxpayers---Law having fixed the limitation period for decision of the case in respect of a particular show-cause notice, extension could be made only in exceptional circumstances; therefore, unless those exceptional circumstances were brought on record on the basis of Central Board of Revenue extended the time, its decision could safely be held to be suffering from illegality and mal­administration---Revenue Division had failed to give any cogent reason for giving extension of time after the expiry of such a long time, or that it applied its mind in deciding whether the circumstances existed in which such delay took place on the part of the officer of the Revenue Division in not deciding the case and if so, those constituted exceptional circumstances to justify extension of time---Decision of Central Board of Revenue in the absence of any such reasons or findings about existence of exceptional circumstances was not only illegal but also suffered from arbitrariness adversely affecting the rights of the taxpayers to treat the proceedings to have come to an end on the expiry of the period of limitation so far as the said show-cause notice was concerned---Decision of Central Board of Revenue of extending of time suffered from being in violation of law, arbitrary, unreasonable, unjust and oppressive---Federal Tax Ombudsman recommended the competent authority to reopen the impugned Order-in-Original and Order-in-Appeal under the provisions of S.45A of the Sales Tax Act, 1990 and annul the aforesaid Order-in-Original as being hit by time limitation as provided by law as well as annul the Order-in-Appeal for illegally upholding the time-barred Order-­in-Original and may proceed in accordance with the provisions of law.

PLD 1963 SC 382 ref.

Complaint No.805 of 2003 Messrs Pace International rel.

Complaint No.335 of 2002 and Complaint No.904 of 2005 distinguished.

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

---S. 9(1)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Federal Tax Ombudsman can "investigate any allegation of maladministration on the part of the Revenue Division".

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

---S. 9(1)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Federal Tax Ombudsman is empowered to examine any decision of the Central Board of Revenue and if it is found to have suffered from maladministration, pass decision and make appropriate recommendations with regard thereto.

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

---S. 9(1)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Any superstructure based on illegal or void order has no legs to stand and has to fall on the ground along with the order on which it was based.

PLD 1958 SC 104 rel.

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

----Ss. 9(2)(b) & 2(3)(i)(ii)---Jurisdiction, functions and .powers of the Federal Tax Ombudsman---Scope---Provisions of S.9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 had to be read with the provisions of S.2(3)(i)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Whenever maladministration was committed, the Federal Tax Ombudsman acquired jurisdiction in that case---Definition of maladministration was very wide and inclusive in nature and includes decisions, process, recommendations, act of omission or commission which were contrary to law, rules and regulations and were perverse, arbitrary, unreasonable, unjust, biased, oppressive or discriminatory.

(f) Constitution of Pakistan (1973)---

----Art. 254---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Failure to comply with requirement as to time does not render an act invalid---Limitation---Article 254 of the Constitution, was applicable only to those acts which were required to be done under the Constitution itself within specified time prescribed in the Constitution.

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

9(1)-Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Judgments of the Appellate Tribunal were not binding on the Office of Federal Tax Ombudsman.

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

----S. 32-Representation to the President---Finding of the President---Nature---Findings of the President were mandatory in nature and the relevant provision was binding on all the functionaries of the Government as well as the Federal Tax Ombudsman.

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

----S. 36(3)---Provisions of S.36(3) of the Sales Tax Act, 1990 were mandatory.

Mirza Saqib Siddeeq I.T.P. and A.R. for Complainant.

Zulfiqar Hussain Khan D.C. Sales Tax and D.R. for Respondent.

2007 P T D 1349

[Federal Tax Ombudsman]

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

SHEHZAD KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-228-K of 2004, decided on 3rd July, 2004.

Customs Act (IV of 1969)---

----S. 168(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Seizure by Customs Officer---Complainant alleged that his Taxi Cab was seized/detained by Collector of Customs (Preventive) on 13-9-1998---No show-cause notice was issued and no action was taken on his applications and reminders---Department had admitted the seizure by Anti-smuggling Organization and presence of vehicle in the bonded wherehouse---Validity---Vehicle was seized by the Customs Department on 13-9-1998 and show-cause notice under section 168(2) should have been issued to him within two months of its seizure failing which the seized vehicle should have been returned to the person from whose possession it was seized---Federal Tax Ombudsman recommended Central Board of Revenue to direct the Collector of Customs (Preventive) to return the vehicle to the owner.

Zahid Khan for the Complainant.

Basit Maqbool Abbasi, Deputy Collector of Customs (Preventive) Headquarters.

2007 P T D 1356

[Federal Tax Ombudsman]

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

Messrs NEW SOURCE ELECTRONICS COMPANY through Messrs Awan Law Associates

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-741-K of 2006, decided on 17th October, 2006.

Sales Tax Act (VII of 1990)---

----S. 21---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---S.R.O. 456(I)/2004, dated 12-6-2004---S.R.O. 26(I)/2005, dated 6-1-2005---S.R.O.(I)/2005, dated 6-6-2005---Cancellation of Survey Certificate on complaint, wherein the in-house facility for manufacture/assembly of TV sets was challenged, without issuing any notice to the unit and affording opportunity of explaining the petitions and submitting the views on personal hearing---Validity---No adverse action should be taken against any individual or person for any purported infringement of law without affording an opportunity of explaining the position and the opportunity of hearing---Basic right of the complainant had been constantly denied and the Department had not provided the legal right to represent their case, rebut the allegations made in the complaint against them and establish the genuineness of their claim---Action taken by the Additional Collector cancelling the Survey Certificate issued by the Central Board of Revenue without due process was arbitrary, unjust, unreasonable, against the established practice without valid reason which constitute maladministration---Federal Tax Ombudsman recommended that Central Board of Revenue to cancel the impugned order of the Additional Collector and direct the Collector of Sales Tax to re-examine the facts and frame charges against the complainants, if any, issue show-cause notice and after affording them the opportunity of hearing, decide the case on merits in accordance with law.

M. Afzal Awan, Advocate. Imran Javed, Consultant.

Imran Iqbal for Respondent.

Muhammad Irfan, Importer.

Wahid Bux Shaikh, Assistant Collector of Sales Tax.

Rizwan Ali Khan, Deputy Superintendent.

2007 P T D 1380

[Federal Tax Ombudsman]

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

Messrs ISLAM BROTHERS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-993-K of 2006, decided on 17th November, 2006.

Customs Rules, 2001---

----R. 346---Partnership Act (IX of 1932), S.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Licence of bonded warehouse---Renewal of---Four partners, on account of dispute, had withdrawn power of managing the affairs of the warehouse given to the applicant partners---Renewal of the bonded warehouse was held in abeyance by the customs authorities as four partners of the firm had requested that it may not be allowed till the announcement of the decision of Court---Validity---Collector, in view of the letter of the partners and suit filed before the High Court, was not satisfied that the licence be renewed---Customs Authorities, however had not given any reason in writing or issued any show-cause notice to the complainants and had not responded to the application for renewal of licence---No justification existed for the Customs Authorities not to renew the licence and stop the in-bonding of goods unless an order to that effect was passed by a Court of competent jurisdiction or partnership was legally dissolved---Complainant seemed to have a genuine grievance that their business was suffering losses due to discontinuation of in-bonding of imported goods and adverse action taken against them without due process---Maladministration thus was established---Federal Tax Ombudsman recommended that Central Board of Revenue should direct the Collector of Customs to allow renewal of bonded warehouse and its regular operations within fifteen days.

M. Ali Hakro for Complainant.

Rizwan Mahmood for Respondent.

2007 P T D 1384

[Federal Tax Ombudsman]

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

AZHAR IQBAL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-272-K of 2004, decided on 10th July, 2004.

Customs Act (IV of 1969)---

----Ss.139, 142 & 181---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Declaration by passenger---Temporary detention---Confiscation---Complainant was working in foreign country, .Gold Bangles brought by the complainant in his baggage were declared by him and wanted to pay customs duty---Customs officials confiscated the bangles---Department, in reply alleged that the complainant had requested for summary adjudication for immediate release---Validity---Adjudication order was passed without issuing show-cause notice and without written request---Appellate authority had not passed order more than two years after hearing---Confiscation order passed by Adjudicating Officer was contrary to law, unjust and oppressive---Pendency of appeal reflected neglect and inefficiency---Case was of clear maladministration--Federal Tax Ombudsman recommended Central Board of Revenue to allow re-export of the Gold Bangles under section 142 of the Customs Act, 1969 at the time of departure from Pakistan.

Azhar Iqbal for the Complainant.

Ghulam Rabbani for Respondent.

Nisarul Haq, Chartered Accountant.

Azizuddin Ahmed Secretary (Legal), C.B.R.

Syed Naeem Akhtar, Deputy Collector of Customs.

2007 P T D 1390

[Federal Tax Ombudsman]

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

Messrs PAKISTAN OIL MILLS (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-54-K of 2004, decided on 10th July, 2004.

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

----S.80---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment of duty---Bill of lading---"Ullage Report"---Complainants had paid the duty and taxes as per quantity mentioned in bill of lading---Customs Authorities at the sea port detained 4 Metric Tones of the consignment on the ground that quantity on board was in excess---Assessment of duty was to be made on quantity ascertained at "on-board examination" and duty was assessed prior to clearance for home consumption---Validity---Main question for consideration was whether the duty should be assessed on quantity delivered to the complainant in terms of bill of lading or on basis of the quantity as mentioned in the "ullage report"---Bill of lading and shore terminal tank certificate could be referred from which the quantity shifted, landed and delivered could be ascertained-Federal Tax Ombudsman recommended Central Board of Revenue to direct the Collector to release the detained quantity of oil against suitable guarantee subject to the decision of the Supreme Court in case M/s. Fatima Enterprises Limited.

(b) Customs Act (IV of 1969)-

----S.80---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9(2)---Seizure of goods---Assessment of duty---Jurisdiction---Customs Authorities detained (four) Metric Tones of the consignment on the ground that quantity on board was in excess of the quantity mentioned in bill of lading---Objection was that matter related to determination of liability of duty under Customs Act, 1969 and jurisdiction of Federal Tax Ombudsman was barred---Validity--- Complainants had approached the office against the anomalous and discriminatory attitude of the Department---Complaint did not involve the mechanics of the assessment of duty and taxes or the. determination of their components for calculation of tax liability but was aimed against the manner in which the Customs Authorities had charged full duty but detained a small part of the quantity---Objection regarding jurisdiction was therefore irrelevant and misconceived.

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

----S. 9(2)(a)---Jurisdiction---Sub judice---Matter would be sub judice between the parties when the dispute was between the same parties---Matter referred in the case was between different persons---Importer was a different person---Cited precedent therefore did not make the matter sub judice between the parties who were not parties to it.

Naved Ahmad Khan for Complainant.

Muhammad Faisal Khan, Assistant Collector of Customs for Respondent.

2007 P T D 1412

[Federal Tax Ombudsman]

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

Rana ARIF HUSSAIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 226 of 2004, decided on 18th June, 2004.

Customs Act (IV of 1969)---

----S. 33---Income Tax Ordinance (XXXI of 1979), S. 96---S.R.O. 648(I)/96 dated 4-8-1996---C.B.R. Circular No. 2(14) WT/98 dated 20-5-1999---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 9(2)(b)---Refund---Deduction of tax at source---Tax paid in advance---Capital Value Tax---Exemption---Complainant was aggrieved of non-payment of Capital Value Tax refund---Tax was paid by Importer and complainant was end user---Importer claimed exemption as per S.R.O. 648(I)/96 dated 4-8-1996 whereby Federal Government had exempted motor vehicles plying for hire from charge of Capital Value Tax---Refund was refused on the ground that Importer was not himself to ply the vehicle for hire; Exemption from Capital Value Tax would not be available due to clarification letter C. No.1(12) WT/97 dated 20-7-98 and taxpayer had not applied himself and complaint related to determination of refund by interpretation of law which was beyond the jurisdiction of Federal Tax Ombudsman in the light of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Validity---Plain reading of S.R.O. was contrary to the Department's contention---No interpretation of law was involved in the matter---Department's refusal to refund the Capital Value Tax which was not actually chargeable was an act of maladministration---Federal Tax Ombudsman recommended that the amount of Capital Value Tax as claimed by the complainant be refunded to him.

Imtiaz-ul-Hassan Abid, A.R. for the Complainant.

S. Inamur Rehman, DCIT for Respondent.

2007 P T D 1420

[Federal Tax Ombudsman]

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

Messrs S.F. TRADERS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-88-K of 2004, decided on 15th June, 2004.

(a) Sales Tax Act (III of 1951)---

---S. 10---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)7--Refund---Complaint was filed against alleged illegal adjudication and rejection of claim for refund of sales tax amounting to Rs.30,43,132---Complainant alleged that they had not received show-cause notice, adjudication was ex parte, no audit observation was issued, payments were made through crossed cheques/Bank drafts, costs of taxable goods inclusive of sale tax was paid by them and Department should not refuse refund if the suppliers were not traceable---Department in its reply had asserted that refund was claimed on fake/flying invoices made in the same premises and complainant and suppliers were one and the same person and Banking transactions were made "to manoeuvre to fulfil the requirements of section 73 of the Sale Tax Act, 1951" and that Adjudication Order was correct and there was no maladministration---Validity---Customs Authorities had held that the refund claimed was based on fake invoices and the input tax had not been paid by the suppliers---Show-cause notice was not served on the complainants and their claim was summarily rejected by adjudicating branch---Validity of each invoice and transaction j was not examined---Cogent reasons were not given---Existence suppliers, genuineness of transfer, payment of sales tax through Banking Channels, purchase record with regard to quality and quantity should have been examined before rejection of refund claim---Rejection 00 mere suspicion was maladministration---Federal Tax Ombudsman recommended that Central Board of Revenue to set aside the order passed by the Deputy Collector of Sales Tax and direct the Collector to determine the admissibility of the claim on the basis of transfer of goods against valid transport documents, payment of value of goods inclusive of sales tax, receipts of goods and satisfy himself on the crucial points as mentioned in by the Ombudsman and decide the claim after hearing and through a speaking order.

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

----S. 9(2)(a)---Sub judice---Jurisdiction---Manner in which the refund claim was dealt with betrayed disregard for due process of law---Claim was rejected merely on suspicion---Issue agitated before the office was different from the matter pending in the High Court about the return of seized documents---Argument that available legal remedies should have been exhausted did not impinge on the jurisdiction of the office to investigate into a case of manifest maladministration.

Tahir Razzaq Khan, FCA, for the Complainant.

Dr. S.M. Shoaib, Deputy Collector of Sales Tax for Respondent.

2007 P T D 1425

[Federal Tax Ombudsman]

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

ISLAMUDDIN SHAIKH through Tahir Law Associates, Sukkur

Versus

SECRETARY, REVENUE DIVISION, GOVERNMENT OF PAKISTAN, ISLAMABAD

Complaint No.C-912-K of 2006, decided on 17th October, 2006.

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

-------- S.2(3)---Income Tax Ordinance (XXXI of 1979), Preamble---

'Maladministration'---Opportunity of hearing- Complainant/assessee contended that instead of considering the complainant's request for transfer of his case, Regional Commissioner of Income Tax directed the complainant to approach the same Taxation Officer against whom he had filed an application and that no opportunity of hearing was provided to him which was maladministration---Department had also not clarified as to how and for what years the amount paid had been adjusted---Validity--Since all pending assessments had been completed, complainant's request for transfer of case had become infructuous and required no further action---When application was made for transfer of case, Regional Commissioner of Income Tax should have allowed an opportunity of hearing and should have considered the grievances and submissions of the assessee---Regional Commissioner of Income Tax, instead of giving any decision on the complainant's request for transfer of record, directed him to comply with the statutory notices issued by the same officer for whom the complainant had expressed his lack of confidence---Disregarding and ignoring the request without allowing an opportunity of hearing was contrary to principles of natural justice and propriety and showed inaptitude and an attention which tantamounts to 'maladministra­tion'---Not responding to the request for disclosing as for which years the amount paid had been adjusted also showed neglect, inattention and inaptitude in discharge of duties and responsibilities by the tax officials--Federal Tax Ombudsman recommended that, within 15 days of the receipt of this order, the Taxation Officer should inform the complainant by giving break-up of the assessment years in which the amount paid by him at Rs.2,721,495 had been adjusted.

Abdul Tahir Ansari for the Complainant.

Saeed Ahmed Siddiqui, Additional Commissioner, Income Tax for Respondent.

2007 P T D 1433

[Federal Tax Ombudsman]

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

Messrs MEHRAN OIL (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-130-K of 2004, decided on 14th April, 2004.

Sales Tax Act (III of 1951)---

----S. 13---Sales Tax General Order No.2 of 2002---S.R.O. 987(I)199---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Exemption---Complainant stated that machinery was imported vide bill of entry dated 22-12-1999; Indemnity bond was submitted in respect of Sales Tax under S.R.O. 987(I)/1999 and Installation-cum-production certificate was not issued in spite of repeated requests---Assistant Collector, Collection and Enforcement admitted acceptance of indemnity bond and receipt of letter dated 10-6-2002 and issuance of the certificate dated 29-6-2002 subject to condonation of delay by the Central Board of Revenue, however he denied the receipt of earlier letters and directed the complainant to approach the Collector for condonation of delay so that the indemnity bond could be released---Validity---Simple issue of installation certificate had become a contentious matter and had lingered on for about three years---Unwillingness of the sales tax officials to do their duty was deplorable, their inaction betrayed neglect, inattention, 'delay, inefficiency and inaptitude in discharge of their duties which may be identified and suitably dealt with by the Central Board of Revenue---Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector to issue a new unconditional certificate of installation-cum ­production.

Noor Badshah for the Complainants.

Mumtaz Ali, Manager Finance.

Dr. Sarmad Qureshi, Deputy Collector of Customs for Respondent.

2007 P T D 1440

[Federal Tax Ombudsman]

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

Messrs IFTIKHAR CORPORATION through Nadeem & Company, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-49 of 2004, decided on 14th April, 2004.

Customs Act (IV of 1969)---

----Ss.16, 32, 193, 194, 199(3), 168(2) & 186---S.R.O.377(I)/2002, para.2---Import Trade and Procedure Order 2000, Appendix-A---Estab­lishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9(2)---Restriction on importation---Misdeclaration---Appeal---Seizure---Detention---Confiscation---Adjudication order passed by Additional Collector (Adjudication) and jurisdiction in terms of S.R.O. 377(I)/2002 para. 2 was challenged in complaint and was alleged that Customs Officials had wrongly sent the samples of their imported Betelnuts to HEJ Laboratory for determination of fitness for human consumption---Department, in reply had asserted that Federal Tax Ombudsman had no jurisdiction---Remedies of appeal were available and were not exhausted---Reputable laboratory had reported that samples were not fit for human consumption and goods were liable to confiscation and cases were rightly adjudicated---Validity---Matter related to great hazard to public health particularly as HEJ, a renowned laboratory of international standard, had declared the consignments unfit for human consumption---No maladministration could be attributed to the Department---Case was closed.

Nadeem Ahmed Miraz for the Complainants.

Abid Hussain, Assistant Collector of Customs (Appraisement) for Respondent.

2007 P T D 1447

[Federal Tax Ombudsman]

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

Messrs STAR TEXTILE MILLS, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.561 of 2006, decided on 21st August, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 45, second proviso & 36(3)---Constitution of Pakistan (1973), Art. 254---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Law, Justice and Human Rights Division's letter No.185/2004/FT-Law, dated 7-5-2004---Power of adjudication---Extension of time limit in exceptional circumstances---Extension was granted by the Central Board of Revenue on the ground that "Parawise comments in respect of the taxpayer's have not yet been submitted by the Collectorate of Sales Tax and Federal Excise"---Validity---Reason given was not related to any fault of the complainant and could not be termed as "exceptional circumstances" within the meaning of second proviso to S.45 of the Sales Tax Act, 1990---Order of Central Board of Revenue for extension of time of suffered from maladministration and could not be the basis for permitting the Collector/officer of Revenue Division to deal with the case and pass the impugned Order-in-Original in relation to show-cause notice in question after the expiry of period of limitation---Decision also suffered from maladministration being superstructure based on an illegal order---Federal Tax Ombudsman recommended Central Board of Revenue to proceed under S.45 of the Sales Tax Act, 1990 reopen the case and cancel the impugned Order-in-Original and may proceed in accordance with law.

Complaint No.805 of 2003, dated 28-5-2005 rel.

Nos. 154 and 155/ST/IB/2005, dated 28-11-2005, Messrs Pangraphies (Pvt.) Ltd., Islamabad Complaint No.904 of .2005 and Complaint No.122 of 2006 distinguished.

Khalid Pervez A.R. for the Complainant.

Muhammad Azam D.C. Sales Tax and D.R. for Respondent.

2007 P T D 1519

[Federal Tax Ombudsman]

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

Messrs SHAKARGANJ MILLS LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-85-K of 2007, decided on 12th April, 2007.

Customs Act (IV of 1969)---

----S.81(2), Explanation---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Finance Act (VII or 2005), Preamble---Provisional assessment of duty---Non-release of post-dated cheque being the security for provisional assessment on import of Pre-Engineered Steel Building on the ground that after the stipulated period the provisional assessment attained finality and no amount was payable as the provisional assessment included the amount of duty and taxes paid or secured as stated in explanation under S.81 of the Customs Act, 1969---Where the provisional assessment was not finalized within the prescribed period it would become final inclusive of the security---Validity---Entire reliance on the "explanation" under S.81 of the Customs Act, 1969 betrays complete disregard of the elaborate system of provisional determination of tax liability which had developed over a long period of time and a progressive formulation of the procedure had been enacted under the four subsections of S.81 of the Customs Act, 1969---Law makers and the government never intended to put a premium on the delay, inaction, indecisiveness, lack of investigation, lack of any new valuation evidence, and failure of the Collectorate and the Valuation Department to determine with substantive reasons and justification the final assessment within considerably long period of nine months, to reward the customs officers for their inefficiency, neglect and lack or will or ability to decide pending valuation/assessment cases on substantive grounds and arbitrarily deprive the importer of the security deposited in the belief that a fair decision would be taken---If the Customs Authorities wanted to include the amount of security within the ambit of duty and taxes they could have done so only with adequate evidence and passed speaking order observing the due process---Allegation of maladministration having been established, Federal Tax Ombudsman recommended that Central Board of Revenue could direct the Collector of Customs to finalize the assessment on the basis of, declaration and return the post-dated cheque to the complainants within fifteen days of the receipt of this order.

M. Mubeen Ahsan Advisor for Dealing Officer.

Muhammad Afzal Awan and Imran Iqbal for Petitioners.

Rana Tasleem, Assistant Collector of Customs PQA and Tariq Aziz, Appraising Officer Law.

2007 P T D 1936

[Federal Tax Ombudsman]

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

FAQIR MUHAMMAD MASOOM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1564 of 2003, decided on 10th August, 2004.

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

----Ss. 59, 61, 62 & 50(7H)---C.B.R. Circular No. 21 of 2000 dated 11-9-2000---C.B.R. Circular No.4 of 2001 dated 18-6-2001---C.B.R. Circular No.7 of 2002 dated 15-6-2002--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-­assessment---Property income---Returns were filed under Self-Assessment Scheme---Assessments were processed, by issuing notice under S.61 of the Income Tax Ordinance, 1979---Assessee objected to the issuance of notices under S.61 of the Income Tax Ordinance, 1979 while returns had been filed under Self-Assessment Scheme---Objection was rebutted vide notice under 5.62 of the Income Tax Ordinance, 1979 with the remarks that returns were not qualifying under the "Self-Assessment Scheme" as the returns filed did not fulfil the condition regarding the percentage increase in tax"---Validity---Reason recorded by the Assessing Officer in the assessment order proved the incompetence and inaptitude of the Assessing Officer in discharge of his duties and responsibilities---Inattention to the Note attached to para. 1.2 of the Self-Assessment Scheme had caused undue harassment to the complainant/assessee and loss to the State in terms of wastage of time and effort of its employees---Admittedly, total income declared in the returns of income riled under S.55 of the Income Tax Ordinance, 1979 was derived only from house property and the condition regarding the percentage increase in tax was not applicable---By simple reading of Law which required due attention it was proved that the process employed by the Assessing Officer to exclude the returns from the purview of Self-Assessment Scheme was ab initio contrary to unambiguous provisions of Circulars---Very basis to invoke jurisdiction to make assessment in any manner other than Self-Assessment Scheme did not exist in the case---Having found that the reason that the complainant/assessee had been confronted with the notice under S.62 of the Income Tax Ordinance, 1979 for exclusion of the returns from Self-Assessment Scheme was misconceived---Other matters raised on the complainant/assessee became inconsequential---Federal Tax Ombudsman recommended that the Commissioner undertakes written counselling of the concerned Taxation Officer to impress upon him the need to improve his, competence and to pay more attention to the facts and .relevant provisions of law applicable thereto and try to avoid causing undue harassment to taxpayers and that the Commissioner in discharge of his responsibility under S.122A of the Income Tax Ordinance, 2001 may call for the record of proceedings considered in which the orders had been passed by the Taxation Officer working under him and proceed under subsection (2) of S.122A of the Income Tax. Ordinance, 2001 as he deemed fit.

Complaint No.845 of 2001- distinguished.

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

----S.2(3)---Maladministration---Meanings---In most general terms bad or poor management or regulation of public affairs is maladministration---Bad or poor management/regulation of public affairs will remain bad notwithstanding that it is bona fide and for valid reason because goals of good management or regulation of public affairs cannot be achieved without eradication of such reasons/causes.

Chambers 21st Century Dictionary, Revised Edition at page 829 and Black's Law Dictionary, 7th Edition, at page 967 rel.

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

----S.2(3)(i)(a)---Maladministration---Words "unless it is bona fide and for valid reasons", "bona fide", "valid reason", "contrary to law", "departure from established practice or procedure"---Interpretation and meanings.

Chambers 21st Century Dictionary, Revised Edition at page 155 and Black's Law Dictionary, 7th Edition, at Page 168 rel.

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

----S.2(3)(i)(a)---Maladministration---No malice/mala fide is required to be proved for any conceivable maladministration on the part of Revenue Division or tax employees.

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

----S.2(3)(i)(a)---Maladministration---Contrary to law---Any act, process or decision, which is contrary to law, suffers .from malice in law.

PLD 1989 SC 26 and PLD 2003 Kar. 721 rel.

Muhammad Aslam Marwat for the Complainant.

Aurangzeb Khattak and Taza Khan, Taxation Officers, Bannu for the Respondent.

2007 P T D 1955

[Federal Tax Ombudsman]

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

PROGRESSIVE ASSOCIATES, GUJRAT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 467 of 2004, decided on 13th August, 2004.

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

----Ss.170, 177, 114(1) & 120(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Return was riled under S. 114(1) of the Income Tax Ordinance, 2001 and assessment in respect of such return was deemed to have been finalized under S.120(1) of the Income Tax Ordinance, 1979---Complainant/ assessee was entitled to a tax refund in consequence of such assessment and an application as prescribed by law was duly attached with the return---Department contended that complainant's case fell within the parameters determined for selection for audit under S.177 of the Income Tax Ordinance, 2001 as the refund claimed exceeded Rs.100,000---Refund could not be issued on account of selection of the case for audit and it was to be issued if found due after the audit is finalized---Validity---Commissioner could have no reason to believe that the income declared by the complainant/assessee was not the true income merely because the complainant/assessee had claimed a refund of over Rs.100,000---In principle, there was no reason for withholding the refund claimed by the complainant/assessee through an application under S.170 of the Income Tax Ordinance, 2001 and the failure to issue the refund was an act of maladministration---In however, any verification of the payments/deductions claimed was still pending the verification may be carried out expeditiously before the issuance of refund---Federal Tax Ombudsman recommended that the refund for the tax year 2003 as claimed by the complainant be issued to it and if verification of tax payments/deductions is required, it be carried out expeditiously.

Complaint No.363 of 2004 rel.

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

----Ss.177 & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Audit---Refund---Reason that refund could not be paid because audit was to be conducted under S.177 of the Income Tax Ordinance, 2001 was not tenable in the light of provisions of S.177 of the Income Tax Ordinance, 2001.

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

----Ss.170, 177 & 122---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Audit---Audit could be undertaken by the Commissioner on the basis of any matter which he considered relevant but the audit under S.177 of the Income Tax Ordinance, 2001 was in the nature of preliminary enquiry to determine whether an amended assessment was to be made under S.122 of the Income Tax Ordinance, 2001 in which connection the requirements of that section would have to be met independently including an opportunity to the taxpayer under subsection (9) of S.122 of the Income Tax Ordinance, 2001---Mere selection of a case for audit under S.177 of the Income Tax Ordinance, 2001 could in no way mean that the assessment under S.120 of the Income Tax Ordinance, 2001 had been modified or the refund on the basis of the assessment was no longer payable---Income Tax Ordinance, 2001 did not envisage the withholding, a refund on the basis of any subsequent proceedings.

Mirza Muhammad Wasim, Adviser.

Z.H. Khawar for the Complainant.

Faqir, Hussain, DCIT, Circle 17, Gujrat for Respondent.

2007 P T D 1977

[Federal Tax Ombudsman]

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

Messrs GULISTAN TEXTILE MILLS LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-422-K of 2004, decided on 17th August, 2004.

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

----S.33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund to be claimed within six months---Non-issuance of refund---Detention notice was issued without first giving a notice or a reminder to the complainants to produce the installation certificate and refund was not sanctioned till a complaint was lodged in the Office of Federal Tax Ombudsman and notice to the Department---Refund claimed remained pending for one year without justification---Maladministration was established.

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

----S.33---Sales Tax Act (VII of 1990), S.67---Income Tax Ordinance (XLIX of 2001), S.171---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund to be claimed within six months---Compensation for delay in payment of refund---Complainant claimed mark up @ 14 per annum as compensation---Validity---No provision under the Customs Act, 1969 exists to grant compensation for delay in payment of refund---Case was not the one where the statutes itself provides for compensation under S.171 of the Income Tax Ordinance, 2001 and S.67 of the Sales Tax Act, 1990---Compensation could not be granted merely because of delay---Amendment is required in the Customs Act, 1969 to make a provision for compensation as is in. the Sales Tax Act, 1990 and Income Tax Ordinance, 2001 which will be beneficial provision for the aggrieved party.

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

----S.22---Customs Act (IV of 1969), S.33---Award of costs and compensation and refund of amounts---Delay in payment of refund---Compensation---Under S.22 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 compensation may be awarded to an aggrieved party for any loss or damage suffered by him on account of maladministration committed by a tax employee or the Revenue Division---Proof of loss or damage due to the delay caused by non-payment of refund within time should be established and there should be some material or evidence to show that damage or loss has been caused to the aggrieved party by delay---Mere fact that delay in payment of refund has been proved as maladministration is not sufficient to grant compensation.

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

----S.216---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---No compensation for loss or injury except on proof of neglect or wilful act---Delay in payment of refund---Compensation ---Under S.216 of the Customs Act, 1969 it is provided that no owner of the goods shall claim from any Officer of Customs. compensation unless it is proved that such loss, damage was occasioned by gross negligence or willful act of such Officer---As compensation has been provided for delay in payment of refund in Sales Tax Act, 1990 and Income Tax Ordinance, 2001 which are fiscal statutes it will be just and proper that similar provision be added in the Customs Act, 1969 as well---Revenue Division should take steps for amendment of the Customs Act, 1969 to provide provision for compensation for delay in payment of refund.

M. Mubeen Ahsan, Adviser.

Zamir Q. Siddiqi, Authorized Representative.

Muhammad Abdullah, Director

Ms. Zeba Bashir Ahmad, Deputy Collector of Customs (Exports).

Naeem Akhtar, Deputy Collector of Customs (Preventive) AFU.

2007 P T D 1982

[Federal Tax Ombudsman]

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

Messrs INNOVATIVE IMPEX through Nadeem & Co., Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-526-K of 2004, decided on 3rd January, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 10. 21(4) & 73---Sales Tax Refund Rules 2000 and 2002---Customs Act (IV of 1969), S.25(15)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be refund that---Claim of refund on zero rated supplies was deferred on the ground that suppliers were included in the list of blacklisted units---Complainant contended that in case of blacklisting of suppliers, action should be taken against them but the refund should not be deferred but on cogent reason was given for withholding the refund---Validity---Deferment of processing of refund claims was contrary to law, departure from established practice without valid reasons, perverse, arbitrary, unjust, based on irrelevant grounds---Present was a case of deliberate withholding of refund---Maladministration against the Department was established---Federal Tax Ombudsman recommended that Central Board of Revenue direct the Collector concerned to process and finalize the refund claims and pay compensation for the withheld amount under S.67 of the Sales Tax Act, 1990.

Messrs Kashmir Edible Limited, Lahore's case Complaint No.950-L, of 2001 ref.

Nadeem Ahmad Mirza Consultant for Petitioner.

S.M. Shoaib Deputy Collector of Sales Tax.

2007 P T D 2002

[Federal Tax Ombudsman]

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

QAISER SHEH2AD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 417 of 2004, decided on 10th August, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.66(1)(c) & 13(1)(d)---Establishment. of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Limitation for assessment in certain cases---Assessments were set aside with the directions to obtain proper evidence regarding ownership of the shop and business---Addition under S.13(1)(d) of the Income Tax Ordinance, 1979 was also set aside---No re-assessment order was available on record---Demand notice was never served and the signatures in acknowledgement of receipt of demand notice were in fact fabricated on the direction of the concerned Record-keeper---No record in the regular Demand and Collection Register of the re-assessments statedly framed---DCR numbers given' on the order were admittedly did not exist in the circle DCR---Assessee contended that. no re-assessment proceedings had been conducted and recovery notice had no legal basis ---Assessing Officer contended that the re-assessment order was not placed on record earlier due to inadvertence---Validity---Record-keeper/UDC reported that no -such re-assessment order existed on the assessment record---Naib Qasid also admitted in writing that he had himself signed the demand notice (in acknowledgement of its service) when asked to do so by the Record­ keeper---Such was a blatant case of manipulation and tampering with records---No re-assessment was actually made in the name of assessee and an unsuccessful attempt had been made to make it appear that an order of re-assessment had been passed before the expiry of limitation---When in fact no such order had been passed, recovery notice issued regarding tax demand had no legal basis---Matter was obviously covered by the definition of "maladministration"---Federal Tax Ombudsman recommended that no re-assessment be considered to have been made in `the case after the setting aside the assessments for the years 1998-99 to 2000-2001 by the Appellate Additional Commissioner in the case; no action for recovery of any tax based on the so-called re-assessments for the said years be taken; enquiry be made by the Enquiry Wing of the Central Board of Revenue regarding the circumstances in .which a combined assessment order was purportedly passed by the taxation officer which in fact was apparently never passed during his posting in the Circle; the matter of the apparently bogus and forged service of demand notice be also examined and disciplinary action be taken against the guilty officer and officials) identified as a result of the enquiry.

Mirza Muhammad Wasim, Adviser.

Sajid Rehman Malik, A.R. for the Complainant Asif Haider Orakzai, DCIT for Respondent.

2007 P T D 2014

[Federal Tax Ombudsman]

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

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

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1610 of 2003, decided on 12th August, 2004.

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

----Ss. 10, 66 & 34A---S.R.O. 308(I)/2000 dated 6-6-2000---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Refund to be claimed within one year---Exemption from penalty and additional tax---Sales tax was paid on sale of old vehicles on audit objection by availing the amnesty under S.R.O. 308(I)/2000 dated 6-6-2000--Subsequently, refund of such amount was claimed on the basis of superior court's decision that sales tax was not chargeable on old vehicles---Department contended that tax had been deposited voluntarily to avail the benefit of the amnesty scheme---Subsequent decisions of High Court and Appellate Tribunal in some other cases did not automatically entitle the complainant to refund of sales tax deposited voluntarily and that such refund could only be based on an order-in-original or order-in­-appeal---Validity---In the light of judgment of High Court no sales tax was payable---Amount deposited by complainant was neither sales tax nor due from it---Applying the principles of judgment of Supreme Court the refund became due and payable, however, it would lie subject to the disposal of show-cause notice---Maladministration was established in not following the binding judgment of High Court and unnecessarily delaying the disposal of proceedings pursuant to show cause notice---Federal Tax Ombudsman recommended that the proceedings initiated through the Deputy Collector (Adjudication's) show-cause notice be finalized expeditiously and the claim for repayment/refund of amount deposited as sales tax be finalized.

(b) Precedent---

----Superior court's judgments---Applicability---For applying the law laid down by a superior court it is not necessary that person relying upon should be a party to that case.

(c) Precedent----

---Superior Court's judgments---Applicability---Where neither the judgment has been suspended by way of stay order nor the said judgment has been set aside by the Supreme Court, said judgment holds the field and it is the duty of every authority, department or person to follow it.

Mirza Muhammad Wasim, Adviser.

Saeed N. Cheema for the Complainant.

Muhammad Tahir, Deputy Collector, Sales Tax, Faisalabad for Respondent.

2007 P T D 2027

[Federal Tax Ombudsman]

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

Messrs STAR LINK, (GLAMOUR SHOPPING MALL), through Messrs Tahir Law Associates, Sukkur

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.7 of -2007 in Complaint No.884-K of 2006, decided on 29th May, 2007.

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

----S.12---Income Tax Ordinance (XLIX of 2001), S.120---Defiance of recommendations---Federal Tax Ombudsman recommended the assessee, to file normal return of such income and then raise question of payment of refund which shall be decided by the Taxation Officer---Assessee filed return of income of discount which according to him shall be deemed to have been accepted under Self-Assessment Scheme as deemed assessment under S.120 of the Income Tax Ordinance, 2001---Assessing Officer Found that the entire income was covered under presumptive tax regime, there Fore, no refund could be claimed---Assessee contended that Departmental Authorities should be proceeded against and be punished for contempt of Federal Tex Ombudsman's office by not adhering in letter and spirit to the stand taken by them before the Federal Tax Ombudsman in proceedings in the complaint---Validity---Contention of the assessee was misconceived as the order was only that the assessee should file normal return if he was of the view that income earned through discount was not covered by presumptive tax regime and if the same was filed the Taxation Officer should decide the same vi accordance with. law---Taxation Officer through rectification order had found that said income, in his opinion was covered by presumptive tax regime, which could not be said to have been contrary to the stand earlier taken by the department in the complaint---Assessee had been given relief by the First Appellate Authority---As the matter stood concluded by the said order, application being misconceived was dismissed by the Federal Tax Ombudsman.

Abdul Tahir Ansari for the Complainant.

Nemo for Respondent.

2007 P T D 2038

[Federal Tax Ombudsman]

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

FAROOQ AHMED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 414 of 2004, decided on 2nd September, 2004.

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

----S.122(1)---C.B.R. Circular No.3(12) IT-Jud/2004 dated 24-4-2004---C.B.R. Letter C. No.1(48) IT-I/79 dated 17-2-1981---Finance Ordinance (XXVII of 2002), Preamble---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessments---Show-cause notice to reopen and modify the assessment for the assessment year 2001-2002 as well as for the earlier two years, 1999-2000 and 2000-2001---Assessee contended that amendment in S.122 of the Income Tax Ordinance, 2001, providing for its application to order passed under the Income Tax Ordinance, 1979 was inserted vide Finance Ordinance, 2002---Such amendment was applicable for assessment year 2002-2003 only and not to any earlier assessment year---Notice issued in respect of assessment years 1999-2000 to 2001-2002 was void ab initio---During pendency of complaint, order under S.122 of the Income Tax Ordinance, 2001 had been passed---Validity---Action of Taxation Officer in initiating proceedings under S.122 of the Income Tax Ordinance, 2001 was contrary to settled law and Circular of Central Board of Revenue---Completion of amended assessments under S.122 of the Income Tax Ordinance, 2001 amounted to incompetence and inaptitude of the Department in discharge of its duty and responsibility---Maladministration was proved and matter fell within the jurisdiction of Federal Tax Ombudsman---Federal Tax Ombudsman recommended that the Commissioner undertakes written counselling of the Taxation Officer concerned and place the copy of his counselling memo. on personal file of the concerned officer; that the Commissioner, in discharge of his statutory obligation under section 122A of the Income Tax Ordinance, 2001 takes due cognizance of proceedings initiated in contravention of principles of law settled by binding decision and Central Board of Revenue Circulars, culminating in the perverse orders under S.122 of the Income Tax Ordinance, 2001 and proceed in accordance with law to discharge his obligation under S.122A of the Income Tax Ordinance, 2001 and that outstanding verified refund, if any, based on the original assessment for the yeas 1999-2000 be paid to the complainant/assessee.

2001 PTD 1525 rel.

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

----S.122(1)---C.B.R. Circular No.3(12) IT-Jud/2004 dated 24-4-2004---Finance Ordinance (XXVII of 2002), Preamble---Establishment of 01'fice of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessments---Amendment of law through Finance Ordinance, 2002---Effect---Central Board of Revenue's interpretation is that while the amendment brought about in S.122(1) of the Income Tax Ordinance, 2001 through the Finance Ordinance, 2002 would be applicable to assessments made under the Income Tax Ordinance, 1979 but after the said amendment it would not be applicable to assessments framed before the amendment in law viz. before 1-7-2002---Assessments made prior to the amendment brought about in S.122(1) of the Income Tax .Ordinance, 2001 through the Finance Ordinance, 2002 effective from 1-7-2002 could not be reopened under S. 122 of the Income Tax Ordinance, 2001.

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

----Ss. 122(5) & 240---S.R.O. 633(I)/2002 dated 14-9-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessments---Since the S.R.O. 633(I)/2002 dated 14-9-2002 applied to assessment for the year beginning on first July, 2002 the reference to the Income Tax Ordinance, 1979 inserted in subsection (5) of S.122 of the Income Tax Ordinance, 2001 would not be applicable to assessments made prior to such insertion which confirmed that action under S.122 of the Income Tax Ordinance, 2001 could not have been taken regarding assessments made prior to 1-7-2002.

Syed Saghir Tirmizey and Syed Hassan Askari for the Complainant.

Sajjad Azhar, DCIT, for Respondent.

2007 P T D 2051

[Federal Tax Ombudsman]

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

Messrs HAFEEZ CLOTH HOUSE, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 502 of 2004, decided on 4th September, 2004.

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

----S.122(5A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Finance Act (I of 2003)---C.B.R. Letter C.No.4 (530) TO-I/2002 dated 22-03-2004---CBR Letter C.No.3 (12) IT-Jud/04 dated 24-4-2004---C.B.R. Circular No.1 (48)/11-1-1979 dated 17-2-1981---S.R.O. 663(I)/2002 dated 14-9-2002---S.R.O. 608(I)/ 2003' dated 24-6-2003---Amendment of assessment---Initiation of proceedings by the Inspecting Additional Commissioner by invoking jurisdiction under S.122(5A) of the Income Tax Ordinance, 2001 for the assessment year 2001-2002---Validity---Proceedings were initiated under S.122(5A) of the Income Tax Ordinance, 2001 on 10-3-2004 for the assessment year 2001-2002---Assessment for the said year was made on 5-12-2002 after subsection (5A) was added to S.122 of the Income Tax Ordinance, 2001 through S.R.O. 663(I)/2002 dated 14-9-2002 which was rescinded by S.R.O. 608(I)/2003 dated 24-6-2003---No notice under S.122(5A) of the Income Tax Ordinance, 2001 could be issued on 13-3-2004 invoking already rescinded provisions---Substituted subsection (5A) in S.122 of the Income Tax Ordinance, 2001 was effective from 1-7-2003; hence inapplicable to a matter decided and closed prior to enactment of Finance Act, 2003---Alleged maladministration, on account of initiating a process which was contrary to the principles of law enunciated in the binding decision of High Court was proved---Department had no jurisdiction under S.122 of the Income Tax Ordinance, 2001 on 10-3-2004 to issue a notice under S.122(9) of the Income Tax Ordinance, 2001 to amend the assessment order that was either deemed to had been passed on 30-6-2002 or in any case on 5-12-2002---Process fell under the inclusive definition. of mal­administration---Federal Tax Ombudsman recommended that the Member Income Tax, Central Board of Revenue ensures that the principles of law enunciated in the binding decision of High Court in which Central Board of Revenue Circular had been cited with approval is conveyed through another Circular to all field officers so as to save both the time and effort of the officers and unnecessary harassment to the assessee and that the proceedings initiated in the case of present complainant/assessee are dropped.

I.T.A. No.3996/LB of 2002; Complaint No.530 of 2002; Messrs Monnoo Industries Limited v. The Commissioner of Income Tax, Central Zone, Lahore 2001 FTD 1525 and 2001 PTD (Trib) 2902 ref.

Messrs Monnoo Industries Limited v. The Commissioner of Income Tax, Central Zone, Lahore 2001 PTD 1525 rel.

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

----S.2(3)---Maladministration---Mala fide---No mala fide is required to be proved for a finding of maladministration.

Complaints Nos.1472-L of 2003; 368 of 2004 and 329-K of 2004 rel.

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

----S.2(3)---Maladministration---Definition---In general terms bad or poor management or regulation of public affairs is maladministration---Bad or poor management/regulation of public affairs will remain bad notwithstanding that it is bona fide and for valid reason because goals of good management or regulation of public affairs cannot be achieved without eradication of such reasons/causes.

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

----S.2(3)(i)---Maladministration---Bona fide and valid reasons---Interpretation and explanations---Meanings of the term "bona tide" showed that a decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations or a departure from established practice or procedure may be claimed to be done in good faith (bona fide), the concept of malice in law notwithstanding---Attributing any "valid reason" to a decision, process, recommendation, act of omission or commission which is "contrary to law" (the law as settled by the binding decisions of judicial forums) is inconceivable ---Departure from established practice or procedure is the only act for which valid reason may be offered---Rider governs only the second part of sub-Cl(a) of Cl.(i) of Sub-S.(3) of S.2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 i.e. the phrase, "act of omission and commission which is a departure from established practice or procedure" because it may be both bona tide as well as for valid reasons---Use of conjunction "and" in the rider requires the tax employee to prove that an act of omission or commission which is a departure from established practice or procedure on his part was both bona ride as well as for valid reasons---Failure to discharge onus on any one of the two counts or both shall not absolve him of maladministration because the use of the word "unless with rider suggests that it is for the Department to prove bona fide and valid reasons---Rider "unless it is bona fide and for valid reasons" governing the second part of sub-Cl.(a) of Cl.(i) of subsection (3) of S.2 of the Establishment of Office of Federal Tax Ombudsman. Ordinance, 2000 is an exception to -the common dictionary meanings of the word "maladministration"---Exception seems to have been made to suggest that the Federal Tax Ombudsman does not recommend any adverse action against a tax employee who is able to prove that departure from established practice or procedure on his part was bona fide and for valid reason.

Chamber 21st Century Dictionary -Revised Edition at page. 155 and Black's Law Dictionary, 7th Edition, at page 168 ref.

Saghir Tirmizey for the Complainant.

Khalid Farooque Mian, DCIT for the Respondent.

2007 P T D 2079

[Federal Tax Ombudsman]

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

MCC RESOURCES DEVELOPMENT COMPANY (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 257 of 2004, decided on 6th September, 2004.

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

----Second Sched.---Income Tax Ordinance (XXXI of 1979), S.13---Constitution of Pakistan (1973), Arts. 246 & 247---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Exemption---Project of the complainant/assessee was located at Taftan Tehsil of Chagai District, in the Province of Balochistan which is "Tribal Area" and production/commercial activity carried on in that project area was not liable to the provisions of the Income Tax Ordinance, 2001 while the Government of Pakistan is deducting tax on the export proceeds as presumptive tax under the Income Tax Ordinance, 2001---Deduction was illegal in view of provisions of Articles 246 and 247 of the Constitution---Complainant/assessee sought confirmation of the correctness of the views from Member Income Tax, Central Board of Revenue and also prayed that the Central Board of Revenue be directed not to deduct any taxes from proceeds of export of sales of goods and to refund the amount of tax already deducted at source but no reply was given in spite of several reminders---Validity---Complainant/assessee company was owned by the Government of People's Republic of China--involvement and investment was involved from China which was engaged in an important project beneficial for the country's economy---Non-response and delay became a serious maladministration committed none else but a Member of C.B.R.---Negligent and non-serious approach of the Member was exhibited by the fact that the reply was asked to be filed by the Regional Commissioner of Income Tax who did not have any paper and information about the case---All allegations were related to the Member who was duty bound to reply but it was avoided---Such negligent and arbitrary attitude and behaviour shake the confidence of the investors particularly the foreign investors, which brings bad name to the country---Maladministration had been established---Federal Tax Ombudsman recommended that the Central Board of Revenue to decide the issue raised by the complainant in his letter dated 24th September 2002 within 30 days of the receipt of this decision/recommendation and that the decision be placed before the Chairman Central Board of Revenue for information and necessary action.

Syed Ahmed, Chartered Accountant Present.

None present for Respondent.

2007 P T D 2434

[Federal Tax Ombudsman]

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

Messrs MILLI TEXTILE (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 221-L of 2007.

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

----S.56(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Finance Act (III of 1998), Preamble---Service of order, decisions, etc.---Courier service---Service through courier was in accordance with law and the Federal Tax Ombudsman did not find the claim acceptable that such service was riot legally valid.

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

----S.56(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Finance Act (III of 1998), Preamble---Service of order, decisions, etc.---Courier service---Noting, not containing the mine of the person serving nor the date on which the service was attempted nor the stamp of the Courier Service---Such failures did not fully satisfy the requirement of a valid service.

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

----S. 36---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Recovery of tax not levied or short-levied or erroneously refunded---Show-cause notice---Order passed before the expiry of the date given in the show-cause notice could not be sustained in the eye of law.

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

----Ss. 56(a) & 36---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Finance Act (III of 1998), Preamble---Service of order, decisions, etc.---Maladministration'---Order-in-originals-were passed before the expiry of the date of hearing; sufficient time was not allowed to explain the claim and though complainant failed to conclusively prove the invalidity of the service of show-cause notice but it was not entirely above doubt---Such was reflective of neglect and inattention on the part of Revenue and fell in the definition ofmaladministration' within the meaning of S.2(3)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman observed that the order-in-originals could not be sustained; that the competent authority to cancel the said order-in ­originals and issue fresh notices to the complainant and provide it proper opportunity to establish its claim; that in view of the defects pointed out in the service of notices and the records maintained; the Central Board of Revenue to issue the instructions to all its subordinate offices to the effect that whenever a notice is refused, the serving authority should note the date on which the service was attempted; the name of the person attempting the service; the name of the person who refused the service and the stamp of the .Courier Service---All letters along with their enclosures, received from taxpayers should be properly acknowledged.

2004 PTD 2434 ref.

Dealing Officer Shamim Ahmad (Advisor)

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

Muhammad Azam, D.C., Sales Tax, Faisalabad and Ghulam Shabbir, Senior Auditor and D.Rs. for Respondent.

2007 P T D 2460

[Federal Tax Ombudsman]

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

Messrs M. N.-IMP. & EXP. COMPANY, KARACHI

Versus

SECRETARY, REVENUE DEVISION, ISLAMABAD

Complaint No. C-634-K of 2007, decided on 30th July, 2007.

Customs Act (IV of 1969)---

----Ss. 81(3) & 25(1),(2)(f),(9)---Valuation Ruling No. 497/2006, dated 21-1-2006---Customs General Order 12 of 2002---Finance Act (VII of 2005), Preamble---Provisional 'assessment of duty---Complainant contended that provisional assessment at the declared value attained finality under subsection (4) read with subsection (2) of S.81 of the Customs Act, 1969 as the Customs Authorities did not pass the final assessment order within the mandatory period prescribed under S.81(2) of the Customs, Act, 1969---Post-dated cheque should have been returned but the Customs Authorities did not fulfil their obligation under S.81(3) of the Customs Act, 1969---Department, stated that with the addition of "Explanation" under S.81 of the Custom Act, 1969, the provisional determination value included the amount of duty and taxes secured with bank guarantee or post-dated cheque and this legal .provision empowered the customs to encash the guarantee---Validity---If the Customs Authorities decided to include the amount of security in the final determination, an appropriate order should have been passed which had not been clone so far---Cause of action did not arise at the time of provisional assessment but after the expiry of mandatory period mentioned in S.81 of the Customs Act, 1969---Fact was established that the assessment of goods was not determined even till 11-7-2007 and no action was taken to return post dated cheque---Provisional determination be deemed to be the final determination of duty and imposition of taxes under S.81(4) of the Customs Act, 1969 was fully justified---Federal Tax Ombudsman recommended that Federal Board of Revenue would direct the Collector of Customs (Appraisement) to return the post-dated cheque of Rs.3,82,193 to the complainant within 15 days.

Complaint No. 85-K of 2007 ref.

Dealing Officer: Mr. M. Mubeen Ahsan, Advisor.

Afzal Awan, Advocate.

Irfan Javed, Deputy Collector of Customs (Appraisement).

Rashid Jamil, Assistant Director Customs Valuation.

M. Aslam, Principal Appraiser, Customs Valuation.

2007 P T D 2473

[Federal Tax Ombudsman]

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

Messrs PAK PERSIAN CARPETS (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 299-L of 2007.

Sales Tax Act (VII of 1990)---

----Ss.36, 73 & 45A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Recovery of .tax not levied or short-levied or erroneously refunded---Creation of liability of tax in respect of received refund of input tax along with additional tax and penalty on the basis of vague show-cause notice issued without completion of prerequisites of show-cause notice inasmuch as it did not supply the grounds or reasons for taking proposed action---Validity---Adjudicating Officer hastily concluded that the complainant was guilty without giving her own independent findings on the objection raised by the complainant, without giving reasons in support of the conclusions---Held, each plea advanced by the complainant should have been analyzed, facts and figures should have been. examined and the reasons why the complainant's point of view was rejected should have been properly spelled out---Adjudicating Officer had failed to pass a detailed and well-reasoned order; it appeared as if the Adjudicating Officer was swayed by prosecution side's version of the issues involved and ignored complainant's arguments---Order-in-Original was sketchy, lop-sided, improper, arbitrary and against the principles of natural justice, all of which amounted to `maladministration' within the meaning of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Revenue Division direct the competent authority to re-open order-in-original in so 1'ar as it related to charges (1 and 2) and decide these charges afresh on the merits of the case in accordance with the provisions of law after providing the complainant the opportunity of being heard.

C.P.L.A. No.1968 of 2002; Sales Tax Appeal No.131 of 2002; C. A. No.316 of 2001; Complaint No.805 of 2003; Sales Tax Appeal No. 213 of 2003 (K-2); Zamindara Paper and Board Mill's case C.P. No, 702-L of 2003; 1993 SCMR 31; PLD 1968 Lah. 131; 2007 PTD (Trib.) 840 and Complaint No, 34-L of 2007 ref.

Dealing Officer Muhammad Akbar (Advisor).

Muhammad Mehtab Chughtai, Consultant for the Complainant.

Ms. Asma Hameed, A.C., Sales Tax, Lahore for Respondents.

2007 P T D 2490

[Federal Tax Ombudsman]

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

Messrs MAQBOOL PAINT HOUSE through M. Mazhar-ul-Hassan & Company, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-346-K of 2007, decided on ??

Central Excise Act (I of 1944)---

----S. 33-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 22---Release of seized goods---No response for release of impounded goods by the Revenue on the ground that due to transfers and postings and shifting of office premises, the goods/records were misplaced and the Collectorate was trying hard to locate the goods which will be returned as soon as, these. were located----Validity---After passage of long period of seven years and conclusion of all proceedings, the goods/records impounded had still not been returned which spoke volumes of the callousness, carelessness and insensitivity of the functionaries of the Department---When the goods were impounded, it was the solemn duty of the concerned officials to ensure their safe custody and safe return to the .complainant on conclusion of the proceedings---Even if there was shifting of premises from one place to another, this would not absolve the concerned officials from the responsibility of safe keeping of the goods---Degree of responsibility, in such an eventuality .would be higher as it would require extra care to ensure that goods/records impounded belonging to the taxpayers were not lost or misplaced---If officers were transferred, then it was incumbent upon the relieved officers to .properly hand over the charge, including the account of the impounded goods, to their successors---Misplacement and/or loss of impounded goods showed neglect, inattention, inefficiency and inaptitude in the discharging of duties and responsibility by the concerned officials which tantamount to maladministration---Federal Tax Ombudsman recommended that Item which had been traced out should be handed over to the complainant within 3 days of the order; that other item be traced out and handed over to the complainant within 45 days of the receipt of the present order, in case the .other item was not found within the above period, the Department was to pay to the complainant au amount of Rs.40,000 being the estimated cost of the item for its replacement and that-due to loss in business suffered by the complainant on account of maladministration committed by the concerned officials, the Department was to pay a compensation of Rs.20,000 to the complainant within 30 days of the receipt of present order.

Dealing Officer Asad Arif, (Advisor).

Saeed Qureshi and M. Mazhar-ul-Hassan for the Complainant.

S. Sajjad Rizvi, Deputy Collector, Federal Excise and Sales Tax for Respondent.

2007 P T D 2502

[Federal Tax Ombudsman]

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

Messrs METAL CARE PRIVATE LIMITED, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 221-L of 2007.

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

----Ss. 34, 33(2), 35(2) & 45(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Additional Tax (default surcharge)---Show-cause notice did not invoke S. 34 of the Sales Tax Act, 1990 but order did demand additional tax---Validity---Additional tax could not be legally demanded vide Order-in-Original because S.34 of the Sales Tax Act, 1990 was not invoked in the show-cause notice for recovery of the same, nor was the complainant confronted with it---Penalty imposed under S.33(2) of the Sales Tax Act, 1990 was not legally sustainable because the complainant was not confronted with specific clause of subsection (2) of S.3 of the Sales Tax Act, 1990 before such imposition---Maladministration was established on the part. of Revenue in adjudicating the complainant's case---Federal Tax Ombudsman recommended that Revenue Division direct the competent authority to re-open the impugned Order-in-Original under S.45-A of the Sales Tax Act, 1990 and strike off the demand of additional tax and also delete penalty of Rs.25000, which was imposed under S.33 of the Sales Tax Act, 1990---Rest of the impugned Order-in-Original would remain in tact.

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

----S. 33(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Offences and penalties---Invocation of S.33 of the Sales Tax Act, 1990 without invoking the specific subsection and/or relevant clause of S.33 of the Sales Tax Act, 1990---Validity---Section 33(1) of the Sales Tax Act, 1990 and S.33(2) of the Sales Tax Act, 1990 revealed that the two subsections provided for different penalties for different contraventions, yet the Adjudicating Officer, in the present case, jumping subsection (1) of S.33 of the Sales Tax Act, 1990 and its specific clauses proceeded to impose penalty under S.33(2) of the Sales Tax Act, .1990 without invoking it in the show-cause notice---Affected party needs to be confronted with specific provisions of law under which it was intended to be penalized, this having not been done, the penalty imposed under 5.33 of the Sales Tax Act, 1990 was not sustainable.

Dealing Officer Muhammad Akbar (Advisor).

Arshad and Waseem Ahmad for the Complainant.

Ms. Asthma Hameed, A.C., Sales Tax Lahore for the Respondents.

2007 P T D 2615

[Federal Tax Ombudsman]

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

Messrs ADAM SUGAR MILLS LIMITED, BAHAWALNAGAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 94-L of 2007, decided on 16th April, 2007.

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

---S. 9(2) (a)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Argument that Federal Tax Ombudsman .could not investigate a complaint, which was sub judice, was not sustainable because the complaint was filed before Federal Tax Ombudsman on 15-1-2007 whereas the appeal before Collector (Appeals) was filed on 25-1-2007 later than filing the complaint---On the day the complaint was filed the subject cases were not sub judice before the appellate authority.

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

----Ss. 38, 40 & 40A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Authorized officers to have access to premises, stocks, accounts and records---Show cause notice----Complainant submitted that since he had filed petition for leave to appeal before the Supreme Court against Court order, the proceedings be held in abeyance but if the Department still wanted to proceed with the matter, copies of entire records/materials on the basis of which show-cause notice was issued be provided to prepare and file comprehensive replies---Request was verbally accepted to adjourn the cases and to provide materials that formed the basis of show-cause notices but neither the cases were adjourned providing another opportunity of hearing nor did relevant materials were supplied to prepare the defence and arbitrarily orders were passed confirming the allegations framed in show-cause notices---Validity---Operative portion of Order-in-Original gave the impression that Adjudicating Officer decided the cases hurriedly without properly dealing with each of the charges framed in the show-cause notices and without hearing the complainant on the charges 'so framed---Department's claim that cases were decided on the basis of available records on merit was not sustainable because non-speaking and sketchy Order-in-Original was passed at the. back of the complainant without providing the complainant the opportunity of rebutting the charges framed in the show-cause notices---Allegations levelled in the show-cause notices were not sustainable because the first hearing fixed in the case was adjourned and the case was kept pending till decision by the High Court and at the second hearing complainant pleaded for supply for material farming the basis of show-cause notices, which plea was not accepted and the cases were decided rather hurriedly---Maladministration was observed on the part of Department for passing non-speaking Order-­in-Original without enlisting the viewpoint of the complainant the specific charges framed in the show-cause notices---Federal Tax Ombudsman recommended that Revenue Division should direct the competent authority to set aside Orders-in-Original under S.45A of the Sales Tax Act, 1990 and decide each case afresh on its merits in accordance with the provisions of law after providing the complainant the opportunity of both written and oral defence as agreed during complaint proceedings.

Muhammad Akbar (Advisor) Dealing Officer.

Mian Abdul Ghaffar for the Complainant.

Abdul Malik Additional Collector for Respondents.

2007 P T D 2627

[Federal Tax Ombudsman]

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

Messrs ADAM SUGAR MILLS LTD. through Chief Executive

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 579-L of 2007, decided on 9th July, 2007.

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

----Ss. 34(1), 33(5) & 2(37)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Default surcharge---Complainant was served with a fresh show-cause notice for the same allegation, same charges and for the same period, which were earlier adjudicated upon up to the level of Appellate Tribunal---Complainant submitted that the matter had already been adjudicated upon and since the show-cause notice involved the same charge and the same period and the Appellate Tribunal had waived off the default surcharge and penalty, the Department was not competent to re-adjudicate the matter as it would amount to violating the Appellate Tribunal's order---Ignoring the complainant's reply and Appellate Tribunal's judgment, Adjudicating Officer passed a fresh Order-in-Original directing the complainant to pay default surcharge and penalty for the period already adjudicated upon by the Appellate Tribunal---Validity---Since the late payment was due to sufficient cause as held by the Appellate Tribunal there was no point 'in issuing a new show-cause notice and deciding the case afresh for the same offence i.e. late payment of tax for the same period---Collectorate should have realized the spirit of the Tribunal's order and restrained from issuing fresh show-cause notice and re-deciding the case for the same offence and the same period which had already been adjudicated upon---Department's action amounted to double jeopardy resulting in punishing the complainant for the same offence which had already been adjudicated upon---Show-cause notice and Order-in-Original were illegal and void---Maladministration was established---Federal Tax Ombudsman recommended that Revenue Division was to direct the competent authority to re-open show-cause notice and the Order-in-Original under S.45A of 'the Sales Tax Act, 1990 and quash them being illegal and void and direct the' Collectorate to implement. Appellate Tribunal's order unless the Collectorate had filed an appeal against the aforesaid order of the Tribunal and had obtained a stay order from the competent Court against operation of Tribunal's judgment.

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

----S. 57---Establishment of Office of Federal Tax. Ombudsman Ordinance (XXXV of 2000), S.9---Correction of clerical errors, etc.---Explanation---Clerical error is an error, which 'relates to office clerk or his work' resulting from a minor mistake of inadvertence' such astyping an .incorrect. number, missing transcribing a word, omitting the Appendix from documents' and an arithmetical error or an inadvertent error resulting from, say, a calculation or typing mistake apparent from the record.

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

----S. 57---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Correction of clerical errors, etc.---Issuance of fresh show-cause notice for the same offence for which a notice was issued earlier and :had passed fresh adjudicating order for the same offence i.e. the offence of late payment of tax despite the fact that the Appellate Tribunal had decided the earlier case is favour of complainant---Validity---By no stretch of imagination could one accept the Department's version that the new show-cause notice and the Order­-in-Original Were passed on the basis of proceedings drawn under the .provisions of S.57 of the Sales Tax Act, 1990---Even otherwise said section provided that before such correction a notice shall be given to the registered person or to a person affected by such correction whereas the new show-cause notice and the latter adjudicating order did not even mention that the notice was issued and the adjudicating order was passed under the provision of S.57 of the Sales Tax Act, 1990---New show-cause notice, in fact was issued and the resultant Order-in-Original was passed for the same offence i.e. for late payment and for the same period without realizing that the Appellate Tribunal had in its judgment set aside Collector's Order-in-Appeal, which upheld the earlier adjudicating order and accepted the appeal of the complainant.

Muhammad Akbar (Advisor) Dealing Officer.

Mian Abdul Ghaffar for the Complainant.

Muteen Alam A.C. Sales Tax for Respondents.

2007 P T D (Trib.) 9

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos. 1058/LB to 1060/LB, 6947/LB and 6948/LB of 2003, decided on 26th April, 2006.

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

----Fourth Sched. R.5(c)---Insurance Ordinance (XXXIX of 2000), Preamble---Computation of profits and gains of insurance business---General insurance---Curtailment of management expenses---Assessee contended that assessments framed after the promulgation of the Insurance Ordinance, 2000 were not maintainable in law on the issue of curtailment management expenses as. no limits had been prescribed in this respect in the Insurance Ordinance, 2000 thus making the applicability of R.5(c) of the Fourth Schedule to the Income Tax Ordinance, 1979 to be of no legal effect---Department could not controvert such factual position of the assessee, Appellate Tribunal deleted the management expenses in circumstances.

I.T.A. No. 2172/12B of 2001 and 2005 PTD (Trib.) 474 rel.

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

----S. 62---Assessment on production of accounts, evidence etc.--Disallowence---Assessee contended that disallowances were made without specifying and identifying element of personal nature expenses---Department supported the finding of First Appellate Authority that disallowances had been made in line with the history of the case as evolved at the level of Appellate Tribunal---Assertion of department was found correct and appeal of the assessee on the issue was dismissed by the Appellate Tribunal.

2002 PTD 1496 rel.

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

----Ss. 24(c) & 50--Deduction not admissible---Re-insurance premium payments on commission---Disallowance was made for failure to withhold tax on re-insurance premium payments on commission payable to Pakistan Insurance Corporation---Assessee contended that no payment was made but the total claim represented accrued amounts and no question of deduction of tax could arise---Validity---Pakistan Insurance Corporation was taxpayer and was paying tax on its income which included receipts from re-insurance premium commission---Appellate Tribunal directed to delete the addition made under S.24(c) of the Income Tax Ordinance, 1979.

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

----Ss. 52 & 50---Liability of persons failing to deduct or pay tax---Assessee contended that Assessing Officer was not justified to pass the orders under S.52 of the Income Tax Ordinance, 1979 in order to collect the tax on re-insurance premium commission due under S.50 of the Income Tax Ordinance, 1979; as the recipient had duly paid tax in respect of the receipt, the withholding agent could not be required to pay related amount of tax not withheld by him as it would amount to double taxation---Validity---Through an order under S.52 of the Income Tax Ordinance, 1979 the Assessing Officer was empowered to declare a person to be an assessee in default in respect of tax not withheld by it under provision of S.50 of the Income Tax Ordinance, 1979, recovery proceedings could be initiated to recover the amount of tax in respect of which an assessee was held to be an assessee in default---Assessing Officer was justified in passing the order under S.52 of the Income Tax Ordinance, 1979 to demand the tax not withheld by the assessee--Recipient of the commission on re-insurance premium having paid tax on its income inclusive of these receipts, the Assessing Officer could not pass order under S.52 of the Income Tax Ordinance, 1979 to recover the amount of tax not withheld by the assessee---Appellate Tribunal vacated the order of First Appellate Authority and directed to cancel the orders framed under S.52 of the Income Tax Ordinance, 1979.

2001 PTD 570; (1999) 80 Tax 282; 87 Tax 89 (Trib.) and I.T.A. No. 6341/LB of 2004 ref.

Imran Afza, F.C.A. for Appellant.

Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 31

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 2503/LB of 2002, 3551/LB, 2862/LB, 3898/LB of 2003, 2419/LB, 5891/LB, 3254/LB and 2657/LB of 2004, decided on 28th December, 2005.

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

----Ss. 111 & 13---C.B.R. Circular No.6 of 1987, dated 5-7-1987---Penalty for concealment of income etc.---Addition---Set off against loss---Department contended that addition under S.13 of the Income Tax Ordinance, 1979 was assessable under the head "income from other sources" and the same could not be set off against the brought forward loss of the previous year and addition having been separately made under the head "income from other sources" penalty under S.111 of the Income Tax Ordinance, 1979 was rightly made---Assessee contended that loss was declared and assessed and after including brought forward losses, the carry forward loss was determined therefore, no tax was payable on the declared or the assessed income, as both these figures represented the loss and in case of loss, no tax was payable by the assessee, therefore, no penalty could be levied---Validity---No tax was found payable as the assessment proceedings simply resulted in curtailment of loss declared---In absence of any tax found to have been evaded, no penalty could be imposed, as the amount of penalty was directly co-related with the amount of tax evaded or sought to be evaded---Quantum of penalty had a nexus with the amount of tax evasion or for that matter, tax evasion in itself---Assessing Officer had calculated notional evaded tax and had imposed penalty thereon which was notional tax only because no such tax was levied or worked out by the Assessing Officer---Notional tax did not fit in the definition of tax sought to be evaded because whether any tax was evaded or sought to be evaded should flow from the order---Assessing Officer was not required to read into the order giving rise to the penalty proceedings or to impute or attribute something which was purely and simply notional in character and spirit---Tax evaded had reference to a set of completed transactions where assessment had resulted in the levy of tax at a certain specified amount, which was identifiable---Penalty could not be imposed on the basis of some notational tax and First Appellate Authority had rightly cancelled the penalty order---Appeal of the department was dismissed by the Appellate Tribunal on this issue.

1992 PTD Note 12 dated 7-5-1987 and 1994 PTD (Trib.) 688 rel.

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

----S. 111---Penalty for concealment of income etc.---Purpose, of the law was to curb and prevent the tax evasion as reflected in, and determined by the amount of tax sought to be evaded through concealment of income and furnishing of inaccurate particular of income---No penalty could be imposed merely on the basis of finding on the point of concealment in the assessment proceedings.?

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

----S. 111---Penalty for concealment of income etc.---Onus in penalty proceedings---Onus lies on the department in the penalty proceedings to prove independently the guilty intent by showing deliberate commission or omission on the part of the assessee resulting in concealment of income or furnishing of inaccurate particulars of income, which may result in avoidance of tax---If there is no evasion of income tax as represented by the difference in amount of tax originally assessed and the amount of tax subsequently assessed or found payable, there cannot be any penalty.?

(d) Income-tax---

----Rate of tax---Cotton yield---Taxation Officer himself applied rate of 85% on the basis of parallel case and the assessee had failed to rebut the reason as given by the Assessing Officer---No interference was made by the Appellate Tribunal in the order of First Appellate Authority, as he had reduced the rate to 85% in view of the parallel cases and the previous history of the case.?

(e) Income-tax---

----Sale rate--Cotton yarn---Sale rate for the assessment year 1999-2000 as reduced by the First Appellate Authority to 82.85% was upheld---Sale rate of P.C. Yarn adopted by the Taxation Officer at 88.72% as against declared at 88.72% was reduced to 82.85% for the assessment year 2001-2002---Sale rate of cotton yarn for said year declared at 94% was upheld by the Appellate Tribunal.?

(f) Income-tax---

----Sale rate---Cotton yarn---Sale rate for assessment year 1999-2000 reduced by the First Appellate Authority to 82.85% was upheld by the Appellate Tribunal and the sale rate of P.C. yarn by the Taxation Officer at 88.72% as against declared at 88.72% was reduced to 82.85% for the assessment year 2001-2002; sale rate of cotton yearn for this year declared at 94% was upheld.

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

----S. 13(1)(e)---Unexplained investment etc., deemed to be income---Addition on account of manufacturing of combed yarn from outside parties---Validity---Law required a piece of information covered under the term "definite information", which leads to believe that the income of the assessee had either escaped or under-assessed--Commissioner of Income Tax had not controverted the incorporation of expenses on account of manufacturing of combed yarn from outside parties in the subsequent period, after settlement of payment, there was no basis to reduce the expenses for addition and there was no basis for addition either with the assessing panel or with the First Appellate Authority---Addition made was deleted by the Appellate Tribunal having been made without any proper basis.?

2000 PTD (Trib.) 2905 rel.

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

--- S. 13(1)(c)---Unexplained investment etc., deemed to be income---Addition on account of difference in the stock recorded in the books of accounts and the stock hypothecated with the banks---Assessee contended that no addition could be made in respect of stock relating to period when the income was exempt and therefore addition was not maintainable regarding un-explained stock relating to exempt period---Validity---Difference in the stocks recorded in the books of accounts and the stocks pledged with the banks, in quantitative terms, was out of books and addressable as `deemed income' under S.13(1)(c) of the Income Tax Ordinance, 1979---Issue of brought forward of losses was taken up before the First Appellate Authority who observed that "the matter of losses of previous years did not relate to this assessment year, therefore, the appellant may apply to the Assessing Officer directly for credit and brought forward of said losses"---Appellate Tribunal agreed with such observations of. First Appellate Authority but the issue of brought forward of losses was not before the Appellate Tribunal for adjudication---Addition made on account of unexplained pledged stocks, in quantitative terms; was upheld by the Appellate Tribunal in the manner in which the First Appellate Authority maintained.?

C.T.R. No.137 of 1998; I.T.A. No.146/LB of 2005; I.T.A. No.4793/LB of 2003; I.T.A. No 5570/LB of 2005; 1997 PTD (Trib.) 1985 and (1995) 71 Tax 7 (Trib.) ref.

(i) Income-tax---

----Addition---Stock---Market price---Purchase price---Calculation for addition.?

(j) Income-tax---

----Tax liability---Nature---Tax was not a forced liability, but in fact was a responsibility to owe to the State a proportionate share given by the tax-payer for utilizing and consuming the services provided by the State---Determination of tax must be made with a view to keep such principle intact and to maintain confidence and to boost the encouragement in the tax paying society so that the tax should not be taken by the concerned public to be a harsh imposition but a duty.

(k) Income-tax---

----Addition on account of purchase rate---Taxation Officer had unnecessarily without bringing on record, blamed the taxpayer/assessee that "a collusive arrangement existed between the assessee and the parties and a good chunk of profit was suppressed by virtue of declaring low sale rate"---Both the officers below had neither looked for any relevant positive evidence nor for any significant basis for making a case against the assessee---Addition made on account of purchase rate was deleted by the Appellate Tribunal.?

(l) Income-tax--

---Addition-Sale of waste---Sale of waste was made admittedly to registered parties and all the receipts against sales of waste were through proper banking channels---Copies of sale tax invoices along with sales tax registration had been furnished for verification and there was no justification for the addition---Addition made on account of sale rate of waste was deleted by the Appellate Tribunal.?

(m) Income-tax--

----Disallowance---Disallowance of profit and loss account expenses were dismissed by the Appellate Tribunal as the grounds in this respect were vague and no disallowance had been specifically mentioned.?

Muhammad Iqbal Hashmi and Yousaf Ali Ch. ITP for Applicant (in I.T.A. No.2503/LB of 2002, I.T.A. No.3551/LB of 2003, I.T.As. Nos. 2419 and 5891/LB of 2004).

Sabiha Mujahid, D.R. for Respondent (in I.T.A. No.2503/LB of 2002 and I.T.A. No.3551/LB of 2003, I.T.As. Nos. 2419 and 5891/LB of 2004).

Sabiha Mujahid, D.R. for Appellant (in I.T.As. Nos. 2862/LB, 3898/LB of 2003 and I.T.As. Nos. 3254/LB, 2657/LB of 2004).

Muhammad Iqbal Hashmi and Yousaf Ali Ch. ITP for Respondent (in I.T.As. Nos. 2862/LB, 3898/LB of 2003 and I.T.As. Nos. 3254/LB, 2657/LB of 2004).

2007 P T D (Trib.) 123

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 8/LB of 2006, decided on 3rd May, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Addition---Gift amount from mother was received through cross cheque which was deposited in the account of Association of Persons---Addition was made on the ground that individual gift was not received through cross cheque as the gift should have been received in the bank account of the person to whom the gift was made---Assessee contended that provisions of law were not applicable where some loan, gift or advance was received by a cross cheque drawn on a bank and the law did not further lay down the requirement of receipt in the personal account---Validity---Only requirement for avoiding the mischief of S.12(18) of the Income Tax Ordinance, 1979 was to receive the loan or gift or advance through a crossed cheque drawn on bank---Gift was received through a cross cheque drawn on hank---Authorities below clearly erred not only in adding the expression "in his account" in the provision of law, which was not there, but also by invoking these provisions as the case was of invocation of deeming provisions which were to be invoked 'strictly on the basis of express language used by the Legislature---No scope was available in such like cases for going beyond the wording used in the provisions of law---Bank account of the Association of Persons was in fact the bank account of the members---Action of the Assessing Officer was not maintainable, particularly in the background of admitted position on gift payment through a crossed cheque---Provisions of S.12(18) were also not attracted in the case of genuine, identifiable and traceable transactions and the transaction in this case was fully traceable---Authorities below grossly misdirected themselves in invoking and upholding these provisions of law---Orders passed by the authorities were not maintainable either factually or legally---Assessee's appeal was allowed, the orders of authorities below were vacated and addition made was annulled/cancelled by the Appellate Tribunal.

2002 PTD 63; Vol. 7 No.2 Tax Forum 63; 2001 PTD 1180; Vol. 10 No.02 Tax Forum 44; 2005 PTD 2577; (2005) 92 Tax 205; 2004 PTD (Trib.) 1377; 2004 PTD (Trib.) 1572 and 2006 PTD (Trib.) 864 rel.

Asim Zulfiqar, A.C.A. and Zulfiqar Ali Sheikh, I.T.P. for Appellant.

S. Ashraf Ahmad Ali, D.R. for Respondent.

2007 P T D (Trib.) 139

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.5138/LB to 5149 of 2004; decided on 30th November, 2005.

(a) Income-tax---

---Addition-"--Cost of purchase---Transportation expenses---Difference of expense of cost of purchase of sugarcane with the parallel cases was due to the transportation, as the cane had to be purchased from far areas to run the sugar mill and the extra transportation expenses had to be borne by the parties which were being compensated by the assessee Mill---Assessing Officer had not pointed out any instance of unverifiability despite the fact that the books had been maintained and had been produced before the Taxation Officer, who had to examine the same---No justification was available for addition in cost of sale's and same was deleted by the Appellate Tribunal.

(b) Income-tax---

---Addition-Sale rate of sugar---Due to teething problem, the quality of sugar was not up to the market, the new markets had to be discovered, the assessee had to offer special incentives for sale for sugar and the declared sale rate of sugar was fully justified---Addition was made by referring a parallel case while for making a addition in respect of cost of sales, another parallel case was referred----Addition in sale rate of sugar was without justification and the same was deleted by the Appellate Tribunal.

(c) Income-tax---

---Addition---Sale of molasses by sugar mill---Assessing Officer had not pointed out any instance of unverifiability and had not considered the explanation given by the assessee that the assessee-company having no storage facility had to make instant sales to keep the funds intact---Addition in this respect had also not been made in the rest of the years---Addition on account of sale of molasses was deleted by the Appellate Tribunal being unjustified.

(d) Income-tax---

---Addition---Consultancy charges---Opportunity of being heard---Issue regarding addition of consultancy charges was set aside by the Appellate Tribunal as the same had not been confronted and directed for affording an opportunity of being heard.

(e) Income-tax---

---Addition---Interest accrued on loan---Difference of amount shown as interest accrued on loan from directors and adopted in Profit and Loss account was added towards total income---Assessee had not given any justification for difference in the figure---Appellate Tribunal declined interference by upholding the addition by the First Appellate Authority and appeal regarding interest on loan from directors was dismissed.

(f) Income-tax---

----Depreciation---Disallowance of---Depreciation was claimed for 141 days---Taxation Officer restricted the depreciation on plot and machinery for 53-days only on the ground that capacity of sugar mill was 8000 MT, per day and it had crushed 424,486 MT sugarcane and Mill had worked at full capacity for 63 days only---Assessee contended that record of Central Excise Department was with the Taxation Officer showing that Mill had worked for 141 days---Issue was set aside by the Appellate Tribunal with the direction that addition should not be made on the basis of presumption and if there was concrete evidence available on record that the Mill had worked for 141 days, the extra depreciation on plant and machinery should be allowed for that period.

(g) Income-tax---

----Recovery rate---Sugar mill---Declared recovery rate of 6.79% for the preceding years was accepted and there was no justification for the recovery rate of 8%-Assessing Officer was directed to accept the declared recovery rate at 7.2% for the assessment year 1992-93.

(h) Income-tax---

----Disallowances out of profit and loss expenses---Disallowances had been made without specifically pointing out the instance of un­verifiability or the element of expense of personal nature under each of the head---Books of accounts had been maintained, produced before the Taxation Officer and examined---No justification was available for the disallowances without specifically pointing out the defects in the accounts---Assessee was a listed public company and all the expenses were genuine and duly verifiable from the record and supportive evidences---Disallowance made in respect of Profit and Loss Account expenses were deleted by the Appellate Tribunal.

1991 PTD 531; 1998 PTD 806; 2004 PTD (Trib.) 2231; 1994 PTD 174; 1987 PTD 730; 2001 PTD 406 and 2001 PTD 987 ref.

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

----S. 12(18)---C.B.R. Circular No.3 of 1992, dated 27-1-1992---Deemed income---Advances---Business advances---Addition was made "on the ground that advances received from the parties were not through cross cheques---Validity---Advances were 'the business advances and the expression "advance" used in S.12(18) of the Income Tax Ordinance, 1979 means non-business advance---Expression "advance" as used by the legislature' in S.12(18) of the Income Tax Ordinance, 1979 should not be taken in an isolated or detached manner disassociated from the text, but was to be read together and construed in the light of the purpose and object of the provisions of law---Expressions "loan" and "gift" were related to non-business transaction, therefore, the expression "advance" being connected to other was also in the nature of non-business financial transaction---Advances were business advances and were not hit by the mischief of S.12(18) of the Income Tax Ordinance, 1979---Purpose of section 12(18) of the Ordinance was to check fictitious transactions' but the Taxation Officer had not observed that the advances were fictitious---Trading advance will become income as per accounting process for computation of income in the subsequently year and will tantamount to double jeopardy---Additions made were deleted by the Appellate Tribunal being without justification.

1992 PTD (Trib.) 1346; 2004 PTD (Trib.) 151; 1973 PTD 453; 1992 PTD 576 and (2004) 89 Tax 295 (Trib.) ref.

(j) Interpretation of statutes---

----Fiscal statute---While interpreting any provision of statute, plain meanings of the expression and the words used in a statute shall be adhered to and no other meaning shall be deduced therefrom which was not available from a plain reading of the expression and the words used in the statute---If there are two possible constructions of the words of the statute, then the effect is to be given to the one that is in favour of the citizen and not the one that enhances or increases the burden on him---Neither any tax nor higher rate of tax can be imposed by any interpretation---No provision in fiscal statute can be extended on analogy---Straining the language in order to hold a subject liable to tax or to a higher rate of tax cannot be held to be justified when by looking at the clear words used by the legislature their meanings are clear.

(k) Interpretation of statutes---

----Fiscal statute---While interpreting any provision of statute, plain meanings of the expression and the words used in a statute shall be adhered to and no other meaning shall be deduced therefrom which was not available from a plain reading of the expression and the words used in the statute---If there are two possible constructions of the words of the statute, then the effect is to be given to the one that is in favour of the citizen and not the one that enhances or increases the burden on him.

(l) Interpretation of statutes---

----Deeming provision---Deeming provisions are to be applied strictly in accordance with law as the deeming provisions are the fiction of law and all fiction of law are to be interpreted and applied strictly and the doubt, if any, is to be resolved in favour of assessee.

Muhammad Ayub Aftab for Appellant.

Shahid Jamil Khan, L.A. and Mrs. Sabhia Mujahid, D.R. for Respondent.

2007 PTD (Trib.) 155

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2266/LB to 2268/LB of 2005, decided on 17th April, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 62(1)---Assessment on production of accounts, evidence etc.---Rejection of books of accounts along with the sales tax record without confronting the assessee through notice under S.62(1) of the Income Tax Ordinance, 1979---Validity---Proper books of accounts were produced before the Assessing Officer---Notice under S.62(1) of the Income Tax Ordinance, 1979 after having examined the same was not issued---Returned version had been rejected without any cogent reasons---Assessments framed were void ab initio illegal---Since notice under proviso to S.62(1) of the Income Tax Ordinance, 1979 was not issued pointing out specific defects in the books of accounts and no intention was shown to make add-back from Profit and Loss accounts, the rejection of accounts and add-backs made were illegal and unjustified---Assessing Officer was directed by the Appellate Tribunal to accept the returned version declared by the assessee.

PTCL 1990 CL 70(9) and (2003) 87 Tax 129 (Trib.) rel.

Mumtaz-ul-Hassan for Appellant.

Muzammal Hussain, D.R. for Respondent.

2007 P T D (Trib.) 163

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos.293/LB and 2312/LB of 2005, decided on 12th May, 2006.

(a) Income-tax---

----Sales---Estimation of---Estimated sales were reduced by the Appellate Tribunal on the ground that it had been explained by the assessee that there was decline in the business and assessee's plea in this regard had been accepted by the Taxation Officer as well as by the First Appellate Authority in their respective orders.

(b) Income-tax---

----Profit and loss expenses---Disallowance of---Disallowances should be made, if required, after giving specific justification under each of the head of expenses claimed by the assessee---Disallowances made by the Taxation Officer in the profit and loss account expenses were deleted by the Appellate Tribunal, as no reason under each of the expense had been given.

(c) Workers' Welfare Ordinance (XXXVI of 1971)---

----S. 4(4)---Income Tax Ordinance, (XXXI of 1979), Preamble---Charge of workers welfare fund---No order had been passed regarding workers welfare fund but it had been charged on IT 30-A Form---Validity---Written order for the charge of workers welfare fund was the mandatory requirement as provided under the Workers' Welfare Fund Ordinance, 1971 and the violation of the mandatory requirement of law made the order ab initio illegal and void---IT-30 may be treated an order to the extent of computation of tax demand under the Income Tax Ordinance, 1979 but in no way was a substitute for an order in writing as provided under Workers' Welfare Fund Ordinance, 1971---Taxation Officer for the charge of workers welfare fund had to pass order determining the amount due from the industrial establishment on the basis of income assessed under the Income Tax Ordinance, 1979 and may subsequently convey same through IT-30 Form indicating the liability of the tax payer---No order in writing existed regarding workers welfare fund and the charge had been made only through IT-30, there was no justification for upholding the levy of workers welfare fund by the First Appellate Authority---Charge so. made was deleted by the Appellate Tribunal.

1990 PTD (Trib.) 1014 rel.

Kh. Abdul Jaleel for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 181

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Jawaid Masood Tahir Bhatti, Judicial Members and Mukhtar Ahmad Gondal Accountant Member

I.T.As. Nos. 3934/LB, 717/LB, 4208/LB of 2002 and 1167/LB of 2004, decided on 29th March, 2006.

(a) Precedent---

----Ratio decidendi---Meaning of---Ratio decidendi of a case makes the decision a binding precedent for the future---Ground of a decision is the material fact of the case, so that if a similar or comparable set of facts come before the Court again, and the new case is on "all fours" with an earlier case, the Court will follow and apply the decision given in the earlier case.

(b) Precedent---

----Decision---Reasons---Where a Court proceeds to give more than one reason for a decision, per se both the reasons would be binding but the Court is entitled to consider the correctness of the reasons.

AIR 1961 Raj. 250 rel.

(c) Income-tax---

----Mistake in the order---Law does not permit that if, owing to inadvertence, any mistake has been committed in the order that should go on travelling for all times to come.

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

----Ss. 156, 135(9) & 136---Rectification of mistake---Finality of the order---If a mistake of law and fact had been crept in the order that order certainly requires rectification and modification under S.156 of the Income Tax Ordinance, 1979---Finality is attached to the extent that the order passed by the Appellate Tribunal on appeal shall be final being not assailed further by way of applying to the High Court or by invoking the constitutional jurisdiction---No other meanings could be attached to S.135(9) of the Income Tax Ordinance, 1979 if read in consonance with the provisions of S.136 of the Income Tax Ordinance, 1979.

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

----S. 156---Rectification of mistake---Legislature in terms of S.156 of the Income Tax Ordinance, 1979 had empowered the Income Tax Authority or the Tribunal to amend and rectify any order passed by it either on its own motion or on such mistake being brought to its notice by any income tax authority or by the assessee.

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

----S.156---Rectification of mistake---Irrelevant judgment---Mistake apparent from the record---Furnishing of an irrelevant judgment and relying upon which the decision had been made affecting the rights of either party was certainly a mistake apparent from the record.

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

----S.156---Rectification of mistake---Review of judgment---Appellate Tribunal had no power so as to review its own judgment but the provisions of S.156 of the Income Tax Ordinance, 1979 vividly empowers the income tax authority or the Tribunal to amend or rectify its order where a mistake of law and fact had taken place.

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

----S. 156---Rectification of mistake---Irrelevant judgment---Mistake apparent from the record---Interpreting a provision of law on the strength of an irrelevant judgment, without any ambiguity, was a mistake apparent from the record.

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

---S. 156---Rectification of mistake---Word "amend" and "rectify"---Meanings---Word "amend" means to improve, to change or to modify for the better by removing defects or defaults, to correct, to revise, to alter while the word "rectify" means to correct or define something which is erroneous or doubtful.

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

---S. 156---Rectificatory provisions---Use of---Rectificatory provisions are always used as a tool to improve, change, modify, alter, revise the order for the better by removing defects, faults, mistakes etc.

(k) Judgment---

---Irrelevant judgment is that judgment which is not relating or applicable to matter in issue or not supporting the issue of fact to be proved.

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

---Ss. 135(5)(8) & 156---Disposal of appeals by the Appellate Tribunal---Constitution of Full Bench for rectification of an order---Validity---Chairperson of the Appellate Tribunal, in exercise of his statutory powers, was competent to constitute Full Bench for adjudication of appeals, references and applications including rectification of the orders.

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

--S. 64(1)---Limitation for assessment---Word "made"---Interpretation of---Significant word used in subsection (1) of S.64, Income Tax Ordinance, 1979 with particular reference to assessment is "made" is second form of the verb, first one is make and in general terms this word means to manufacture, to create out of nothing, to produce---Word specifies to cause to exist to execute, bring into existence things and to prepare and sign to issue limitation provided in S.64(1) of the Income Tax Ordinance, 1979 in this perspective was relevant to "making of assessment" and no other interpretation could be attached to such words.

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

----S. 64---Making of assessment---Communication of the order---Phrases "making of assessment" and "communication of the order" are to distinct and independent steps to be taken---In fact "communication of the order" is only a part of process of reaching final conclusion to the party after "making the assessment".

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

---Ss. 64 (1) & 154---Limitation for assessment---Service of order---As per scheme of the Income Tax Ordinance, 1979, the assessment order made under S.64 of the Income Tax Ordinance, 1979 shall be served upon the party in the manner laid down under 5.154 of the Income Tax Ordinance, 1979---Cut date provided in S.64 of the Income Tax Ordinance, 1979 in an unambiguous language was relevant to "making of assessment" but did not include communication of the order within that period---Neither provisions nor any word in a statute could be treated to be redundant---In no way "communication of the order" could be shoved in the limitation of time provided for completion of assessment---Phrase "communication of the order" was alien to the limitation of time provided for "making of assessment" under S.64 of the Income Tax Ordinance, 1979.

(p) Interpretation of statutes---

---Fiscal statute should be interpreted according to their natural meanings---Neither there is room or any intendment nor any presumption can be attached to any provision of the statute as to what extent hardship may appear to the judicial mind to be.

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

----S. 156---Rectification of mistake---If the case is not brought within the words of the statute interpreted according to their natural meaning; and if there is a case which is not covered by the statute so interpreted, that can be cured by invoking the provisions of S.156 of the Income Tax Ordinance, 1979 being mistake of law having crept in the order.

(r) Interpretation of statutes---

---Courts should follow that construction of law which does not lead to startling results or destructive ends---Fiscal statutes should be interpreted strictly in accordance with the letter of law used and the words employed and the Court can not imply anything not expressed in statute.

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

----S. 64(1)---Limitation for assessment---Communication of order to the parties---Limitation prescribed under S.64 of the Income Tax Ordinance, 1979 was relevant to making of assessment order and not its communication to the parties within that limit of time.

2005 PTD (Trib.) 1716 reversed.

PTCL 1988 CL 372 distinguished.

I.T.A. No.6288/LB of 1999, dated 29-9-2000; AIR 1996 SC 1313; (1974) 93 ITR 215 (1996) PTR 1136; PLD 2001 SC 1; PLD 2002 SC 630; 2002 PTD 679; PLD (1990) SC 1092; 1997 SCMR 1804; Black's Law Dictionary (Sixth Edition); Law Lexicon (Edition 1996) Page 62; Webster New World Dictionary (Third Edition) Page 43; CIT v. National Food Laboratories (1992) PTD 570 (SC Pak.); CIT Hussain Bhai M. Badri (1994) 208 ITR 719; National Food v. CIT (1991) 64 Tax 60; Sheikh Muhammad Iftikhar-ul-Haq v. ITO Bahawalpur PLD (1996) SC 542; 1997 PTD (Trib.) 879; 2004 PTD (Trib.) 297; AIR 1961 Raj. 250 and PLD 1995 SC 423 not relevant.

Iqbal Hashmi, Naseem Akbar, F.C.A. and Shahbaz Butt (amicus curie) for Appellant (in I.T.As. Nos.3934/LB and 717/LB of 2002).

Dr. Shahid Siddique Bhatti, D.R. for Respondent (in I.T.As. Nos.3934/LB and 717/LB of 2002).

Dr. Shahid Siddique Bhatti, D.R. for Appellant (in I.T.As. Nos.4208/LB of 2002 and 1167/LB of 2004).

Iqbal Hashmi, Naseem Akbar, FCA for Respondents (in I.T.As. Nos.4208/LB of 2002 and 1167/LB of 2004).

Shahbaz Butt (amicus curie).

2007 P T D (Trib.) 199

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.A. No. 5495/LB of 2002, decided on 8th May, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 12(18), 27(2)(a)(ii)(b), 56 & 61---Income deemed to accrue or arise in Pakistan---Returns declaring nil business income and capital assets gain exempt under S.27 (2)(a)(ii)(b) of the Income Tax Ordinance, 1979 gifted by the husband of the of the assessee were filed in response to notice under Ss. 56 and 61 Income Tax Ordinance, 1979---Affidavit of husband of the assessee was also filed---Claim regarding exemption was rejected for the reason that the gift had not been received through banking channel and addition under S.12(18) of the Income Tax Ordinance, 1979 was made---Validity---Purpose of S.12(18) of the Income Tax Ordinance, 1979 was to check the back dated fictitious transactions and S.12(18) of the Income Tax Ordinance, 1979 was not applicable in valuable transactions---Donor, the husband of the assessee, had filed an affidavit and the Taxation Officer or the First Appellate Authority had not doubted the contents of the affidavit filed by the donor---No justification was available for the addition made under S.12(18) of the Income Tax Ordinance, 1979---Order of the First Appellate Authority as well as one passed by the Taxation Officer under S.62 of the Income Tax Ordinance, 1979 were vacated and the addition made under S.12(18) of the Income Tax Ordinance, 1979 was deleted by the Appellate Tribunal.

2002 PTD 63 and I.T.As. Nos. 2397 and 2398/LB of 2001 ref.

Vol. 9 No.8 Tax Forum 25 rel.

Naeem Munawar for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 213

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 5156/LB of 2004, decided on 6th June, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114(6), 122(3)(b) & 239(1)---Income Tax Ordinance (XXXI of 1979), Ss. 61, 62 & 57---Return of income---Assessment year 2001-2002---Revised return---Assessee contended that Assessing Officer illegally assessed the revised return filed under S.114(6) of the Income Tax Ordinance, 2001 which was to be an amended assessment order under S.122(3)(b) of the Income Tax Ordinance, 2001---Validity---Income Tax Ordinance, 2001 had come into force on 1-7-2002 and under the saving provision of S.239(1) of the Income Tax Ordinance, 2001---Taxation Officer had rightly not accepted the revised return, as it was not obligatory to accept the same under the Income Tax Ordinance, 1979---Sales estimated being still excessive were reduced by the Appellate Tribunal and GP rate applied @ 25% was directed to be applied @ 20% keeping in view the parallel cases.

Yawar Mehdi Naqvi for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 217

[Income-tax Appellate Tribunal Pakistan]

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

W.T.As. Nos.1221/LB to 1224/LB of 2002, decided on 9th August, 2005.

Wealth Tax Act (XV of 1963)---

----Ss. 17B, 19(3), 16(3) & 35---Income Tax Ordinance (XXXI of 1979), S.72(2)(b)--Wealth Tax Rules, 1963, R.8(3)---Powers of Inspecting Additional Commissioner to revise Wealth-tax Officer's order---Deceased assessee---Initiation of proceedings under S.17B of the Wealth Tax Act, 1963 after the death of the assessee---Assessee contended that law did not provide proceedings under S.17B of the Wealth Tax Act, 1963 against deceased person---Validity---Inspecting Additional Commissioner had proceeded under S.17B of the Wealth Tax Act, 1963 without issuing notices to legal heirs of the deceased, which was the mandatory requirement of law-Whole proceedings had been completed without impleading the legal heirs of the deceased as a party in accordance with law---Section 19(3) of the Wealth Tax Act, 1963 had specifically provided that the provisions of Ss.14, 14A, 15, 15A, 17 and 17A of the Act shall apply to an executor, administrator etc., but S.17B authorizing Inspecting Additional Commissioner to reopen the case was missing, which clearly showed the intention of legislature to exclude the reopening of the cases, whereas the orders passed by the Assessing Officer were erroneous insofar as these were prejudicial to the, interest of Revenue---When specific S.19 was available in the Wealth Tax Act, 1963, there was no reason to take refuge by applying the provisions of Income Tax Ordinance, 1979 with the observations that "the provisions of Income Tax Ordinance, 1979 were applicable to Wealth Tax Act, 1963 proceedings insofar as the Wealth Tax Act, 1963 was silent on that account"---Proceedings under S.17B of the Wealth Tax Act, 1963 could not be initiated against the dead person and for creating charge against the legal heirs, separate notices on each of them was a legal requirement---No charge could be created against a person unless he was impleaded as a party---Undoubtedly those, who acquire benefit, were responsible for liabilities but the liability of Government revenues were to be established after legal process provided under the law by impleading the liable person as a party-Such having not been done the whole proceedings had become illegal---Orders passed under S.17B of the Wealth Tax Act, 1963 for all the assessment years were declared to be illegal and were cancelled by the Appellate Tribunal.

(2005) 91 Tax 146 (Trib.); I.T.A. No.854/LB of 1999 and Begum Nusrat Bhutto v. ITO 1981 SCMR 1192 rel.

1992 SCMR 687 = 1992 PTD 570; 1998 PTD (Trib.) 1379; 1997 PTD (Trib.) 149; 1993 PTD (Trib.) 234; 1994 PTD 427; (1996) 71 Tax 154; 1999 PTD (Trib.) 394; (1998) 78 Tax 319; 1995 PTD 356, (1990) 184 ITR 149; (1979) 118 ITR 447; (1993 201 ITR 635; (1993) 203 ITR 108; 2005 PTD (Trib.) 344 and 1997 PTD (Trib.) 135 ref.

Shahbaz Butt for Appellant.

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

2007 P T D (Trib.) 256

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman, Jawaid Masood Tahir Bhatti and Syed Kabirul Hassan, Judicial Members

W.T.As. Nos. 202/KB to 204/KB of 2000-01, decided on 14th May, 2002.

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

----Ss. 2(1)(5)(ii) Explanation, 16(2) & 17---C.B.R. Circular No.568-S (WT)/80, dated 20-9-1980---Finance Act (III of 1998), Preamble---Assets, held for purposes of business of construction and sale or letting out---Sale of land by the legal heirs in order to keep the commitment of their father---Purchaser, advertised commercial projects for construction and sale of shops and flats on such land---Fifteen acres of land left with legal heirs on which Drive-In-Cinemas and poultry farm existed from which business income derived was being regularly assessed---Assessments of the legal heirs were completed for income-tax as well as wealth tax---Assessing Officer of another circle issued notices under S.17/16(2) of the Wealth Tax Act, 1963 in the status as an Association of Persons for the land of 15 acres, on the ground of "sale of land" which was residential and commercial and that on the earlier land sold, projects of construction and sale were undertaken by the purchaser and therefore, the intention of the assessees was to sell land for commercial purposes falling under Explanation to S.2(5)(ii) of the Wealth Tax Act, 1963---Taxation---Assessee contended that property was not held for purpose of business of construction and sale or letting out as their deceased father had always declared their properties for self use---Sale was completed as agreement to sell was made by their deceased father---If at all any action was warranted, notices could be issued in the case of deceased through legal heirs---Notices issued were time barred---Notices treating the legal heirs as Association of Persons were illegal as charge of wealth in the case of an Association of Persons was dependent on the existence of the events mentioned in S.2(1)(5)(ii) of the Wealth Tax Act, 1963---Validity---Assessing Officer had failed to establish that the assesses had let out the property or the property was being held for the purpose of construction and sale or letting out---Intention could not be taxed and the conduct at the time of assessment had to be considered---Department had not been able to bring on record or even point out that the assessees/appellants had ever indulged in construction business---Representative of the department categorically stated that there was no such evidence but there was evidence that the assessee had intention to start construction projects in future and intention was enough for proving the purpose---Such assumption was not approved as there should be actual `sale and construction' during the relevant periods to fasten chargeability on the assessee---Evidence existed for sale of some portion of land out of the total land of Drive-In-Cinema but no evidence of construction or any intentions to indulge in such activity had been brought on record---Assessing Officer failed to bring on record any tangible cogent evidence to establish that there was any letting out of property or the assesses were engaged in construction along with sale of immovable property---Order of First Appellate Authority was vacated and all the orders made by the Assessing Officer were annulled being passed without having jurisdiction---Charge of tax under S.3 read with S.2(1)(5)(ii) of the Wealth Tax Act, 1963 was not justified---Orders already made in the hands of individual owner were upheld by the Appellate Tribunal.?

1996 PTD (Trib.) 114; 1994 PTD 567 (Statutes); PIDC v. Pakistan 1992 SCMR 891 1992 PTD 576; Messrs Phillips's 1990 PTD 389; B.P. Biscutt Factory Limited, Karachi v. The Wealth Tax Officer (Civil Appeal No. K-140 of 1981); 1993 PTD (Trib.) 266; (1959) 36 ITR 9; 1994 PTD 672; C.I.T. UP v. Kanpur Cool Syndicate (1961) 10 Taxation 1975; (2000) 82 Tax 83 (Trib.); 1992 PTD (Trib.) 1187; 1998 PTD (Trib.) 2116 and 1998 PTD (Trib.) 2054 ref.

1997 PTD (Trib.) 1034; 1991 PTD (Trib:) 1058; 1992 PTD (Trib.) 1187; 1996 PTD (Trib. )114; (1990) 62 Tax 29 (Trib.) and Messrs PICICI Ltd. v. CIT (East), Karachi 1980 PTD 322 rel.

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

---Ss. 17 & 2(1)(5)(II)---Wealth escaping assessment---Jurisdiction---Issuance of notice under S.17 of the Wealth Tax Act, 1963 on the ground that assessees were liable to wealth tax as an Association of Persons because the land held by more than one person could not be divided and taxed in the hands of individuals separately but will be assessed jointly in the hands of an Association of Persons---Validity---Issue of jurisdiction being the legal issue could be agitated at any stage of proceedings uptill the highest appellate forum---Assessing Officer admitted that in compliance to notice under S.17 of the Wealth Tax Act, 1963 followed by notice under S. 16(2) of the Wealth Tax Act, 1963, assessee had filed wealth tax returns "under protest" declaring Nil wealth in the name of Association of Persons---Returns were filed under protest because assessees were objecting the jurisdiction and had already declared the subject-matter assets already to the Assessing Officer of another Circle---Defect in jurisdiction was rectified which showed that Assessing Officer had no jurisdiction to pass the assessment order.?

Shagufta Begum v. Income Tax Officer PLD 1989 SC 360 = 1989 PTD 544; 1986 PTD (Trib.) 314; 1999 PTD 4037 4053; (1993) 67 Tax 74 (Trib.); 1987 PTD 407 and Pir Sabir Shah v. Shad Muhammad and others PLD 1995 SC 66 rel.

65 Tax 36 H.C. Karachi at page 38 ref.

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

---Ss. 2(1)(5)(ii) & 3---Assets---Charge of wealth tax on the assets on the ground that such property could be rented out---Validity---If the proposition of First Appellate Authority that "properties could be rented out and, therefore, they could be subjected to the levy of wealth tax" was accepted then every property held by an Association of Persons should be included in the definition of "asset" because every property could be rented out sometime in future---It will make the entire definition and the explanation added thereto in S.2(m)(ii) of the Wealth Tax Act, 1963 as superfluous and nugatory---View of the First Appellate Authority that "since the property was owned by Association of Persons, wad occupied by a company which was a separate entity, therefore, by virtue of such occupation the property could be assessed on notional rental value even if no rent was paid by the company" could also not be approved which clearly amounted to travelling beyond the express provision of law and such interpretation would make the clear and expressed provision of law nugatory and redundant---Such view of First Appellate Authority was against the established principles of the interpretation of the statues and could not be sustained.?

(d) Wealth Tax Act (XV of1963)---

--S.17---Wealth escaping assessment---Question, whether the notice under S.17 of the Wealth Tax Act, 1963 was legal when there is no escaped asset of the assessee---Assessing Officer issued notice under S.17 of the Wealth Tax Act, 1963 which was regarding escaped assets but there was no escaped assets of the assessee, as the assesses/appellants had already declared the disputed property, and the property had already been assessed in the hands of the individual owner and there was no definite information of escapement available with the Assessing Officer.?

M. Rehman I.T.O. v. Narain Ganj Company (Pvt.) Limited (1971) 23 Taxation 223 rel.

Sirajul Haque Memon for Appellant.

Muhammad Farid assisted by S.M. Attaullah, Special Officer of Income-tax for the Department.

2007 P T D (Trib.) 295

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

W.T.A. No.1230/LB of 2005, decided on 23rd May, 2006.

Wealth Tax Act (XV of 1963)---

----Ss. 2(1)(5)(ii), 3, 16(2) & 17---Wealth Tax Rules, 1963, R.8(3)---Assets---Assessee, a company deriving income from running a Textile Mill/lease income---Mill was leased out and lease income was declared---Wealth tax was charged under the provisions of S.2(5)(ii) of the Wealth Tax Act, 1963 on the ground that the assessee himself assigned the purpose of his immovable property held for the purpose of letting out in the Memoranduiri and Articles of Association---Validity---Memorandum and Articles of Association of the assessee company contained undoubtedly a specific sub-clause regarding the objects and purposes of the assessee company wherein to lease, let out, hire, mortgage etc. were among the objects, but this object was one among more than 37 objects, which had to be adjudged in its totality, which were in fact "to erect, establish and work weaving, spinning, embroidery, bleaching sizing, dyeing, printing, twisting, calendering, and finishing for the manufacture of all kinds of cotton, woollen, silk linen, art silk, rayon, and mixed textile and articles---Legislature had never intended to impose wealth tax on leased out industrial/commercial units---Even if, in one of the object clauses, the object of the company had been mentioned as the purposes of the company as to lease, let out etc. that clause was not conclusive and was of general nature, as the purpose had been defined as the ultimate use of the company, which had never been said to be let out or to lease---Assessee had not held the immovable property for the purpose of letting out, or business of letting out, but the purpose of the assessee company as was evident from its title was the textile and general mills---First Appellate Authority had rightly cancelled the order---Order of the First Appellate Authority was upheld and the appeal tiled by the Department was dismissed by the Appellate Tribunal.

(2004) 89 Tax 234 (Trib.) rel.

2002 PTD (Trib.) 2370; (1997) 76 Tax (SC Pak.); 1990 PTD (Trib.) 671; 2006 PTD 406; 2006 PTD (Trib.) 5 and W.T.As. Nos.191 to 195/LB of 2003, dated 18-1-2005 ref.

2000 PTD (Trib.) 1826 per incurrium.

Mahmood Aslam, I.A.C. for Appellant.

M. Iqbal Kh. for Respondent.

2007 P T D (Trib.) 307

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Syed Masood-ul-Hassan Shah, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.As. Nos.1418/IB, 1419/1B of 2005, 152/IB, 153/IB, 351/IB, 352/IB, 491/IB to 493/IB of 2006, decided on 22nd April, 2006.

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

---Ss. 238 & 239---Income Tax Ordinance (XXXI of 1979), S.166---General Clauses Act (X of 1897), S.6---Repeal and savings---Application of---Principles---Rights and liabilities and obligations etc. which stood acquired and incurred and created respectively under the repealed law have to be enforced and vindicated and discharged respectively as per old law and repeal will not affect such rights/liabilities/obligations etc.---If "Savings" of certain provisions of the repealed old law have also been provided in the re-enacted law then the procedural aspect can be dealt with under the re-enacted law for coming to a logical conclusion for the enforcement of such rights/liabilities and for the discharge of the obligations which stood created under the repealed law.

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

---Ss. 114(4) & 239---Income Tax Ordinance (XXXI of 1979), Ss.59, 59A, 61, 62 & 63---Return of income---Calling of return in respect of an income year ending on or before 30-6-2002---Validity---Calling of return of income through notice under S.114(4) or the Income Tax Ordinance, 2001 being a procedural matter for initiation of proceedings in respect of obligations/liabilities created and incurred during the assessment period relevant to Income Tax Ordinance, 1979, would not lead to redundancy by calling the notice as illegal notice and the proceedings thereafter to be without any express savings provided in S.239 of the Income Tax Ordinance, 200I---Obligation/liabilities created and incurred under the - law (luring the period falling under the Income Tax Ordinance, 1979 must be enforced because the provisions of assessment under the Income Tax Ordinance, 1979 (Ss. 59, 59A, 61, 62 & 63) had been saved in the Income Tax Ordinance, 2001 for computation of total income and for the tax payable in that regard.

(c) Interpretation of statutes---

----Law is 'always taken to be legislated for the advancement of its purpose and not for a futile exercise.

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

----Ss. 114(4) & 239(2)---Income Tax Ordinance (XXXI of 1979), Ss.62 & 63---Return of income---Initiation of proceedings by calling the returns of income through notice under S.114(4) of the Income Tax Ordinance, 2001 and finalization/completion of assessments under S.62 or 63 of the Income Tax Ordinance, 1979 was justified, lawful and in accordance with the savings provided in S.239(2) of the Income Tax Ordinance, 2001 for framing assessments under S.62 or 63 of the Income Tax Ordinance, 1979 relating to "assessment years falling on or before 30-6-2002."

2005 PTD (Trib.) 490 reversed.

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

----Ss. 114(4) & 239---Income Tax Ordinance (XXXI of 1979), Ss.56, 62 & 63---Return of income---Issuance of notice under S.114 of the Income Tax Ordinance, 2001 and consequential framing of assessment under S.62 or 63 of the Income Tax Ordinance, 1979 in respect of an income year ending on or before 30-6-2002---Validity---Procedure for initiation of proceedings for calling a return through notice under S.114 of the Income Tax Ordinance, 2001 was rightly adopted by the Taxation Officer under the Income Tax Ordinance, 2001---Non-saving of provisions of S.56 of the Income Tax Ordinance, 1979 will not have any effect on the proceedings initiated through notice under S.1 14(4) of the Income Tax Ordinance, 2001 being a procedural matter and there was no other way but to initiate the proceedings in the cases where the substantive provisions relating to the manner of determination of rights/ obligations/liabilities/computation of income/charge of income tax etc. had been specifically saved in Savings in S.239 of the Income Tax Ordinance, 2001---Orders of First Appellate Authority were set aside and were remanded to decide the appeals of the assessees on merits.

2005 PTD (Trib.) 490 reversed.

PTD 1985 (Trib.) 255; PLD 1960 Lah. 770; 2004 PTD 1173; 1997 PTD 821; Idrees Ahmed and others v. Hafiz Fida Khan PLD 1985 SC 376; PLD 1964 SC 266; 2004 PTD 1173 (H.C. Kar.); 2006 PTD 734; 1986 PTD (Trib.) 141; PLD 1974 SC 284; PLD 1982 SC 247; 88 Taxation 145 (Trib.); (2003) Tax 230 = 2002 PTD 3106; 2005 PTR 17; 2005 PTD 108; 1960 PTD 574 and "Principle of Interpretation Statutes" by Mr. Shaukat Mahmood and Mr. Nadeem Shaukat ref.

(f) Interpretation of statutes---

----Repeal and savings---Application of---Principles---Rights and liabilities and obligations etc. which stood acquired and incurred and created respectively under the repealed law have to be enforced and vindicated and discharged respectively as per old law and repeal will not effect such rights/liabilities/obligations etc. If "Savings" of certain provisions of the repealed old law have also been provided in the re-enacted law then the procedural aspect can be dealt with under the re-enacted law for coming to a logical conclusion for the enforcement of such rights/liabilities and for the discharge of the obligations which stood created under the repealed law.

Shahina Akbar, L.A. and Muhammad Ali Shah, D.R. for Applicants (in I.T.As. Nos.1418/IB and 1419/IB of 2005).

None for Respondents (in I.T.As. Nos.1418/IB, 1419/IB or 2005).

Shahina Akbar, L.A. and Muhammad Ali Shah, D.Rs. for Applicants (in I.T.As. Nos.152/IB, 153/lB of 2006).

None for Respondents (in I.T.As. Nos.152/IB and 153/IB of 2006).

Shahina Akbar, L.A., Muhammad Ali Shah, Zia Ahmed Butt, Assessing Officer D.Rs., Dr. Ikram-ul-Haq and Hafiz Muhammad Idrees, Advocates as Amicus curiae for Applicants (in I.T.As. Nos.351/IB to 352/IB of 2006).

C.A. Habib, FCA for Respondent (in I.T.As. Nos.351/IB to 352/IB of 2006).

Shahina Akbar, L.A. and Muhammad Ali Shah, D.Rs. for Applicants (in I.T.As. Nos.491/IB to 493/IB of 2006).

None for Respondent (in I.T.As. Nos.491/IB to 493/IB of 2006).

2007 P T D (Trib.) 322

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 2480/LB to 2482/LB of 2005, decided on 2nd March, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Ss, 221, 122(5) & 339---Income Tax Ordinance (XXXI of 1979), Ss.156, 80CC, 14(l) and First Sched., Part-I, Para CCCC and Second Sched., Part-III, Cl. (12)---C.B.R. Letter No. (4)(530)-TO-1/2002, dated 22-3-2004---Rectification of mistake---Assessment years 1995-96, 1997-98 and 1999-2000---Issuance of show-cause notice, dated 25-3-2003 for withdrawal of 90% rebate allowed through a rectified order, dated 18-7-2000 on the ground that the same had been allowed by mistake of law, by virtue of which 90% rebate allowed on the supply of engineering goods towards the international tenders were withdrawn---Cancellation of such orders by the First Appellate Authority---Validity---As the amendment in S. 221 of the Income Tax Ordinance, 2001 had been brought on statute book on June, 17 by virtue of Finance Act, 2003, therefore, it will start its voyage from the said date i.e. June, 17, 2003---Orders having been passed by the Taxation Officer under S.221 of the Income Tax Ordinance, 2001 on 3-6-2003, same had rightly been declared as illegal, null and void and were correctly cancelled---No interference was made by the Appellate Tribunal and appeals filed by the Department were dismissed.

Vol. 8 No.4 Tax Forum 49; 2001 PTD 1525; Vol.9 No.3 Tax Forum 27 and 2005 PTD (Trib.) 1697 ref.

2006 PTD (Trib.) 1768 rel.

Javed Iqbal Rana and Dr. Ishtiaq, IAC for Appellants.

Zaeem-ul-Farooq for Respondent.

2007 P T D (Trib.) 345

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Blratti, Judicial Member and Shaheen Iqbal, Accountant Member

LT.As. Nos. 4222/LB, 4752/LB of 2004 and 296/LB, 5203/LB, 5204/LB, 6233/LB to 6235/LB of 2005, decided on 18th May, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 25(c)---Amounts subsequently recovered in respect of deductions, etc.---Assessee a sugar mill---Financial charges---Department contended that addition deleted should have been restored as the assessment at NIL income did not mean that financial charges had not been allowed---Validity---No interference was warranted by the Appellate Tribunal, deletion of addition made under S.25(c) of the Income Tax Ordinance, 1979 was upheld in circumstance. [pp. 351, 3531 A & G

1998 PTD (Trib.) 3478 ref

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

--S. 62. on production of accounts, evidence etc.---Rejection of accounts---Addition on account of purchase rate of sugarcane and the add backs in Profit and Loss account expenses---Only one notice titled as "Notice under section 62" and no specific defects in the books of accounts warranting rejection of book version had been mentioned despite the fact that hooks were- admittedly maintained, were produced and had been examined by the Taxation Officer---Neither parallel cases of purchase price of sugarcane nor their purchase prices had been confronted in the notice---Intention to curtail the declared purchase price of sugarcane by Rs.50 per Metric Ton had also not been confronted---On failure of the Taxation Officer to confront the assessee as provided under the mandatory requirement of law under S.62(1) of the Income Tax Ordinance, 1979, addition as well as the disallowances out of Profit and Loss Account expenses were liable to be deleted---Purchases of sugarcane were fully verifiable, as complete identifying particulars, addresses including National Identity Card Nos. were mentioned in the pass book issued to the growers by the assessee and the reference of pass book number was given on the CPRs on which the payment was made by the bank to the growers---Addition merited deletion on legal and factual premises---Same was the position of disallowances out of Profit and Loss Account expenses, which had also been made without pointing out any specific defects in the books of accounts pertaining to the expenses claimed---Addition made on account of purchase rate of sugarcane and the add backs in Profit and Loss Account expenses were deleted by the Appellate Tribunal.

2002 PTD 407; 1986 PTD 84; 2003 PTD 625 (Trib.); 1989 PTD 1233 (Trib.); 1997 PTD (Trib.) 1408; 1990 PTD 731 (Trib.); 2004 PTD 1572 (Trib.); 1999 PTD ('Trib.) 382; 2002 PTD (Trib.) 1583 and 2003 PTD (Trib.) 2668 rel.

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

----S. 62---Assessment on production of accounts, evidence etc.---Rejection of accounts---Merely mentioning notice under S.62 of the Income Tax Ordinance, 1979 on the top of the notice did not make it a notice as contemplated under the proviso pertaining to pointing of specific defects in the books of accounts---Statutory requirements were mandatory and not directory and on failure to fulfil the mandatory requirement, the addition ought to be deleted.

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

----S. 62---Assessment on production of accounts, evidence etc.---Disallowance of Profit and Loss expenses---Opportunity to fill in the lacunas---For Profit and Loss Account disallowances in the claimed expenses, the legal requirement of S.62 of the Income Tax Ordinance, 1979 was to be fulfilled and in case of failure to do so, the additions were to be deleted and the Department was not to be given an opportunity to fill in the lacunas and to improve upon its case in another round of assessment.

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

----Ss. 62 & 88---Income Tax Ordinance (XLIX of 2001), S.128(1)---Assessment on production of accounts, evidence etc.---Rejection of accounts---Cancellation of assessment by the First Appellate Authority on the ground that books of accounts were produced on 12-5-2003, while the assessment was finalized on 13-5-2003 without issuing any notice under S.62 of the Income Tax Ordinance, 1979---Additional tax was also deleted---Department contended that notice under S.62 of the Income Tax Ordinance, 1979, dated 12-4-2003 was issued on the basis of details filed during assessment proceedings and since the details were based on books of accounts, the legal requirement of issuing notice under S.62 of the Income Tax Ordinance, 1979 after examination of books of accounts was fulfilled---Validity---Unambiguous mention of books of accounts existed in the proviso to S.62(1) of the Income Tax Ordinance, 1979, though the books of accounts were not defined in the Income Tax Ordinance, 1979, yet in the prescribed notice under S.61 of the Income Tax Ordinance, 1979, the cash book, ledger, journal, stock register, Bank pass book, original vouchers of purchases and carbon copies of cash memo/bills for sales were specifically mentioned---Assessing Officer had not mentioned in the body of assessment order that any of the books/documents requisitioned by him were not produced, it could be safely inferred that books of accounts as contemplated under the proviso were produced in support of declared version---Any details riled were not substitute to the books of accounts which were maintained on double entry system of accounting and each entry therein was supported by vouchers reflecting debit and credit effect of each transaction--Assessment made in violation of provisions of S.62 of the Income Tax Ordinance, 1979 having rightly been cancelled by the First Appellate Authority, the same was upheld by the Appellate Tribunal.

2003 PTD 368 and 2002 PTD 388 (Kar. H.C.) ref.

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

----S. 62---Assessment on production of accounts, evidence etc.--Rejection of accounts---Notice not based on examination of books of accounts---Validity---If notice titled as "Notice under section 62" was issued before the production and examination of books of accounts requiring certain information, documents and explanation and in response to that notice, books of accounts were produced in support of declared version and if the Assessing Officer was not in agreement with the declared version then a fresh notice was to be issued based on examination of books of accounts and in such situation, the previous notice issued before the examination of books of accounts would become infructuous.

2003 PTD (Trib.) 625 rel.

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

----Ss. 88 & 54---Charge of additional tax 'or failure to pay tax with the return---Levy of additional tax on the ground that declared income had not been correctly worked out as adjustment of unabsorbed depreciation allowance was made whereas no such allowance was available in the assessment order of the previous year---Validity---Additional tax under S.88 of the Income Tax Ordinance, 1979 was leviable if the tax payable under S.54 of the Income Tax Ordinance, 1979 on the basis of return under S.55 of the Income Tax Ordinance, 1979 was either not paid or there was short payment---Admitted position was that return to total income vas filed declaring loss and admitted taxability thereon being minimum tax under S.80D of the Income Tax Ordinance, 1979 stood paid---No default of S.54 of the Income Tax Ordinance, 1979 was found and accordingly, additional tax under S.88 of the Income Tax Ordinance, 1979 was not chargeable---No interference was called for in the order of First Appellate Authority and departmental appeal on this issue was dismissed by the Appellate Tribunal.

2002 PTD 388 (Kar. H.C.) rel.

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

???????????

----S.62---Assessment on production of accounts, evidence etc.---Addition---Financial charges---Interest free advances---Advances and other receivables appearing in notes to final accounts, which included receivable from various sister concerns, were considered interest free advances---Addition was on the ground that assessee failed to prove that the said amounts were given from the sources other than borrowed funds so it was considered appropriate to make addition of 10% in net financial charges---Validity---Assessing Officer had acknowledged the production of books of accounts, vouchers and bank statement etc., but while making addition, he had given the observation that "the assessee had failed to prove that the said amounts were given from sources other than borrowed funds" which was not valid---Onus of proof was on the Assessing Officer and he had failed to discharge the said onus---Had he discharged his onus, he might have come with an exact addition instead of ad hoc addition of 10% of the claim---Order of First Appellate Authority was vacated and addition in financial charges were deleted by the Appellate Tribunal.

1986 SCMR 968 rel.

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

----S.62---Assessment on production of accounts, evidence etc.---Rejection of accounts---Profit and loss expenses---Addition in Profit and Loss Account expenses were deleted as the same had been made without pointing out specific defects in the books of accounts in respect of expenses claimed under the specific heads.

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

---S. 62---Assessment on production of accounts, evidence etc.---Rejection of accounts---Addition of purchase rate---Assessing Officer failed to rebut the reply of assessee and had made the addition on the basis of general observations---Addition was rightly deleted by the First Appellate Authority on the ground, among others, that when declared gross profit rate was being accepted, no addition in an item of the cost of sale was justified.

Shahid Pervaiz Jami for Appellant (in I.T.As. Nos.4222/LB of 2004 and 296/LB, 5203/LB, 5204/LB of 2005).

Mehmood Aslam, D.R. for Respondent (in I.T.As. Nos.4222/LB of 2004 and 296/LB, 5203/LB, 5204/LB of 2005).

Mehmood Aslam, D.R. for Appellant (in I.T.As. Nos. 4752/LB of 2004 and 6233/LB to 6235/LB of 2005).

Shahid Pervaiz Jami for Respondent (in I.T.As. Nos. 4752/LB of 2004 and 6233/LB to 6235/LB of 2005).

2007 P T D (Trib.) 379

[Income-tax Appellate Tribunal Pakistan]

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

M.A. (AG) No.562/LB of 2006 and I.T.A. No.3350/LB of 2005, decided on 26th June, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 24(c) & 134---Addition---Appeal to Appellate Tribunal---All necessary details were provided which were acknowledged by Assessing Officer---Deputy Commissioner of Income Tax who was author of impugned order, without confronting a single instance of inadmissibility disallowed certain amounts in a very bald mam1er---No justification was left with Deputy Commissioner of Income Tax to make additions.

2005 PTD 1157 rel.

Sirajuddin Khalid for Appellant.

S. Ashraf Ahmad Ali for Respondent.

2007 P T D (Trib.) 386

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.209/KB and 210/KB of 2005, decided on 29th April, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S. 221---Income Tax Ordinance (XXXI of 1979), Ss.65 & 11-Rectification of mistake---Rectification of order passed by the Appellate Tribunal and setting aside of the same by the First Appellate Authority in appeal---Validity---Obedience was the essence of law---Such constitutive aspect of law was missing in the orders under consideration---Treatment accorded by the Additional Commissioner/Taxation Officer and First Appellate Authority did not fall within their jurisdiction---Assessing Officer and First Appellate Authority did not have statutory powers to interfere in the issues decided by the Appellate Tribunal---Decisions of the Appellate Tribunal had material legal force i.e. the legal statements were binding for the parties involved in the proceedings---Possibility may exist that the material legal force could be eroded by limitation of ratione personae, ratione materiae and ratione temporis which was not obvious in the present case---No violation was found based on procedural errors or shortcomings of such gravity that. a serious doubt was cast on the Appellate Tribunal's proceedings---Principle of `Legal Certainty' required that, after a certain point, a judicial decision could not be questioned any more-Additional Commissioner/Taxation Officer and First Appellate Authority were bound not to interpose with the decision of the Appellate Tribunal which enjoyed material legal force besides being an authority over factual domain---Orders passed by both the authorities below were without lawful authority and tantamount to exercise of excess jurisdiction and not sustainable in the eyes of law---Order passed by Additional Commissioner/Taxation Officer and First Appellate Authority were directed to be annulled by the Appellate Tribunal.

Rehan Hasan Naqvi and Miss Lubna Pervez for Appellant.

Rehmatullah Khan Wazir, D.R., for Respondent.

2007 P T D (Trib.) 394

[Income-tax Appellate Tribunal Pakistan]

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

M.As. Nos.494/LB of 2004 and 599/LB of 2006, decided on 23rd September, 2006.

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

----Ss. 66A, 62(1), 59(4) & 156---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Self­ assessment---Till expiry of assessment year no order was passed, no disqualification or ineligibility was intimated or confronted---Later on, proceedings under S.62 of the Income Tax Ordinance, 1979 were initiated and ended in acceptance of the declared income---Initiation- of proceedings under S.66A of the Income Tax Ordinance, 1979---Validity---Necessity of accepting the return under S.62(1) of the Income Tax Ordinance, 1979 when the order in terms of S.59(4) oft the Income Tax Ordinance, 1979 deemed to have been passed after the 30th day of June of the financial year next following the income, was not explained--Such fatal legal lacuna had resulted bringing into existence two orders i.e. one was deemed order under S.59(4) and the other under S.62(1) of the Income Tax Ordinance, 1979 which had been subjected to action under S.66A of the Income Tax Ordinance, 1979 and not the deemed order under S.59(4) of the Income Tax Ordinance, 1979---Legal defect was that it was the order passed under S.62(1) of the Income Tax Ordinance, 1979 which had been amended---Order under S. 62 of the Income Tax Ordinance, 1979 which had been the subject-matter of S.66A of the Income Tax Ordinance, 1979 had no legal existence in the presence of deemed order under proviso to S.59(4) of the Income Tax Ordinance, 1979 which was holding the field---In presence of such order no further assessment order was legally required---Proceedings which were against patently illegal order consequently had made proceedings under S.66A of the Income Tax Ordinance, 1979 as being void ab-initio and devoid of any legal sanction behind it---Such transparent legal lacuna had been omitted to be noticed so as to be dilated upon in the original order---Mistakes were floating on surface---Order was rectified by dilating upon the preliminary legal objection on the legality of action under S.66A of the Income Tax Ordinance, 1979---Invoking S.66A of the Income Tax Ordinance, 1979 was declared as annulled; being void ab initio in the eye of law as not maintainable---Assessee's miscellaneous application succeeded whereas application seeking permission for additional ground was dismissed as additional ground in respect of main appeal could not be taken up at this stage.

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

----S. 66A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Captioning the order under S.66A of the Income Tax Ordinance, 1979 as "assessment order"---Validity---Held, it was un-parallel by captioning as "assessment order" and remanding after cancellation of the case because the same was not permitted under S.66-A of the Income Tax Ordinance, 1979.

S.A. Rauf, I.T.P. for Applicant.

S. Ashraf Ahmad Ali, D.R. for Respondent.

2007 P T D (Trib.) 406

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.5767/LB and 5768/LB of 2004 and 4944/LB to 4948/LB and 4954/LB of 2005, decided on 27th April, 2006.

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

----S. 34---Set off of losses---Nature of the provisions---Provisions of S.34 of the income Tax Ordinance, 1979 were clearly substantive in nature and by no stretch of imagination could be held to be of exemption/concessionary nature.

1992 PTD 1141 and 2005 PTD 2430 distinguished.

2005 PTD 1621; 1998 PTD 3866 and 51 Tax. 222 rel.

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

----S.34---Set off of losses---Scope---Convention of the department that entitlement of the assessee to set off loss suffered under a head of income is restricted to choosing a head of income' and not thesource of income' within a particular `head' is an attempt to restrict or narrow down the scope of a substantive provision which is neither the intention nor the purpose of the legislation.

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

----S. 34---Income Tax Ordinance (XLIX of 2001), S.122---Set off of the business loss against the dividend income---Validity---Set off of the business loss against the dividend income, seemed to be against the principles of equity particularly in the circumstances where if there had been a business income that would have been subjected to tax at the rate applicable to interest income and not the dividend income---Present one was a simple case of comparing like with like under which principle again no room existed for setting off the business loss against the dividend income--No exception could be taken to the findings recorded by the First Appellate Authority that the business loss computed in the case of assessee was required to be set off against the interest income and not the dividend income.

2005 PTD 1621 and 1998 PTD 3866 rel.

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

----S. 156---Income Tax Ordinance (XLIX of 2001), Ss. 221 & 122---Rectification---Computation of limitation---Where a rectification was carried out on a matter which was not the subject of subsequent proceedings the time limitation would always be computed from the date of original assessment--Amendment proceedings never involved in issue i.e. computation of rebate on donations---Consequently,, time limitation of four years would be considered from date of original assessment which had expired three months before the date of rectification order---Findings of First Appellate Authority that the rectification was barred by time was fully in accordance with law and did not call for any interference--Even otherwise if the contention of department was accepted that rectification was carried out in respect out in respect of amendment order, the same was again not maintainable because when amendment order had been found to be illegal then the subsequent rectification in respect thereof was also not maintainable and was illegal.

?

51 Tax 222; I.T.As. Nos. 1695-1696/LB of 2000, dated 14-5-2003 and I.T.A. No.1506/LB of 2001, dated 13-10-2003 rel.

Amjad Zubair Tiwana, D.C.I.T. for Appellant.

Asim Zulfiqar Ali, A.C.A. for Respondent.

2007 P T D (Trib.) 490

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.As. Nos. 5258/LB to 5260/LB of 2005, decided on 1st November, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Ss.1 14(4) & 132(2)---Income Tax Ordinance (XXXI of 1979), S.63---Income Tax Appellate Tribunal Rules, 2004, R.20(2)---Return of income---Assessment was formulated under S.63 of the Income Tax Ordinance, 1979 after issuance of notice under S.114(4) of the Income Tax Ordinance, 2001 asking for furnishing of evidence in support of return income---Assessment was annulled by the First Appellate Authority being patently illegal on the ground that assessment proceedings were initiated by two different enactments which was nullity in law---Validity---Assessment proceedings initiated under the Income Tax Ordinance, 2001 and formulation of assessment under the Income Tax Ordinance, 1979 was declared lawfully made and the order of First Appellate Authority was vacated by the Appellate Tribunal with the direction that assessee's appeals before' the First Appellate Authority shall remain pending for disposal and shall be adjudicated on merits on other grounds, if any.

I.T.A. No.301/LB of 2004, dated 9-9-2004 reversed.

I.T.As. No.1418 and 1419/IB of 2005, dated 22-4-2006 rel.

Sheraz Mirza, D.R. for Appellant.

Nemo for Respondent.

2007 P T D (Trib.) 493

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 2675/LB and 4360/LB of 2005, decided on 19th September, 2006.

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

----Ss. 239(3) & 205---Savings---Word "or any other amount"---Additional tax---First Appellate Authority found that words "or any other amount" appearing in subsection (3) of S.239 of the Income Tax Ordinance, 2001 covered the charge of additional tax under said provision---Validity---Words "ally other amount" were not meant to describe "additional tax" in the presence of word "additional tax".

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

----S.239(3)---Savings---Assessment year 2001-2002---Application of amended subsection (3) of S.239 of the Income Tax Ordinance, 2001 to the proceedings for assessment year 2001-2002---Validity---Pre-amended provisions of subsection (3) of S.239 of the Income Tax Ordinance, 2001 would hold the field till 30-6-2002, i.e. prior to substituting the same w.e.f. 1-7-2002---for assessment year 2001-2002, the pre-amended provisions of subsection were to be invoked, accordingly under original subsection (3), the proceedings were to be finalized under relevant provisions of the Income Tax Ordinance, 1979---Amended subsection (3) of S.239 was not applicable in the proceedings for the assessment year 2001-2002.

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

----S.205---Income Tax Ordinance (XXXI of 1979), S.88---Additional tax---Mentioning "an order under S.205(88)"---Legal shape of---By writing as S.205 of Ordinance, 2001 and S.88 of Ordinance, 1979 it could commonly be understood in the legal parlance that it meant subsection (88) of main S.205 whereas Assessing Officer had meant as 205/88---Assessing Officer had left it to others to read what was in his mind---Such a sketchy way of mentioning the sections and drafting order could not be approved by any stretch of imagination---Assessee had the right to know precisely under which specific provisions of law he had been made liable to pay tax---Appellate Tribunal disapproved that it could be taken as an order whether administrative or judicial---Assessing Officer had offered negative contribution, conspicuously and other officers should avoid same.

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

----S.205---Income Tax Ordinance (XXXI of 1979), S.88-Additional tax---Mentioning of section firstly from the un-repealed Ordinance and then from the repealed Ordinance---Legality of proceedings---By writing as "205(88)" it could possibly be presumed as such that was S.205 of the Income Tax Ordinance, 2001 by "88" it meant the corresponding section of the Income Tax Ordinance,, 1979---Such proceedings, simultaneously under the two enactments of law, one was alive and other was dead, legally not permissible, which had made the order as unlawful---Mentioning of sections in such manner had an ultimate effect on the proceedings which had become legally without any coverage or any legal sanction behind it.

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

----S.205---Income Tax Ordinance (XXXI of 1979), S.88---Additional tax---Order under "S.205(88)" was passed at the end of' the assessment order under S.62 of the Income Tax Ordinance, 1979---Validity---Order appearing in such a way was not at all sustainable in the eye of law for the reasons that nothing had been expressed as to the assumption of the jurisdiction for an order under "S.205(88)" by the Assessing Officer, as for assessing the income order had been passed under S.62 of the Income Tax Ordinance, 1979 clearly depicting that jurisdiction was assumed for passing an order under S.62 of the Income Tax Ordinance, 1979, thus without expressing as to how jurisdiction had been assumed for an order under "S.205(88)" which had been made part of the earlier one---Not assuming the jurisdiction had made the entire proceedings as illegal and void ab initio, and thus merited to be cancelled/annulled---Proper course was that firstly to conclude the order under S.62 of the Income Tax Ordinance, 1979 by putting the signatures with affixing official seal/stamp, only then second order could have commenced after proper assumption of jurisdiction by the Assessing Officer---Proceedings in such an ignorant way by the Assessing Officer was unparalleled where only a top administration in the tax structure could take a notice so as to put a stop to this illegal manner.

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

----S.205---Income Tax Ordinance (XXXI of 1979), S.88---Additional tax---Order captioned as "under S.205(88)"---Validity---Order captioned as "under S.205(88)" could not be taken as an order at all either an administrative or a judicial---Was mandatory that while imposing additional tax complete basis/working i.e. the days and the rate at which tax had been imposed, were to be given so as ultimately the amount which the assessee had been made liable to pay was made clear---No basis had been given which had made the entire exercise as illegal, void ab initio---Order passed under "S.205(88)" was void ab initio and was annulled accordingly by the Appellate Tribunal.

Mirza Anwar Baig for Appellant.

S. Ashraf Ahmad Ali, D.R. for Respondent.

2007 P T D (Trib.) 509

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Muhammad Faiyaz Khan, Accountant Member

I.T.A. No. 930/IB of 2005, decided on 22nd July, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S.12(18)---Income deemed to accrue or arise in Pakistan---Loan---Addition was made on the ground that loan had appeared in the wealth statement for which no evidence was filed to prove that the loan was routed through banking channel---Assessee explained that liability of the said amount was distributed among the members equally---Loan was advanced by one of the members of the agreement that if the loan was not repaid, he was to become 1/3rd shareholder in the plot and it was the 1 /3rd share which had appeared in the wealth statement as a liability and it was not a transaction legally and merely a transfer of liability for which the provisions of S. 12(18) of the Income Tax Ordinance, 1979 were not attracted---Validity---Assessing Officer, instead of following the directions of the Appellate Tribunal had embarked on a course for which he had no mandate---First Appellate Authority had failed to appreciate the legal position and had also erred in upholding an addition which was not in accordance with law---Addition made under S.12(18) of the Income Tax Ordinance, 1979 was ordered to be deleted.

Black's Law Dictionary 7th Edition and 1989 PTD 909 (SC of Pakistan ref.

Naeem-ul-Haq for Appellant.

Amjad Khan Khattak, D.R. for Respondent.

2007 P T D (Trib.) 553

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos. 1093/LB and 150/LB of 2004, decided on 29th May, 2006.

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

---S. 130(3)-Form of appeal and limitation---Sufficient cause for condonation of delay---Appeal against subsequent order under Ss. 62/135 of the Income Tax Ordinance, 1979 was not filed under the impression that the same was not warranted as the reference application before High Court in respect of order under S.62 of the Income Tax Ordinance, 1979 was pending---Delay condoned by the First Appellate Authority was upheld by the Appellate Tribunal as the assessee had shown reasonable cause for not filing the appeal in circumstances.

Messrs Laser Praxis Depilex Clinic v. Customs, Central Excise and Sales Tax Appellate Tribunal 2002 PTD 549 rel.

I.T.As. Nos. 1913 to 1915/LB of 1996-97; 1998 PTD (Trib.) 1951; Messrs Concord of India Insurance Co. Ltd, v. SMT. Nirmala Devi and others (.1979) 118 ITR 507; 158 ITR 75 (S.C.); Collector Land Acquisition v. Mst. Katiji and others (1987) 56 Tax 130; CIT v. Krud Sons Ltd. 1994 PTD 174; CIT v. Choudhri Brothers 1986 SCMR 443; Messrs Ayenbee (Pvt.) Ltd. v. ITAT 2002 PTD 407; Messrs PIMPA (Pvt.) Ltd. Karachi v. CIT 1994 PTD 123; MEJ Hazati and Sons v. CIT 1985 PTD 516; CIT v. Messrs Fateh Textile Mills, Hyderabad 1984 PTD 218; Messrs Printers Combine (Mercantile) Ltd., Karachi v. CIT 1984 PTD 276; S.M. Yousaf and Brothers v. CIT 1974 PTD 45; Messrs Barry Brothers v. CIT 2001 PTD 2612; 1998 PTD (Trib.) 2106; 1966 PTD (Trib.) 135 and 2005 PTD (Trib.) 1208 ref.

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

----S. 62(1), proviso---Assessment on production of accounts, evidence etc.---Rejection of accounts---Original assessment made under S.62 of the Income Tax Ordinance, 1979 was set aside with the direction to point out specific defects in the books of accounts through notice under S.62 of the Income Tax Ordinance, 1979 as per requirement of law contained in proviso to S.62(1) of the Income Tax Ordinance, 1979---Despite this specific direction, the Assessing Officer had failed to point out any defect in the books of accounts---Though the notice was issued but it did not contain any specific defect in books of accounts---Not only books of accounts but vouchers were also produced which were retained and were scrutinized---No specific defects based upon such scrutiny had been pointed out---Assessing Officer rather had tried to justify the rejection of accounts on the basis of non-production of certain record which was not maintained and not required to be maintained under the law/rules---Assessing Officer failed to make out a case for rejection of books of accounts in the light of criterion laid down by proviso to S.62(l) of the Income Tax Ordinance, 1979---First Appellate Authority rightly is approved the rejection of books of accounts/declared version and had deleted the trading addition.

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

----S.62(1), proviso---Assessment on production of accounts, evidence etc.---Rejection of accounts---Stock register---Book version could not be rejected for failure to maintain or to produce stock register.

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

----S. 62(1), proviso---Assessment on production of accounts, evidence etc.---Rejection of accounts---Gross profit rate---High gross profit rate declared in any other case or applied by the department could not be basis for rejection of books of accounts.

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

----S. 13(1)(d)---Addition---Payments made to ex-shareholders as purchase consideration of shares as well as to bank on behalf of subsidiary company in respect of their outstanding liabilities and were. shown under the heads "long term investment" and "due from subsidiary" respectively---Addition---Validity---Accounts of "due from subsidiary" were supported with ledger, audited final accounts as well as bank statement were very convincing that in the books/final account the payment stood reflected and by no stretch of imagination, it could be termed as unexplained investment---Addition was rightly deleted by the First Appellate Authority in circumstances.

2005 PTD (Trib.) 270; Messrs Allied. Matter Ltd. v. C.I.T. 2004 PTD 1173; I.T.A. No. 1405/LB of 2004; I.T.A. No.229/L of 2005 and (1995) 75 Tax (Trib.) 34 ref.

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

----Second Sched. Cl (118-D)---Exemption---Addition in respect of gain on sale of vehicle---Assessce contended that transaction had been made with the leasing company at book value and there was no clement of gain---Addition was made without rebutting the argument rather the Assessing Officer had taken the line that the gain was not exempt as only business profits of industrial undertaking were exempt---Validity---Assessing Officer had failed to rebut that the transaction was with the leasing company with buy back arrangement as a financing transaction involving no gain---Addition was not maintainable and had rightly been deleted by the First Appellate Authority.

(g) Income-tax---

----Disallowances out of profit and loss account---Additions were set aside with the direction to point out specific defects---In reassessment order, addition had not been made in some of the heads with the observation that vouchers were produced while the additions in some of the heads were repeated on the basis of failure to produce documentary evidence---Validity---Held, it was beyond comprehension that vouchers pertaining to some of the heads were produced and not in respect of the others---Since Assessing Officer had failed to point out specific instances so the additions under such heads merited deletion.

88 Tax 48 rel.

(h) Income-tax---

----Profit and loss expenses---Addition under the head telephone had been made by observing that there was element of personal and non-business calls---Validity---Addition was not maintainable as artificial juridical person the observation of personal element was irrelevant unless specific instances of non-business calls by the officials/directors were given.

88 Tax 48 rel.

(i) Income-tax---

----Profit and loss expenses---Addition on account of provisions of Workers Participation Fund---No such addition was made in the original assessment order---Addition was made despite the fact that such addition was outside the mandate of setting aside of specific addition---Validity---New addition was not legally tenable and had rightly been deleted by the First Appellate Authority---Appeal of the department was dismissed on this issue.

72 Tax 34 distinguished.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Rejection of accounts on the basis of non-production of stock inventory of finished goods---Validity---Non-production or non-maintenance of stock register could not be made the basis of rejection of accounts---Assessing Officer failed to bring on record any material to show that profits and gains could not be deducted in the absence of stock inventory and that too of finished goods only---Assessing Officer had also not discarded any single item of cost of sales to establish that cost of sales was unverifiable---Absence of stock inventory of finished goods only did not constitute a specific defect specially in the absence of corroborative evidence---Action to discard books of accounts on this basis could not be maintained.

1994 PTD (Trib.) 535 ref.

1996 PTD 1104; C.I.T. v. Krud Sons Ltd. 1994 PTD 174; 1994 PTD 517 and (1996) 74 Tax 227 rel.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Variation in sale rate---Rejection of accounts---Variation in sale rate did not constitute specific defect in terms of proviso to S.62(1) of the Income Tax Ordinance, 1979---Since a mandatory provision regarding rejection of accounts had not been fulfilled, said observation could not legally be made a basis for rejecting account version---Rejection of accounts on the basis of variation in sale rate was not valid.

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

----Ss.62(1) & 24(fff)---Assessment on production of accounts, evidence etc.---Rejection of accounts on the basis of difference of amounts between Director's remuneration claimed in the final audited account and shown in the books of accounts being' unexplained---Addition under S.24(fff) of the Income Tax Ordinance, 1979---Validity---By making such addition Assessing Officer accepted the claimed amount and addition was made on the basis that payments made otherwise than through crossed cheques---Such treatment was not only contradictory in 'itself, but was a conclusive proof that explanation of the assessee regarding difference was accepted---Since no adverse inference on the basis of earlier observation had been drawn, link of the said observation with the rejection of accounts automatically vanished---Rejection of account on this basis was not valid.

(m) Income-tax---

---Gross profit rate---Estimation of sales and application of gross profit rate at 25% was declared arbitrary, unjustified and unwarranted as against declared rate at 18.75% on the basis of parallel cases in which applied gross profit rate of 25% was reduced to 18% on declared sales.

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

---Ss. 24(fff) & 50(1)---Deduction not admissible---Director's remuneration---Payment through book adjustment---Addition---Validity--Addition was made because payments were made through cash but in spite of having books of accounts and bank statement, no detail of such cash payments were given---Documentary evidence had been produced showing Director's remuneration paid through book adjustment which had been accepted by the Assessing Officer and the remaining amount was paid through prescribed banking channel---Tax under S.50(1) of the Income Tax Ordinance, 1979 on total amount had been deducted and that was the reason that addition under S.24(c) of the Income Tax Ordinance, 1979 had not been made in this regard---Addition had rightly been deleted by the First Appellate Authority in circumstances.

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

---Ss.23, 24 & 111(1)(b)---Deductions---Salary expenses---Disallowance out of such salary expense on the ground that the same were overcharged and had increased three times that for the previous year---Such overcharging of expense constituted concealment---Assessee contended that quantum of an expense claimed did not provide justifiable ground for its disallowance under the law---Assessing Officer should have established the unverifiabiliy or inadmissibility of the expense for disallowance---Admittedly, salary sheets were produced wherein the requisite particulars of each employee were given and there was no requirement of either income tax law or of Companies Ordinance, 1984 to maintain salary register---Validity---Assessing Officer neither confronted the assessee on the point of unverifiability nor cited any instance of unverifiability---Nature of expenses was not such in which presumption of unverifiability could be allowed to be taken---Addition deleted by the First Appellate Authority was maintained by the Appellate Tribunal in, circumstances.

72 Tax 141 (Trib.) and 56 Tax 5 rel.

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

----Third Sched., Rr. 5 & 5B---C.B.R. Circular No. 7 of 1981, dated 6-7-1981---Depreciation allowance---Re-investment allowance---Initial depreciation was disallowed on the ground that the same was admissible where Plant and Machinery had been installed by 30-6-2000 and the same was also included in Capital Work-in-Progress till 30-6-2001---Validity---Assessec was entitled to reinvestment allowance under R.5B of the Third Schedule of the income Tax Ordinance, 1979---Addition in asset had been made during the prescribed period and the said asset had been used during year---Such being a statutory allowance did not require express claim and was admissible to the assessee---First Appellate Authority had rightly directed to allow , reinvestment allowance as admissible under R.5B of the Third Schedule instead of initial depreciation.

Mrs. Sabiha Mujahid D.R. for Appellant.

Sajjid Ijaz Hotiana D.K. for Respondent.

2007 P T D (Trib.) 578

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.684/KB of 2003, decided on 29th April, 2006.

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

----Ss. 62 & 4-A---Assessment on production of accounts, evidence

etc.---Hospital -Appointment of firms of Accountants---Audit by chartered accountant---Loss of books of accounts by the tax authorities---Payments received on behalf of doctors or pharmacy by the assessee---Addition---Validity---Payments received on behalf of doctors or pharmacy could not be treated as the income of the assessee---Doctors did not attend the patients without fee and no medicine could be supplied free of cost---Assessing Officer commented that "neither transaction of corresponding cost disbursement had been highlighted in the books of accounts.... "---Books of accounts were in possession of the department which could provide one of the predominant basis for defence to assessee-company---Indefinite retention of books of accounts by the tax authorities could not be called a legal act---Any query arising from the books of accounts could not be termed as a lawful approach with regard to tax authorities objective---No cause of action may be founded upon an immoral or illegal act---Said axiom vitiates tax authorities action in these typical and deviant circumstances---Assessee had history of acceptance of declared version---Addition in receipts could not be sustained and was deleted by the Appellate Tribunal.

Zam Zam Traders v. I.T.O. 1997 PTD 40; CIT v. Moon Mills Ltd. (S.C.) 1966 I.T.R. 574 ref.

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

----S. 13(1)(aa)----Unexplained investment etc., deemed to be income--Addition on account of bogus overdraft liability without confronting the bank certificate---Validity---Contention was that without showing or providing a copy of the bank certificate obtained by the tax authorities, assessee had been denied the opportunity to know its precise contents and to get it clarified from the bank, was a substantive grievance---Principle of `audi alteram partem' had been violated---Assessing Officer had failed to confront the copy of bank's letter to the assessee and no appropriate opportunity had been provided for submission of necessary clarification along with bank statements and other supporting evidence--Such addition warranted appreciation of system of accounting adopted by assessee which was mercantile---Such position was not rebutted by the department---Assessment order showed that Assessing Officer had obtained such information from the bank statement and relevant books of accounts---Paradoxically assessee had no access to its books of accounts which was necessary for its defence---Addition, view of one sided approach, could not be sustained---In absence of reasonable opportunity and considering typical circumstances of the case the addition being not tenable under the law was deleted by the Appellate Tribunal.

Asia Petroleum Ltd. v. FOP 1999 PTD 1313; Siemens Pakistan Engg. Co. Ltd. v. Pakistan 1999 PTD 1358 and En Em Stores (P.) Ltd. v. DCIT 1999 PTD 2762 ref.

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

----S. 13(1)(c)---Unexplained investment etc., deemed to be income---Advances and deposits---Admittedly, amount receivable was wrongly recorded as advance instead of sundry debtors---Correction of---Addition was made on the ground that assessee was suggesting it merely correcting entry whereby a transaction had been re-characterized---Validity---Addition based upon presumption was not sustainable---Section 13(1)(c) of the Income Tax Ordinance, 1979 specifically mention, "found" which implied a status of certitude and the same aspect was missing---Statutory provision envisaged condition of `not recorded' which has not the situation---Addition being not tenable on legal plane, was deleted by the Appellate Tribunal.

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

----Ss. 23, 4-A & 112(2)(b)---Deductions---Profit and loss expenses---Repair and maintenance--Loss of books of accounts by the tax authorities---Assessing Officer, on the basis of audit report found that repair and maintenance expenses had been enhanced in the revised return---Addition was made on the ground that fake vouchers in support of the claim were furnished and expenses had been inflated---Validity---Assessing Officer, while making addition did not confront assessee with the alleged bogus vouchers as well as the vouchers not related to the business in whose names they were issued as the tax authorities had lost those vouchers---Doctrine "No one maintains an action arising out of his own wrong" was attracted in the case---By retaining books of accounts vouchers etc. and asking the assessee to defend the addition, was not logical and justified--Additions were deleted by the Tribunal.

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

----Ss. 13(1) & 4A---Unexplained investment etc., deemed to be income---Auditor pointed out that assessee deposited cash in bank on various dates but failed to declare in final accounts--Addition was made on the ground that cash deposit obviously reflected the income of the assessee which was beyond the scope of normal business operations as the cash had not been reflected in the books of accounts and ultimately in the final accounts---Validity---In view of reconciliation the amounts had already been incorporated in the declared receipts in the second revised return of income---Income declared through second revised return of income had already been increased by such amount--Such addition would mean double taxation of same income which was not permissible under the law---Addition was deleted by the Appellate Tribunal.

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

----Ss. 13(1)(c) & 4-A---Unexplained investment etc., deemed to be income---Addition on the ground that cash on the closing day as per bank statements and the books of accounts did not tally by rejecting assessee's affirmation that "difference was existing because of factum that cheques were issued but not presented" same being the afterthought had remained unsubstantiated---Validity,--Issuance of cheques and not having been presented and corresponding reconciliation could not be diverted to falsifying declared version of assessee---Books of accounts and vouchers were in possession of the Department from which Assessing Officer could have verified the plea taken by the assessee---Addition was deleted as retention of assessee's books of accounts were not in favour of upholding the Departmental treatment---Legal course shall follow in case of proven falsification of any of itemized reconciliation statements filed by the assessee.

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

------S. 19(1)---Income from house property---Assessing Officer noted that Medical College was independent entity and housed in the building of assessee hospital without payment of any rent---Charge of "income from house property" was on the basis of "annual value" and not the factual receipt of rent---Validity---Factual position remained that Medical College was located in the assessee's premises---Assessing Officer was justified to make addition---Addition should be restricted to ALV unless Department substantiated alternative treatment on legal and factual plane after due observance of procedure required in this behalf.

CIT v. H.P Sharma 1980 122 ITR 675 rel.

(h) Income tax---

----Addition---Addition being made on account of service charges of fans was deleted by the Appellate Tribunal as the same was already included in the receipts.

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

----Ss. 13(1)(a) & 4-A--Unexplained investment etc., deemed to be income---Liabilities---Loss of books of accounts by the department---Addition on account of bogus liabilities---Validity---Provision of law related to the certain credits as apparent from the books of accounts of an assessee---Books of accounts were in possession of the Department as such the plea of such addition could not be entertained---Addition was deleted by the Appellate Tribunal with the observation that if any discrepancy emerged later on, same could be dealt by remedial action via statutory provisions available in this behalf.

Shaikh Jalaluddin, C.A. and Agha Faqir Muhammad for Appellant.

Rehmatullah Khan Wazir, D.R. for Respondent.

2007 P T D (Trib.) 624

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 5627/LB, 5626/LB, 5625/LB, 5793/LB of 2005 and 4150/LB of 2003 decided on 3rd February, 2006.

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

----S. 62(1), proviso---Assessment on production of accounts, evidence etc.---Additions of profit and loss account without pointing out any specific defect or instance of unverifiability---Setting aside of asses went---Validity---Assessing Officer having failed to point out any specific defect or instance of unverifiability of the claim of expenses, was not justified either to set aside these additions or to confirm/reduce the same---Additions of the profit and loss account were ordered to be deleted.

1971 SCMR 681; 87 Tax 162; 2002 PTD 1583 and 1996 SCMR 230 rel.

(b) Income-tax---

----Addition---Addition was a capital expenditure---Payment against purchase of modern cards, reimbursement of maintenance of electricity i.e. for replacement of electricity cable, purchase of wooden pallets, dismantling of equipment, design of underground water tank and shifting of plant were treated as capital expenditure---Validity---No sufficient reasons were available to treat the expenditure as of capital nature---Such expenses were for keeping the equipment in running and working condition which was of revenue nature--Assessing Officer was accordingly directed by the Tribunal to allow such expenses as of revenue nature.

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

----Third Sched---Depreciation allowance---Addition on the grounds that written down value of assets as per depreciation schedule was different from the written down value 'as per statement of operating fixed assets in the books of accounts; that certain assets like vehicles and furniture the rate of accounting 'depreciation was same as per rate of tax depreciation but the written down value in both the situations was different and that most of the assets had been claimed as written off at nil value because no salvage value was realized/placed on assets---Assessee contended that written down value as per tax depreciation schedule and as per book valuation schedule was different because the lax depreciation schedule was prepared in accordance with the rules as per Third Schedule of the Income Tax Ordinance, 1979, whereas for purpose of book value the normal accounting procedure and practice was adopted which may differ from the tax depreciation rules---Assets which had been written off at nil value were in fact scraped without realizing any value on them--Validity---Addition was made without any proper basis and without any proper working of the written down value as well as the sale value 'of the assets disposed of---Appellate Tribunal endorsed the order of First Appellate Authority deleting such addition.

(d) Income-tax---

----Addition---Stock---Addition on account of diminishing value of stock on the ground that assessee could not furnish any documentary evidence with regard to damaged raw material---Addition was deleted by the First Appellate ,Authority on the explanation of assessee that values closing stock at net realizable value or the cost whichever was less and the value of closing stock to the amount of differential in the realizable value and the cost value was charged to the profit and loss account---If Such differential was charged in any particular year by reducing the value then its effect in the next year was that gross profit to that extent would be enhanced---Validity---Issue having not been properly examined by the tax authorities, the same 'was remanded for it's proper re-consideration by the Tribunal with the direction that assessee shall furnish complete evidence of the realizable value on account of stock the value of which had been diminished.

M. Awais, A.C.A. for Appellant (in 1.T.As. Nos.5625/LB to 2627/LB of 2005 and 4150/LB of 2003).

Mehmood Aslam Lillah, D.R. for Respondent (in I.T.As. Nos.5625/LB to 2627/LB of 2005 and 4150/LB of 2003).

Mehmood Aslam Lillah, D.R. for Appellant (in I.T.A. No.5793/LB of 2005).

M. Awais, A.C.A. for Respondent (in I.T.A. No.5793/LB of 2005).

2007 P T D (Trib.) 639

[Income Tax Appellate Tribunal of Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.As. Nos. 5545/LB and 5546/LB of 2005, decided on 30th November 2006.

(a) Income Tax Appellate Tribunal Rules, 1981-

----R. 10---Contents of memorandum of appeal---Opportunity to remove vagueness in the memorandum---Scope---If the grounds were vague then opportunity to amend the grounds be provided to the party concerned.

1992 PTD (Trib.) 1176 and 2003 PTD 26 rel.

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

---S. 62(1)---Assessment on production of accounts, evidence etc.--Assessee engaged in car parking business---Notice issued under S.62 of the Income Tax Ordinance, 1979 could in no way be held to be the substitution of a legal notice as the same was so general in its expression to which no significance could be attached and in such notice merely an intention was shown to adopt receipts on the ground that less parking receipts had been declared in the year under appeal viz. the immediately preceding assessment year in particular when the place was equipped with more capacity of parking, as such, the declared receipts were liable to be disbelieved.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---Notice issued prior to examination of the books of accounts established that no notice as contemplated by law was ever issued by the Revenue in order to disbelieve the returned version---Non-issuance of notice under S.62(1) of the Income Tax Ordinance, 1979 specifically pointing out the defect noted in the books of accounts rendered the assessment to have been made illegally---First Appellate Authority should not have quashed the assessment order rather should have ordered for acceptance of the returned version---Findings of First Appellate Authority were modified by the Appellate Tribunal accordingly by holding that the returned version was to be accepted.

(d) Income-tax----

---Merger of orders---Principles---Where higher authority modifies or cancels or annuls or sets aside the order passed by the lower authority, then the order stands merged with the order of the higher authority.

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

----S. 122---Amendment of assessments---Amendment of Appellate Tribunal's order---Validity---Appellate Tribunal ordered for acceptance of the returned version---Orders of Assessing Officer and that of the First Appellate Authority were merged with the Tribunal's order---Taxation Officer was not vested with the powers to amend the Tribunal's order by invoking the provisions of S.122 of the Income Tax Ordinance, 2001.

?

Messrs Monoo Industries Ltd. v. The Commissioner of Income Tax Central Zone Lahore (84) Tax 330 (H.C.L.) rel.

Sheraz Mirza, D.R. for Appellant.

Viqar A. Khan, F.C.A. for Respondent.

2007 P T D (Trib.) 651

[Income Tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos.5441/LB, 5862/LB, 5861/LB of 2002, decided on 31st August, 2006.

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

----Ss. 65 & 59(A)--- Additional assessment---Re-opening of assessment on the basis of under valuation of cost of construction of the house---Assessee contended that Taxation Officer could not reopen the case unless some new material was discovered; and declared cost of construction being reasonable, Taxation Officer could not reopen the case on the change of opinion---Validity---Only basis of reopening the assessment was under valuation of the cost of construction of house and it was not justifiable, as under S.65 of the Income Tax Ordinance, 1979, the additional assessment could be made if any income had been under-assessed or assessed at too low a rate and under S.65(2) of the Income Tax Ordinance, 1979, no proceedings should be initiated unless definite information had come in possession of the Assessing Officer---Assessee through evidence had explained the sources of income and there was no justification to reject the version of the assessee without bringing on record definite information that income had been under-assessed---Order of First Appellate Authority was vacated and additional assessment made by the Taxation Officer was cancelled by the Appellate Tribunal.

1993 PTD 1108 rel.

2002 PTD 912; 2002 PTD (Trib.) 1949; 2002 PTD (Trib.) 129; 1976 33 Tax (285); I.T.A. No.1799/LB of 2001; I.T.A. No.4401/LB of 2002 and 2005 PTD 1795 ref.

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

----S.65---Additional assessment---Definite information---Case was reopened on the basis of information given by assessee himself in returns, which in no way could be said to he `definite information' regarding escaped assessment.

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

--Ss. 13(1)(aa) & I48---Addition---Gift---Rejection of gift on the ground that date of gift and evidence of payments had not been produced and since there was no blood relationship with the assessee, the gift could not be made---Assessee contended that First Appellate Authority was-not justified to set aside the addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 for re-consideration, as the girt transaction was fully verifiable and authentic in the eyes of law and addition was liable to be deleted---Validity---Donors had sworn affidavits and had appeared before the Taxation Officer and had been examined under 5.148 of the Income Tax Ordinance, 1979 and admittedly they were existing taxpayers---Rejection of version of assessee on flimsy grounds was not justified---For gifts, there was no requirement under the law that gift could be made to the blood relationship only---Donors were men of means and had shown gifts in their respective income tax assessments and there was no valid reason to reject the gifts, as oral gift was as valid as written gift under the Islamic Law and "offer", "acceptance" and "possession" were the only three conditions under the law for performance of gift, which had been fulfilled---Addition was deleted by the Appellate Tribunal in the circumstances.

(d) Income Tax Ordinance (XXX1 of 1979)---

----Ss. 59(4) & 65---Self-assessment---Limitation---Return was filed under Self-Assessment Scheme and no order having been passed before 30-6-1999 as provided under S.59(4) of the Income Tax Ordinance, 1979, order if any later on passed on 1st January, 2000 was nullity in law and superstructure built thereon fell down for want of jurisdiction.

2002 PTD 912 (Trib.) rel.

Khurshid Ahmed for Appellant (in I.T.A. No.5441/LB of 2002).

Nemo for Respondent (in I.T.A. No.5441/LB of 2002).

Nemo for Appellant (in I.T.As. Nos.5862/LB and 5861/LB of 2002).

Khurshid Ahmed for Respondent (in I.T.As. Nos.5862/LB and 5861/LB of 2002).

2007 P T D (Trib.) 666

[Income Tax Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

I.T.A. No.1481/LB to 1483/LB of 2005, decided on 13th June, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 56, 58(1) & 61---Income Tax Ordinance (XLIX of 2001), S.239(1)(2)(4)---Notice for furnishing return of total income---Assessment year 2000-2001, 2001-2002 & 2002-2003---Issuance of statutory notices under Ss. 56, 58(1) and 61 of the Income Tax Ordinance, 1979 after promulgation of Income Tax 'Ordinance, 2001---Assessee contended that since Income Tax Ordinance, 1979 had been repealed, the assessing authority had no jurisdiction to invoke the said provisions of law and he was not under legal obligation to make compliance to the notices issued under the Income Tax Ordinance, 1979---Assessments framed were annulled/cancelled by the First Appellate Authority---Validity---Notice under S.56 of the Income Tax Ordinance, 1979 was issued on 3-1-2004 which prompted the initiation of proceedings---No substance/matter was available either in the air or on the ground warranting consideration by any authority, since neither the assessee had filed a tax return subjecting him to the scrutiny of the relevant authority nor had the Revenue invoked its jurisdictional powers by issuing the notices envisaged under the law---Proceedings against the assessee were commenced on 3-1-2004 under the Income Tax Ordinance, 1979 whereas S.239(4) of the Income Tax Ordinance, 2001 contemplates proceedings which were pending on the commencement of Income Tax Ordinance, 2001---Meaning of term "pending" clearly evinces that some step must have already been taken by either of the parties at the time of promulgation of Income Tax Ordinance, 2001---No proceedings were pending on 1-7-2002, the case would go out of the purview of S.239(4) of the Income Tax Ordinance, 2001---Assessing Officer also fell in error, when he issued notice under S.56 of the Income Tax Ordinance, 1979 even for the tax year 2002-2003 because for the said year, after the promulgation of Income Tax Ordinance, 2001, the notice should have been issued under S.114 of the Income Tax Ordinance, 2001 which was a glaring legal error on the part of the assessing authority---Assessing Officer erred in law while invoking S.56 of the Income Tax Ordinance, 1979, hence all the proceedings conducted subsequent thereto were without jurisdiction and void ab initio, hence nullity in the eyes of law---Order of First Appellate Authority was upheld being in consonance with law and departmental appeals being devoid of any merit were dismissed by the Appellate Tribunal.

ITA No.1574 to 1579/LB of 2006 and (2004) 90 Tax 24 (D.C. Kar.) = 2004 PTD 1173 rel.

Balck's Law Dictionary ref.

Wajahat Mehdi Hashmi, D.R. for Appellant.

Sh. Zafar ul Islam for Respondent.

2007 P T D (Trib.) 673

[Income Tax Appellate Tribunal of Pakistan]

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

I.T.A. No.636/KB of 2005, decided on 26th May, 2006.

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

----S. 23(1)(xviii)---Deductions---Amalgamation expenses-Disallowance of amalgamation expenses for the reason that such expenses were in the nature of preliminary/incorporation expenses and not admissible-Validity---Amalgamation' expenses were not for incorporation or formation of any new entity, but were for merger/amalgamation of already operational three Modarabas for business reasons and could not be held as capital expenditure or preliminary expenditure and which could not be capitalized---Doctrine of `Nihil Dicit' was attracted in the situation---Appellate Tribunal vacated setting aside directive of First Appellate Authority and directed to allow such expenses as Revenue admissible deduction.

1997 PTD 390 rel.

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

----S. 80D & Second Sched., Part-IV, Cl. (32F)---Minimum tax on income of certain companies and registered firms---Exemption---Modaraba---Contention was that minimum tax under S.80D of the Income Tax Ordinance, 1979 on net receipts/turnover was not leviable being a Modaraba, it was exempt from such levy under Cl. (32F) of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979---Validity---Appellate Tribunal directed deletion of such levy, as admittedly appellant/assessee was exempt from such levy under Cl. (32F) of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979.

Akbar G. Merchant, F.C.A. and Ms. Yasmin Ajani, F.C.A. for Appellant.

Dr. Nauman Ikram, D.R. for Respondent.

2007 P T D (Trib.) 676

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Khalid Waheed Ahmed, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos. 4316/LB to 4319/LB, 5957/LB, 5958/LB of 2004, 513/KB to 518/KB of 2003, decided on 19th July, 2005.

Per Khalid Waheed Ahmed, Judicial Member

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

---Ss. 65 & 56---Additional assessment---Where the assessment stood completed for the previous year a notice under S.65 of the Income Tax Ordinance, 1979 could be issued in case of escaped assessment or underassessment of income---When no assessment had been framed or deemed to have been framed in respect of any current or previous assessment year, notice under S.56 of the Income Tax Ordinance, 1979 was required to be issued to initiate assessment proceedings---No assessments were previously framed in the present case---Assessments framed for the year under consideration on the basis of notices issued under S.65 of the Income Tax Ordinance, 1979 were not maintainable in law---Assessment proceedings carried out by the Assessing Officer for the years without first acquiring the jurisdiction to initiate such proceedings through issuance of notice calling for the returns under the relevant provisions of law were void ab initio.

2001 PTD 1998 rel.

(b) Constitution of Pakistan, 1973---

----Arts. 165 & 165A---Power of Majlis-e-Shoora (Parliament) to impose taxes on the income of certain corporations etc.---Taxation or exemption---Manners of.

Chairman District Council Rahim Yar Khan v. U.B.L. Rahim Yar Khan 1989 CLC 1397 rel.

(c) Constitution of Pakistan, 1973---

----Arts. 165 & 165A---Power of Majlis-e-Shoora (Parliament) to impose taxes on the income of certain Corporations etc.---Provincial Employees Social Security Institution---Income of---Exemption---Exemption under Article 165 of the Constitution from the Federal Taxation was not available in respect of the income of Provincial Employees Social Security Institution even if it was working under the management and control of the respective Provincial Government because of its falling under Article 165A of the Constitution.

Chairman District Council Rahim Yar Khan v. U.B.L. Rahim Yar Khan 1989 CLC 1397 distinguished.

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

----Ss. 9, 11, 15, 2(14), 2(16)(b), 2(24), 62 & Second Sched., Cls. (56), (93) & (94)---Constitution of Pakistan (1973), Arts. 165 & 165A---Provincial Employees Social Security Ordinance, (X of 1965), Ss.3(2), 4, 20, 23, 59, 75, 80(1)---Employees Old-age Benefits Act, (XIV of 1976)---C.B.R. Letter C. No.14(2) WT/91-Pt, dated 25-4-1992---C.B.R. Circular No.11 of 1993, dated 11-7-1992---Charge of income tax---Provincial Employees Social Security Institution---Income from statutory contribution---Taxability--[Minority view].

Writ Petition No.10227 of 2002; Sessi v. Pakistan National Produce Co. Ltd. 1989 PLC 8; (1993) 67 Tax 400; Adamjuee Cotton Mills, Karachi v. SESSI 1974 PLC 213; Pattoki Sugar Mills and others dated 1-10-2001 in C.As. Nos.1558 to 1574 of 2000; 1995 PTD 431; (2001) 83 Tax (sic) 2001 PTD 1998; 1995 PTD 1100 (Trib.); 1990 PTD 389 (Trib); 1990 PTD 889; C.B.R. v. SITE Ltd. 53 Tax 47; Chairman District Council Rahim Yar Khan v. U.B.L. Rahim Yar Khan 1989 CLC 1397; 52 Tax 1; Blacks Law Dictionary; 64 Tax 163; 83 Tax 105; (2000) 81 Tax 78; (1998) 78 Tax 56 (S.C. India); 1983 PTD 1390 (S.C. India) and 37 Tax 211 (S.C. India) ref.

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

----Ss. 9, 11, 15, 2(14), 2(16)(b), 2(24), 62 & Second Sched.---Constitution of Pakistan (1973), Arts. 165 & 165A---Charge of income-­tax---Employees Social Security Institution----Profit earned on investments---Taxability of---Income of Employees Social Security Institution from the profit earned on investments made by it could be subjected to tax as income of the Institution if otherwise not specifically exempted under the provisions of Second Schedule of the Income Tax Ordinance, 1979---Employees Social Security Institution being a body corporate under the control of Provincial Government was covered under Article 165 of the Constitution and was no more available to such bodies or institutions etc. after the addition of Article 165A to the Constitution---Profit earned on the investments being an activity carried on by the institution to earn such income was different from the amounts received by it on account of statutory contribution made by the employees towards Social Security Fund.

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

----Second Sched., Cl. (93)---C.B.R. Letter C. No.14(2) WT/91-Pt, dated 25-4-1992---Exemption---Employees Social Security Institution---Profit earned on investments in Federal Investment Bonds---Exemption from withholding tax on profit earned from Federal Investment Bonds had already been granted in the case of Punjab Employees Social Security Institution by the Central Board of Revenue---Claim of exemption of income earned from investments in Federal Securities under C1.(93) of Part-I of the Second Schedule of the Income Tax Ordinance, 1979 was remanded by the Tribunal to the Assessing Officer for verification of the facts and directed that exemption be allowed if the profits earned fell under the category of income mentioned in the said clause---Same issue in the case of Sindh Employees Social Security Institution in case of another province was also remanded with the same directions as given in the case of Punjab Employees Social Security Institution i.e. that exemption under this clause should be allowed after verification of facts relating to income earned from this source.

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

----S.9---Charge of income-tax---Employees' Social Security Institution---Income from statutory contribution---Profit earned on investments---Taxability of---Initiation of assessment proceedings through issuance of notice under S.65 of the Income Tax Ordinance, 1979---Summary of findings---[Minority view].

Per Shaheen Iqbal, Accountant Member

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

----Second Sched. & S.9---Exemption---Receipts---All the receipts of a person are chargeable to tax unless these receipts are exempted from the charge of tax either as per specific exemption made available under provisions of the Second Schedule to the Income Tax Ordinance, 1979 or specifically exempted from tax under the Act or the Ordinance through which an institution is created by the legislature.

Per Sahaeen Iqbal Accountant Member; Khawaja Farooq Saeed, Chairperson agreeing

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

----Ss. 9, 11, 15, 2(14), 2(16)(b), 2(24), 62 & Second Sched. Cl. (56), (93) & (94)---Constitution of Pakistan (1973), Art. 165 & 165A---Provincial Employees' Social Security Ordinance, (X of 1965), Ss.3(2), 4, 20, 23, 59, 75 & 80(1)---Employees' Old age Benefits Act (XIV of 1976)---C.B.R. Letter C. No.14(2) WT/91-Pt, dated 25-4-1992---C.B.R. Circular No.11 of 1993, dated 11-7-1992---Charge of income-tax---Punjab/Sindh Employees Social Security Institution---Income from statutory contribution---Taxability of---Validity---Neither an exemption from tax had been granted to Employees Social Security Institution in the related Act/Ordinance of the government through which it was created .nor its income stood exempted from tax under any provision of the Second Schedule to the Income Tax Ordinance, 1979---Statutory contribution received by the Social Security Institution for the employers were taxable in the hands of Institutions---Income of Punjab Employees Social Security Institution arising from the contributions, received by it was chargeable to tax---Chairman totally agreed with the Accountant Member that the contribution received by Sindh Employees of Social Security Institution and Punjab Employees Social Security Institution were chargeable to tax as income.

1995 PTD 493; 84 Tax 139; 31 Tax 23 (Trib.); (1940) 8 ITR 187 and 56 ITR 131 S.C. ref.

Per Khawaja Farooq Saeed; Chairperson

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

----S.9---Charge of income tax---Punjab/Sindh Employees Social Security Institution---Income from statutory contribution---Taxability---Method of---Amounts, which had been charged to tax, had been taken from the balance sheet in total disregard to the fact that once the receipt was to be charged as income it had to be after allowance of proper expenditure allowable under law---Once the Organizations were to be assessed to tax, the assessment should have been made adopting the correct methods/rules and admissible allowances---Institutions may not have provided necessary information with regard thereto for the reason of their understanding that they were not taxable being a limb of government---Equal duty was cast upon the Assessing Officer as well for determining the correct income liable to charge---Case for the purpose was set aside for de novo consideration by the Appellate Tribunal with the direction that Assessing Officer shall, after issuance of proper notices, call for the necessary record based upon annual statement of accounts and shall make the assessment giving all the benefits in terms of expenses under S.23 of the Income Tax Ordinance, 1979 including depreciation on fixed assets as well as movable assets---Assessment should not be of any problem for the concerned authorities as well as the taxpayers as this was not a case of a street business house---Concept of inadmissibility of un-verifiability of expenses or estimated add-backs would definitely not arise---Assessment should have been made under strict compliance of law and rules and appreciating the fact that the entire expenses were verifiable and subject to internal and external audit---Assessments were set aside for the purpose of determination of income only.

Haroon Mirza, Rana Hammad Aslam and Zia Haider Rizvi for Appellant (in I.T.As. Nos.4316/LB to 4319/LB, 5957/LB and 5958/LB of 2004).

Muhammad Ali Shah, D.R. and Shahid Jamil Khan, L.A. for Respondent (in I.T.As. Nos.4316/LB to 4319/L13, 5957/LB and 5958/LB of 2004).

Muhammad Ali Shah, D.R. and Jawaid Farooqi, L.A. for Appellants (in LT.As. Nos. 513/KB to 518/KB of 2003).

Khalid Majid, F.C.A., Kaleem Ashraf, A.C.A. and Sardar Rahat Azeem, A.C.M.A. for Respondents (in I.T.As. Nos. 513/KB to 518/KB of 2003).

2007 P T D (Trib.) 741

[Income-tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.3294/LB of 2005, decided on 31st August, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 62---Assessment on production of accounts, evidence etc.---Deceased assessee---Assessment was framed in the name of deceased assessee without bringing on record legal heirs of the assessee in accordance with law in spite of sending notice in the name of another person---Validity---Intimation regarding death of the assessee was duly given, which was available on record---Observation by the First Appellate Authority that `ground of appeal was invalid' was made without confirming same from the record---No justification was available for the assessment made on a deceased person without making legal heirs of the assessee (deceased) party to the case in accordance with the provisions of law---Order of First Appellate Authority was vacated and the assessment so made was annulled by the Appellate Tribunal.

Abdul Hameed, ITP for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 745

[Income-tax Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No.868/IB of 2005, decided on 14th June, 2006.

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

----S. 59-C.B.R. Circular No.4 of 2001, dated 18-6-2001, Para. 1.2, Note---Self-assessment---Assessment year 2001-2002---Income from house property---Condition regarding percentage increase in tax was not applicable if the income was derived only from house property.

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

----S. 59---C.B.R. Circular No.4 of 2001, dated 18-6-2001, Para. 1.2, Note---Self-assessment---Assessment year 2001-2002---If income from property was less than the previous years or tax was not higher than the previous year, it was no disqualification---Makers of the Scheme had clearly and unambiguously directed to accept the income from property without any exception as declared.

2004 PTD (Trib.) 1470 rel.

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

---S. 59---C.B.R. Circular No.4 of 2001, dated 18-6-2001, Para. 1.2, Note---Self-assessment---Assessment year 2001-2002---Income from house property---Increase in income to remain covered within the scheme of self-assessment---Validity---All taxpayers who had only one source of income that was from house property, need not increase this income to remain covered within the scheme of Self-Assessment---Assesse's income was entirely from property the condition precedent was to accept the return and then proceed under law and rules---Appellate Tribunal directed to accept the return under Self-Assessment Scheme.

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

----S. 59(3)---C.B.R. Circular No.4 of 2001, dated 18-6-2001, Para. 1.2, Note---Self-assessment---Assessment year 2001-2002---Income from house property---Filing of return and acceptance of the case under Self-Assessment Scheme did not debar the department to look into inadmissible claims against property income---Department could always add back by invoking S.59(3) of the Income Tax Ordinance, 1979, legally inadmissible claim etc.

Hafiz Muhammad Idrees and Aurangzeb LT.P., for Appellant.

Muhammad Ali Shah D.R. for Respondent.

2007 P T D (Trib.) 754

[Income-tax Appellate Tribunal of Pakistan]

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

W.T.As. Nos.1059/LB to 1068/LB, 995/LB to 999/LB of 2005, decided on 31st August, 2006.

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

----S: 18(1)(ii)(4)---Penalty for concealment---Penalty by Special Officer---Validity---Provisions of S.18(4) of the Wealth Tax Act, 1963 clearly reveal that where non-compliance of statutory notices under S.I6(2) of the Wealth Tax Act, 1963 was committed by the assessee, the Deputy Commissioner was the competent authority to impose penalty with prior approval of Inspecting Additional Commissioner---Special Officer had passed penalty order by resorting to provisions of S.18(1)(ii) of the Wealth Tax Act, 1963, who was not competent to do so.

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

--Ss. 18(1)(ii) & 16(5)-Penalty for concealment---No intention was shown in the body of ex parte assessment order for levy of penalty---Effect---Assessing Officer was under legal obligation to show his intention regarding invocation of provisions of S.18 of the Wealth Tax Act, 1963 in the body of ex parte assessment order framed under S.16(5) of the Wealth Tax Act, 1963 but he failed to do so, which was contrary to settled rationale.

1989 PTD 1221 rel.

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

----S. 18(1)(ii)---Penalty for concealment---Levy of penalty exceeding the amount of tax payable---Validity---Ex parte assessment under S.16(5) of the Wealth Tax Act, 1963 was finalized by the Assistant Commissioner determining the tax payable by the assessee at Rs.68,932 Rs.51,873, Rs.70206, Rs.79036 and Rs.1, ].1,232 for the assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99 respectively---Subsequently, Special Officer initiated penalty proceedings against the assessee by resorting to provisions of S.18(1)(iii) of the Wealth Tax Act, 1963 and imposed penalty at Rs.2,30,500 Rs.2,80,266, Rs.2,56,025, Rs.202,450 and Rs. 1,81,100 for the said assessment years respectively, which was clear-cut violation of S.18(1)(ii) of the Wealth Tax Act, 1963.

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

----S. 18(1)(ii)-Penalty for concealment---Penalty order without mentioning date---Validity---Penalty order passed without mentioning date therein, made the action of Special Officer (who was not competent to pass such penalty order) to be legally infirm.

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

----Ss. 18(2) & 16(5)---Penalty for concealment---Levy of penalty after lapse of more than four years from the date of ex parts assessment---Validity---Ex parte assessment was finalized under S.16(5) of the Wealth Tax Act, 1963 on 24-1-2000 whereas the penalty proceedings had been initiated by the Special Officer after the lapse of more than lour years as was evident from notice under S.18(2) of the Wealth Tax Act, 1963 issued on 13-3-2004, which was not legally, tenable being contrary to settled rationale.

1986 PTD 588 and 1989 PTD 1333 rel.

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

----S. 18(2)-Penalty for concealment---Opportunity of being heard---Assessee was to be afforded an adequate opportunity of being heard before passing penalty order---Revenue claimed the issuance and service of statutory notices under S. 18(2) of the Wealth Tax Act, 1963 upon the assessee but the assessee denied the service of said notice by filing an affidavit---Question arose as to whether service of notice was validly effected upon the assessee or not---Held, if believed that service of notice was effected upon the assessee then too, penalty order passed by the Special Officer was not sustainable on the ground that he was not competent to pass penalty order as he was not empowered to exercise the powers of Deputy Commissioner, who was competent authority to pass such penalty order under the law.

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

----S. 18(1)(ii)--Penalty for concealment---Cancellation of---Grounds---Penalty order passed under S.18(1)(i) of the Wealth Tax Act, 1963 cancelled on the grounds that the penalty order under S.18(1)(i) had been passed by Special Officer of Income Tax/Wealth Tax which was unsustainable in the eye of law as competent authority to pass such order was Deputy Commissioner of Income Tax; that no date has been mentioned on the face of penalty order under S.18(1)(i) of the Wealth Tax Act, 1963, which made it legally and that the ex parte assessment was finalized under S.16(5) of the Wealth Tax Act, 1963 on 24-1-2000 whereas the penalty proceedings had been initiated under S.18(1)(i) of the Wealth Tax Act, 1963 by the Special Officer of Income Tax/Wealth Tax after the lapse of more than lour years as was evident from notice under S. 18(2) of the Wealth Tax Act, 1963 was not legally tenable.

Iqbal Hashmi and Yousaf Ali Ch. I.T.P. for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2007 P T D (Trib.) 769

[Income-tax Appellate 'Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.As. Nos. 1020/IB to 1022/IB of 2006, decided on 20th October, 2006.

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

----S.19---Income Tax Ordinance (XLIX of 2001), S.221---Income from house property---Oral gift---Division of property---First Appellate Authority directed to accept the declared income being supported by gift deed as the ingredients of gift had been met with and there was no question of assessment of the income of the entire property in the hands of one assessee---Revenue contended that no evidence with regard to the position of the gifted asset was furnished even after providing opportunity---Neither any transfer through Development Authority had been made nor any mutation before any other authority had been produced---Oral gift needed evidence of the said oral transaction---Assessee at no stage of the proceedings had been able to provide any evidence so as to support the claim of his evidence of oral gift---Validity---Held, there was no argument against the fact that an oral gift was a valid gift in Islam and the same prevailed as well---Oral gift, however, would also need some tangible support to prove that the transaction actually took place and the claim was not only an arrangement to deceive Revenue---Concept of offer, acceptance and actual transfer required at least some witness and subsequent actions must support the factum of said transaction---Affidavit or gift deed was undoubtedly a piece of evidence but under law one did not become owner of an immovable property unless it was registered in some form with the concerned agencies---Claim of the assessee of oral gift supported by a gift deed besides having no support whatsoever of the said claimed transaction also was of no help to the assessee for the purpose of bifurcation of the property income in his spouses as well as other family members---Signing of rent deed by the assessee was an additional evidence in support of the department that income was chargeable in the hands of assessee under S.19 of the Income Tax Ordinance, 1979---Appellate Tribunal disagreed with the findings of the First Appellate Authority and restored' the order of Assessing Officer.

2004 PTD (Trib.) 1523; 2006 PTD 529 and 2006 PTD 590 ref.

1987 SCMR 1403 distinguished/not applicable.

(b) Gift---

----Oral gift---No one became owner of an immovable property unless the gift deed was registered with Collector of Land Revenue.

(c) Words and phrases----

----`Owner'---Owner who has possession to use the property and has power to convey it to the others is the owner---Possession of property does not mean that a person is owner of the same.

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

----S. 19---Income from house property---Oral gift---Unless the donee became owner which meant that he was equipped with the rights to further convey the said property to anybody of his choice and requirement, he did not become owner and unless a person became owner of a property he could not be brought to charge of tax under S.19 of the Income Tax Ordinance, 1979 for the rental income he was receiving therefrom---Even if one did not doubt the actuality of the oral gift still one would not be able to assess the income of a person from a property of which he was not its owner.

Riaz Muhammad D.R. for Appellant.

Nemo. for Respondent.

2007 P T D (Trib.) 776

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Istataat Ali, Accountant Member

M.As. (AG) Nos.600/LB to 602/LB of 2006 and I.T.As. Nos.7393/LB to 7395/LB of 2005, decided on 6th October, 2006.

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

----S. 62---Assessment on production of accounts, evidence etc.---Disallowance on the basis of stock phrases---Declared trading results had been accepted with the observation that complete books of accounts had been produced along with necessary documentary evidence in support of the declared version, but disallowances regarding expense out of Profit and Loss account expenses had been made on the basis of stock phrases like partial unverifiable, element of personal use, excessiveness and past history etc., and no instances of personal expenses or unverifiable receipts had been pointed out---Validity---No disallowance could be based upon stock phrases like partial unverifiability, personal use etc. and should not be made in the arbitrary manner---Neither there was any justification for the disallowances made in the claims of expenses out of Profit and Loss Account expenses nor remanding the issue of disallowances for further consideration.

2002 PTD 1496; 2004 PTD 2231; 2002 PTD 407; 1991 PTD (Trib.) 643; PTCL 1998 CL 193; 1989 PTD (Trib.) 39 and (2002) 88 Tax 48 (Trib.) ref.

(b) Income-tax---

---Tax is not a forced liability and in fact is a responsibility to owe the State a share given by the taxpayer for the development of the nation and for providing services to the State.

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

----S. 62---Assessment on production of accounts, evidence etc.---Disallowances out of Profit and Loss Account without specifically confronting the defects in the books of accounts---Remand of such assessment order---Validity---Once the assessee had furnished books of accounts, no addition should be made. without specifically confronting the assessee regarding the defects in the books--Remanding the matter would, have meant that the assessee would have been subjected to another round of cumbersome proceedings, which was deprecated in law, as no body should be vexed twice for the same cause--Details submitted before the Taxation Officer were not rebutted---Appellate Tribunal vacated the order of First Appellate Authority remanding the issue of disallowances and assessment for all the three years under review regarding disallowances out of Profit and Loss Account expense, which was annulled directing to allow the expenses claimed by the assessee---Appeal of the assessee on the issue was allowed.

2002 PTD 1496; 2004 PTD 2231; 2002 PTD 407 (Kar. H.C.); 1991 PTD (Trib.) 643; PTCL 1998 CL 193; 1989 PTD (Trib.) 39 and (2002) 88 Tax 48 (Trib.) ref.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Receipt of cash payment from Directors by the company---Addition was made for ,he reason that assessee-Company had received cash payments from Directors, which were hit by the provisions of S.12(18) of the Income Tax Ordinance, 1979 not received through normal banking channel---Explanation of the assessee that the 'amounts paid by the Directors were not loans but the repayments of the expenses already made by the company on behalf of the Directors was not accepted--Validity---Taxation Officer without establishing that the amounts were fictitious had made the addition, despite the fact that books of accounts were produced and examined---Taxation Officer should have pointed out the fictitious transaction, if any---Addition under S.12(18) of the Income Tax Ordinance, 1979 could not be made where Directors made any payment directly to a third party on behalf of the company and vice versa, and in such cases only it had to be seen whether the payments were genuine or bogus and if the payments were genuine made from explained sources, no addition could be made---Addition was deleted by the Appellate Tribunal in circumstances.

2002 PTD 63; 2003 PTD 1372 (Trib.) and 2004 PTD 1572 (Trib.) rel.

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

---S. 24(fff)---Deductions---Salary---Assessee contended that nowhere it has been said as in S.24(fff) of the Income Tax Ordinance, 1979 that if salary exceeding was paid otherwise than through a crossed cheque the same shall be disallowed rather provision of law says that if the payment of salary exceeding Rs.5,000 was made through a crossed cheque, the same shall be disallowed---Validity---Contention of the assessee was repelled as 24(fff) of the Income Tax Ordinance, 1979 was the continuity of subsection (ff) of S.24 of the Income Tax Ordinance, 1979, which was regarding payments on account of expenditure under a single head of account, which in aggregate exceeds Rs.50,000 made otherwise than through a crossed cheque---Intention of the legislator was the documentation of the economy---Wording of the statute may not be properly drafted, but the intention in this regard was clear---Assessee having not paid salary through cross cheques, the provisions of S.24(fff) of the Income Tax Ordinance, 1979 were applicable and expense was rightly disallowed being inadmissible---Contention that "proper tax regarding salary had been deducted and deposited in accordance with law, the addition should not be made" was repelled, as the salaries had not been paid through banking channels---Assessee's appeal was dismissed by the Appellate Tribunal on this ground.

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

----S. 24(ff)---Deductions---Medical expenses---Addition was illegal even on the face of it, as the entire payment was only Rs.10,000 whereas provision of S.24(ff) of the Income Tax Ordinance, 1979 was attracted only where the amount of payment exceeds Rs.50,000---Addition of Rs.10,000 made in respect of medical expense was deleted by the Appellate Tribunal.

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

----S. 24(ff)---Deductions---Motor Vehicle expenses---Individual payments were not exceeding Rs.500, but the total amount in this regard had became Rs.71, 480, which in total had been disallowed---Addition made was deleted being not justified by the Appellate Tribunal.

Sajid Ijaz Hotiana for Applicant.

Rana Javed Iqbal, CIT (LTU) for Respondent.

2007 P T D (Trib.) 795

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shahid Azam Khan, Accountant Member

M.A. (Rect.) No.212/KB of 2006, decided on 17 October, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S.221---Income Tax Ordinance (XXXI of 1979), S.156---Rectification of mistake---Application for restoration of appeal---Appellate Tribunal recalled its order for adjudication on merit after hearing the parties as the adjournment application was rejected for want of' Vakalatnama and the law and justice required adjudication of the matter on merit---Application was allowed to restore the appeal ignoring the captioned of the application i.e. "application moved under S.221 of the Income Tax Ordinance, 2001."

Abdul Tahir, ITP for Applicant.

Shafqat Hussain Kohar, D.R. for Respondent.

2007 P T D (Trib.) 803

[Income-tax Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Syed Aqeel Zafar-ul-Hassan, Accountant Member

I.T.As. Nos.283-IB, 174-IB, 180-IB, 188-IB, 189-IB, 190-IB, 192-TB, 193-IB, 204-IB to 228-TB, 235-IB to 253-IB, 256-IB to 262-IB, 264-IB to 276-IB, 278-IB to 282-IB, 284-IB to 291-IB, 300-IB to 318-IB, 320-IB to 322-IB, 324-IB, 327-IB to 334-IB, 336-IB to 350-IB, 362-IB to 364-IB, 469-IB, 385-TB to 389-IB of 2006, decided on 2nd July, 2006.

Per Khawaja Farooq Saeed, Chairperson-

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

----S.64---General Clause Act (X of 1897), S.24-A---Limitation for assessment---Service of assessment order---Annulment of assessment order by the First Appellate Authority by holding that limitation provided under S.64 of the Income Tax Ordinance, 1979 included service up to the said 30th June---Validity---Provision of S.64 of the Income-tax Ordinance, 1979 applied on the process of assessment which stood completed on making an entry in the relevant registers of the department on the date of passing---If entry in the relevant registers was beyond the provision of S.64 only then the case would become barred by time---If the same stood completed before two years from the end of the assessment year in which the return was first filed, its service thereafter would not make the case as barred by time---Decision given by the First Appellate Authority was unjustified.

2005 PTD (Trib.) 960 per incuriam.

1966 PTD 40 rel.

1991 PTD (Trib.) 26; 1998 PTCL CL 372 and 1974 (93) ITR p.215 distinguished.

ITR 1960 Supreme Court 1313; 1966 PTD 40; M.S. Shah Jewana Textile Mills Limited v. Income Tax Appellate Tribunal 2003 PTD 2023; Multiline Associates v. Ardeshir Cowasjee PLD 1995 SC 423; (1977) 75 Tax 108 (Trib.); Jowwitt's Dictionary of English Law, Second Edition; Bourier's Law Dictionary; Bellentine's Law Dictionary, Third Edition and Law Dictionary by Max Radin and Words and Phrses First Edn. By D. Varagarajan ref.

(b) Judgment---

----"Per incuriam"---Definition---Decision delivered in ignorance or forgetfulness of some statutory provisions or of some authority binding on the Court is decision given per incuriam.

Jowwitt's Dictionary of English Law, Second Edition; Bourier's Law Dictionary; Bellentine's Law Dictionary, Third Edition and Law Dictionary by Max Radin rel.

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

----S.64---Limitation for assessment---Term "assessed' and "communicated"---Term "assessed" as used in S.64 of Income Tax Ordinance, 1979 could not be equated with the term "communicated".

(d) Precedent---

----Binding judgment---Where there was an earlier binding judgment in field which was never disturbed by a larger bench of the Appellate Tribunal or by the Superior Courts in terms of High Court as well as the Supreme Court of Pakistan, Court must ignore the subsequent judgment given in ignorance of the earlier ones.

(e) Judgment---

----Per incuriam---Bench of higher strength or Court having a superior authority need not hold an earlier judgment to be as per incurriam as it had no binding force on them---Concept of per incuriam only come to surface when ratio decidendi of a bench of equal strength appears to have been ignored by the other bench of the similar strength.

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

----S.64---Limitation for assessment---Communication and assessment---Communication to the parties was a ministerial act and it had got nothing to do with the process and procedure of assessment.

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

----S.64---Limitation for assessment---Process of assessment---Process of service---Effectiveness of assessment order---Passing of an order obviously would not become effective unless the parties concerned come to know of the decision therein---Generally and more particularly in the higher Courts the judgments were announced immediately after the hearing and the same became effective there and then---In income tax proceedings since the concept of announcing the judgment did not exist at all, obviously it was after communication of the order that the same became effective for all purposes---Without communication in terms of service of the said order it was not only the assessee who could not be asked to pay for the consequent responsibilities but the department also could not implement the same in terms of recovery of taxes etc., unless assessee received the order as well as demand notice---Order was complete till the day it was communicated---One view could be that L was not effective or that it could not be implemented but to say that them was no order prior to the same was not a correct interpretation---Keeping the order pending for administrative reasons or other ministerial bottleneck would. not amount to non-completion of the order---Service was entirely a separate process and procedure than assessment proceedings and was consequent to an assessment order---Such two could not be mixed so as to say that the process of assessment had not completed till the order was served---Point was only that the order did not become operative but it did not mean that it was not in existence.

Per Syed Aqeel Zafar ul Hasan, Accountant Member.---

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

----S.64---Limitation for assessment---Term making' andfinalization'--Connotations---Two terms namely, making' andfinalization' carry every different connotations---Statute speaks of 'making' as opposed to `finalization' of an assessment.

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

----S.64---Limitation for assessment---Ineffective order---Legality of---Contention that unless a tax was communicated to an assessee, it was not effective (meaning evidently that it was not recoverable) also favours an assessee but did not undermine the legality of an assessment order which did not lead to the conclusion drawn that if, for delay in communication, an order remains ineffective same was therefore no order at all.

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

----S. 64---Limitation for assessment---Terms "finalized" and "communicated"---Perception that S.64 of the Income Tax Ordinance, 1979 says that the assessment should be finalized' andcommunicated' was at variance with law---Neither of said two terms had been employed/ mentioned in the statute.

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

----S.64---Limitation for assessment---Order became effective after service---View that order became effective only after service had not evidently negated the concept of `making' an otherwise valid order.

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

----S.64---Limitation for assessment---Judicial act i.e. of passing an order was different from communications thereof which was a ministerial act---Order made within a given time frame, could not be said to be time-barred merely because the ministerial act of service was delayed.

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

----Ss.64 & 62---Limitation for assessment---General Clauses Act (X of 1897), S.24-A---Section 24-A, of the General Clause Act, 1897 neither restricts the legality of an assessment on the basis of date of service thereof nor had it otherwise been shown that the power to make an order under S.62 of the Income Tax Ordinance, 1979 had been exercised unreasonably, unfairly, unjustly or was otherwise not for advancing the purpose of enactment of the Income Tax Ordinance, 1979.

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

----Ss.64 & 62---Limitation for assessment---Service of an assessment order---Neither S.62 nor S.64 of the Income Tax Ordinance, 1979 required service of an assessment order within any specific time frame and only speak of an assessment by an order in writing made within two years from the end of the assessment year in which the income was first assessable.

1991 PTD (Trib.) 26; (1998) PTCL CL 372 and 1974 (93) ITR 215 distinguished.

Saeed Ullah Khan, D.R. for Appellant (in all I.T.As.).

Hafiz M. Idrees for Respondent (in I.T.As. Nos.283/IB, 343/IB of 2006).

Saeed Anwar Kazmi, I.T.P. for Respondent (in I.T.As. Nos.174/IB, 271/IB of 2006).

Asad Azam, F.C.A for Respondent (in I.T.A. No.180/IB of 2006).

Nemo for Respondents (in I.T.As. Nos.188/IB, 189/16, 204/IB, 205/IB, 215/IB. 222/IB, 223/IB, 225/IB, 227/IB, 235/IB, 237/IB, 267/IB, 268/IB, 272/IB, 285/IB, 287/IB, 288/IB, 291/IB, 303/IB, 307/IB, 314/IB, 318/IB, 321/IB, 331/IB to 334/IB, 336/IB, 339/IB, 342/IB, 346/IB, 349/IB and 350/IB of 2006).

Zahid Hussain, A.C.M.A. for Respondents (in I.T.As. Nos.190/TB. 216/1B, 228/IB, 304/IB, of 2006).

Sohail Sabir, I.T.P. For Respondents (in I.T.As. Nos.192/IB, 193/IB, 363/TB, 364/IB of 2006).

Kaleem Ashraf, A.C.A. for Respondents (in I.T.As. Nos.206/IB to 214/IB, 226/IB, 240/IB, 269/IB, 315/IB to 317/IB, 327/IB and 389/IB or 2006).

Aurangzeb, I.T.P. for Respondent (in I.T.As. Nos.217/IB, 218/IB, 273/IB, 289/IB, 386/IB of 2006).

Saeed Hassan Khan, Accountant for Respondent (in I.T.A. No.219/TB of 2006).

Aamer Ehsan, I.T.P. for Respondent (in I.T.A. No.220/IB of 2006).

Jehangir, I.T.P. for Respondent (in I.T.A. No.221/IB of 2006).

Abdul Hafeez, I.T.P. for Respondents (in I.T.A. No.224/IB of 2006).

Shakeel Ahmed, I.T.P. for Respondents (in I.T.As. Nos.236/IB, 242/IB, 243/IB of 2006).

S.A. Kazmi, I.T.P. for Respondents (in I.T.As. Nos.238/IB, 345/IB of 2006).

Zahid Masood Chatha for Respondents (in I.T.As. Nos.239/IB and 244/IB of 2006).

Waseem Ahmed Siddiqui, F.C.A for Respondents (in I.T.As. Nos.241/IB, 270/IB, 286/IB of 2006).

Farrukh Jamil, A.C.A. for Respondent (in I.T.As. Nos.245/IB, 251/IB to 253/IB, 256/IB to 261/IB, 280/IB to 282/IB, 301/IB, 308/IB, 328/IB, 337/IB, 338/IB 341/IB, 347/IB of 2006).

M. Moyhuddin, I.T.P. for Respondent (in I.T.As. Nos.246/IB to 250/IB, 265/IB, 309/IB, 330/IB, 344/IB of 2006).

Abdul Basil, F.C.A. for Respondent (in I.T.As. Nos.262/IB, 274/IB, 290/IB, 306/IB, 320/IB, 329/IB of 2006).

Zafar Iqbal, Company Secretary (in I.T.A. No.264/IB of 2006).

Sajid Ali, I.T.P. for Respondent (in I.T.As. Nos.275/IB, 300/1B of 2006)

Amir Ahmed, I.T.P. for Respondent (in I.T.A. No.276/IB of 2006).

Tahir Razzaq Khan, F.C.A. for Respondent (in I.T.As. Nos.279/IB, 313/IB of 2006).

Jawaid Anwar, F.C.A. for Respondent (in I.T.A. No.284/IB of 2006).

Zubair Ahmed, I.T.P. for Respondent (in I.T.A. No.302/IB of 2006).

Rao Shabbir Ahmed for Respondent (in I.T.A. No.305/IB of 2006).

Azam Mehmood, A.C.A. for Respondent (in I.T.A. No.322/IB of 2006).

Khurram Shahzad, I.T.P. for Respondent (in I.T.A. No.324/IB of 2006).

Waked Shahzad for Respondent (in I.T.A. No.348/IB of 2006).

Shaheed Ahmed, I.T.P. for Respondent (in I.T.A. 362/IB of 2006).

Ahmed Ali for Respondent (in I.T.A. No.469/IB of 2006).

Khalid Mehmood, F.C.A. for Respondent (in I.T.As. Nos.385/IB and 388/IB of 2006).

2007 P T D (Trib.) 827

[Income-tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member)

I.T.A. No.1440/LB of 2006, decided on 31st August, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Second Sched., Part IV, Cl. (41)---Exemption---Rejection of declaration of option for the presumptive/final tax regime was upheld by the First Appellate Authority---Validity---Held, there was no order by the Commissioner of the Taxation Officer as such no appeal could be filed and the treatment meted out by the First Appellate Authority upholding the observations of the Commissioner in a letter was ab initio, illegal and void---Right of appeal had been specifically provided under the provisions of law, as mentioned in Part-III of the Income Tax Ordinance, 2001 from S.127 to onwards and only the orders as mentioned under the provisions of law could be agitated in the course of appeal and any other order passed will he without jurisdiction---Assessee may move in this regard before higher authorities including Central Board of Revenue---No order under the Income Tax Ordinance, 2001 being in the field appealable under the law, the order of First Appellate Authority had been passed without having jurisdiction and the same was vacated by the Appellate Tribunal and assessee was directed to make representation before the higher forums.

Asim Zulfiqar Ali, A.C.A. for Appellant.

Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 830

[Income-tax Appellate Tribunal of Pakistan]

Before Muhammad Ashfaq Baloch, Judicial Member

I.T.As. Nos. 322/KB, 323/KB, 324/KB of 2005.

(a) Interpretation of statutes---

----Retrospective operation of a statute---Principles---Statute would operate prospectively, unless it expressly provided for its retrospective operation---If on perusal of provision of statute, it could be implied that it was intended that a particular provision should be enforced retrospectively the statute would be so enforced---Substantive laws would ordinarily be enforced prospectively, whereas procedural laws could be enforced with respect to pending cases as well.

(2005) 91 Tax 60 (FTO Pak) ref.

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

----Ss. 122(5-A) & 131---Amendment of assessment---Appeal to Appellate Tribunal---Assessments for the relevant years under S.62 of Income Tax Ordinance, 1979, were finalized much before insertion of S.122(5-A) of newly promulgated Income Tax Ordinance, 2001---No retrospective effect was given to subsection (5-A) of S.122 of Income Tax Ordinance, 2001---Subsection (5-A) of S.122 of Income Tax Ordinance, 2001, being a substantive law and not procedural law, its application retrospective, was not justified---Impugned orders framed by I.A.C. under subsection (5-A) of S.122 of Income Tax Ordinance, 2001, being ab initio, void and illegal, were vacated and original orders passed under S.62 of Income Tax Ordinance, 1979, were restored.

Colonial Sugar Refining Company Ltd. v. Irving 1905 AC 369 and 2001 PTD 1525 ref.

Muhammad Iqbal and Hamidullah, I.T.P. for Appellant.

Fazal Abrejo, D.R. for Respondent.

2007 P T D (Trib.) 835

[Income-tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos. 4009/LB and 4010/LB of 2003, decided on 19th August, 2006.

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

----S.62---Assessment on production of accounts, evidence etc.---Estimation of sales---Rejection of declared version with the observation that "although purchases from the Government Department were verifiable yet chances of other local purchases could not be ruled out"---Validity---Rejection of declared version was without giving any specific reason---Taxation Officer had admitted that "the reply of the assessee was incorrect, although the purchases from the government departments were verifiable yet all other local purchases could not be ruled out"---Assessing Officer without bringing on record any substance had observed that the other local purchases could not be ruled out---Taxation Officer had to prove through evidence that purchases had been suppressed and the declared version should not be rejected merely by a general observation and if the purchases were verifiable, at the most it would be reasonable to apply Dandakar formula---Where the accounts were rejected the Assessing Authorities were required to spell out their belief that accounts were fictitious and not reliable and their such belief should he judicious and not capricious---No justification in circumstances was available for remanding the matter by the First Appellate Authority with the direction to consider the matter in accordance with other parallel eases---Directions of the First Appellate Authority were vacated and the Taxation Officer was directed to proportionally adjust the sales considering the G.P. rate applied in accordance with Dandakar formula and previous history of the case.

1994 PTD (Trib.) 47; 1992 PTD (Trib.) 739 and 1994 PTD (Trib.) 1228 rel.

2001 MLD 1257; 1986 CLC 1042; 2005 PTD (Trib.) 1364 and Mrs. Naureen Hajra Bibi v. DCIT (I.T.A No.3392/LB of 1998) ref.

(b) Income Tax---

----Lump sum addition out of Profit & Loss Account---Validity---Disallowance if made in the Profit & Loss Account same should be alter giving specific reasons under each head of the Accounts---Such disallowance made were deleted by the Appellate Tribunal.

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

----S. 23(1)(v)---Deductions---Depreciation---Assessee claimed depreciation in the return but Taxation Officer had failed to allow the claim and the First Appellate Authority had also not given any specific observation despite the fact that assessee had specifically contended before the First Appellate Authority that disallowance of depreciation was unjustified---Taxation Officer was directed by the Appellate Tribunal to allow the claim of depreciation under S.23(1)(v) of the Income Tax Ordinance, 1979.

Amir Abbas for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent

2007 P T D (Trib.) 886

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 994/LB of 2004, decided on 22nd July, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 52, 86 & 50(4)---Liability of persons failing to deduct or pay tax---Assessee, a limited company maintaining full books of accounts---All details along with books of accounts were produced---Assessing Officer proceeded to frame assessment under Ss.52 and 86 of the Income Tax Ordinance, 1979 without pointing out any defect in books of accounts or without identifying the instances of non-deduction of tax on purchases made by the assessee---First Appellate Authority set aside the assessment with the observation that a tax was charged in a summary manner on all the payments under the head stores and spares and repair and Assessing Officer did not examine the record honestly as it was not possible that all the payments under the head stores and spares could attract the provisions of S.50(4) of the Income Tax Ordinance, 1979---Validity---Assessee produced full books of account which stood admitted in the assessment order---Assessing Officer failed to identify even a single payment which could be consideration falling within the purview of S.50(4) of the Income Tax Ordinance, 1979 where tax should have been deducted at source---Assessment was set aside with observations that Assessing Officer did not examine the record honestly and all the payments under the head stores and spares would attract the provisions of S.50(4) of the Income Tax Ordinance, 1979---Case should not be remanded in routine because that amounted to allowing of premium to the Assessing Officer to make up his deficiencies---When books of accounts were available with the Assessing Officer, he did not bother to identify the payments where S.50(4) of the Income Tax Ordinance, 1979 was attracted---Assessee should not be allowed to suffer the hassle of re-assessment just for the reason that the departmental officials did not perform their duties with due 4iligence and framed assessment without application of mind---Order of First Appellate Authority was vacated and assessment made under Ss.52 and 86 of the Income Tax Ordinance, 1979 was cancelled by Appellate Tribunal.

Mumtaz ul Hassan for Appellant.

Rana Muhammad Luqman, D.R. for Respondent.

2007 P T D (Trib.) 898

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 284/LB of 2004, decided on 14th March, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---C.B.R. Circular No. 7 of 2002, dated 15-6-2002, Para. 9(a)(ii)---C.B.R. Circular No. 7(7)/S-Asstt/2002, dated 17-12-2002---Self-assessment---Selection of case for total audit on the grounds that income was quite low in view of the volume of business as well as the investment made in capital; that expenses claimed in Profit and Loss Account did not commensurate with the declared income; that genuineness of the such huge expenses was required to be checked and that it should be verified as to whom the amount of rent and salary had been paid and whether tax had been deducted under the provisions of law or not especially under the head rent and salary---Validity---Case was taken outside the scope of Self-Assessment Scheme for the three reasons viz. hefty amount of rent; huge amount of salaries and heavy amount spent on repair and maintenance---When assessment was finally framed after having sought explanation of the assessee/appellant major reasons for taking out the case from the purview of Self-Assessment Scheme were dropped and department was left with little justification to proceed under normal law instead of accepting the declared version under Self-Assessment Scheme which amounted to unnecessary tinkering---Case was set apart in an indiscriminate manner and against the instructions of Central Board of Revenue---Only those cases were to be set apart which were Revenue potential and where there was a sound basis for framing a normal law assessment---Application of higher gross profit rate and addition out of profit/loss account expenses were not in accordance with the provisions of Income Tax Ordinance, 1979 and direction of the higher appellate authorities---income computed by the Assessing Officer was disapproved---Case of the assessee was not a Revenue potential case and there was no bona fide reason to oust the same from the scope of Self-Assessment---Such kind of action did amount to sabotaging the Self-Assessment Scheme and confidence reposed by the State in the taxpayers---Department was directed to accept the returned version of the assessee under Self-Assessment Scheme.

2004 PTD 1719 ref.

Waheed Shahzad for Appellant.

Muzammal Hussain, D.R. along with Taqui Qureshi, D.C.I.T. for Respondent.

Date of hearing: 11th March, 2006.

2007 P T D (Trib.) 932

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No.5796/LB of 2005, decided on 24th January, 2007.

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

----Ss.182, 190(5) & 110---Income Tax Ordinance (XXXI of 1979), Ss.62 & 116---C.B.R. Circular No.2 of 1969, C. No.4(3)-ITP/59, dated 21-1-1959---Penalty for failure to furnish a return or statement---Setting aside of original assessment---Deletion of penalty---Department contended that First Appellate Authority was not justified in deleting the penalty on the ground of setting aside of the original assessment without any cogent reason and First Appellate Authority had exercised its discretion illegally or perversely in allowing the appeal---Validity---First Appellate Authority was fully justified in deleting the penalty as the basis of penalty was assessment order/outstanding demand which was admittedly set aside by the First Appellate Authority---Penalty could not be sustained in the circumstances and was liable to be cancelled---Order of First Appellate Authority was maintained and in consequence, departmental appeal was dismissed being without any merit.

Messrs Muhammad Muslim v. C.I.T. (1980) 42 Tax 129; Spies v. United States 317 US 492; Hillenbrand v. C.I.T. 42 TC 617; Fattorini (Thomas) (Lancashire) Ltd.'s case (1943) 11 Supp. ITR 50; C.I.T. v. Vedlapatla Veera Venkataramiah and another (1943) 11 ITR 308 (Mad.); 1994 PTD 668; I.T.O. v. Nanalal Chunilal Kansara 19 Taxman 58 (Adh.); Chhotalal Vashram v. I.T.O. 19 Taxman 45 (Ahd); C.W.T. v. Ramik Lal D. Mehra 136 ITR 729 (Ord); CIT. v. Hari Ram Sri Rain Taxation 83 (3) 429 (All.); Begum Mumtaz Jamal's case PLD 1976 Lah. 761; C.I.T. v. Chief Glass House (1992) 65 Tax 205; C.I.T. v. Azam Industries Ltd. 1980 PTD 26; C.I.T. v. Fateh Textile Mills Ltd. PLD 1982 Kar. 679; C.I.T. v. Sindh Land Development Ltd. (1985) 52 Tax 114; C.I.T. v. Javed Khaliq 1993 PTD 730; Moinuddin Qureshi v. State 1983 PCr.LJ 946 and Oxford Dictionary ref.

(b) Income-tax---

----Penalty---Concept---Nature and limitations to penalize assessee---Power of taxing authority to penalize the assessee was not power to destroy rather it was a quasi-criminal power hedged with limitation and had to be exercised subject to those limitations and within its scope and ambit---Taxing authority should always keep in mind the principles which had been approved by the long chain of decisions---Penalty, pecuniary or otherwise was an integral part of any taxing statute, designed to ensure that the provisions of the law for determining the tax liability of persons were strictly complied with.

(c) Income-tax---

----Penalty---Rationale behind the provision of penalties and prosecution in the Income Tax Laws is to discourage the taxpayers to falling a prey to these human frailties.

(d) Income-tax---

----Penalty---Purpose and scope---Burden of proof---Principles.

(e) Income-tax---

----Penalty---Imposition of penalty is not matter of guesswork.

(f) Income-tax----

---Fraud---Cannot be presumed.

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

----Parts X, XI & XII---C.B.R. Circular No.6 (II)IT-6/75/561 dated 17-6-1975---Penalty---Imposition of---Limitation---Some times the penalties were imposed after inordinate delay, and if there was no limitation fixed in the taxing statute there is instruction contained in the Central Board of Revenue's Circular No.6(II)IT-6/75/561 dated 17-6-1975 to complete the penalty proceedings within 3 months after the assessment---Penalty imposed after inordinate delay was invalid.

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

Javaid Zakria for Respondent.

2007 P T D (Trib.) 954

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T.As. Nos. 1248/LB to 1252/LB and 1311 to 1315 of 2004, decided on 18th July, 2006.

(a) Income-tax---

----Assessment setting aside of---When all the material facts were available before the First Appellate Authority to decide the issue on merits, the assessment should not have been set aside.

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

----Ss.56 & 62---Notice for furnishing return of total income---No notice under S.56 of the Income Tax Ordinance, 1979 could be issued after the expiration of five years from the end of the assessment year for which the return of income was due, as contemplated in the erstwhile provision of the section---When period of five years was reckoned from the end of the assessment year for which the return of income had to be filed, the assessment made under S.62 of the Income Tax Ordinance, 1979 for the assessment year 1993-94 was hit by limitation.

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

----S.56, proviso---Notice for furnishing return of total income---Proviso to S.56 of the Income Tax Ordinance, 1979 was directory in nature and was applicable retrospectively and was applicable to all pending proceedings at any stage including the appeal proceedings.

2002 PTD (Trib.) 2609 and 2004 PTD (Trib.) 708 rel.

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

----Ss.56 & 62---Notice for furnishing return of total income---Initiation of proceedings without lawful jurisdiction---Effect---Proceedings under S.56 of the Income Tax Ordinance, 1979 initiated without lawful jurisdiction would result into cancellation of the assessment made under S.62 of the Income Tax Ordinance, 1979.

(e) Income-tax---

----Evidence---Substantial material had to be unearthed by the Revenue to justify its action by adducing concrete material evidence.

(f) Income-tax---

----Complaint---Placing implicit reliance on bogus, complaint by the department was highly objectionable and uncalled for.

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

----Second Sched., Part I, Cl. (1)-Constitution of Pakistan (1973), Fourth Sched. Part I, item 47---S.R.O. 766(I)/88, dated 7-9-1988---Exemption---Agricultural income---Assessing Officer was not vested with the powers under the Income Tax Ordinance, 1979 to cut down the agricultural income declared by the assessee provided it was established that agricultural income was being earned by him.

(h) Income-tax---

----Agricultural income---Declared agricultural income by the assessee in no way could be alleviated---Assessing Officer was directed by the Tribunal to accept the declared agricultural income as per revised income tax return being curtailed in absence of any lawful authority.

Azhar Ehsan Sheikh for Appellant (in I.T.As. Nos. 1248/LB to 1252/LB of 2004).

Sheraz Mirza, D.R. for Respondent (in I.T.As. Nos. 1248/LB to 1252/LB of 2004).

Sheraz Mirza, D.R. for Appellant (in I.T.As. Nos.1311/LB to 1315/LB of 2004).

Azhar Ehsan Sheikh for Respondent (in I.T.As. Nos.1311 /LB to 1315/LB of 2004).

2007 P T D (Trib.) 974

[Income-tax Appellate Tribunal Pakistan]

Before Javed Masood Tahir Bhatti, Judicial Member and Khawar Khursheed Butt, Accountant Member

I.T.As. Nos.5048/LB, 6173/LB to 6176/LB of 2004 and 2045/LB of 2005, decided on 12th February, 2007.

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

----S.156---Rectification of mistake---Limitation starts from original order---Finding of the First Appellate Authority that "limitation for rectification starts from the date of original order and order under S.156 of the Income Tax Ordinance, 1979 passed after the lapse of four years was without lawful jurisdiction" was confirmed by the Appellate Tribunal holding that First Appellate Authority had rightly cancelled the order under S.156 of the Income Tax Ordinance, 1979 as the limitation had already expired.

(1998) PTCLR 54 and 2002 PTD 2407 rel.

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

-----S.62---Assessment on production of accounts, evidence etc.---

Assessee was a limited company quoted on Stock Exchange--Books of accounts were being maintained and were furnished before the Assessing Officer who had examined the same and by using stock phrases had rejected the declared version---Validity---Appellate Tribunal, after considering facts, circumstances and specifically previous history of the case, held that there was no justification for rejection of the accounts---Order of First Appellate Authority was vacated and the declared trading results were directed to be accepted.

1994 PTD (Trib.) 858; 2002 PTD 407; 2005 PTD 2417; 2002 PTD (Trib.) 1583; 2003 PTD (Trib.) 2668; 2001 PTD (Trib.) 2938; (Vol.8 No.5 Tax Form 62 (Trib.); 1999 PTD (Trib.) 3892; 2001 PTD 2612; 2001 PTD (Trib.) 2941; 1994 PTD 516; 1962 PTD (Trib.) 123; 1974 PTD 45; 1984 PTD 276 and (1985) 52 Tax 115 ref.

(c) Income-tax---

---Rejection of declared version---Once on behalf of the assessee the explanation regarding the decline in the sales or the gross profit rate had been explained there was no justification for rejection of the declared version.

(d) Income-tax---

---History of the case---History of the assessee should not be ignored without bringing on record the distinguishing factor from the previous assessment year if the fashion of maintaining the accounts had remained the same.

(e) Income-tax---

---Accounts setting aside of---Matter should not be set aside where the history was of acceptance of accounts and the assessment had been made on the personal whims of the Taxation Officer.

1994 PTD (Trib.) 858; 2002 PTD, 407; 2005 PTD 2417; 2002 PTD (Trib.) 1108; 2003 PTD (Trib.) 2668; 2001 PTD (Trib.) 2938; 2005 PTD (Trib.) 1208; (Vol. 8 No.5 Tax Form 62 (Trib.); 1999 PTD (Trib.) 3892; section PTD 2612; 2001 PTD (Trib.) 2941; 2005 PTD (Trib.) 1208 and PTD 516 rel.

(f) Income-tax---

----Rejection of accounts---Low gross profit rate was not a valid ground for the rejection of accounts.

2005 PTD (Trib.) 1208; 1961 PTD (Trib.) 123; 1974 PTD 45; 1984 PTD 276; (1985) 52 Tax 115 and 2001 PTD (Trib.) 2938 rel.

(g) Income-tax---

----Disallowances---Disallowances were made as per history of the case but First Appellate Authority set aside the assessment being not in accordance with the previous history---Appellate Tribunal directed Assessing Officer to make the disallowances if required after keeping in view the previous history or to give specific reasons for the disallowances after confronting same to the assessee.

Mrs. Sabiha Mujahid, D.R. for Appellant (in I.T.A. No.5048/LB of 2004).

Younis Khalid for Respondent (in I.T.A. No.5048/LB of 2004).

Younis Khalid for Appellant (in I.T.As. Nos.6173/LB to 6176/LB of 2004 and 2045/LB of 2005).

Mrs. Sabiha Mujahid, D.R. for Respondent (in I.T.As. Nos.6173/LB to 6176/LB of 2004 and 2045/LB of 2005).

2007 P T D (Trib.) 986

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.1582/LB of 2002, decided on 20th January, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 13(1)(aa), 62, 65 & 66A---C.B.R. Circular No.9 of 1988, dated 21-7-1998, Cl. (5)---Self-assessment---Processing of case under normal law in absence of fulfilment of requirements of paras 4 and 5 of Circular No.9 of 1998, dated 21-7-1998---Assessee contended that return was filed under Self-Assessment Scheme and same was neither selected for Special Audit nor was there' any default in compliance of any short document notice, therefore, case could not be assessed under normal law---Department could take only one action i.e. under Ss.65/66A of the Income Tax Ordinance, 1979 and for that purpose the assessment under S.59(1) of the Income Tax Ordinance, 1979 was to be first completed---Validity---If concealment of income was detected by the Assessing Officer then the return filed under Self-Assessment Scheme should first be processed under S.59(1) of the Income Tax Ordinance, 1979 and then it could be reopened under S.65 of the Income Tax Ordinance, 1979---Contentions of the assessee were accepted by the Appellate Tribunal and Assessing Officer was directed to accept the return under Self-Assessment Scheme.

1990 PTD (Trib.) 296; 1996 PTD (Trib.) 740; 1996 PTD (Trib.) 790; 1988 PTD (Trib.) 16; 1983 PTD 291 and 1985 PTD (Trib.) 247 rel.

Muhammad Aslam for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2007 P T D (Trib.) 994

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.3747/LB to 3749/LB of 2002, decided on 7th April, 2005.

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

----Ss.52, 86 & 156---Liability of persons failing to deduct or pay tax---Limitation---Assessee contended that orders were hit by limitation as it could have been passed within the limitation period of four years as prescribed for an action under S.156 of the Income Tax Ordinance, 1979---Validity---Appellate Tribunal was bound to follow the precedent quoted by the assessee---Appellate Tribunal found that order was hit by the limitation and orders passed by the High Court were on all fours to the matter---Assessee's appeal was accepted and the order under Ss.52/86 of the Income Tax Ordinance, 1979 was annulled being barred by time.

2003 PTD 1571 rel.

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

----Ss.52 & 86---Liability of persons failing to deduct or pay tax---Order passed under Ss.52/86 of the Income Tax Ordinance, 1979 was remitted back for passing a proper speaking order after affording a proper opportunity of being heard to assessee on the ground that neither the assessee nor the Department had said anything about the 50% of tax paid hy the assessee as given in the order.

2002 PTD (Trib.) 3333 ref.

Yousaf Ali Ch., I.T.P. for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

2007 P T D (Trib.) 1016

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.As. Nos.3276/LB to 3278/LB of 2005, decided on 2nd February, 2007.

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

----S.62(1), proviso---Assessment on production of accounts, evidence etc.---Rejection of accounts without noting discrepancies or defects in the books of accounts---Validity---Assessment had been made on whimsical inferences drawn from certain set of facts which were based on fanciful assumption to which no credence could be attached--Sales were estimated on the desires of Assessing Officer---Neither suppression in purchase nor understatement of sales had been pointed out on examination of books of accounts---Even no glaring discrepancies or defects had been noted from the books of accounts produced for examination---Assessing Officer though had vast powers to make assessment but his estimate must be based on facts and circumstances of, the case as borne out from the record---Notice issued under S.62(1) of the Income Tax Ordinance, 1979 did not contain any defect to be noted in the books of accounts in order to render the declared version to be unreliable---Declared trading version had been rejected on vague and imaginary reasons---Rejection of trading version having been made by blatantly disregarding the terms laid down in proviso to subsection (1) of S.62 of the Income Tax Ordinance, 1979, Assessing Officer was directed by the Tribunal to accept the declared trading version.

1989 PTD 177; 2001 PTD (Trib.) 1480; I.T.A. No.139/LB of 1997; I.T.As. Nos.2073 and 2074/LB of 2005; 1989 PTD (Trib.) 508 and 2004 PTD (Trib.) 1642, rel.

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

----S.62(1), proviso---Assessment on production of accounts, evidence etc.---Notice issued under S.62 of the Income Tax Ordinance, 1979 based on general observations and gossips could not be equated with the notice to be issued confronting the assessee with the defects noted in the books of accounts.

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

----S.62(1), proviso---Assessment on production of accounts, evidence etc.---Mere mentioning S.62 on the face of the notice without adhering to the terms of the notice to be issued under S.62(1) of the Income Tax Ordinance, 1979 could not absolve the Assessing Officer from his responsibility to confront the assessee with the defects to be .noted in the books of accounts.

(d) Income-tax---

----Sales---Estimation of---Stocks and survey report---Assessee admittedly had declared better turnover qua assessed by the survey team---Average stock of goods was also available with the assessee at Rs.650,000 (opening stock of Rs.610,500 and closing stock of Rs.705,500) as was declared in the income tax return and was not objected by the Assessing Officer---If such average stock was to be rotated to six times, the sales were evolved at Rs.39,50,000---Viewing the facts in its entirety, Appellate Tribunal fastened the sales at Rs.43,00,000.

Hafeez-ur-Rehman Cheema, I.T.P. for Appellant.

Sheraz Mirza, D.R. for Respondent.

2007 P T D (Trib.) 1034

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Istataat Ali, Accountant Member

I.T.A No. 4294/LB of 2005, decided on 24th November, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss.129, 62, 61, 59(A) & 156(3)---Appeal to the Appellate Additional Commissioner---Setting aside of assessment by the First Appellate Authority for reappraisal and re-adjudication of the case after observing that---"Taxation Officer was not justified to complete the assessment on 30-6-2001 under S.62 of the Income Tax Ordinance, 1979 without issuing statutory notices under Ss. 61/62 of the Income Tax Ordinance, 1979"---Validity---Condition of notices to the assessee was of mandatory nature for assessment purposes---Order without a notice would be wholly void ab initio as being an act performed in disregard of the provisions of the statute and any further action taken on the basis of such void order would also be vitiated and the defects at the initial stage would be incurable by a hearing at a subsequent stage---No justification was found in the order of First Appellate Authority remanding the matter to the Taxation Officer---Order of First Appellate Authority was vacated and the assessment order passed by the Taxation Officer was cancelled by the Appellate Tribunal.

1971 SCMR 681 rel.

P.T.R. No. 2 of 2001; 2003 PTD (Trib.) 1956; (2002) 88 Tax 48 (Trib.); 2002 PTD 407; 2002 PTD 629; I.T.As. Nos.1832 & 1833/LB of 1985-86 and Messrs Hazara Engineering Company v. I.T.O. (1979) 39 Tax 30 (Trib.) ref.

M. Iqbal Chughtai for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 1048

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.576/LB of 2005, decided on 16th December, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 61, 58(1) & 63---C.B.R. Circular No. 7(2)DT-14/94 dated 1-2-1994---Notice for production of books of accounts, etc.---Notice was issued on 21-8-2002 for appearance of assessee on 29-8-2002---No assessment order had been passed on that date but the assessment order had been passed on 31-8-2002 which date was neither fixed for hearing nor any notice regarding hearing of the case was issued on that date---Validity---Order sheet showed that notice had been issued on 21-8-2002 for 29-8-2002 but there was no entry for 29-8-2002 in the order sheet and the assessment had been finalized under S. 63 of the Income Tax Ordinance, 1979 on 31-8-2002 for which date, there was no intimation to the assessee as per the order sheet, even in the assessment order, no explanation in this regard was available which showed that case fixed for 29-8-2002 for hearing was not called on that fixed date, but was decided on a subsequent date on 31-8-2002 which in fact was neither fixed for hearing nor it was even intimated to the assessee---Taxation Officer had not recorded the fact of proceeding ex parte against the assessee in the minutes of the proceedings of the case---Estimation had been made without any basis---Add backs out of Profit & Loss account had been made on the lump sum basis, which could not be approved---No justification was available for setting aside the assessment for de novo consideration---Order of First Appellate Authority was vacated and the assessment framed by the Assessing Officer was cancelled---Declared version was directed to be accepted.

1981 PTD 210 ref.

Aamir Naseer Khan for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 1055

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos.206/LB to 209/LB of 2004, 569/LB to 572/LB of 2004, decided on 18th November, 2006.

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

----Ss.24(1) & 16(2)---Deductions not admissible---Inclusion of medical expenses in excess perquisites---Validity---Medical expenses could not be included in excess perquisites---Addition upheld by the First Appellate Authority was without any justification---Addition made in respect of medical expenses was deleted by the Appellate Tribunal.

Oxford Dictionary; Longman Dictionary; Black's Law Dictionary; (1984) 49 Tax 110; 1998 PTD 977; (1988) 173 ITR 290(AP); (2001) PTD 964; (1982) 137 ITR 827; 1998 PTD 1042 and 1998 PTD 977 ref.

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

----S.24---Deductions not admissible---Capital loss---Setting off loss on investment in securities against other business income---Disallowance of such loss was confirmed by the First Appellate Authority with the observation that "loss not dealing with securities was capital loss, which could not be set off against business income"---Validity---Investment in quoted stocks was part of composite business activity of the company and any loss arising from such investment could be adjusted against other business---Addition upheld by the First Appellate Authority was without any justification which was deleted by the Appellate Tribunal.

77 Tax 231 (Trib.) Dictionary and 1993 PTD (Trib.) 472 rel.

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

----S. 24(c)---Deductions not admissible---Legal and professional charges---Addition was deleted by the Appellate Tribunal as assessee had given full details of such expenses and all the evidence was produced---No justification existed for such addition.

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

----S.24---Deductions not admissible---Addition on account of `Taxation of Lease Rental in litigation'---Validity---Since recovery suits were filed, the possibility of recovery, if any, was conditional and subject to the order of court, the lease rentals did not accrue in the accounts---First Appellate Authority was not justified in confirming the addition which was deleted by the Appellate Tribunal.

C.I.T. v. U.P. Financial Corporation (1995) 85 ITR 565 and C.I.T. v. Citibank N.A. (1994) 75 ITR 483 rel.

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

----S. 24---Deductions not admissible---Other expenses---Assessee-Company made adjustment on instructions of Auditors on account of wrong entries---Disallowance was confirmed by the First Appellate Authority with the observation that no evidence' to substantiate such claim was produced---Validity---Both the officers below failed to appreciate that such was merely an adjustment for which no evidence was necessary---Addition was deleted by the Appellate Tribunal.

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

----S.24---Deductions not admissible---Lease Key Money, deletion of addition by the First Appellate Authority by reliance on the decision of Appellate Tribunal was confirmed by the Appellate Tribunal.

I.T.A. No.304/LB of 2001 and I.T.A. No. 2377/LB of 2002 rel.

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

----S.24---Deductions not admissible---Vehicle Running Expenses, deletion of---No interference was made by the Appellate Tribunal as the addition was deleted by the First Appellate Authority keeping in view the decision of the Appellate Tribunal.

2005 PTD (Trib.) 2041 rel.

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

----S.24---Deductions not admissible---Allowance of expenses relating to exempt capital gain---Appeal on issue regarding "allowance of expenses relating to exempt capital gain" was dismissed by the Appellate Tribunal as the same was decided by placing reliance on the decision of Appellate Tribunal.

(2004) 90 Tax 129 (Trib.) rel.

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

----S.23(1)(x)---Deductions---Irrecoverable receivables---Deletion of addition---No interference was made by the Appellate Tribunal as the addition was deleted by reliance on the decision of Appellate Tribunal.

2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.) and 2003 PTD (Trib.) 1189 rel.

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

----Ss.24(c), 50(4) & 52----Deductions not admissible---Fee and subscription---Disallowance of "fee & subscription" paid to Stock Exchange, Leasing Associations of Pakistan and CDC under S.50(4) of the Income Tax Ordinance, 1979---Addition was deleted by the First Appellate Authority on the ground that such payments did not fall within the nature of supply of goods, services 'rendered or for execution of contract which were pre-requisite for invocation of S.50(4) of the Income Tax Ordinance, 1979---Since the said figure stands taxed under S.52 of the Income Tax Ordinance, 1979, no addition under S.24(c) of the Income Tax Ordinance, 1979 Could be made---No interference was made by the Appellate Tribunal in circumstances and appeal of the department was dismissed.

2002 PTD (Trib.) 3118 rel.

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

----S.24---Deduction not admissible---Irrecoverable/written off lease rentals---Addition was deleted by the First Appellate Authority by following the decisions of Appellate Tribunal---No interference was made on the issue by the Appellate Tribunal.

2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.) and 2003 PTD (Trib.) 1189 rel.

Dr. Ikramul Haq and Masood Baig for Appellant (in I.T.As. Nos.206/LB to 209/LB of 2004).

Mrs. Sabiha Mujahid, D.R. for Respondent (in I.T.As. Nos.206/LB to 209/LB of 2004).

Mrs. Sabiha Mujahid, D.R. for Appellant (in I.T.As. Nos.569/LB to 572/LB of 2004).

Dr. Ikramul Haq and Masood Baig for Respondent (in LT.As. Nos.569/LB to 572/LB of 2004).

2007 P T D (Trib.) 1085

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Istataat Ali, Accountant Member

I.T.As. Nos.4011/LB and 4012/LB of 2005, decided on 18th November, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 23, 22, 30 & 35---Deductions---Department contended that set aside of assessment by the First Appellate Authority with the direction to allow expenses claimed as revenue expenses under S.23 of the Income Tax Ordinance, 1979 notwithstanding the fact that no business was conducted and loss computed on account of expenses to be allowed under S.23 of the Income Tax Ordinance, 1979 be set off against interest income was also without any justification---No justification existed in directing to assess loss under S.22 of the Income Tax Ordinance, 1979 and after setting off loss against income under S.30 of the Income Tax Ordinance, 1979, the balance loss to be carried forward to next year as provided under S.35 of the Income Tax Ordinance, 1979---Assessee contended that according to S.34 of the Income Tax Ordinance, 1979, if interest income was assessed under the head "income from other sources" and there was loss under the head "income from business" due to expenses, this business loss will be adjusted against interest income---Validity---First Appellate Authority had set aside the assessments with the direction to assess interest income under S.30 of the Income Tax Ordinance, 1979 under the head "Income from other sources", allow expenses claimed as business expenses under S.23 of the Income Tax Ordinance, 1979 in each year and set off loss against income under S.30 of the Income Tax Ordinance, 1979 in each year and set off loss against income under S.30 of the Income Tax Ordinance, 1979 and the balance loss to be carried forward to the next year as provided under S.35 of the Income Tax Ordinance, 1979---First Appellate Authority having already set aside the assessments, Appellate Tribunal did not interfere with the order in that respect---Taxation Officer was directed that while framing fresh assessment, he should consider the relevant law and precedents.

Messrs Greys Leasing Limited v. IAC I.T.A. No.4814/LB of 1997; PTD (Trib.) 85; (1983) 48 Tax 58 (Trib.); 2002 PTD 214; 2003 PTD (Trib.) 1076 and 2005 PTD (Trib.) 621 ref.

Sabiha Mujahid D.R. for Appellant.

Muhammad Arshad, ITP for Respondent.

2007 P T D (Trib.) 1091

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.4981/LB of 2004, decided on 30th August, 2005.

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

----S. 62---Assessment on production of accounts, evidence etc.---Non-­confrontation of lowness of gross profit rate---Assessee contended that order of adjudication based on ground which was not mentioned in the show-cause notice was palpably illegal on the face of it and the notice issued under S.62 of the Income Tax Ordinance, 1979 did not mention the lowness of declared gross profit rate nor application of gross profit rate of 8%---Validity---Notice issued pointed out various defects e.g. variation in sale rate, unverifiability of various expenses debited to Profit and Loss Account, low yield and addition on account of variation in sale rate but lowness of declared gross profit rate had not been confronted to the assessee---Notice also did not point out any defect in the expenses debited to trading account though the defects in expenses debited to Profit and Loss Account had been confronted to the assessee---Assessee having not been confronted on lowness of gross profit rate, defects in the expense debited to trading account and the sales had been accepted, there was no justification for application of gross profit rate of 8% against declared gross profit rate of 7.18%-Order of First Appellate Authority directing to accept the trading results was justified and was not interfered by the Appellate Tribunal.

1987 SCMR 1840 ref.

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

----S. 24(ff)---Deductions not admissible---Additions were made on account of unverifiable nature of expenses---Such additions were deleted by the First Appellate Authority with the observation that Assessing Officer failed to pinpoint any specific defects of unverifiability expenses---Deletion of additions by the First Appellate Authority were confirmed by the Appellate Tribunal as Assessing Officer had failed to pinpoint any instances of unverifiable nature of such expenses.

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

Ch. Mumtaz-ul-Hassan for Respondent.

2007 P T D (Trib.) 1107

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.A. No.6032/LB of 2004, decided on 1st September, 2006.

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

----Ss. 27, 2(2)(20), 22, 29(5), & 30---Capital gain---Company---Distribution of shares were treated as transfer of capital assets to the shareholders and difference between market value of the share and their cost was treated as capital gain stating that it attracted the provisions of S.27 read with S.29(5) of the Income Tax Ordinance, 1979---Validity---Where a company distributes any assets owned by it by way of dividend-­in-specie to its shareholders, it was actually distributing profits among the shareholders, company did not receive any thing from its shareholders and such transaction did not fall within the ambit of S.27 of the Income Tax Ordinance, 1979---If the company sold shares to the shareholders, it would have become liable to charge of income tax on the capital gain---Treating the distribution of dividend-in-specie as sale of shares to shareholders, was totally illegal and amounted to stretching the interpretation of the provisions of section 27 too far---If the interpretation placed by the Taxation Officer on the provisions of S.27 of the Income Tax Ordinance, 1979 is accepted, then the distribution of the bonus share, right shares or even cash dividends to the shareholders by company would also entail charging of capital gain in the hands of the company---No justification was available for setting aside the case for de novo consideration---Order of the First Appellate Authority was vacated and the assessment order was cancelled by the Appellate Tribunal and declared version was directed to be accepted.

Messrs Ashiq Ali and others v. Messrs Mst. Zamir Fatima and others PLD 2004 SC 10; Shah Wazir Khan v. Abdul Razzaq PLD 2004 (Pesh.) 109; (1983) 48 Tax 6 (Trib.); 2004 PTD (Trib.) 2300; Sampath Lyengar's Book, "Law of Income Tax", Volume-2, Page 2522 18th Edition); CIT v. R.M. Amin 82 ITR 191 203; CIT v. Madurai Mills Co. Ltd. 89 ITR 51; CIT v. Muhanpdhaibhai Pamabhai 91 ITR 393; Kantilal Majilal v. CIT 41 ITR 275; 278 (SC); Ujjan General Trading Society (P.) Ltd. v. CIT (1968) 67 ITR 315 (MP); CIT v. Central India Industries Ltd. (1971) 82 ITR 555 (SC); Kanga Palkhivala; Kishenchand Chellaram v. CIT 46 ITR 275; 1974 PTD (Trib.) 27 and Maxwell on Interpretation of Statutes (12th Ed. pp.208-210) ref.

(b) Income-tax---

----Nobody should be vexed twice for the same cause, specifically when the assessee had furnished the detailed explanation with case-law.

(c) Income-tax---

----Setting aside of assessment order should not be made as routine or for filling of the lacunas on the part of the Taxation Officer which amounts to sheer harassment to an assessee.

(d) Income-tax---

----Practice and procedure---When the assessee had furnished the explanation and the Taxation Officer had not rebutted the contentions, the presumption would be that the explanation furnished by the assessee had substance, and contention of the assessee should be accepted.

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

----S. 27---Capital gain---Distribution of dividend-in-specie was not of the nature of transactions envisaged by S.27 of the Income Tax Ordinance, 1979.

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

----S. 27---Capital gain---Receipts of consideration and the consequent arising of profit or gain (or loss) was a condition precedent for the invocation of S.27 of the Income Tax Ordinance, 1979.

(g) Interpretation of Statutes---

----Interpretation that leads to absured results must be discarded.

(h) Income-tax---

----Income---Assets distribution constitutes income in the hands of the shareholders; no income could arise to the distributing company.

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

----S.27---Capital gain, whether deeming provision---Provision of S.27 of the Income Tax Ordinance, 1979 was not a deeming provision.

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

----S. 27---Capital gain---Transfer---Term "transfer" was wide enough to include every kind of transfer of assets and relinquishment or extinguishment of right in the assets, but receipt of a consideration was a condition precedent for transfer of share to fall within the ambit of S.27 of the Income Tax Ordinance, 1979.

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

----Ss. 2(20) & 27---Dividend---Under S.2(20) of the Income Tax Ordinance, 1979, any amount distributed in excess of accumulated profits could be treated as dividend---Restriction of "to the extent of the accumulated profits" appearing in S.2(20 of the Income Tax Ordinance, 1979 relates to distributions which were not actually dividends but were deemed as dividends under various sub-clauses of sub-Cl. (20) of S.2 of the Income Tax Ordinance, 1979---Distribution of dividend-in-specie did not attract the provisions of S.27 of the Income Tax Ordinance, 1979.

Muhammad Farooq Shahid, ITP and Abdul Khaliq, ITP for Appellant.

Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 1179

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Member Judicial

I.T.A. No. 1556/LB of 2005, decided on 6th October, 2006.

(a) Income tax---

----Limitation---Condonation of delay---Principles---While deciding the application for condonation of delay, prime consideration should be advancement of justice and the technicalities should not be stretched to the extent whereby the justice is denied.

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

----S. 130(3) & 62---Limitation Act (IX of 1908), S.5---Penal Code (XLV of 1860)---Limitation---Condonation of delay---Condonation of 210 days delay by the First Appellate Authority on the basis of affidavit of assessee that the assessment order was retuned immediately after service of the order to the Taxation Officer for making correction of wrongful computation of income and various other defects therein---Validity---Returning back of the assessment order after issuance and proper service, for the purpose of making alteration, addition and changes in findings as well as computation and calculation of income and tax, without opting the process of rectification, reflected mala fide of the parties---Even if it was presumed that the Taxation Officer directed to return the assessment order, even then tampering with quasi-judicial order was a cognizable offence punishable under Penal Code, 1860 and a crime jointly committed by the officials of the Assessee and Assessing Officer---Conduct of the assessee was not fair, as such benefit of S.5 of the Limitation Act, 1908 could not be extended to the assessee for want of reasonable diligence in prosecution of proceedings---Application for condonation of delay was rejected by the Appellate Tribunal being infructuous.

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

----Ss. 156 & 62---Rectification of mistakes---Return of the original assessment order without any acknowledgment for the purpose of change of verdicts together with required alteration without follow up of process of rectification, was absolutely illegal and against the fundamental rules.

(d) Income tax---

----Limitation---Condonation of delay---Person, having absolute knowledge of limitation, without sufficient cause sleeping over the matter and allowing period of limitation to run out could not, afterward, seek the indulgence of the Court for condonation of delay.

Salman Iqbal Pasha for Appellant.

Muhammad Ali Khan, D.R. for Respondent.

2007 P T D (Trib.) 1191

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Member Judicial

I.T.A. No.620/KB of 2003, decided on 8th April, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 87 & 53---Finance Act, (XXII of 1997), Preamble---Charge of additional tax for failure to pay advance tax---Assessment year 1998-99---Levy of additional tax on the basis that latest completed assessment before 15-9-1997 was the assessment year 1994-95 completed on 30-5-1997---Assessee contended that amended provision of S.53 of the Income Tax Ordinance, 1979 was made applicable w.e.f. 1st July, 1997 and would be applicable in assessment year 1998-99 whereas the Assessing Officer had applied old S.53 of the Income Tax Ordinance, 1979---Validity---Treatment meted out reflected application of un-amended S.53 of the Income Tax Ordinance, 1979, whereas in the case of assessee, the amended provision of S.53(a), 53(b) and 53(c) of the Income Tax Ordinance, 1979 would be applicable---Case was fit. one for charge of additional tax for failure to pay advance tax, but in accordance with amended S.53 of the Income Tax Ordinance, 1979 substituted vide Finance Act, 1997 as amended provision of law was distinguishable and provided a different treatment to the assessee other than a company or a registered firm and also provided a different schedule for the companies and registered firms---Charge of additional tax under substituted provisions would be a correct and judicious approach, whereas charge under the old provisions did not warrant interference---Assessing Officer was directed to pass a fresh order keeping in view the amended S.53 of the Income Tax Ordinance, 1979 substituted vide Finance Act, 1997.

Ghulam Muhammad Gangat, FCA for Appellant.

Riaz Ahmed, D.R.

2007 P T D (Trib.) 1203

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.A. No. 936/LB of 2005, decided on 23rd February, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 63, 61 & 58(1)---Best judgment assessment---Passing of assessment order on next following the defaulted date with the remark in the order sheet "non compliance"---Validity---Ex parte assessment had been made on a date for which the case was not fixed for hearing---Assessing Officer had not recorded ex parte proceedings on the defaulted date and proceeded to make his own judgment on the subsequent date which was not permissible under the law---Nothing was shown that case was actually taken up for ex parte proceedings on the date specified in the statutory notices for appearance---Assessee's absence was marked on that date---Merely making absence of the assessee in the order sheet, without observing to pass ex parte assessment or order, could not be possibly held that the Assessing Officer had made up his mind to proceed ex parse on the defaulted date and in such eventuality it was necessary to issue a fresh notice or to adjourn the case---Ex parte assessment having been made on a subsequent date qua the defaulted date, the exercise of powers by the Assessing Officer under S.63 of the Income Tax Ordinance, 1979 was not sustainable in law---Assessment order was annulled/cancelled by the Appellate Tribunal in circumstances.

M.A. Malik, FCA for Appellant.

Sheraz Mirza, D.R. for Respondent.

2007 P T D (Trib.) 1226

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No. 5795/LB of 2005, decided on 24th January, 2007.

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

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---After appeal, no order under S.62 of the Income Tax Ordinance, 1979 existed to be modified under S.122(5A) of the Income Tax Ordinance, 2001.

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

----S.66A(1A)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Before insertion of subsection (1A) in S.66A of the Income- Tax Ordinance, 1979, once an appeal was filed, provision to S.66A of the Income Tax Ordinance, 1979 could not be invoked; after insertion of subsection (IA) in S.66A of the Income Tax Ordinance, 1979 in 1991, the position changed as it was provided that only that part would merge in the appellate order which was appealed against or on which any finding was given by the Appellate Authority---Law as existing prior to 1991 and after insertion of subsection (IA) in S.66A of the Income Tat Ordinance, 1979 was interpreted accordingly---No Court assumed the position which was not available in S.66A of the Income Tax Ordinance, 1979 from 1979 to 1990---Had legislature intended to provide that erroneous order of the Assistant Commissioner of Income Tax was to be revised by his superior officer, it could have done so by an explicit provision as was done in S.5(1)(c) of the Income Tax Ordinance, 1979---Theory of complete merger as such arising from S.66A of the Income Tax Ordinance, 1979 before insertion of sub-section (IA) prevailed for 12 years after promulgation of Income Tax Ordinance, 1979 and the Courts interpreted the law as it was and not as it would have been after 12 years, similarly in S.122(5A) again, any parallel provision like S.66(1A) of the Income-Tax Ordinance, 1979 was missing and Appellate Tribunal interpreted the law accordingly.

I.T.As. Nos.825/KB to 829/KB of 2003 ref.

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

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Jurisdiction of Additional Commissioner---Order passed by the Additional Commissioner lacked jurisdiction as the original assessment order passed under S.62 of the Income Tax Ordinance, 1979 was made well before insertion of subsection (5A) of S.122 of the Income Tax Ordinance, 2001 as the same being substantive law did not have retrospective effect.

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

----S.122(5A)---Amendment of assessments---Use of words prospectively and retrospectively---Effect---Subsection (5A) of S.122 of the Income Tax Ordinance, 2001 being substantive piece of legislation could not operate retrospectively until and unless specifically provided to be so applied---Subsection (5A) of S.122 of the Income Tax Ordinance, 2001 had thus to be applied prospectively and not retrospectively.

I.T.As. Nos.837/KB and 838/KB of 2003; Order No. MA(AG) No.349 to 353/KB of 2004; I.T.As. No.825/KB to 829/KB of 2003; 2005 PTD 1316; 2006 PTD 734; I.T.A. No.846/KB of 2005 and 2006 PTD (Trib.) 2729 rel.

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

----S.122(5A)---Amendment of assessment---Jurisdiction---Powers to amend completed assessment order of Assessing Officer vests in the Commissioner---S.122(5A) of the Income Tax Ordinance, 2001 empowers the Commissioner to amend or further amend, an assessment order if he considers the order erroneous and prejudicial to the interest of Revenue---Only Commissioner had been vested with the jurisdiction to take action under S.122(5A) of the Income Tax Ordinance, 2001 on the basis of his personal examination and consideration of the case himself---Before the power under S.122(5A) of the Income Tax Ordinance, 2001 was exercised or delegated, the Commissioner must be satisfied on the materials-on record that the order, being erroneous, had caused prejudice to the interest of Revenue or was likely to cause such a prejudice.

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

----S. 122(5A)---Amendment of assessment---Nature of power---Section 122(5A) of the Income Tax Ordinance, 2001 vests power in the Commissioner in subjective terms---When an enactment vests discretion in any authority saying "if it appears", "if he is satisfied", "if he considers," that does not mean that it is a matter of only a subjective satisfaction as such authority has not to judge the circumstances appearing in the case in an objective manner.

2005 PTD (Trib.) 344 rel.

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

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Amendment of assessment by Additional Commissioner---Validity---Commissioner had not examined and considered the case record to formulate an opinion of his own to invoke the provisions of S.122(5A) of Income Tax Ordinance, 2001---Notice issued under S.122(5A) of the Income Tax Ordinance, 2001 by the Additional Commissioner of Income Tax was not sustainable in law and was without jurisdiction---Any subsequent proceedings under the said illegal notice shall be void and illegal---Commissioner must give his own reasons for his being satisfied that order passed by the Assessing Officer under S.62 of the Income Tax Ordinance, 1979 was prejudicial and erroneous to the interest of Revenue even before delegation of power--Assumption of jurisdiction by Additional Commissioner while passing order under S.122(5A) of the Income Tax Ordinance, 2001 was unlawful---If an acquiescence lacks jurisdiction, no amount of consent or acquiescence in the proceedings could invest any jurisdiction on him---First Appellate Authority rightly annulled the order passed under S.122(5A) of the Income Tax Ordinance, 2001 which was upheld by the Appellate Tribunal and appeal filed by the Department was dismissed.

2005 PTD (Trib.) 344; C.I.T. v. Gabriel India Ltd. 203 ITR 108; 2002 PTD (Trib.) 3027; 1999 PTD 2851; 1983 PTD 201; 1997 PTD (Trib.) 2137; 2003 PTD (Trib.) 1536; 1996 PTD (Trib.) 1069; 1984 PTD 137; 1996 PTD (Trib.) 750; Mrs. Anjuman Shaheen v. IAC of Income Tax Zone `A' 1993 PTD 1113; 1997 PTD (Trib.) 902; 2005 PTD (Trib.) 1536; 2004 PTD 440; 2001 PTD 3810 (Trib.); (1977) 109 ITR 229; 1991 SDTD 830; 203 ITR 108; Ujala Cotton Mills v. ITO etc. 1985 51 Tax 237; Glaxo Laboratories Ltd. v. IAC.PLD 1992 SC 549 =-1992 PTD 932; CIT East Zone, Karachi v. Atta Muhammad Faiz 1985 PTD 874; Mrs. Anjuman Shaheen v. IAC (1993) 68 Tax 160; Glaxo Lab. Ltd. v. IAC 66 Tax 74; A & B Food Ind. Ltd. v. CIT 1992 SCMR 663 = 1992 PTD 545; 2002 PTD 150; Messrs Sui Southern Gas Company Ltd.'s case Federal Tax Ombudsman Complaint No.1282-K of 2003; Constitutional Petition No.D-1879 of' 1994; I.T.As. Nos.837/KB and 838/KB of 2003; I.T.A. No.1165/KB of 2003; Order No. MA(AG) No.349 to 353/KB of 2004; I.T.As. No.825/KB to 829/KB of 2003; Sugar Refining Company Ltd. v. Irving 1905 AC 369; Messrs Monnoo Industries Ltd. v. C.I.T. 2001 PTD 1525; Constitutional Petition No.D-643 of 2004; 2001 PTD 2919 and 2002 PTD (Trib.) 358 ref.

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

----S.122(5A)---Amendment of assessment---Expression "if he considers" in S.122(5A) of the Income Tax Ordinance, 2001 postulates a scrutiny by the Commissioner of all the relevant facts for holding that the order was erroneous and prejudicial.

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

----S.122(5A)---Amendment of assessment---Provisions of S.122(5A) of the Income Tax Ordinance, 2001 was so clear that no exception could be taken to this.

(j) Interpretation of statutes---

----If something is required to be done, it needs to be specifically enacted, as the law cannot be interpreted in anticipation---Plain language of law is to be adhered to and no intendment is permitted.

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

----Ss.210(1A) & 122(5A)---Delegation---Amendment of assessment---Legislature through enactment of subsection (IA) of S.210 of the Income Tax Ordinance, 2001 provided that no officer below the rank of Additional' Commissioner could be delegated powers by the Commissioner for the purposes of S.122(5A) of the Income Tax Ordinance, 2001---Delegation of power could not be in respect of orders passed by the Commissioner of Income Tax himself or by the Additional Commissioners as they could not revise/amend their own orders considering them erroneous as well as prejudicial to the Revenue---If they do so they will sit on their own judgments and it will be against the rule of law as no person could be a Judge in his own cause, otherwise the very purpose of insertion of subsection (1A) in S.210 read with S.122(5A) of the Income Tax Ordinance, 2001 will become meaningless.

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

----S.122(5A)---Amendment of assessment---Delegation of powers---Nature---Expression "if he (Commissioner) considers" used in S.122(5A) of the Income Tax Ordinance, 2001 by the legislature clearly spells out that the powers of the Commissioner to invoke the provisions of S.122(5A) of the Income Tax Ordinance, 2001 was wholly, solely and exclusively dependent upon to consider by himself which must be formulated on objective basis and it was not possible to translate, transform and pass on the same consideration and thinking what he himself could do for amending the order as it required continuous learning and experience which the Commissioner himself acquired in a period of time after the elevation and performing his duties as Commissioner of Income Tax---No substitute of knowledge and experience existed which could not be passed on to any other person just with a stroke of pen except what the Commissioner could do himself.

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

---S.122(5A) Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Assessment and amendment of the same order by the same authority---Validity---Original order under S.62 of the Income Tax Ordinance, 1979 was passed by the Additional Commissioner and the order under S.122(5A) of the Income Tax Ordinance, 2001 was also passed by the same authority i.e. Additional Commissioner of Income Tax---Equal authority could not revise/alter/ amend the order of co-jurisdiction/counterpart---Language of S.122(5A) read with S.210(1A) of Income Tax Ordinance, 2001 clearly showed that hierarchy of administration had been kept in view to conform revisional jurisdiction to well-established rule of law that a person could not be judge in own cause.

New Jubilee Insurance Company Ltd., Karachi v. National Bank of Pakistan, Karachi PLD 1999 SC 1126 rel.

(n) Constitution of Pakistan (1973)---

----Art.4---Income Tax Ordinance (XLIX of 2001), S.122(5A)---Right of individuals to be dealt with in accordance with law---Person should not be judge in his own cause---Due process of law as enshrined in Article 4 of the Constitution necessarily required that a person should not be judge in his own cause---If an Assessing Authority (whatsoever may his designation or grade) is given power to sit in his own judgment, it will be violative of supreme law of the land---Such authority is not even available to the superior judiciary of the country, let alone to be enjoyed by revenue authorities while exercising quasi - judicial functions.

Sandal Engineering (Pvt.) Ltd. v. IAC 2001 PTD 1467 and I.T.As. Nos.5763 and 5764/LB of 2004 rel.

Dr. Samra Ashraf, DCIT for Appellant.

Javaid Zakria for Respondent.

2007 P T D (Trib.) 1292

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T.As. Nos. 5062/LB to 5064/LB, .4231/LB to 4233/LB of 1999, 3280/LB, 2880 of 2000 and 3989 of 2003, decided on 26th September, 2006.

(a) Income-tax---

----Rejection of accounts---Variance in sales and purchase rates or law of GP rate could not be made basis of rejection of accounts.

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

----S.62---Assessment on production of accounts, evidence etc.---Rejection of accounts---No effort had been made by the Assessing Officer to bring home any material and plausible basis warranting rejection of accounts---Assessing Officer while completing assessment had given some instances of un-verifiability of sales whereby out of 212 parties names of 9 parties had been mentioned---First Appellate Authority found that detail of sales showed the complete and verifiable particulars of the parties with whom the sales were transacted and which included the names of the person mentioned in the assessment order as unverifiable---First Appellate Authority was justified in directing the acceptance of declared version and Appellate Tribunal confirmed the finding of the First Appellate Authority in this regard.

P.T.R. No.2 of 2001 ref.

(c) Income-tax---

----Provision for octroi expenses---Such provision was rightly created and claimed in the Profit and Loss account as the same was created on the ground that in case the petition before High Court fails the same shall become payable to the Town Committee.

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

----Ss. 144 & 148---Power to call for information---Power to take evidence on oath, etc.--Scope---Scope of Ss.144 and 148 of the Income Tax Ordinance, 1979 was altogether different for the reason that under the earlier section an information could be called for while under S.148 of the Income Tax, 1979 the Assessing Officer could compel production of evidence and witnesses by taking resort to the later section.

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

---Ss. 24(ff) & 148---Deductions not admissible---Additions on account of payment other than through crossed cheque---Endorsement available on the reply submitted by the Bank Manger belies the stance taken by the Assessing Officer---No notice under S.148 of the Income Tax Ordinance, 1979 was issued by the Assessing Officer in exercise of the powers conferred under the said section---Addition could only be made to the extent of Rs.2,58,000 being a payment other than through crossed cheque---Addition made to the tune of Rs.1,53,00,000 was uncalled for and the same was restricted to Rs.2,58,000 only.

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

----S. 13(1)(aa)---Unexplained investment etc., deemed to be income---Assessing Officer confronted for making an addition of Rs.2,95,000---Subsequent to confrontation and receipt of reply, the Assessing Officer reached to the conclusion that the addition to the tune of Rs.30,20,638 was warranted and same was made accordingly---Validity---Assessing Officer was under legal obligation to confront the assessee in respect of all the amount of enhanced addition but he failed to confront the assessee with the proposed addition, which was not tangible in the eyes of law---Law specifically required that the assessee must be given an opportunity to explain his position with regard to any addition made under the deeming provisions of S. 13 of the Income Tax Ordinance, 1979---Since the mandatory requirement of confronting the assessee with the proposed addition had not been fulfilled, First Appellate Authority was justified in deleting the said addition.

(g) Administration of justice---

----When law requires a thing to be done in a particular manner, if not so done, the same shall be nullity in the eyes of law.

(h) Income Tax---

----Disallowances---Add backs made at assessment stage and subsequently reduced/confirmed/modified by the First Appellate Authority were called in question on the ground that such addition in various heads was made by using stock phrases such as unverifiable expenses' andexpenses of personal nature' while First Appellate Authority had confirmed the same without passing any speaking order by only stating that Profit and Loss expenses were not agitated seriously'---Assessee was maintaining regular books of accounts duly supported by evidence and all the expenses claimed in Profit and Loss account were properly vouched and authenticated---Contention of assessee a corporate body was that the expenses could not be disallowed on the ground that the same were of personal nature---Validity---Until the nature of the expense was proved through tangible evidence that same reflected personal nature of expense, such addition was not called for---Appellate Tribunal found force in the arguments of the assessee and the additions made in the Profit and Loss account by the Assessing Officer or reduced by the First Appellate Authority was restricted to 20% and 10% of various heads accordingly.

Rana Javed Iqbal, D.R. for Appellant (in I.T.As. Nos.5062/LB to 5064/LB of 1999, 3280/LB of 2000 and 3989 of 2003).

Shahbaz Butt for Represented (in I.T.As. Nos.5062/LB to 5064/LB of 1999, 3280/LB of 2000 and 3989 of 2003).

Shahbaz Butt for Appellant (in I.T.As. Nos.4231/LB to 4233/LB of 1999 and 2880 of 2000).

Rana Javed Iqbal, D.R. for Represented (in I.T.As. Nos.4231/LB to 4233/LB of 1999 and 2880 of 2000).

2007 P T D (Trib.) 1325

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Istataat Ali, Accountant Member

I.T.A. No.934/IB of 2006, decided on 18th January, 2007.

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

----Ss.122 & 177---Amendment of assessment---Audit---Estimation of sales---Sales were declared excluding sales tax---Audit party found that sales before the sales tax authority were different from the sales declared before Income Tax Authorities---Sales were enhanced in regular assessment and suppressed sales had directly been added in the total income---Validity---Not only the reconciliation statement submitted by the assessee had totally been ignored but directions given by the Appellate Tribunal in various judgments not to go beyond the sales tax authorities' assessment except in the presence of distinguishing circumstances had also not been given due care---Order was neither judicious nor properly reasoned---Appellate Tribunal cancelled the assessment and Assessing Officer was directed to accept the declared sales and consequent income declared by the assessee.

2005 PTD 152 rel.

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

----S.122--Amendment of assessment---Assessment of sales different than the declared/determined by the Sales Tax Department---Validity---Tax Collector had been directed by the Tribunal not to disrespect the figures disclosed and object to the sales declared before one department by the other sister departments---Appellate Tribunal had declined the determination of a different figure than the one determined by the sales tax department unless there was some valid proof available with the income tax authorities for deviation.

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

----Preamble---General Clauses Act (X of 1897), S.24A---Exercise of power under enactments---Provisions of law contained in S.24A of the General Clauses Act, 1897 was of binding nature and Income Tax Officer as well as all others in the hierarchy of the tax administration were bound to be fair, just, reasonable and to work for the advancement of the purpose of enactment.

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

----Preamble---Purpose of law was charge of tax for a subject which is due from him---Creation of charge against someone which is not due is not the purpose---Charging a person beyond the legal requirement can neither be the spirit of law nor the said order can be called as a fair, judicious or a reasonable order.

Aamir Ahmed, I.T.P. for Appellant.

A.A. Sheikh, D.R. for Respondent.

2007 P T D 1428

[Income-tax Appellate Tribunal of Pakistan]

Before S. Hasan Imam, Judicial Member

I.T.As. Nos.1271/KB to 1273/KB of 2005, decided on 17th February, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.2(41), 62 & 132---Income Tax Rules, 1982, R.190---Return of total income---Order of Assessing Officer was declared to be illegal, unawarranted and cancelled by the First Appellate Authority on the ground that acceptance of return filed by the Manager and power of attorney seem to be in violation of S.2(41) of the Income Tax Ordinance, 1979 and sub-rules (1) & (2) of R.190 of the Income Tax Rules, 1982---Validity---Was not verified whether the returns before and after the present returns were also filed by the same Manager or any other Manager---First Appellate Authority had also not specified any reason to make basis of its finding that Demand Note was not served or improperly served on the assessee which was necessary for adjudication of issue of limitation, finding on the consequences of not filing of return by the assessee had been ignored and steps to be taken under law, had not been considered---While recording the verdict that no returns had been filed authority was supposed to record its finding on the consequences of not filing of returns by the assessee and other Members of Association of Persons as non-filing of return was more fatal as compared to tax demand resulting in rejection of declared version and making various additions---Apparently assessee and other Members of Association of Persons had not furnished return---Non-filing of return was more serious matter as law provides severe action in this context and no time limit was provided to lodge action to meet such situation---Case was remanded to First Appellate Authority to look into the matter afresh to record finding on issue of time-barred appeal, taking into consideration the date of service of notice, past record of the proceedings and consequences of non-filing of return by the assessee and other Members of Association of Persons.

Ali Akbar Depar, D.R. for Appellant.

Abdul Tahir, I.T.P. for Respondent.

2007 P T D 1444

[Income-tax Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairman and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos. 804/IB and 805/IB of 2006, decided on 22nd February, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.52, 86, 143-B, 59-A, 108 & 144C---Liability of persons failing to deduct or pay tax---Assessee engaged in business of supply of goods had filed statement under 5.143-B of the Income Tax Ordinance, 1979--Assessing Officer sought information regarding sellers of goods---No information was filed---Purchases supposed to have been made were worked out back (from, the amount of supplies) and levied income tax deductible @ 3.5 per cent as well as additional tax---Validity---No column existed in the prescribed statement under S.143-B of he Income Tax Ordinance, 1979, wherein the assessee could disclose the figures of purchases---Statement was different from trading profit and loss account---Non-declaration of purchases was not a default on the part of assessee---Declared receipts being covered under the provisions of S.80C of the Income Tax Ordinance, 1979, no further information was required to be filed by the taxpayer---If the assessee had not cooperated, independent inquiry could have been conducted in order to find out the exact quantum of purchases attracting the relevant provisions of law---Such tax could not be levied on mere guess work---Department had shifted the onus of proving the default under Ss.52/86 of the Income Tax Ordinance, 1979 on the assessee---Failure to file information under S.144C of the Income Tax Ordinance, 1979 entailed penalty under S.108 of the Income Tax Ordinance, 1979 and did not call for invocation of the provisions of Ss.52/86 of the Income Tax Ordinance, 1979---Depart­mental action was not legally justified---Orders of both the authorities were vacated by the Appellate Tribunal.

Sajid Ali, ITP for Appellant.

A.A. Sheikh, DR. for Respondent.

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2007 P T D (Trib.) 1609

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahid Azam Khan, Accountant Member

I.T.A. No. 1094/KB of 2005, decided on 26th January, 2007.

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

---Fourth Sched., R.5(c)---Insurance Ordinance (XXXIX of 2000), Ss.1(3), 66, 168 & 170---Insurance Act, 1938 (IV of 1938), Preamble---Insurance Rules, 1958, R.40(c)---Insurance Rules, 2002---Computation of profits and gains of insurance business---Health insurance---Management expenses---Disallowance of excess management expenses--Validity---Insurance Rules, 1958 were protected by S.170 (Savings) of the Insurance Ordinance, 2000 for at least the intervening period from 19-8-2000 to 6-8-2002 and the disallowance made by the Taxation Officer was justified---Order of First Appellate Authority was vacated and restored that of the Taxation Officer regarding disallowance of excess management of expenses.

2005 PTD 474 and I.T.A. No.2172/KB of 2000 not applicable.

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

----Fourth Sched., R.5(c)---Insurance Ordinance (XXXIX of 2000), S.34(2)(d)---Insurance Act, 1938 (IV of 1938), S.27(2)(b)---Securities and Exchange Commission (Insurance) Rules, 2002, R.11---Computation of profits and gains of insurance business---Health insurance---Reserve for un-expired risk---Disallowance being excess of 40% limit---Validity---Section of the Insurance Act, 1938 provided limit of reserve in terms of percentage i.e. 40%---Section 34 of the Insurance Ordinance, 2000 read with R.11 of the Insurance Rules, 2002 providing the liability for expired risk shall not be valued at less than the sum of the unearned premium supported by the insurer's valuation performed as envisaged in R.11 of the Insurance Rules, 2002---Taxation Officer was not justified to restrict the claim of 40% since Insurance Act, 1938 was not applicable for the assessment year 2001-2002 onward---Since the assessee had also not provided the basis to determine quantum of reserve as laid down in S.34(2)(d) of the Insurance Ordinance, 2000 and R.11 of the Insurance Rules, 2002, order of First Appellate Authority was vacated and the disallowance was set aside for de novo order by the Appellate Tribunal.

1998 PTD (Trib.) 1103 ref.

Farrukh Ansari, D.R. for Appellant.

Irshad Ansari, ITP and Amir Anwar A.C.A. for Respondent.

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2007 P T D (Trib.) 1665

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahid Azam Khan, Accountant Member

I.T.A. No.1535/KB of 2005, decided on 26th January, 2007.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Disallowance---Sales tax paid under Sales Tax Amnesty Scheme was disallowed on the ground that assessee breached provisions of Sales Tax Law and paid the Sales Tax for two earlier years as a consequence of breach of Sales Tax Law and any such expense which was tainted with illegality could not be allowed as a lawful expense---Validity---Sales tax paid for availing the benefit of the Sales Tax Amnesty Scheme was not in the nature of penalty nor due to any infringement/breach of law---No interference was called for in the order passed by the First Appellate Authority by the Appellate Tribunal directing that Sales Tax paid be allowed as business expense.

2005 PTD 165; I.T.A. No.1058/KB of 2003; 1998 PTD 1985 and 1973 PTD 442 held not relevant.

I.T.A. No.1058/KB of 2003 and I.T.A. No.1299/KB of 2003 rel.

(b) Income-tax---

---Penalty---Sales Tax paid under the Amnesty Scheme could not be equated with any penalty.

I.T.A. No.1299/KB of 2003 rel.

(c) Income-tax---

---No account case---Expenses---Expense could only be claimed and allowed in the year it was actually paid in a no account case.

Fahimul Haq, D.R. for Appellant.

A.H. Faridi for Respondent.

Date of hearing: 13th January, 2007.

2007 P T D (Trib.) 1680

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahid Azam Khan, Accountant Member

I.T.As. Nos. 1536/KB and 1537/KB of 2005, decided on 31st January, 2007.

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

----S. 170---Income Tax Ordinance (XXXI of 1979), Ss. 59(4), 50(5), 80-C & 64---Sales Tax Act (VII of 1990), S.2(16)---Refund---Assessment years 1997-98 and 1999-2000---Rejection of created refund available as a result of being assessment under S.59(4) of the Income Tax Ordinance, 1979 on the ground that taxpayer did not provide any proof in respect of being an industrial undertaking and created refund; proceedings. in question were not meant for the assessment of income of the taxpayer but for ascertaining the legality of refund claimed and Limitation Law would not make an illegal claim a legal one and there was no bar on the examination of genuineness and legality of refund claimed---Validity---Taxation officer was not empowered to reject the refund claimed, as the matter was hit by time limitation as prescribed in S.64 of the Income Tax Ordinance, 1979, as law did not permit Department to deprive any taxpayer from his genuine claim of refund after a period of six years and four years respectively from the date of filing of returns, specifically when the assessments for both the years were deemed to have been completed under the provisions of Ss.59(4) and 59(1) of the Income Tax Ordinance, 1979 and Taxation Officer was not empowered at this stage to modify/amend/reopen/rectify the originally completed assessments---Case of the assessee could not be excluded from the ambit of Self-Assessment Scheme and to be re­-completed under S.80-C of the Income Tax Ordinance, 1979 on mere assumption basis, on conjectures and surmises that the taxpayer was a commercial importer---Taxation Officer had only come across the fact that the assessee was a commercial importer, when the taxpayer requested for the issuance of refund vouchers for the determined refund---Department had never asked the taxpayer whether he was a manufacturer or commercial importer---Taxation Officer was not empowered to reject the claim of refund after the lapse of four to six years when the assessments for both the years had been completed and was not empowered to modify/amend/reopen/rectify the originally completed assessments---First Appellate Authority rightly vacated the order passed under S.170 of the Income Tax Ordinance, 1979 by the Taxation Officer.

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

----S. 50(5)---Deduction of tax at source---Manufacturer---Import of semi-finished goods---Adjustment of tax deducted at source---Assessing Officer rejected the claim of refund on the allegation that tax under S.50(5) of the Income Tax Ordinance, 1979 was deducted on import of finished goods, and not on raw material---Validity---Observations of Taxation Officer were not correct, as it was not compulsory that every manufacturer should import only raw material, as he could import a semi-finished items, which could be finished/completed after the import with the usage of spare parts etc.

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

----First Sched., Part-IV, para. B---Industrial undertaking---Manufac­turer---Not necessary that every manufacturer should fall within the criteria of an industrial undertaking---Even a small moulder could be termed as "manufacturer" as he reforms the articles.

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

---S. 50(5)---Deduction of tax at source---Manufacturer---Commercial importer---Import of machines not in working order---Assessee was treated as commercial importer---Validity---Wording "all the above machines are not in working order and sold as seen" on the invoices showed that imported items were not finished items and the taxpayer could not be treated as a commercial importer merely on conjectures and surmises---Taxpayer had rebuilt the machine and brought them into working condition and then sold in the open market---Certain involvement of value addition existed and this may bring the taxpayer into the ambit of manufacturer, as the expression manufacturer had in ordinary acceptation a wide connotation which meant making of articles, or material commercially different from the basic component by physical labour or mechanical process.

Fahim ul Haq, D.R. for Appellant.

Saleem-ud-Din Qureshi for Respondent.

Date of hearing: 13-1-2007.

2007 P T D (Trib.) 1687

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 1613/KB of 2005, decided on 8th July, 2006.

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

---Ss. 221, 152(6)(2.) & 159---Rectification of mistake---Payment to non-residents---Exemption or lower rate certificate---Refusal to rectify order passed under S.152(6) of the Income Tax Ordinance, 2001 confirming the order directing the assessee to deduct tax from the payment in accordance with S.152(2) of the Income Tax Ordinance, 2001---Validity---Finding recorded in respect of status of the foreign based company had nothing to do with the provision of S.159 of the Income Tax Ordinance, 2001 where the affecting person may exercise its rights for the determination of its status---Purpose of S.152 of the Income Tax Ordinance, 2001 was served through a restricted interim order to save the deducting person from further chargeability---Finding recorded so far as the status was concerned, would not affect while determining the issue under S.159 of the Income Tax Ordinance, 2001 as the same had been recorded without affording an opportunity to the affecting person whose status had been declared---Order directing to deduct tax was elaborate, clear, unambiguous, free from errors, containing sufficient reasons to believe that the assessee was liable to deduct tax---Order passed on rectification application did not warrant interference besides being beyond the scope of rectification---Appeal was dismissed by the Appellate Tribunal.

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

----Ss. 221, 152(6) & 127---Income Tax Ordinance, (XXXI of 1979), Ss.87 & 129---Rectification of mistake---Request for non-deduction of tax was refused---Application for rectification---Rejection of---Department contended that since initial order under S.152(6) of the Income Tax Ordinance, 2001 was not appealable, the same issue could not be re-agitated in appeal taking benefit of S.221 of the Income Tax Ordinance, 2001---Such was an administrative order, no appeal was provided and as such, mere filing of rectification application, would not make the actual controversy appealable---Validity---Order under S.152(6) of the Income Tax Ordinance, 2001 was not appealable under the provision of appeals to Commissioner (Appeals)---Section 221 of the Income Tax Ordinance, 2001 contrary to 5.127 of the Income Tax Ordinance, 2001, provide rectification of mistake by amending any order passed by the Commissioner, the Commissioner (Appeals) or the Appellate Tribunal under the statute---Since every order was appealable order on rectification application, the assessee having no recourse under S.152(6) of the Income Tax Ordinance, 2001, diverted towards rectification in order to resolve the issue/controversy up to the level of appeals taking benefit of the fact that all orders of rectification were apparently appealabe---Any order which was not appealable, became appealable in circumstances, by virtue of invoking jurisdiction under S.221 of the Income Tax Ordinance, 2001---Appeal at the instance of assessee was maintainable so far as- the order of rectification was concerned, subject to restrictions laid down in order reported as 2002 PTD 570.

2002 PTD 570 ref.

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

----Ss. 152(6), 159, 160 & 161---Payments to non-residents---Non-­deduction of tax---Nature of relief---Relief provided to the tax deducting person under the statute, from the face of it was interim in nature simply to avoid consequence of non-deduction of tax under the provision of S.152(6) of the Income Tax Ordinance; 2001 and to save skin from clutches of Ss.160 and 161 of the Income Tax Ordinance, 2001---Since affected person based outside Pakistan was a necessary party for all such findings and in his absence, no definite finding regarding his status could be recorded under S.152(6) of the Income Tax Ordinance, 2001 instead of S.159 of the Income Tax Ordinance, 2001---Section 152(6) of the Income Tax Ordinance, 2001 provides an interim relief in the absence of affected person and for this reason, no appeal had been provided from the order and the finding recorded in the order was of the nature that it was mere a judicial process in the absence of affected person whereby parties ordered to 'do or not to do a particular act to avoid consequences hereof.

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

----S. 152(5) & (6)---Payments to non-residents---Word "believe" is different from "view", "opinion" or "any specific finding"---By using the word "believe" in S.152(5) and (6) of the Income Tax Ordinance, 2001, the intention of the legislature was to gather from phraseology implied in a particular statutory provision.

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

----S. 152(5) & (6)---Payments to non-residents---Non-deduction of tax---Law referred in S.152(5) & (6) of the Income Tax Ordinance, 2001, did not impose condition or any burden on the Commissioner to prove his finding by positive evidence, which apparently otherwise was not possible in the absence of person whose tax was being deducted.

(f) Income-tax---

--Discretion-Belief-Discretion had been judicially exercised in arriving at a belief and if it was once found to be so exercised, no interference would be possible.

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

----S. 152---Payments to non-residents---Word "believe"---Definite evidence---Requirement of law in terms of meaning of the word "believe" was that the order should be passed to the best of the knowledge of Commissioner without indulging into the direct or definite evidence---Commissioner could not be required to undertake re-appraisal of evidence or interpretation of any provision of law for coming to an opinion refusing or allowing the relief under S.152 of the Income Tax Ordinance, 2001 taking into consideration status of third party without affording him an opportunity of hearing.

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

----Ss. 159 & 152(6)---Exemption or lower rate certificate---Payments to non-residents---Request for non-deduction of tax---Rejection of---Validity and effect---Finding of, the Commissioner would not disentitle the company based outside the Pakistan to agitate the issue invoking S.159 of the Income Tax Ordinance, 2001 which provides remedy in terms of exemption of deduction of tax under S.159 of the Income Tax Ordinance, 2001--If the Commissioner is satisfied that an amount was exempt from tax, the Commissioner shall, upon application from a person whose income was not likely to be chargeable to tax, issue an exemption certificate irrespective of the order under S.152(6) of the Income Tax Ordinance, 2001 as remedy under S.152(6) of the Income Tax Ordinance, 2001 could not determine the status of foreign based person for all purposes under the statute.

(i) Income-tax---

----Assessee---Status, determination of---Opportunity of being heard---Status of the parties could not be determined unless the person, whose tax was being deducted, was not heard---No one could be condemned unheard---Would be improper and illegal to declare the status of a person without affording an opportunity of hearing and any order in this context, without hearing of the concerned person, would be of no consequence.

Farogh Nasim with Fasihuz Zaman, Chartered Accountant for Appellants.

Aqeel Abbasi, D.R. and Ayaz Mahmood D.R. for Respondents.

Date of hearing: 15th June, 2006.

2007 P T D (Trib.) 1703

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Istataat Ali, Accountant Member

I.T.As. Nos. 228/LB to 231/LB of 2006, decided on 4th January, 2007.

(a) Income-tax---

----Tax-Concept-Tax was not a forced liability, but in fact responsibility to owe to the State a proper share given by the taxpayer for utilizing and consuming services provided by the State.

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

----S. 62---Assessment on production of accounts, evidence, etc.---Rejection of declared sale and purchase rate of cane on the basis of parallel cases---Validity---Declared sale rate and purchase rate of cane by assessee, a Sugar Mill, had been rejected by the Taxation Officer on the basis of parallel cases without considering the fact that the assessee­-company had newly been- established, which could not be compared with the companies with whom the assessee-company had to compete and required huge incentives to the formers for the establishment of his business---No justification existed for rejection of accounts---Declared sale rates and the declared purchase rate of cane were directed to be accepted.

2001 PTD 1480 and 1987 PTD (Trib.) 638 ref.

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

----S. 62---Assessment on production of accounts, evidence etc.---Disallowances out of Profit and Loss account expenses had been made without confronting the assessee and pointing out specific instances of un-vouched and unverifiable nature of expenses, which was not justified--Disallowances made in Profit and Loss account were deleted by the Appellate Tribunal and claim of expenses was directed to be accepted.

1971 SCMR 681; (1994) 50 Tax 48 (Trib.); (1999) 79 Tax 76 (Trib.); 1999 PTD (Trib.) 3896; 2001 PTD (Trib.) 2938 and 2002 PTD (Trib.) 583 ref.

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

----S. 62---Assessment on production of accounts, evidence, etc.---Financial expenses---Rejection of---Assessee contended that complete details duly supported with relevant bank statements had been appended rendering entire claim of financial expenses fully verifiable---Validity---In presence of valid evidence in the shape of bank statement, there was no justification for curtailment of the claim regarding financial charges---Such evidence had also been furnished before First Appellate Authority but he had ignored the same---No justification existed for curtailment of the claim of financial expenses---Orders of the officers below were vacated and the claim of financial expenses was allowed by the Appellate Tribunal.

1995 PTD 289 ref.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Trade advances, addition of---Assessee contended that advances were admittedly trade advances against which sales had been made---Addition had been made on the basis that the payment could not substantiate that these were received through bank cheques---Validity---Assessee had not claimed these amounts as loans, gift or advance, addition made under S.12(18) of the Income Tax Ordinance, 1979 was unjustified---Expression advance' should not be taken in form of isolated or detached manner, this associating the context was to be read to give and construe in the light of the purposes and objects of the act itself---Expressionadvance' was to be interpreted in the light of the words associated to it and not in isolation, as in S.12(18) of the Income Tax Ordinance, 1979, advance' had been mentioned along withloan' and `gift', which clearly relates to non-business financial transaction, but in the case of assessee, advances on which provisions of S.12(18) of the Income Tax Ordinance, 1979 had been invoked were business advances--Such advances were not hit by mischief of S.12(18) of the Income Tax Ordinance, 1979---No justification existed for the addition---Order of First Appellate Authority was vacated and additions made under S.12(18) of the Income Tax Ordinance, 1979 were deleted by the Appellate Tribunal.

1973 PTD 453 ref.

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

----S.39(3)(4)---Income Tax Ordinance (XXXI of 1979), S.12(18)---Income from other sources---Business advances---Exemption from chargeability thereof---Under subsection (4) of S.39 of the Income Tax Ordinance, 2001, it had been specifically mentioned that "subsection (3) shall not apply to an advance payment for sale of goods or supply of services"---Income Tax Ordinance, 2001, provides exemption from chargeability of tax of business advances received against sale of goods or supplies.

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

----S. 13(1)(d)---Unexplained investment etc., deemed to be income--Addition on account of construction of factory building Assessee contended that Taxation Officer without looking into type of construction, location of premises had adopted higher cost of construction @ Rs.350 per sq. ft. against declared cost of Rs.222 per sq. ft.---Validity---Taxation Officer had quoted some parallel cases but without examining site and other relevant facts, the construction could not be treated to be parallel---Taxation Officer should have pointed out defects or have given concrete reasons for rejecting the declared cost after obtaining any expert opinion---Cost of construction was reduced to Rs.250 per sq. ft. by the Appellate Tribunal and addition made in this respect was directed to be reduced accordingly.

1989 PTD 311 and 1994 PTD (Trib.) 1268 ref.

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

----S. 13(1)(a)-Unexplained investment etc., deemed to be income---Addition on account of unexplained creditors---Assessee contended that complete details and break up of creditors were furnished---Creditors were fully verifiable but addition. had been made in violation of Central Board of Revenue's standing instructions---Validity---Taxation Officer had pointed out few instances of incomplete addresses in assessment order and unverifiable parties had not been confronted through notice under S.62(1) of the Income Tax Ordinance, 1979---Addition made in this respect was set aside to confront the assessee in this respect and if creditors were verifiable, then to delete the addition, otherwise, fresh assessment be made in this respect in accordance with law.

(i) Income-tax---

----Depreciation---Curtailment of---Without installation of huge machinery, the declared quantity production of sugar could not be possible---Taxation Officer had made mere observation and had curtailed the claim of the assessee on plant and machinery without any justification, as it was quite evident from details and documents that no portion of plant and machinery installed by the assessee remained unverifiable---Claim in this respect was directed to be allowed.

Moazzam Zafar for Appellant.

Mehmood Aslam, DR. for Respondent.

2007 P T D (Trib.) 1740

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khursheed Butt, Accountant Member

I.T.As. Nos. 1870/LB to 1873/LB of 2006, decided on 8th February, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 154, 56, 65, 13 & 87(4)---Income Tax Ordinance (XLIX of 2001), Ss.114, 176, 121 & 111---Service of notice---Assessee, a non­resident---Assessment year 2002-2003 and tax years 2003 to 2005---Assessment order neither had mentioned that appellant was ever served with any notice nor Assessing Officer had made any agent of the assessee despite the fact that he had accepted the status of the assessee as non­resident---Assessee submitted an affidavit solemnly declaring on oath that none of the statutory notices under the Income Tax Ordinance, 1979 or the Income Tax Ordinance, 2001 for filing of Income Tax returns or for appearance before the-tax authorities or for production of any evidence or any document was ever served upon him personally or through post or messenger or through substituted service and that assessee had Pakistani and British citizenship and possessed passports from both the countries and in the years under consideration he was a non-resident---No rebuttal in this regard had been made on behalf of the Department despite the fact that similar affidavit was filed before the First Appellate Authority---Appellate Tribunal, without going into the merits of the case, vacated the order of First Appellate Authority on legal issue of `non-service of notice' and assessment orders passed under S.63 of the Income Tax Ordinance, 1979 were annulled in circumstances.

1995 PTD 1239; 1971 SCMR 618; 2002 PTD 102; PLD 1996 (West Pakistan) Lahore 126 and PLD 1995 Lah. 417; (1989) 6 Tax 1 (Trib.); I.T.As. Nos. 983 to 986/LB/1988-89; I.T.A. No.9830/LB of 1991-92 and (1999) 80 Tax 137 (Trib.) ref.

Ahmad Shuja for Appellant.

Mrs. Sabiha Mujahid, DR for Respondent.

2007 P T D (Trib.) 1763

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 4425/LB to 4428/LB of 2005, decided on 7th February, 2007.

(a) Income Tax Ordinance (XLIX of 200l)---

----S. 114(4)-Income Tax Ordinance (XXXI of 1979), S.13(1)(aa)---Finance Act (II of 2004), Preamble---Return of Income---Assessment year 2002-2003---Notice under S.114(4) of the Income Tax Ordinance, 2001 was sent as on 7-1-2004 and assessment order was passed on 31-3-2004---Assessee contended that in subsection (4) of S.114 of the Income Tax Ordinance, 2001, the words "or assessment year" were inserted on 1st July, 2003 and in subsection (5), same words i.e. "or assessment year" were inserted through Finance Act, 2004 from 1st July, 2004, subsection (4) was subject to subsection (5) of S.115 of the Income Tax Ordinance, 2001, therefore, prior to insertion of these words, notices issued were void, ab initio, illegal and without any jurisdiction thus notice in this regard could only be issued on or after 1-7-2004---Validity---Words "assessment years" being not available in the statute on the date when the notices were issued by the Taxation Officer on 7-1-2004, therefore, subsequent proceedings were nullity in the eyes of law.

2000 MLD 357 rel.

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

----Ss.13(1)(aa) & 63---Addition---Approval by Additional Commis­sioner---Assessee contended that approval for the addition had been sought and allowed by the Additional Commissioner, while as provided in S.13(1)(aa) of the Income Tax Ordinance, 1979, approval for the addition should be given by the Inspecting Additional Commissioner, which was against the mandatory provisions of law, therefore, order passed without approval from competent authority was nullity in the eyes of law---Validity---Taxation Officer passed order under S.63 of the Income Tax Ordinance, 1979 making addition under S.13(1)(aa) of the said Ordinance mentioning in the assessment order "In order to meet the legal requirements, approval was sought from the Additional Commissioner of Income Tax"---Approval for making addition had admittedly been accorded by the Additional Commissioner, which according to mandatory requirement of S.13 of the Income Tax Ordinance, 1979 should have been from Inspecting Additional Commissioner---Order passed by Taxation Officer being without compliance of mandatory ' requirement of law was ab initio void.

2006 PTD (Trib.) 1778 and 2005 PTD (Trib.) 720 rel.

Naeem Munawar for Appellants.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 1780

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman and Chaudhry Nazir Ahmed, Accountant Member

I.T.A. No. 30/KB of 2006, decided on 11th April, 2007.

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

----S. 170(1)(4)---Refund---Application for issuance of refund on prescribed form---Taxation Officer before rejecting the same had acted in the manner as if he was making formal assessment of the assessee---Show-cause notice was issued stating that claim of commutation pension in the income as exempt was not legally correct---Claim was bifurcated---On the basis of such bifurcation and his own calculation of tax, confrontation was made to the assessee and later, after obtaining reply, the request for refund was dismissed---Validity---Finding of First Appellate Authority was with regard to chargeability of various amounts shown by the assessee in his return---Discussion with regard to chargeability had been done in consequence of filing of application for refund---Assessing Officer, while rejecting refund application, had made the assessment also after discussion as to whether various amounts received by the assessee were subject to charge under various provisions of law or not---Action of treating the application, a return and discussion of various claims of' the assessee spoke of entering into a jurisdiction available only to the assessing authority---Duty of the refunding authority was controlled to the extent of the cross check of the documents for calculation of the amount of refund only and to satisfy that no other tax was outstanding against him before issuance of the refund---Validity and legality of the various claims of the assessee in his return which practically was the deemed assessment order was not his responsibility and he was not supposed to check the vires thereof-Departmental appeal was without any merit and the entire proceedings from the stage of refunding authority and onwards were under a misunderstood procedure of law---Appeal was dismissed by the Appellate Tribunal and direction was given for issuance of refund to the taxpayer if no other proceedings were pending against him.

I.T.A. No.319/KB of 2006 rel.

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

----S. 170---Refund---Jurisdiction---Present system had distributed various functions to various authorities---Previous method of making assessments and issuance of refund by the same authority had now been done away---Assessment in fact was initially made by the assessee himself, the same was then processed by the information processing section---Provisions of S.170 of the Income Tax Ordinance, 2001 had come out with entirely a different scenario---Working and determination of refund was on the basis of assessee's own calculation which could later be reopened after audit---Unless it had actually been done by the concerned authority the person attached, with the responsibility of issuance of refund did not have any authority to look beyond S.170 of the Income Tax Ordinance, 2001.

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

---S. 170---Income Tax Ordinance (XXXI of 1979); S. 96---Refund---'Satisfaction'---Meaning---Jurisdiction of refunding authority and various functions of other authorities---Provision of S.170 of the Income Tax Ordinance, 2001 and S.96 of the Income Tax Ordinance, 1979 were pari matiria to each other so far as the procedure regarding issuance of refund was concerned---Section 96 of the Income Tax Ordinance, 1979 provided for issuance of refund after the satisfaction of the Assessing Officer which satisfaction was never considered as to include legality of the assessment' or determination of error or mistakes therein as the authority for the issuing of refund was the same which had made the assessment but situation in the Income Tax Ordinance; 2001 was different---Assessing Authority in most of the cases was assessee himself unless Audit department which was entirely a separate set-up finds out fault in the said assessment---While for issuance of refund the authority was Enforcement and Collection Division, refund issuing authority was neither entrusted with the duty of making an assessment nor could it do audit---Central Board of Revenue had distributed work to separate departments with clear and unambiguous jurisdiction---Facilitation Division, Information processing department, Enforcement Division etc. all had separately defined jobs---Job of Audit was totally with Audit Division and they could not issue refund---Likewise the refunding authority had got nothing to do with assessment or assessment work.

(d) Interpretation of statutes---

----Neither the Courts nor any other quasi judicial authority could extend or reduce the application of a provision of law under the garb of interpretation---Intendments expressed by law makers as' a result of natural meaning of a provision could never be ignored and one was not allowed to enter into the legislation' through interpretation.

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

----S. 170---Income Tax Ordinance (XXXI of 1979), S.96---Refund---Interpretation---If an authority while issuing refund under Income Tax Ordinance, 1979 was not entitled to go into the legality of the assessment even earlier, the subsequent change in methods would also not change the interpretation.

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

----'Assessment'-Definition-Assessment has been defined to be as determination of the income of an assessee---For that matter an assessment can be any assessment and shall obviously include a deemed assessment, a re-assessment or a revised deemed assessment.

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

----Ss. 120 & 170---Assessment---Refund---Proceedings in respect of refund---Assessment under S.120 of the Income Tax Ordinance, 2001, be it under any of its section or subsection, was an assessment---In a deemed assessment where the acknowledgment slip had been held to be as an assessment order, application of mind by the department was not required and no one could say that the same was not an assessment order and the consequential action in terms of issuance of refund on the basis thereof would require further proceedings with regard to determination of income---Process of issuance of refund was only a consequential action---Assessment and refund proceedings were two separate independent matters---Proceeding with an application filed by the assessee for refund, scrutiny of the return would amount entering into the purview of S.120 of the Income Tax Ordinance, 2001 which obviously could not be the spirit---Authorities were not stopped from initiating proceedings under Ss.120, 122 or 221 of the Income Tax Ordinance, 2001 as the case may be---Any comment or argument that gives the impression that non-application of mind by the taxation authority made it an order of the lesser status could easily be repelled and the language of law which declares the return to be an assessment order.

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

----S. 170---Refund---Provisions of Chapter VI of the Income Tax Ordinance, 2001 deals with refund and additional payment for delayed refunds and had got nothing to do with determination of income, checking of or validity and veracity or legality of an assessment-Re­opening of assessment, cancellation of appeals or other provision of the kind were part of other chapters and separate provisions had been provided for the same---Such responsibilities had been assigned separately to the other authorities mentioned in the respective sections.

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

----S.170---Refund---Jurisdiction---Jurisdiction to issue refund starts after the end of the jurisdiction of the return receiving authority---Since the Assessing Officer could not issue a refund converse position was that a Taxation Officer assigned with the duty of issuance of refund may not have the power to make an assessment---Determination of the legality of a return, scrutiny of the claim of profit and loss were part of assessment proceedings, such process could not be allowed to be done by the refunding authorities under S.170 of the Income Tax Ordinance, 2001.

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

----Ss.170 & 171(1)---Refund---Expression "satisfied"---Connotation---Jurisdiction of authorities---Application for processing of refund shall be filed by the taxpayer and it was he who was to determine as to whether he deserved a refund or not---Term "satisfied" used in S.171(1) of the Income Tax Ordinance, 2001 was not satisfaction of the refunding authority but of the taxpayer---Refunding authority shall see as to whether the refund determined by the Assessing Officer was on the basis of valid documents and there was no other demand outstanding against him---Refunding authority later was to decide the issue within 45 days during which he will obviously call for the record of the assessing authorities on the basis of which the refund had been determined---Such report as well as transfer of the record from the assessing authority would suffice the matter---Refunding authority would proceed on the basis of information passed on to him by the assessee along with the refund application which he could verify from record---Such verification was restricted to the extent of the facts that tax payment was in excess of the assessee's demand and no other demand was outstanding against the assessee.

Sajidullah Siddiqui, D.R. for Appellant.

Amjad Jawed Hashmi for Respondent.

2007 P T D (Trib.) 1793

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khursheed Butt, Accountant Member

I.T.As. Nos. 5223/LB to 5225/LB of 2005, decided on 17th February, 2007.

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

----Ss. 111 & 116---Penalty for concealment of income etc---Levy of penalty without approval of Inspecting Additional Commissioner--Validity---No penalty under Chapter XI, Income Tax Ordinance, 1979 shall be imposed on any person by the Deputy Commissioner except with the prior approval in writing of the Inspecting Additional Commissioner, unless such person had been given reasonable opportunity of being heard---Requirement of prior approval in writing was the mandatory requirement for imposing penalty which had not been fulfilled---First Appellate Authority therefore, had rightly annulled the penalty order.

AIR 1978 SC 1548; 1971 Jab. LJ. 62; AIR 1957 SC 444; PLD 1984 Lah. 332; 2006 PTR 154; (2006) 93 Tax 266; (2007) 95 Tax 41; 2005 PTD 1 and 2007 PTD (Trib.) 139 ref.

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

----Ss. 184, 190, 239(3) and 137(2)---Income Tax Ordinance (XXXI of 1979), Ss.111 & 116---Penalty for concealment of income---Penalty order was annulled by the First Appellate Authority being without prior approval of Inspecting Additional Commissioner---Department contended that penalty had been imposed under the corresponding provision of Income Tax Ordinance, 2001 and no approval of Inspecting Additional Commissioner as required under S.116 of the Income Tax Ordinance, 1979 had been provided, therefore, penalty orders made were justified---Validity---Provision of S.239(1) of the Income Tax Ordinance, 2001, specifically provided that "in making any assessment in respect of any income year ending on or before 30th of June, 2002, the provisions of Income Tax Ordinance, 1979, insofar as these related to computation of total income and tax payable thereon, shall apply as if Income Tax Ordinance, 2001 had not come into force---Section 239(3) further provided that only the procedure for such imposition or charge shall be in accordance with the corresponding provisions of Income Tax Ordinance, 2001 and the procedural section regarding penalty was S.85 of the Income Tax Ordinance, 1979 which was regarding payment of tax on demand or issuance of IT-30 for calculation of penalty along with penalty order and corresponding section in Income Tax Ordinance, 2001 regarding issuance of demand notice along with penalty order was S.137(2) of the Income Tax Ordinance, 2001 and no documents like IT-30 was required, as the penalty under the Income Tax Ordinance, 2001 was calculated through the penalty order---First Appellate Authority had rightly annulled the assessments---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeals filed by the Department were dismissed.

AIR 1978 SC 1548; 1971 Jab. LJ. 62; AIR 1957 SC 444; PLD 1984 Lah. 332; 2006 PTR 154; (2006) 93 Tax 266; (2007) 95 Tax 41; 2005 PTD 1 and 2007 PTD (Trib.) 139 ref.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Nadeem Ahmad, ITP for Respondent.

2007 P T D (Trib.) 1806

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos. 503/LB to 508/LB of 2006, decided on 21st November, 2006.

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

----Second Sched., Part-I Cls. (99) & (102A)---Income Tax Act (XI of 1922), S.4(3)(xx)---Income Tax Ordinance (XLIX of 2001), Ss. 121 & 111(1)(b)---Exemption---Income from poultry farm---Assessment---Cancellation of assessment by the First Appellate Authority---Department contended that exemption to poultry farm income was available only when the period of its establishment was determined by the concerned Commissioner of Income Tax on application of the assessee but the assessee had never filed any application nor such order had been passed by the Commissioner of Income Tax---Assessee having not fulfilled legal formality, the Assessing Officer had rightly brought the assessee on tax roll---Assessee contended that business of assessee commenced in the year, 1977 and at that time filing of application was not a perquisite under the Income Tax Act, 1922 and such condition was inserted vide Income Tax Ordinance, 1979---Validity---Department failed to rebut the assertions made by the assessee as well as observations made by the First Appellate Authority---Certification provided from WAPDA and copy from Register of landowner issued by the Patwari clearly confirmed that the poultry farm was established in 1977 and at that time filing of application to the Commissioner was not required---First Appellate Authority was justified in cancelling the assessments---No interference was made by the Appellate Tribunal in such order and appeals of the Department were dismissed being devoid of any merit.

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

----S.111(1)(b)---Unexplained income or assets---Deletion of addition for the tax year, 2004 was justified since facts and circumstances were same on the basis of which assessments for the assessment year 2000-2001 to 2004 were cancelled by the First Appellate Authority---No 'interference was made by the Appellate Tribunal in such order and appeal of the Department was dismissed.

Ghanzafar Hussain, D.R. for Appellant.

Syed Abid Raza Kazim for Respondent.

2007 PTD (Trib.) 1815

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Khawar Khurshid Butt, Accountant Member

I.T.A. No. 3651/LB of 2003, decided on 14th February, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(3), 24(ff), 61, 62, 58(1) & 13---C.B.R. Circular No.7 of 2002 dated 15-6-2002---Self-assessment---Assessment year 2002-2003---Process of case under normal law for the reasons that assessee had claimed payment of rent which was paid in cash and consequently inadmissible through the mischief of S.24(ff) of the Income Tax Ordinance, 1979---Validity---Case was neither selected for audit nor excluded from Self-Assessment Scheme through speaking order as required under para. 8(c) of the relevant Self-Assessment Scheme---Option for Assessing Officer was to assess the same under Self-Assessment Scheme but he definitely had the power to add legally inadmissible add backs through para.9(b)(i) of the Self-Assessment Scheme---Even for making adjustment under S.59(3) of the Income Tax Ordinance, 1979 and adding legally inadmissible claim the proceedings remain that of self-assessment---Show-cause notice should not have been issued under S.62 of the Income Tax Ordinance, 1979 but under the provisions of para.9(b) of Self-Assessment Scheme---Such mistake could be ignored if the same was not supported by notice under S.61 of the Income Tax Ordinance, 1979---Assessing Officer had not only issued notice under S.61 of the Income Tax Ordinance, 1979 but had also issued notice under S.58(1) of the Income Tax Ordinance, 1979 asking for statement of assets and liabilities---Such was beyond the scope and jurisdiction of Assessing Officer for the reason that he was processing the case under Self-Assessment Scheme and not under normal law or total audit---Assessee's return qualified for Self-Assessment Scheme and the Assessing Officer by having mixed proceedings under Ss.61, 62, 58(1) & 59 as well as 59(3) of the Income Tax Ordinance, 1979 had exceeded his jurisdiction---Department's claim that they had proceeded under para.9(b)(ii) of the Self-Assessment. Scheme, 2002 was not tenable as the same in no way, was applicable in such eventualities.

PLD 2005 SC 842 and 1996 (73) Tax 2027 (Trib.) rel.

Muhammad Aslam Bhatti, D.R. for Appellant.

Mian Ashiq Hussain for Respondent.

2007 P T D (Trib.) 1843

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.As. Nos. 3506/LB of 2004 and 2549/LB of 2005, decided on 6th February, 2007.

(a) Income Tax Appellate Tribunal Rules, 1981---

----R.14---Grounds which may be taken in appeal---Ground was vague and against the Income Tax Appellate Tribunal Rules, 1981 as the heads of account of the Profit and Loss Account expenses had not been pointed out.

(b) Income-tax---

----Gross Profit rate---Observation of First Appellate Authority that "Assessing Officer was not at liberty to apply G.P. rate when both purchases and sales were verifiable and Assessing Officer should have specifically pointed out the element of unveriliability of debit side of the trading account instead of using general remarks" was not interfered by the Appellate Tribunal.

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

----S.62---Assessment on production of books of accounts, etc.---Rejection of accounts---Once Taxation Officer had specifically mentioned in the assessment order that during the course of proceedings, books of accounts were produced along with other details and information and it had been admitted that record/details provided by the assessee showed that sales were made to verifiable parties, complete details of the same were provided, stock register, production record and accounts produced by the assessee were also scrutinized, which proved the authenticity of the sales declared by the assessee, there was no justification for rejection of accounts and declared Gross Profit rate was directed to be accepted.

2003 PTD (Trib.) 2668 ref.

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

----S.30---Income from other sources---Addition in respect of other income'---Taxation Officer had admitted that on behalf of the assessee, ledger account and other details were furnished, but he had made the addition without specifically asking for further information---Addition made in respect ofother income' was deleted by the Appellate Tribunal.

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

----S.12(18)---Income Tax Ordinance (XLIX of 2001), S.39---Income deemed to accrue or arise in Pakistan---Advance said before transfer of goods---Addition---Validity---Money paid before transfer of goods did not amount to advance as mentioned in S.12(18) of the Income Tax Ordinance, 1979---Even otherwise, in the Income Tax Ordinance, 2001 in S.39(4), it had been specifically provided that subsection (3) of S.39 of the Income Tax Ordinance, 2001 should not apply to an advance payment for the sale of goods or supply of services---Addition made was deleted by the Appellate Tribunal.

2004 PTD (Trib.) 1883 rel.

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

----S.62---Assessment on production of books of accounts, etc.---Disallowance---Taxation Officer had made disallowances out of Profit and Loss account expenses on the basis of `stock phrases' without specifically confronting the assessee regarding defects in the accounts maintained by the assessee- Disallowances made in Profit and Loss account expenses were deleted by the Appellate Tribunal.

Zaheer-ud-Din Babar, C.A. for Respondent (I.T.A. No.2549/LB of 2005).

Mrs. Sabiha Mujahid, D.R. for Appellant (I.T.A. No.3506/LB of 2004).

Mrs. Sabiha Mujahid, D.R. for Appellant (I.T.A. No.3506/LB of 2004).

Zaheer-ud-Din Babar, C.A. for Respondent (I.T.A. No.2549/LB of 2005).

2007 P T D (Trib.) 1860

[Income-tax Appellate Tribunal Pakistan]

Before Javed Masood Tahir Bhatti, Judicial Member and Khawar Khursheed Butt, Accountant Member

I.T.A. No. 7413/LB of 2005, decided on 7th February, 2007.

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

----S.2(f)---Income Tax Ordinance (XLIX of 2001), Ss.138 & 239(4)---Income Tax Ordinance (XXXI of 1979), S.85---Recovery of tax out of property and through arrest of taxpayer---Tax year 2003---Levy of Workers' Welfare Fund by invoking provisions of Income Tax Ordinance, 2001---Validity---Levy of Workers' Welfare Fund was charged under the Workers' Welfare Fund Ordinance, 1974 where it had been specifically mentioned that such levy would be charged by the authorities under the Income Tax Ordinance, 1979---Authorities under the Income Tax Ordinance, 2001 having not been mentioned in the Workers' Welfare Fund Ordinance, could not charge the levy of Workers' Welfare Fund---Order of First Appellate Authority was vacated and order passed by the Taxation Officer regarding Workers' Welfare Fund was cancelled by the Appellate Tribunal.

2000 PTD (Trib.) 1185 ref.

Abdul Hameed, I.T.P. for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2007 P T D (Trib.) 1869

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Istataat Ali, Accountant Member

I.T.As. Nos. 971/IB to 973/IB and 911/IB to 913/IB of 2006, decided oil 10th March, 2007.

(a) Income-tax---

----`Public welfare'---Definition---Activity which is aimed at advancement of general public fell in the definition of "public welfare".

(b) Income-tax---

---Micro-finance Bank and ordinary Bank---Difference---Only difference between an ordinary bank and micro-finance Bank is in term of scale of loans and there is no other difference between the two.

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

----S. 2(11A)---Charitable purpose---Exemption---Micro finance business---Welfare activity---Small loans given by scheduled banks to poor people "who are not in good financial condition" was also micro finance business which did not mean that they should claim that part of their income earned from micro finance business was not taxable because it was exempt from being related to small loans which had to be treated as "welfare activity"---Whether a bank was exclusively engaged in micro-finance or it was partly engaged in such business was not material---Micro finance was essentially a `banking business' done in ordinary course of activity.

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

----S. 2(11A)-Charitable purpose---Money lending business---Banking business---Welfare activity---Money lending business at small scale was essentially a banking business which could not be termed as "welfare activity" simply for the reason that loans were given to people who were termed as "poor" for the purpose of advancing of such loans.

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

----Second Sched., Cls. (58), (59), (60) & Ss. 122(5A) & 2(11A)---Khushhali Bank Ordinance (XXXII of 2000), Preamble---Exemption---Micro-Finance Bank---Exemption under Cl. (58) of the Second Schedule of the Income Tax Ordinance, 2001 was not available to the assesses simply for the reason that condition of approval from Central Board of Revenue for the purposes of such exemption had not been fulfilled---Exemption under Cl. (59) of the Second Schedule of the Income Tax Ordinance, 2001 was also not available because no "religious" or "charitable" cause was being promoted by the Bank---Income about which exemption was being claimed had not actually been set apart for the purposes of any `welfare activity'---Entire income earned by the Bank from micro-finance business was being utilized for accumulation of further funds for recycling of loans---Profits earned by the Bank on each cycle of loan were again put in the main stream of funds for advancing further loans---Bank had not been proved to have spent or set apart even a single penny for the "welfare of poor people".

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

----Second Sched., Cls. (59), (60), Ss.122(5A) & 2(11A)---Khushhali Bank Ordinance (XXXII of 2000), Preamble---Exemption---Micro-Finance Bank---Income from interest on securities---Interest income from deposits---If income from primary sources i.e. micro-finance business was not exempt from tax then how exemption could be claimed/allowed in respect of Bank's income from interest on securities and interest income arising from its deposits kept in other banks---Fundamental issue of exemption from tax on the basis of being a "welfare organization" had not been established by the Bank---Claim of exemption on income from government securities and bank deposits did not appeal to any logic or reason because the primary source of income from micro-finance business had been offered for taxation---Exemption was not available to the bank under Cl. (59) of the Second Schedule of the Income Tax Ordinance, 2001 in respect of its income from government securities and bank deposits---Micro-finance was not a welfare activity which qualified for exemption---Taxation Officer had correctly disallowed the claim of exemption in respect of income from interest on government securities and interest on bank deposits---First Appellate Authority had rightly rejected the assessee's claim of exemption---No interference was warranted in the orders of both the authorities below by the Appellate Tribunal.

80 Tax 98 and 2004 PTD 1304 ref.

(g) Khushhali Bank Ordinance (XXXII of 2000)---

----Preamble---Statutes of Khushhali Bank---Body corporate---Public limited company---Contention was that Khushhali Bank was a "body corporate" which carne into existence through a special legislation and it had to be treated as a "public limited company" for the purpose of tax rates---Validity---Bank was neither a finance company nor a financial institution; it was a banking company, which was engaged in business of money lending on which interest was also charged on specified rates---Prudential Regulations of State Bank of Pakistan were fully applicable to Khushhali Bank---Bank had rightly been treated as a banking company because it was essentially engaged in banking business as it was giving loans and charging interest on loans---Orders of both the authorities below were upheld by the Appellate Tribunal and appeal of the assessee was rejected on the point of status of the company for the application of tax rates.

1999 PTD (Trib.) 2949 ref.

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

----S. 76(10)---Khushhali Bank Ordinance (XXXII of 2000), Preamble---Cost---Amortization of deferred government grants---Admissible deduction---Grants received from the government for the purchase of durable assets were amortized over a period of their expected life---Amount equal to amortized cost was booked as income and at the same time the amortized amount was shown as expenditure in the account books of the Bank---Entries were made to comply with accounting requirements it was just a formality that a sum equal to amortized cost was shown as an income at the same time a sum equal to this amount was shown as an expenditure in the account books---Said accounting entries did not have any relevance to the tax matters---Taxation Officer was not correct to treat the "amortization of deferred grants" as inadmissible deduction---First Authority had rightly held that amortization @ 10% of the grants which had been reduced from total value of assets purchased by the Bank confirmed that no effect was made on taxable income---Since grants were not income and had only been recorded in the account books for fulfilment of required International Accounting Standards, the addition made was not legally justified and First Appellate Authority was legally right to delete it from income---Departmental appeal was rejected by the Appellate Tribunal on this point.

A. A. Sheikh, D.R. for Appellant (I.T.As. Nos.971/IB to 973/IB of 2006).

Tariq Jamil, F.C.A. and Farrukh Jamil, ACA/AR for Respondent (I.T.As. Nos.971/IB to 973/IB of 2006).

Tariq Jamil, F.C.A. and Farrukh Jamil, ACA/AR for Appellants (I.T.As. Nos.911/IB to 913/IB of 2006).

A.A. Sheikh, D.R. for Respondent (I.T.As. Nos.911/IB to 913/IB of 2006).

2007 P T D (Trib.) 1885

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.A. No. 5057/LB of 2004, decided on 12th February, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 34, 34A, 35, 36, 37, 38, 12(18) & 62---Income Tax Ordinance (XLIX of 2001), S.2(1 A)---Companies Ordinance (XLVII of 1984), Ss.284 to 288, 297 & 305---Set off of losses---Amalgamation---Merger by order of Court---Taxation Officer did not allow the losses sustained by the merged companies against the income of assessee on the ground that merged companies were dissolved and legally did not exist and claim under Ss. 34 and 35 of' the Income Tax Ordinance, 1979 was not eligible---Validity---Intention of Income Tax Law was to encourage merger and amalgamation and to give maximum tax benefits to the company absorbing in other companies and merging thereof---Merger approved by the High Court had the legal effect of giving a continuity to the operations of the merged company, which was a part of the assessee company and vesting the assesses company with all assets and liabilities of the merged companies---If there was any un-discharged tax liability of the non-surviving companies, the same would have been recoverable from the assessee company and that the assessee company would have been bound to duly discharge the same---Assessee company was clearly entitled to have adjustment of the unabsorbed losses that had been brought forward---Order of High Court sanctioned the Scheme of Arrangement under which the assessee company came to be vested with all rights and liabilities of merged companies---Such rights included the right of brought forward losses also---Merger approved by the superior Courts was binding on all concerned including tax authorities---Assessee company was entitled to claim of carrying forward assessed losses of merged companies being merged with assessee's company through orders of High Court---Orders of the officers below were vacated by the Appellate Tribunal and Taxation Officer was directed to allow the claim.

(1995) 51 Tax 223 ref.

Messrs Sitara Chemical Industries Ltd.'s case 2003 PTD 1285 not relevant.

Ujala Cotton Mill v. I.T.O. and others 1985 PTD 510 rel.

Yousaf Saed, FCA for Appellant.

Dr. Ishtiaq Ahmad, DR along with Javed Iqbal Rana, DR for the LTU for Respondents.

2007 P T D (Trib.) 1919

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khurshid Butt, Accountant Member

M.As. Nos. 902/LB and 903/LB of 2006, decided on 2nd March, 2007.

Income Tax Ordinance (XLIX of 2001)---

----S. 132(2)---Disposal of appeals by Appellate Tribunal---Opportunity of being heard---Application for recalling order dismissing the appeal for non prosecution along with request for condonation of delay in filing such application for recalling the order---Validity---Appeal filed by the Department had been dismissed in default for prosecution under S.132(2) of the Income Tax Ordinance, 2001 according to which, it had been specifically provided that the Appellate Tribunal shall afford an opportunity of being heard to the parties to the appeal and in case of default by any of the party on the date of hearing, Appellate Tribunal, may, if it deemed fit, dismiss the appeal in default or may proceed ex parte to decide the appeal on the basis of available record---Appeal having not been disposed of proceeding ex parte on the basis of available record, the basic right of being heard an affording of opportunity of being heard could not be denied to any party---Order of Appellate Tribunal was recalled, the appeal filed by the Department was directed to be placed at its original number and to be fixed for hearing after issuing notices to both the parties---Applications were allowed by the Appellate Tribunal.

Writ Petition No.505 of 2004 ref.

1981 SCMR 37 distinguished.

Sabiha Mujahid, D.R. for Applicant.

Javed Altaf for Respondent.

2007 P T D (Trib.) 1929

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.As. Nos. 1195/LB and 1246/LB of 2005, decided on 3rd March, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 80-B, 30, 2(20), 27, 12(12) & 50(4)---Tax on income of certain persons from dividends and bank profits, etc.---Dividend---Dividend-in-­specie---Income from other sources---Assessing Officer observed that dividend received by the assessee though in specie exceeded the accumulated profit of the distributing company it could not fall under the definition of dividend; further, shares transferred to the assessee could not be termed as dividend rather the market value of the shares as the income earned/received by the assessee from other sources taxable at the normal rate of tax, and had consequently assessed the amount as income from other sources under S.30 of the Income Tax Ordinance, 1979---Validity---First Appellate Authority observed that on the one hand it was being said that the department had never objected to~ the competency of the company so far as issuance of dividend-in-specie but on the other hand technical objections had been raised that company either could not issue the swine for want of accumulated profits or it never treated the same as dividend since the tax deducted under S.50(7A) of the Income Tax Ordinance, 1979 was shown as receivable from the concerned shareholders---If at all there was any fault in issuing the subject dividend-in-specie it was not a shareholder's headache to question the. legality of any dividend being distributable in whatever shape could be---Occasions might be there, where a particular issue dividend and bonus share etc. in some violation of piece of legislation, rules, instructions or accounting standards or even by Clouting the conditions laid down by the regulatory authority---Common sense required that the recipient shareholder was not to be held guilty for any commission or omission on the part of the company giving out some distribution---Shares were appearing in the balance sheet having the value of Re. 1; to dish it out as dividend-in-specie it was required to have in its kitty as its un­appropriated profit whether capitalized or not was a sum of Re. 1 and that was not being denied---Action of Assessing Officer not treating the value of dividend-in-specie received by the assessee as his income from other sources was illegal, unsustainable---Dividend-in-specie received was dividend income in terms of S.80-B of the Income Tax Ordinance, 1979 since the required deduction .had already been made under the provision of S.50 of the Income Tax Ordinance, 1979---Such directions made by the First Appellate Authority were in accordance with law and the order of First Appellate Authority was upheld by the Appellate Tribunal in circumstances.

Messrs Nepak Marketing (Pvt.) Ltd.'s case I.T.A. No.6032/LB of 2004 ref.

Abdul Khalaiq, ITP for Appellant (in I.T.A. No.1195/LB of 2005).

S.A. Masood Raza Qazalbash, D.R. for Respondent (in I.T.A. No.1195/LB of 2005).

S.A. Masood Raza Qazalbash, D.R. for Appellant (in I.T. A. No.1246/LB of 2005).

Abdul Khalaiq, ITP for Respondent (in I.T.A. Nc.1246/LB of 2005).

2007 P T D (Trib.) 1943

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 5704/LB of 2005, decided on 21st March, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 108(a)(i), 55, 56 & 80D---Penalty for failure to furnish return of total income and certain statements---Assessee was enjoying exemption for imposition of income tax and tax imposed under S.80D of the Income Tax Ordinance, 1979 was deleted by the First Appellate Authority---Levy of penalty was made for non-riling of return but in response to notice under S.56 of the Income Tax Ordinance, 1979---Validity---Where provisions of S.108(a)(i) of the Income Tax Ordinance, 1979 clearly established the imposition of penalty with the tax payable, then it had to be followed---Penalty for default of S.55 of the Income Tax Ordinance, 1979 only became leviable when there was a "tax payable" but when no tax had been imposed on the assessee as it enjoyed exemption from tax -and even on assessment nothing could be imposed as Income Tax then penalty could not become leviable---Appeal of the Department was dismissed by the Appellate Tribunal.

2002 PTD (Trib.) 237 ref.

M. Muzaffar Khan Lashari, D.R. for Appellant.

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

2007 P T D (Trib.) 1959

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.As. Nos. 5263/LB to 5265/LB of 2004 and 5986/LB, 7231/LB of 2005, decided on 3rd March, 2007.

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

----S. 122(5)---Amendment of assessment---Definite information---Contention was that order passed under S.122(5) of the Income Tax Ordinance, 2001 could not sustain being passed by the Taxation Officer without having. in his possession the definite information---Validity---No definite information had been mentioned in the order passed under S.122---If the order had been passed under S.122(5) of the Income Tax Ordinance, 2001 there must be definite information mentioned in the order specifically---Nothing appeared in the order under S.122 of the Income Tax Ordinance, 2001 that the already completed assessments were erroneous in as much as those were prejudicial to the interest of revenue---No justification existed for amending the order under S.122 of the Income Tax Ordinance, 2001 in circumstances---Order of the First Appellate Authority was vacated and order passed by the Taxation Officer under S.122 of the Income Tax Ordinance, 2001 was cancelled and assessments were restored by the Appellate Tribunal accordingly.

I.T.A. No.416/LB of 2000-01 rel.

2005 PTD 1316 ref.

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

----S. 122(5)(5A)---Amendment of assessment---Scope of S.122(5) & (5A), Income Tax Ordinance, 2001---No order under S.122 of the Income Tax Ordinance, 2001 could be made without specifically mentioning in the order the subsections mentioned in the section or the ingredients of the subsection as both the subsections (5) & (5A) had the distinct characteristics---Subsection 5(A) could be invoked only by the higher authority to the authority passing the assessment order and the basic ingredient of this section was that the assessment already made was erroneous insofar it was prejudicial to the interest of revenue while the subsection (5) could be invoked by the Taxation Officer passing the assessment order on the basis of definite information acquired from an audit or otherwise regarding the involvement in three deficiencies in the already completed assessment (i) any income chargeable to tax had been escaped assessment; or (ii) total income has been, under-assessed, or assessed at too low a rate, or has been the subject of excessive relies' or refund; or (iii) any amount under a head of income had been miss-classified.

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

----S. 122(8)---Amendment of assessment---Definite information---Explanation---Section 122 (8) of the Income Tax Ordinance, 2001, specifically provided that for the purpose of this section, "definite information" includes information on sales or purchases of any goods made by the taxpayer, receipts of the taxpayer from services rendered or any other receipts that may be chargeable to tax under the Income Tax Ordinance, 2001 and on the acquisition, possession or disposal of any money, assets, valuable article or investment made or expenditure incurred by the tax payer.

Asim Zulifqar, ACA for Appellant (in I.T.As. Nos.5263/LB to 5265/LB of 2004).

Javaid Iqbal Rana, DR for Respondent (in I.T.As. Nos.5263/LB to 5265/LB of 2004).

Javaid Iqbal Rana, DR for Appellant (in I.T. As. Nos.5986/LB and 7231/LB of 2005).

Asim Zulifqar, ACA for Respondent (in I.T.As. Nos.5986/LB and 7231/LB of 2005)

2007 P T D (Trib.) 1986

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T. As. Nos. 1109/LB of 2004, 2655/LB, 2656/LB and 7106/LB of 2005; decided on 7th November, 2006.

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

----S.27---Capital gain---Adventure in the nature of trade---Assessee deriving income from running a textile mill---Factory land was acquired on lease from Provincial Government---Sale of such laud after development by permission of Government to pay off loans obtained from bank---Sale proceeds were directly deposited into a joint account of the assessee and the creditor's committee and loans were paid off according to the ratio of liability---Assessee claimed exemption on gain accrued on disposal of such land being capital receipts---Assessing Officer while framing assessment observed that gain on sale of land could not be termed as `capital gain'---Sale proceed was treated as adventure in the nature of trade 'and taxed the same accordingly---Validity---Transaction was to be seen in the light of fact that at no point of time the assessee acted as a land speculator or land developer---Improvement in capital asset was made to discharge financial liability---Primary factor which could have determined the nature of the transaction, that whether it was a venture in the nature of trade or not was the intention of the party at the time when the land was originally acquired on lease by the assessee---When the assessee got laud on lease it had no intention to sell it for earning profits or income by getting enhanced price, rather assessee was bound by agreement with Provincial Government to use the land for running a textile mill---Assessee never included in such-like activities other than one the selling of land in question---Land was never acquired for earning profits and the same was utilized as factory laird for the period spanning over 45 years---Sale of factory land in peculiar circumstances, could not be treated as business venture. by any stretch of imagination---Proceeds of sale were deposited directly in the-joint account held by the assessee as well as the creditors, and loans were repaid directly to the banks under the supervision of the creditor's committee---Such mode of sale as well as the payment showed that if the seller/vendor of the property could not utilize the sale proceeds as pet its tree-will at best this could be termed a business arrangement for a particular purpose but not a venture in the nature of trade for the purposes of business activity---Order of First Appellate Authority was vacated by the Appellate Tribunal being contravention of ratio laid down by the superior Courts as well as the other judicial fora---Treating the gain on sale of immovable property as business income by the Assessing Officer was held to be against the law by the Appellate Tribunal and taxation of gain on sale of such land was deleted.

Naseer A. Sheikh and 4 others v. CIT 1992 PTD 621; CIT v. Habib Bank Executors and Trustee Co. 1985 SCMR 284; Edulji Dinshaw Ltd. v. ITO 1990 PTD 155; Messrs Pakistan Industrial Credit and Investment Corporation v. CIT 1980 PTD 322; 2006 PTD (Trib.) 447; 1990 PTD (Trib.) 671; 1984 PTD (Trib.) 127; Shymala Pictures (P.) Ltd. v. CIT (1985) 142 ITR 115 (Mad.); 1989 PTD 460 (Trib.); 1969 PTD 317; 1988 PTD (Trib.) 354; 2006 PTD 1422; S.N.H. Industries (Pvt.) Ltd. v. Income Tax Department 2004 PTD 330; Michael A. Kallivapalil v. CIT Kiraly (1976) 102 ITR 202 (Ker.) and C.LT., Madras v. Kasturi Estates (Pvt.) Ltd. (1966) 62 ITR 578 (Mad.) rel.

(b) Income-tax---

----Capital gain---Summary of facts of the case.

Dr. Ikram ul Haq for Appellant.

Ghazanfar Hussain; D.R. for Respondent.

2007 P T D (Trib.) 2010

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 3691/LB and 3995/LB of 2003, decided on 20th December, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66A, 59(4) & 62---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Self-assessment---Assessee contended that no short document notice was issued before 30-6-1994 for making good the deficiency of wealth statement and assessment stood completed under S.59(4) of the Income Tax Ordinance, 1979, that when assessment already stood completed by operation of law there was no justification to frame a normal law assessment under S.62 of the Income Tax Ordinance, 1979; and that original deemed assessment order under S. 59(4) of the Income Tax Ordinance, 1979 was holding the field but order under S.62 of the Income Tax Ordinance, 1979 had been subjected to S.66A of the Income Tax Ordinance, 1979---Validity---Assessment under S.62 of the Income Tax Ordinance, 1979 was without any jurisdiction and void ab initio and nullity in the eye of law and any superstructure built on illegal premises was unlawful and without jurisdiction---Assessment under S.62 of the Income Tax Ordinance, 1979 was cancelled and deemed assessment under S.59(4) of the Income Tax Ordinance, 1979 was restored by the Appellate Tribunal---Departmental appeal being without any merit was rejected.

1993 PTD 332 and I.T.A. No.1321/LB of 2002 ref.

Mian Ashiq Hussain for Appellant (in I.T.A. 3691/LB of 2003).

Muzammal Hussain, DR for Respondent (in I.T.A. 3691/LB of 2003).

Muzammal Hussain, DR for Appellant (in I.T.A. 3995/LB of 2003).

Mian Ashiq Hussain for Respondent (in I.T.A. 3995/LB of 2003).

2007 P T D (Trib.) 2021

[Income-tax Appellate Tribunal Pakistan]

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

M.A. (AG) No.13/LB of 2007 and I.T.A. No. 5071/LB of 2005, decided on 29th March, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1) & 62---C.B.R. Circular No.4 of 2001 dated 18-6-2001, para.9(a)(ii)---C.B.R. Circular No.7(7) S. Asstt. 2001 dated 26-3-2002--Self-assessment---Assessment year 2001-02---Selection of case for total audit for the reasons that yielding net profit rate was very low and overhead expenses seemed to be on the lower side---Validity---Guidelines issued by the Central Board of Revenue were suppression of income, evidence of revenue potential case, decline in income, creation of new assets or disparity in expenses on utilities---Such criteria was somehow not met by the Regional Commissioner of Income Tax---All the relevant parameters of the business had shown much better results as compared to the previous years---Order of First Appellate Authority was vacated and Assessing Officer was directed to accept the return under Self-Assessment Scheme.

2005 PTD 165; 2004 PTD 1719 and PLD 2006 SC 787 = 2006 PTD 2502 ref.

Younis Khalid for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2007 P T D (Trib.) 2029

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No. 3932/LB of 2005, decided on 18th April, 2007.

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

----First Sched., Part-IV, para. 2-B---Companies Ordinance (XLVII of 1984), S.14(3)(d)---Pakistan Council of Architects and Town Planners Ordinance (IX of 1983), S.2(a)---Exemption of supper tax for the firms of architects---Department pleaded that since the Pakistan Council of Architects and Town Planners Ordinance, 1983 did not put an embargo on formation of a limited company, by the Architects, this shall not be covered within the exemption provided under para.2B of Part-IV of the First Schedule of the Income Tax Ordinance, 1979---Validity---Architect in its status and professional duties held the same position as a Chartered Accountant or a lawyer and was barred to form a limited company---Firm formed by such an architect fully qualified within the provisions of para.(2-B) of Part-IV of the First Schedule of the Income Tax Ordinance, 1979---Assessee having enjoyed exemption for a pretty long time under the same language anal circumstances could not now be debarred from the vested right in his favour---Interpretation followed by the department in the past could not be departed by way of introducing a new interpretation in any case---Since limited company could not be registered as an architect though was a legal person there was an obvious prohibition of its incorporation---Finding of the First Appellate Authority was confirmed by the Appellate Tribunal being justified.

2004, PTD (Trib.) 583 and Black's Law Dictionary Seventh Edition ref.

1989 SCMR 353 rel.

(b) Interpretation of statutes---

----The language of law is to be reed in its natural meanings and not to add anything beyond intendments.

(c) Income-tax---

----Exemption---In respect of exemption clause the doubt is resolved in Favour of the department as against the assessee.

(d) Income-tax---

----Exemption---Exemption is a special concession and the same increases the burden of the other taxpayers.

(e) Companies Ordinance (XLVII of 1984)---

----S.14(3)(d)---Obligation to register certain associations, partnerships, etc., as companies---Provisions of S.14(3)(d) of the Companies Ordinance, 1984 indicate in unequivocal terms two professions, lawyers and accountants but at the same time it also adds other professions; such was an inclusive definition which was not restricted to the two professions mentioned therein.

Muhammad Aslam Bhatti, D.R. for Appellant.

Tanveer Aslam for Respondent.

2007 P T D (Trib.) 2046

[Income-tax Appellate Tribunal Pakistan]

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

W.T. As. Nos. 652/LB to 657/LB of 2006, decided on 5th May, 2007.

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

----S.16(4)---Assessment---Finalization of single assessment order for all the years by referring as S.16(4) of the Wealth Tax Act, 1963---Validity---Assessment had been framed under S.16(4) of the Wealth Tax Act; 1963---Said provision of law was meant for calling for details and explanation on certain points if required---Revenue could. not make an assessment under S.16(4) of the Wealth Tax Act, 1963---Assessment could only be made under S.16(3) or 16(5) of the Wealth Tax Act, 1963---Even on confronting it to Department, no explanation For it had been tendered, on this score too the assessment was not maintainable and had rightly been cancelled by the First Appellate Authority.

2006 PTD (Trib.) 987; 2004 PTD (Trib.) 388 and 2004 PTD (Trib.) 1014 ref.

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

----S.16(2)---Assessment---Non-service of notice---First Appellate Authority on perusal of assessment record round that notice under S.16(2) of the Wealth Tax Act, 1963 was never served as both the copies of it were found lying therein meaning thereby that, it remained un-­served---Non-issuance of notice being Fatal, the assessment was not maintainable for all the years---Basis of Framing assessment were not approved, thus on merit it was not found as maintainable---Assessment was cancelled by the First Appellate Authority---Case-law cited fortified such Findings---By Following the judgments and orders, Appellate Tribunal upheld the order of First Appellate Authority.

(1991) 63 Tax (sic); 1990 PTD 389; 2007 PTD 20; 2005 PTD (Trib.) 517 and 2006 PTD 2814 ref.

Muhammad Akram Tahir, D.R. for Appellant.

Siraj ud Din Khalid For Respondent.

2007 P T D (Trib.) 2061

[Income-tax Appellate 'Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shahid Azam Khan, Accountant Member

I.T.A. No. 1320/KB of 2005, decided on 23rd April, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.156, 62/65 & 13(1)(aa)---Rectification of mistake---Rectification application was rejected by the Assessing Officer by observing that grounds given in the application. had been discussed in the order of Appellate Tribunal and the matter could not be rectified at the level of Assessing Officer---Setting aside of rejection order by the First Appellate Authority with observations that objection taken by the assessee had been rejected without valid justification---Validity---Authority which could rectify the order was the authority which passed the final order and not the lower authority---Factual controversies pointed out in the application having been decided, any legal issue covering mistake apparent from record, could not be taken at the lower level as all the mistakes, if any, had been subject-matter of appeals---No justification was available to set aside the matter for de novo consideration---Departmental appeal was allowed and the order of refection of rectification application by the Assessing Officer was maintained by the Appellate Tribunal.

Abdul Hameed Sangi, D.R. fot Appellant.

Abdul Tahir Ansari, LT,P. for Respondent.

2007 P T D (Trib.) 2069

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T. As. Nos. 3964/LB, 3965/LB, 4821/LB and 4822/LB of 2002, decided on 6th September, 2006.

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

----S.62---Assessment on production of accounts, evidence etc.---Rejection of accounts without pointing out defects---Validity---Admittedly, books of accounts were maintained, produced before the Taxation Officer and had been examined but Taxation Officer without pinpointing any defect in the books of accounts had rejected the declared version---No justification existed for rejection of accounts after examining books of accounts and without pointing out any specific defects in the accounts---Where the assessee produced books of .accounts as evidence in support of return, the Assessing Officer before disagreeing with such accounts shall give notice to the assessee of the defects in the accounts and will provide an opportunity to the assessee to explain his point of view about such defects and record such explanation on the basis of computation of total income of the assessee in the assessment order---Such having not been done the assessment orders were liable to be cancelled, as the requirements of the mandatory provisions of law had not been fulfilled---Order of First Appellate Authority was vacated and Taxation Officer was directed to accept the declared version of the assessee.

2001 PTD 3369; 2002 PTD 407 and 2001 PTD (Trib.) 3369 ref.

(b) Income-tax---

----Inspector's report---Inspector's inquiry report dated 23-10-2001 was not relevant 1'or the assessment years ending on 30-6-2000 and 30-6-2001.

2001 PTD (Trib.) 3369 rel.

(c) Income-tax---

----Rejection of accounts---Adverse past history of the assessee could not be a correct ground to reject the accounts, as rule of res judicata was not applicable to the income tax proceedings and every year was an independent year.

2002 PTD 407 rel.

Muhammad Younis Khalid for Appellant (I.T.As. Nos.3964/LB and 3965/LB of 2002).

Mrs. Sabiha Mujahid, D.R. for Respondent (I.T.As. Nos.3964/LB and 3965/LB of 2002).

Mrs. Sabiha Mujahid, D.R. for Appellant (I.T.As. Nos.4821/LB and 4822/LB of 2002).

Muhammad Younis Khalid for Respondent (I.T.As. 4821/LB and 4822/LB of 2002).

2007 P T D (Trib.) 2075

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member

I.T.A. No. 1422/LB of 2005, decided on 12th May, 2007.

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

----S.59(1)---C.B.R. Circular No.18 of 1999, dated 11-9-1999, paras. 2 & 6---Self-assessment---Assessee, being a new taxpayer, was required to declare income at least 30% of the capital employed---Declared capital at Rs.750,000 was found on the lower side in a manufacturing unit of soap and silicate---Capital was estimated at Rs.25,00,000 and case was processed under normal law---Validity---Entire edifice of exclusion of the assessee's return of income, out of the Scheme, had boon built purely arbitrarily and on colourful assumptions that the capital employed in business was at Rs.25,00,000---Not an iota of evidence 'was either adduced or was brought to the notice of the Regional Commissioner of Income Tax by the Deputy Commissioner of Income Tax whereby it could be concluded that present was a case of concealment or evasion of income---By no stretch of imagination the observation made by the Deputy Commissioner of Income Tax .that assessee being a manufacturing unit of soap and silicate capital employed in business would be at Rs.25,00,000 could be marked with a rope that concealment or evasion. of income was made by the assessee---Such observation was certainly needed to undergo through a trial to establish its definiteness otherwise it would not be-regarded more than a "statement"---Neither the decision of the Regional Commissioner of Income Tax nor the reasons advanced by the Deputy Commissioner of Income Tax to process the assessee's return of income under normal law were tenable in the eye of law---Assessee's return of income being fully qualified to be accepted under the Scheme, the Assessing Officer was directed to accept the income declared by the assessee.

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

----S.59(1)---C.B.R. Circular No.18 of 1999 dated 11-9-1999, paras. 2 & 6---Self-assessment---Assumption of capital---Return of income could not be set apart out the purview of the Universal Self-Assessment Scheme for proceeding under normal law on the basis of assumed capital until and unless proved otherwise.

Nazir Ahmad Shad for Appellant.

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

2007 P T D (Trib.) 2084

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.As. Nos.3324/LB, 3325/LB of 2004, 5311 and 5312 of 2005, decided on 3rd March, 2007.

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

----S.19---Income from house property---Annual letting value---Estimation of---Assessee contended that admittedly, declared rental receipts being supported by rent deeds had always been accepted in the previous assessment years and that neither any material had been placed on record to justify the quantum of Annual Letting Value nor the contents of any enquiry report of the Circle Inspector had been confronted---Validity---No justification existed for deviating Prom, the previous history as the Assessing Officer had not brought on record any material evidence to establish that property had been let out at a higher rent---Order of the First Appellate Authority was vacated by Appellate Tribunal and Taxation Officer was directed to accept the declared Annual Letting Value.

1992 PTD (Trib.) 161 rel.

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

----S.11---Penalty for concealment of income etc.---Penalty order being 'without lawful. ,jurisdiction was deleted by the Appellate Tribunal as the order of First Appellate Authority, on the basis of which penalty was imposed, was vacated by the Appellate Tribunal.

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

----Ss.116, 58(1) & 62---Imposition of penalty after notice of hearing etc.---Limitation---Notice under S.116 of the Income Tax Ordinance, 1979 for non-Piling of wealth statement was issued on 19-6-2000 and the penalty proceedings, if at all to be based on said notice, could not be imposed later than 30-6-2000 as provided by proviso to S.116 of the Income Tax Ordinance, 1979 and imposition of penalty on 30-6-2004 was in excess of lawful jurisdiction---First Appellate Authority confirmed that no notice under S.58(1) of the Income Tax Ordinance, 1979 was issued during the re-assessment proceedings and the penalty had been imposed on the basis of notice under S.116 of the Income Tax Ordinance, 1979 issued at the time of original assessment which was hit by limitation on 30-6-2002---First Appellate Authority had rightly deleted the penalty order which was upheld by the Appellate Tribunal and Departmental appeals were dismissed.

Sohail Mutes Babri, I.T.P. for Appellant, (in I.T.As. Nos.3324/LB and 3325/LB of 2004).

Manroor Hussain Shad, D.R. for Respondent (in I.T.As. Nos.3324/LB and 3325/LB of 2004).

Manzoor Hussain Shad, D.R. for Appellant (in I.T.As. Nos.5311/LB quid 5312/LB of 2005).

Sohail Mutee Babri, I.T.P. for Respondent (in I.T.As. Nos.5311/LB and 5312/LB of 2005).

2007 P T D 2088

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No.321/KB of 2005, decided on 12th April, 2007.

Income Tax Ordinance (XXXI of 1979)---

----S. 132---Decision in appeal---Exemption---Withdrawal of---Appeal against---Rejection of appeal by the First Appellate Authority by holding that no appeal lay against an order of the Commissioner through which he withdrew the exemption earlier allowed to the assessee---Validity---Order of the Commissioner enhancing the liability by withholding the exemption, was a very well appealable order---First Appellate Authority was directed to re-admit the case on the basis of already pending file before him and decide the said issue after considering the appeal, filed by the assessee to the extent of its provision in law and to decide the substantive question accordingly.

Pak Saudi Fertilizer Limited's case 1999 PTD 4061; Genertech Pakistan Limited v. ITAT 2004 PTD 2255 and PLD 2006 SC 602 ref.

Munib Akhtar for Appellant.

Hanif Shaikh, DR for Respondent.

2007 P T D (Trib.) 2091

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.1398/LB to 1404/LB of 2005, decided on 6th June, 2007.

Income Tax Ordinance (XXXI of 1979)---

----S.9---Charge of income tax---Ceasing membership on sale of plot or house---Associated membership fee---Taxation---Amount not returned but stood forfeited in favour of assessee, was income chargeable to tax, however, it was not the entire amount which was received under the head associate membership which could be charged to tax but only such amount in each year shall be included in the income for charging it to tax which is left in the hands of assessee on relinquishing the associate membership by sale of property which took place in each year---Matter was remanded to the Assessing Officer for determining the exact amount which had been forfeited by the assessee or stood surrendered in favour of assessee in each year on their ceasing to be' member on sale of property---Assessing Officer was directed by the Appellate Tribunal to work out and verify from the assessee's record the amount in each year which was to be charged to tax in this manner.

Zia Haider Rizvi for Appellant.

Raja Javed Iqbal, I.A.C: (L.T.U.) for Respondent.

2007 P T D (Trib.) 2109

[Income-tax Appellate 'Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman and Istataat Ali Accountant Member

I.T.As. Nos.744/IB, 1255/IB of 200.5, I.T.A. No.768/IB of 2004, M.As.(R) Nos.22A/TB and 22B/IB of 2007, decided on 11th March, 2007.

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

----Fifth Sched., Part-I, R.2(3)---Computation of the profits and gains from the exploration and production of Petroleum---Adjustment and carry forward of losses of dry hole---Rejection on the ground that assessee had failed to comply with provisions of law and had not provided a mechanism about set off and carry forward of losses in its concession agreement with the Government of Pakistan---Assessee was not entitled to claim the carry forward and set off of loss in respect of dry hole---Validity---Concession agreement of the company/assessee was not altogether. silent about mechanism for adjustment and carry forward of lost expenditure on dry hole---Article of the agreement provided that all expenditure deemed to have been lost in terms of R.2 of Part-I of Fifth Schedule of the Ordinance shall be adjusted on "a fully consolidated basis in one of the two ways mentioned in R.2(3) of the Part-I of the Fifth Schedule of the Income Tax Ordinance, 1979---Assessing Officer failed to take into account the Witty gritty of the concession agreement in a proper manner---If for the sake of argument it was accepted that concession agreement was silent about such mechanism, even then the. Assessing Officer was not justified to, disallow the assessee's claim because in such situation the Revenue itself should decide whether the lost expenditure was to be allowed under Cl.(a) or Cl.(b) of R.2(3) of Part-I of the Fifth Schedule of the Income Tax Ordinance, 1979---First Appellate Authority. was fully justified to set aside the assessment for re-determination of expenditure for the purpose of adjustment and carry forward after verification---Order of First Appellate Authority was maintained with the directions that during re-assessment proceedings the Assessing Officer should allow the lost expenditure in either of the two ways prescribed in Cl.(a) and clause (b) of Sub-R.(3) of R.2 of Part-I of the Fifth Schedule to the Income Tax Ordinance, 1979.

DHP Petroleum Asia Pacifiy Islamabad's case LT.A. No.341 (IB) of 2002 ref.

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

----S. 23---Deduction---Exchange loss---Disallowance---Department contended that exchange loss due to fluctuation of currency rates could not be claimed in respect revaluation of assets because in that case it will be a capital loss and not a revenue loss---Similar position will prevail in respect of those liabilities which were payable on account of assets created from such liabilities---Exchange loss due to fluctuation was not admissible deduction at all as it was considered as a business loss then it had to be restricted only to business transaction yielding revenue/income of the assessee---In no way such losses could be claimed as expenditure in respect of assets or those liabilities which related to creation of assets because in that situation it had to be treated as a capital loss---Validity---Exchange loss due to fluctuation of currency rates could not be claimed as revenue expenditure on revaluation of assets or those liabilities out of which such assets were created---Said loss was admissible only in respect of normal business transactions, however, legal position had not been scrutinized to find out as to what portion of loss was of capital nature and what portion was of revenue nature---Orders of both the authorities below were vacated and set aside the assessment with the directions that during de novo proceedings accounts of the assessee should be properly examined to ascertain the nature of exchange loss and if it was found that any portion of such loss related to normal business transactions of the assessee, and did not relate to capital assets or liabilities the same should be allowed as business expenditure---Assessee should be provided with proper opportunity to explain the case and provide necessary details.

1989 PTD 582 ref.

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

----S.23---Deduction---Exploration expenditure written off---Disallowance---Setting aside by the First Appellate Authority instead of deleting the said disallowances---Validity---First Appellate Authority rightly set aside the assessment for re-assessment of the issue and adjudication thereof in accordance with law as the details provided during the hearing before Appellate Tribunal were either not placed before the Assessing Officer or the same were not given proper consideration at assessment stage---Said issue needed detailed analysis at the level of Taxation Officer---Order of First Appellate Authority was upheld by the Appellate Tribunal with the direction that during re-assessment proceedings all the details, documents and evidence available 'with the company should be examined for adjudication in the light of relevant law.

(d) Income Tax---

---Limitation---Assessment will not be barred by time simply for the reason that there was a gap of some days between the date of assessment and the date of service of assessment order on the taxpayer.

2006 PTD (Trib.) 1052 and 1998 PTD 1125 rel.

Nadeem Ayaz FCA/AR for Appellant (I.T.As. Nos.744/IB and 1255/IB of 2005).

A.A. Sheikh, DR for Appellant (I.T.As. Nos.744/IB and 1255/IB of 2005).

A. A. Sheikh, DR for Respondent (I.T.A. No.768/IB of 2004).

Nadeem Ayaz FCA/AR for Respondent (I.T.A. No.768/IB of 2004).

Nadeem Ayaz, FCA/AR for Appellant (M.As.(R). Nos.22A/IB and 22B/IB of 2007).

A. A. Sheikh, DR for Respondent (M.As.(R). Nos.22A/IB and 22B/IB of 2007).

2007 P T D (Trib.) 2122

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Faroog Saeed, Chairperson and Masood Ali Jamshed, Accountant Member

W.T.As. Nos. 205/LB to 207/LB of 1982-83, 356/LB, 357/LB of 1989-90, 300/LB of 1986-87 and 205/LB of 1987-88, decided on 24th .February, 2007.

(a) Wealth Tax Act (XV of 19G3)---

----Second Sched:, CI. (25)---Income Tax Ordinance (XXXI of 1979), 8.2(14)---S.R.O. 650(I)/85 dated 1-7-1985---Exemption---Chambers or Associations of Commerce, Trade and Industry---Issuance of S.R.O. regarding exemption during the period when assessments and appeals were pending adjudication---Assessee contended that during the pendency of proceedings by way of assessment and appeals, beneficial circular issues and amendments made would operate retrospectively and assessee was entitled to reap the benefits thereof and a liberal interpretation concerning retrospectivity prospective application of S.R.O./amendment was to be given---Validity---Legislature had granted exemption through Cl. (25) of the Second Schedule of the Wealth Tax Act, 1963---Said and such other provision that granted exemption had never been allowed retrospective effect in the absence of specific and clear impression by the legislature---Departmental appeal was allowed subject to earlier finding that for the assessment year 1985-86 and. onwards the assets of the assessee were exempt.

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 of In4©me Tax and others 2003 PTD 812; Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73; Brother Engineering (Pvt.) Ltd. v. Deputy Collector 2004 PTD 2928; UDL Industry v. Collector of Customs 2005 PTD 940; Haseeb Waqas Sugar Mills v. Federation of Pakistan 2002 PCTLR 287; Anoud Power Generation v. Federation of Pakistan PLD 2001 SC 340; Ellahi Cotton Mills and others v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555; Rijaz (Pvt.) Ltd. v. Wealth Tax Officer, Circle-III, Lahore 1996 PTD 484; Dawood Cotton Mills v. Commissioner of Income Tax 2000 PTD 285; Messrs Army Welfare Sugar Mills Ltd. v. Federation 1992 SCMR 1652; Government of Pakistan v. Village Devt. Organization PLD 2005 SC 577 = 2005 PTD 2178; C.I.T. v. Late. Gen. Muhammad Ziaul Haq LT.A No. 51 of 2000; C.I.T, v. Shennion Steamship Co. PLD 1971 Kar. 605; H &Sons v. C.B.R. 2005 PTD 147; Collector of Sales Tax Lahore. v. Hoechst Ravi Chemicals Ltd., 2003 PTD 1817; Commissioner of Income Tax v. Olympia 1987 PTD 739; Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise PLD 1988 SC 370; Messrs Irum Ghee Mills Ltd. v. Income Tax Appellate Tribunal (2000) 82 Tax 3; C.I.T. v. Pulikkal Medical Foundation (Pvt.) Ltd. (1994) 210 ITR 299; Muhammad Ali Khan and others v. C.W.T. (1983) 140 ITR 948; C.LT. v. South Rcot District Cooperative (1989). 176 ITR 117; C.I.T. v. Pondicherry Cooperative Housing Society Ltd. (1991) 188 ITR 671 and C.I.T. v. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 196 ITR 149 ref.

(b) Wealth Tax---

----Exemption---Retrospectivity---If one is in a position to satisfy with clarity that the provision has come out to redress an injury or to cure a disease or to provide remedy to an unjust situation it has to be applied retrospectively---Remedy can be by way of a notification, by legislation or through an administrative order but it .has to be for the purpose of redressing some grief or a situation which is patently unjust.

(c) Interpretation of statutes---

----Remedial statute and its object---Remedial statute is the one that provides for a remedy for an injury, its object is either to redress some existing grievance or to introduce some new regulation for proceedings conducive to the public interest such statutes arc made to remove defects and to abridge superfluity in law.

(d) Words and phrases---

----`Cure'---Meanings---Term cure would mean of a disease may that be of any kind.

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

----Second Sched., Cl. (25)---S.R.O. 650(1)/85 dated 1-7-1985---Chambers or Associations of Commerce, Trade and Industry---Exemption which had been provided by S.R.O.650(I)/1985 dated 1-7-1985 was a special facility to all Chambers and Associations of Commerce, Trade and Industry by the Federal Government which would require strict interpretation---Giving it effect prior to the said exemption would amount to entering into the legislation which was beyond the scope of the courts---Government, while issuing such notification could always; by an express word, say that the said amendment was retrospective and applicable even for the earlier years---Notification had come for as an exemption of the income and of the immovable property, the same will have to be read strictly and in favour of the Revenue.

Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise PLD 1988 SC 370 rel.

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

----Second Sched., Cl. (25)---Exemption---Chambers or Associations of Commerce, Trade and Industry---Charity and welfare institutions---Supporting a charity, doing welfare or providing any benefit to the public at large did not provide any right or exemption from tax unless law so specifically provided it---If a charitable institution did not qualify for exemption being not covered within the parameters of some such provision and was subjected to tax, whether could be called as a disease or ill, could readily be answered by an empathetic `No'; similarly if one of such an organization was allowed exemption and the legislature intended to grant the same prospectively, could courts or Tribunals allow it retrospectively for the reason that they were providing some welfare services to the public at large, again could not be answered as positive.

(g) Wealth tax---

. ----Exemption---Principles---Only those persons are granted exemption who arc firstly chargeable to tax and no one can be granted an exemption unless the legislature intends it so by clear and unambiguous direction.

Muhammad Aslam Bhatti, D.R. for Appellant.

Siraj ud Din Khalid for Respondent.

2007 P T D (Trib.) 2140

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member

I.T.As. Nos.639/KB, 640/KB, 641/KB, 642/KB and 643/KB of 2002.

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

----Ss.13(1)(aa), 62 & 65---Unexplained investment etc., deemed to be income---Addition was deleted by the First Appellate Authority by observing that "the amount of addition had been duly approved by the Inspecting Additional Commissioner but notices under S.13(1)(aa) of the Income Tax Ordinance, 1979 did not fulfil the requirements of law being in the nature of notices under Ss.65/62 of the Income Tax Ordinance, 1979---Assessing Officer confronted different amounts as compared to the actual additions made in the orders and under varying subsections of S.13(1) of the Income Tax Ordinance, 1979, as such notice under S.62 of the Income Tax Ordinance, 1979 was not a substitute for notice under S.13(1)(aa) of the Income Tax Ordinance, 1979---Validity---Notices required under S.13 of the Income Tax Ordinance, 1979 had been properly served and there was nothing on record to enable the First Appellate Authority to record his finding that notice under S.62 of the Income Tax Ordinance, 1979 was not a substitute of notice under S.13 of the Income Tax Ordinance, 1979---Finding of First Appellate Authority was based on incorrect facts ignoring the order of Assessing Officer---Argument that no notice under S.13 of the Income Tax Ordinance, 1979 had been issued was not traceable besides being contrary to facts---After admission of entire, facts in compliance of notice under S.13 of the Income Tax Ordinance, 1979, there remained no necessity to go in further details, besides, notice under S.13(2) of the Income Tax Ordinance, 1979 was mandatory in case of amount of expenditure referred to in clauses (aa), (b), (c), or (d)---Amount of the expenditure referred to in clause (c) of subsection (1), was in the opinion of the Deputy Commissioner too low whereas in the present case the situation was different so far as requirements of S.13(2) of the Income Tax Ordinance, 1979 was concerned---Reasonable opportunity had also been provided to the assessee of being heard, although the Director of the Company specifically accepted the proposals for making addition under S.13 of the Income Tax Ordinance, 1979 as such justification appeared to vacate the order of First Appellate Authority.

1989 PTD 1239 and (1994) 70 Tax 44 ref.

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

----S.13(1)(aa)---Qanun-e-Shahadat (10 of 1984), Art.114---Addition of peak credit in benami Bank account---Admission through order sheet entity---Director of the Company was debarred from denying the facts admitted in order sheet after accepting the allegations---Under Article 114 of the Qanun-e-Shahadat Order, 1984, in no manner and at no stage the assessee could decry from admissions endorsed to the Department in writing disclosing the concealed purchases and operation of Bank account for making purchases .permitting the Department to believe a thing to be true and to act upon such belief---Neither the scribe of the statement nor his representative could be allowed to deny the truth at declared facts---Addition of peak credit for the year in benami Bank account appeared to be justified as based on admitted facts.

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

----S.13(1)(aa)---Addition---After addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 them remained no question of another addition in trading account in terms of concealed purchases---Assessing Officer was directed to adjust addition in the head "concealed purchases" in addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 being peak credit of the year.

Rehan H. Naqvi and Mrs. Lubna Pervaiz for Appellant.

Riaz Ahmed D.R. for Respondent.

2007 P T D (Trib.) 2153

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No. 1276/LB of 2006, decided on 30th March, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(3)(b), 120 & 114(6)---Amendment of assessment---Amendment of earlier order in the presence of subsequent assessment order came into existence by virtue of filing revised return---Validity---Return filed became an assessment order by virtue of S.120(1) of the Income Tax Ordinance, 2001---Such return shall be taken for all purposes of Income Tax Ordinance, 2001 to be an assessment order issued to the taxpayer by the Commissioner on the date return was furnished---.Revised return under S.114(6) of the Income Tax Ordinance, 2001, within period prescribed therein also was to be taken for all purposes of the Ordinance to be an amended assessment order issued to the taxpayer by the Commissioner on the day on which the revised return was furnished---If the Commissioner intends to amend an assessment order treated as issued under S.122(3)(b) of the Income Tax Ordinance, 2001, he will have to proceed further on the basis of said assessment and there was no escape from the same---Making an assessment in ignorance .to the 'amended assessment order by implication of the provision of S.122(3)(b) of the Ordinance an amended order on the basis of earlier assessment order obviously could not stay in field---Assessment framed was illegal and same was cancelled by the Appellate Tribunal which did not mean that the cancellation of the order of the Assessing Officer restrained him from proceeding further as per law and rules on the basis of revised assessment order under S.122 of the Income Tax Ordinance, 2001 read with S.77 of the Income Tax Ordinance, 2001.

Javed Iqbal Khokhar for Appellant.

Farooq Ahmed Khan, D.R. for Respondent.

2007 P T D (Trib.) 2155

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Ch. Nazir Ahmed, Accountant Member

M.As. (A.G.) Nos. 1103/LB to 1107/LB of 2006 and W.T. As. Nos.537/LB to 541/LB of 2003, decided on 23rd January, 2007.

(a) Wealth Tax Rules, 1963---

----R.8(4C)---Wealth Tax Act (XV of 1963), S.17-B---Hall let out on hire---Assessment was cancelled by the Additional Commissioner of Income Tax holding the assessee to be owner of the land as well as the superstructure with the direction to make fresh assessment in view of R.8(4C) of the Wealth Tax Rules, 1963 and explanation by the assessee was Pound to be unsatisfactory---Validity---Rule 8(4C) of the Wealth Tax Rules, 1963 made it clear that it would only be applicable in case of "Hall owned and managed by same person" whereas assessee from very start of the proceedings under S.17-B of the Wealth Tax Act, 1963 had been stating that the assessee was not the owner of the land but only managing superstructure---Additional Commissioner, in spite of elaborate explanation by the assessee stressed that the hall and the land was owned and managed by the assessee---Contention of the assessee was that since the land in question was not owned by him, hence the assessment could not be made in his hands under R.8(4C) of the Wealth Tax Rules, 1963---Ownership of the property, however, needed some verification with regard to the land---Case was set aside and remanded to the Assessing Officer with the direction to look into the matter again and if the assessee was not owner of the land then R.8(4C) of the Wealth Tax Rules, 1963 was not applicable and only superstructure was to be assessed in the hands of the assessee.

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

----S.17-B---Power of Inspecting Additional Commissioner to revise Wealth-tax Officer's order---Scope---Assessee contended that Additional Commissioner of Income Tax had no jurisdiction to invoke provisions of S.17-B of the Wealth Tax Act, 1963 as such powers vest in Inspecting Additional Commissioner---Validity---Assessee failed to make out a case with regard to jurisdiction of the Additional Commissioner of Income 'Tax/Wealth Tax under S.17-B of the Wealth Tax Act, 1963---No interference was made by the Appellate Tribunal on the point of jurisdiction of the Additional Commissioner.

Syed Abid Raza Kazmi for Appellant.

Ghazanfer Hussain D.R. for Respondent.

Date of hearing: 16th December, 2006.

2007 P T D (Trib.) 2165

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2169, 0878 and 2477/LB of 2005, decided on Ist March, 2007.

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

-----S.13(1)(aa)---Unexplained investment etc., deemed to be income---Addition---Life long saving---Plea taken on behalf of the assessee that amount of Rs.2,22,731 was his life long saving would sufficiently meet the ends of justice because a person having a considerable property in his name and also earning income from agriculture and cinema business could not be denied to have such a little amount of saving in his hands---Remaining addition of Rs.2,22,731 made under S.13(1)(aa) of the Income Tax Ordinance, 1979 was deleted by the Appellate Tribunal.

(b) Income tax---

----Business income---Reliance on history---Declared business income at Rs.75,000 was discarded and assessed at Rs.2,00,000---First Appellate Authority by placing reliance on history allowed relief to the assessee by restricting the figure at Rs.1,75,000---Validity---Reliance was placed on history and not on immediately preceding assessment---Action of both the authorities below was based merely on guess work---Minor relief was granted by the Appellate Tribunal by restricting the business income to Rs. 1,50,000 in circumstances.

(c) Income tax---

----Adventure in the nature of trade---Principles.

Vol.7 No. l2 Tax Forum 58 of December 2003 rel.

(d) Income lax---

----Adventure in the nature of trade---Agricultural land, sale of---Addition---Validity---Documentary evidence regarding purchase of lands lit the years 1979, 1981 and 1988 as well as its sale in the year 2001 were provided in the shape of registered deed---Nature of land having remained unchanged, there was no course left with the Assessing Officer to disagree with the assessee despite the fact that copy of Khasra Garciawari of the said land was furnished showing the status of the land to be still agricultural land and being cultivated by the assessee himself and no improvement had been made in the land---Deletion of addition by the First Appellate Authority was upheld by the Appellate Tribunal in circumstances.

Vol.7 No.12 Tax Forum 58 0l' December 2003 rel.

1989 PTD (Trib.) 460; 2001 PTD 1534 and 1975 PTD (Trib.) 6 ref.

Anwar Ali Shah, D.R. for Appellant.

Abid Raza Kazmi for Respondent.

2007 P T D (Trib.) 2173

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Istataat Ali, Accountant Member

I.T.As. Nos. 846(IB), 847(IB), 857(IB) and 858(IB) of 2006, decided on 5th April, 2007.

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

----Ss.62/132/135 & 129---Assessment on production of accounts, evidence etc.---Assessment order was partly set aside---Demand on the basis of partly confirmed order---Legality---Assessing Officer followed correct procedure by way of issuing an appeal effect order which was based on partly confirmed assessment---Assessing Officer was fully justified to subsequently undertake regular proceedings for adjudication of set aside issues---No infirmity existed in the proceedings conducted by the Assessing Officer for finalization of assessment on issues which were set aside in appeal, it was a legal right of the department to recover the demand from the assessee which was confirmed in appeal---Assessment order was partly confirmed in appeal---Department hats a right to make recovery of tax demand which was payable by the assessee as a result of partly confirmed order---Assessing Officer was legally right to issue the appeal effect order which was accompanied by demand notice---Assessing Officer was duty bound to adjudicate the issues which were partly set aside in appeal.

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

----S.50(1)---C.B.R. Circular No.15 of 1997 dated 6-11-1997---Deduction of tax at source---Voluntary Separation Scheme or Golden Handshake Scheme---Non-deduction of withholding tax from payments released on account of Voluntary Separation Scheme in view of decision of High Court in which it was held that withholding lax was not deductible from such payments during the period in which appeals were pending against such decision---Addition---Validity---At the material time when payments were released by the lssessee on account of Voluntary Separation Scheme judgment of High Court was in place which did not allow any deduction of tax---Assessee could not make any deduction on provisional or tentative basis as it was expressly provided in the judgment of High Court that withholding tax was not deductible from payments made under Golden Handshake Scheme---Specific constraint was placed by the High Court on deduction of tax from such payments---Assessee at the time of making such payments had reasonable grounds to follow the decision of High Court which was holding the ground and which clearly provided that during the period under consideration tax should not be deducted from payments on account of Voluntary Separation Scheme---Reversal of said order was made later on and that ,judgments had opposite effect subsequent in time---After pronouncement of those judgments assessee started making deductions from payments released under the Golden Handshake Scheme---Assessee was not under legal obligation to make deduction of tax during the period under appeal because judgment of High Court was in place which clearly prohibited from making- deduction of withholding tax and it was immaterial as to whether or not the assessee was a party to litigation on the issue---Assessee could not be required to fallow the decision of Courts given at subsequent stages because those decisions were announced during the period subsequent to the period under consideration---Said decision could not be retrospectively applied by the department---Assessee should not have been driven by prudence and had made deduction of tax in anticipation of judgments in favour of revenue--Orders of both the authorities below were vacated by the Appellate Tribunal and addition was deleted.

Writ Petition No.2086 of 1999; I.C.A. No.241 of 2000; Writ Petition No.15266 of 1998; W.P. No.1973 of 2001; (2002) 85 Tax 332; {1969) 20 Tax 1; I.T.A. No.951(HQ)/1990-91; (1996) 73 Tax 132 (Trib.) acid (1998) 78 Tax 1 ref.

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

----S.23---Deductions---Consumable stores written off---Addition---First Appellate Authority observed that stationery destroyed and claimed as "assets written off" in respect of "consumable stores" had rightly been added back because the assessee admitted that' it did not have any documentary evidence in respect of weeded out consumable stores---Validity---Appellate Tribunal agreed with the Assessing Officer as well with the First Appellate Authority that assessee had failed to prove its claim with the help of evidence and details---Orders of both the authorities were not interfered which were confirmed and appeal on this point was rejected.

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

----S.24(i) & Second Sched., Part-IV, Cl. (3)---West Pakistan Industrial and Commercial Employment (Standing Order) Ordinance (VI of 1968)--Deductions not admissible---Perquisites, allowances and benefits of the employee of the Banking company---Addition of being not exempt from tax---Validity---Provisions of S.24(1) of the Income Tax Ordinance, 1979 were not applicable to any expenditure incurred by a Banking Company or a financial institution controlled by the Federal Government on the provisions of perquisites, allowances or other benefits to any employee in pursuance of law---Assessee was a government controlled financial .institution and was established with the object to manage and extend financial assistance to small business enterprises against proper securities and guarantees---Assessee was entitled to exemption from provisions of S.24(i) of the Income Tax Ordinance, 1979, in the light of protection provided in terms of Cl. (3) of Part-IV of the Second Schedule of' the Income Tax Ordinance, 1979---First Appellate Authority was justified to hold that no addition could be made in the case of such assessee---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeal of the. Department was rejected being devoid of any merit.

Mirza Anwar Baig, A.R, for Appellant (in I.T.As. Nas.846(IB) and 847(IB) of 2006).

Muhammad Mumtaz, D.R. for Respondent (in I.T.As. Nos.846(IB) and 847(IB) of 2006).

Muhammad Mumtaz, D.R, for Appellant (in I.T.As. Nos.857(IB) and 858(IB) of 2006).

Mizra Anwar Baig, A. R, for Respondent (in I.T. As. Nos.857(IB) and 858(IB) of 2006).

2007 P T D (Trib.) 2194

[Income-tax Appellate Tribunal Pakistan]

Before Mian Muhammad Jahangier, Member (Judicial) and Hafiz Muhammad Anees, Member (Technical)

Appeals Nos.564, 565, 1374 and 1376/LB of 2000, decided on 27th June, 2006.

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

----Ss.104, 97 & 86---Stamp Act (II of 1899), S. 40 & Sched.-I, Art.12-B---Punjab Finance Act (IX of 1997), Preamble---Clearance of bonded goods for home-consumption---Appellant failed to pay leviable stamp duty levied under Punjab Finance Act, 1997 on removal of high speed diesel oil from warehousing bond---Appellant was charged with violation of provisions of Ss.86, 97 & 104 of the Customs Act, 1969 read with Punjab Finance Act, 1997 and Article 12-B of Schedule-I of the Stamp Act, 1899 and was directed to pay stamp duty---Validity---Government of the Punjab issued notification dated 1-8-1997, in accordance of which the customs officer concerned was empowered to collect the stamp duty in cash---Punjab Finance Act, 1997 and 12-B of Schedule First of the Stamp Act, 1899 could not be claimed illegal so far as the stamp duty for the relevant period in each case was concerned and any amendment later on would have no retrospective effect---Appellant had to make payment of the stamp duty and fine---Orders were upheld by the Appellate Tribunal and appeals being without merits were dismissed.

(b) Stamp Act (II of 1899)---

----S.40 & Sched.-1, Art.12-B---Punjab Finance Act (IX of 1997), Preamble--When Punjab Finance Act, 1997 was passed by legislature on June 25 of 1997 and assented by the Governor of Punjab on June 27/97 Article 12-B imposing stamp duty on bill of entry was inserted, it was au amendment in the Stamp Act, 1899 which extended to the whole of the Province of Punjab.

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

----S.2(KKA)---Bill of entry---Status---Instrument or transaction---Levy of stamp duty---Stamp duty is levied on an instrument and not a bargain/transaction---`Instrument' includes every document by which any right or liability is purported to be created, transferred, limited, extended, extinguished or recorded---Bill of entry reflected on the right of a party or showing liability, therefore, it was an instrument on which the stamp duty was to be levied---Recovery of stamp duty out of a bill of entry was a subject which was under the control of i.e. the customs officer.

Hashim Ali for Appellant.

Mehmood Hasan D.R. and Mehmood Ahmad, Appraiser for Respondent.

Date of hearing: 12th June, 2006.

2007 P T D (Trib.) 2199

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Masood Ali Jamshed, Accountant Member

I.T.A. No. 3391/LB of 2005, decided on 24th February, 2007.

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

----S.8---All Officers to follow the orders of the Central Board of Revenue---Central Board of Revenue was the highest administrative authority in the income tax hierarchy and its instructions by virtue of S.8 of the Income Tax Ordinance, 1979 were binding on all its subordinate officers.

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

----S.80C---C.B.R. Circular. No.12 of 1991 dated 30-6-1991---Tax on income of certain contractors and importers---Proportionment of expenses---Circular No.12 of 1991 dated 30-6-1991 speaks of the proportionment of the expenses relating to sales covered by presumptive income and the other sales and not proportionment of the same with purchase through import and the other sales.

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

----Ss.62 & 80C---Circular No.12 of 1991 dated 30-6-1991---Assessment on production of accounts, evidence etc.---Proportionment of expenses against imports/purchases---Assessing Officer, while computing the income, had proportioned the expenses incurred by the assessee against imports/purchases in respective of presumptive income sources vis-a-vis the local sales---Validity---Appellate Tribunal directed that the expenses shall be proportioned strictly as per C.B.R. Circular No.12 of 1991 dated 30-6-1991 and the proportiomnent shall be made by .adopting import sales and local sales as the denominators.

(d) Income tax---

----Expenses incurred by any business house in respect of various sources of income to have nexus towards the total sale and could not be left to the will and wish of the Assessing Officer with regard thereto.

(e) Income tax---

----Central Board of Revenue---Status---Central Board of Revenue though was a body in the highest esteem but still did not have any place in the judicial hierarchy, and had full power to explain the provision of an

enactment for making it as practical as possible while guiding its subordinate officers but through such directions it could not be allowed to enter into the sphere of legislation.

Central Insurance Company's case 1993 PTD 766 rel.

Naveed A. Andrabi for Appellant.

Muhammad Aslam Bhatti, D.R. for Respondent.

2007 P T D (Trib.) 2206

[Income-tax Appellate Tribunal Pakistan]

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

M.A. No. 944/LB of 2006, decided on 11th December, 2006.

Income Tax Ordinance (XLIX 2001)---

----S.221---Rectification of mistake---Application for rectification on the ground that confirmation of deletion of addition on account of sale promotion expenses was discriminatory---Validity---Appellate Tribunal could not recall its own order for fresh adjudication as it was not empowered under the provisions of Income Tax Law or Income Tax Appellate Tribunal Rules to do so---No mistake apparent from record or floating on surface of the order wherein proper findings had been recorded on the issue of discount getting support from the order of the First Appellate Authority---Request of revenue was not entertained and miscellaneous application was rejected being devoid of merit.

S. Ashraf Ahmad Ali, D.R. for Appellant.

Sirajuddin Khalid for Respondent.

2007 P T D (Trib.) 2224

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Ch. Nazir Ahmad, Accountant Member

M.A. Nos.443/LB to 447/LB of 2006, decided on 1st December, 2006.

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

----S.135(2)---Disposal of appeal by Appellate Tribunal---Case was adjourned by clerk of Court/ministerial staff---Appeals were dismissed in default for non-appearance of assessee on the adjourned date---Application for recall of order---Validity---When Court was not held, the case was adjourned by clerk of Court/ministerial staff, it was not the date fixed by the Court itself, hence could not be considered an adjournment of the case by the Court---Miscellaneous applications were accepted and order was recalled whereby appeals of the assessee were dismissed for non prosecution---Appeals would be re-fixed and would be heard afresh on merit by the Appellate Tribunal.

PLD 1.964 SC 97 and 1983 SCMR 1092 rel.

Sajid Ijaz Hotiana for Appellant.

Ghazaufar Hussain,. D.R. for Respondent.

2007 P T D (Trib.) 2237

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Liaqat Ali Khan, Accountant Member

I.T.As. Nos. 252/PB to 255/PB of 2004, 124/PB, 197/PB, 198/PB, 180/PB of 2003, 800/PB, 800-A/PB of 1999-2000, 294/PB of 2004 and 230/PB of 2003, decided on 21st December, 2006.

(a) Income tax---

----Provision for ball debt---Addition of---Assessee, a Bank---Assessing Officer was directed to accept the appellant/bank's -claim of bad debts being the issue having finally settled by the Appellate Tribunal and the orders of two forums below were vacated.

1991 PTD 569; 2003 PTD (Trib.) 228; (2002) 85 Tax 245 (Trib.); I.T.A. No.1066 to 1073/LB, 1084 to 1091/IB of 2004, rel.

(b) Income tax---

----Income---Transactions---Assessee, a Bank---Accounting entries as a result of adoption of a certain method of accounting system by taxpayer was not the determining factor alone for certain transactions to become income but each case had to be distinguished by its own facts and circumstances.

I.T.As. Nos. 306, 308 of 1999 and 785 of 2000 rel.

(c) Income tax---

----Income accrued as a result of method of accounting---Assessee, a Bank---Where income actually had not been received but had accrued as a result of the method of accounting adopted by the assessee, same will not constitute income.

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

----S.23---Deduction---Assessee, a Bank---Mark-up in suspense account (Non-performing loans)---Addition of---Outcome of amendment in S.23 of the Income Tax Ordinance, 1979 was realization by the legislature to provide relief to such legitimate claims of hardship, where actually no income had arisen to the assessee---Amount of mark-up in suspense account was liable to taxation merely on the basis of accounting +.entries---Addition made to assessee's income of the amount of mark-up placed in suspense account was ordered by the Appellate Tribunal to be deleted.

1992 SCMR 1652; 1993 SCMR 73; (2002) 85 Tax 245 (Trib.); I.T.A. No.3432/IB of 2000; I.T.A. No.2127/IB of 2000; I.T.As. Nos.341 to 340/IB of 2002 and I.T.As. Nos. 69 and 70/PB of 2001-02 ref.

(1962) 46 ITR 144 and I.T.As. Nos. 306, 308 of 1999 and 785 of 2000 rel.

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

----S.23(xxi)---Deduction---Assessee, a Bank---Deletion of additional mark-up in suspense account---Appeal on the issue had no merit as the provisions of S.23(xxi) of the Income Tax Ordinance, 1979 stood amended w.e.f. 1-7-2000 by which a banking company was entitled for claiming such allowance as deduction.

(f) Income tax---

----Parameters for allowing provision for. gratuity, bonus and bad debts are that it should be ascertained liability; that it should be as per rules and regulation and terms of agreement relatable to said entity; that it .should be as per normal methods of account maintained by such organization and that any ascertainable accrued liability was deductible under Mercantile System of Accounting.

(2000) 87 Tax (Trib.) (sic) rel.

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

----S.24(g)---Deductions not admissible---Assessee, a Bank---Provision of staff retirement gratuity---Disallowance of---Assessing Officer was not correct to disallow the provision of gratuity as inadmissible---Addition was deleted by the Appellate Tribunal in the light of decision and parameters fixed in this regard by the Appellate Tribunal.

(2000) 87 Tax (Trib.) (sic) rel.

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

----S.24---Deductions not admissible---Assessee, a Bank---Disallowance of concessionary loan advance to members of staff---Addition was deleted by the First Appellate Authority---Issue had been settled and order of First Appellate Authority was confirmed by the Appellate Tribunal

I.T.As. Nos.1066 to 1073 and 1084 to 1091/IB of 2004 rel.

(i) Income tax---

----Allocation of expenses under the head exempt income---Assessee, a Bank---Expenses related to exempt income which the department objected to its deletion by the First Appellate Authority being inadmissible under the law and the assessee to prorating of expenses between exempt income and taxable income by First Appellate Authority through matching principle and addition under this head had been confirmed---Validity---Judgment referred was clear on the question of apportionment of expenses between exempt capital gain and income earned from the business operation---Departmental appeal failed and that of assessee's was accepted by the Appellate Tribunal.

I.T.As. Nos.1066 to 1073 and 1084 to 1091/IB of 2004 rel.

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

----S.156---Rectification of mistake---Cancellation of order made under S.156 of the Income Tax Ordinance, 1979 was unjustified as the department was giving appeal effect to the decision of High Court through rectification order---Facts -were that while giving effect, the Assessing Officer had made addition to expenditure proportionately to normal income and income from NIT which resulted in curtailment of expenditure allowed in the original order under S.62 of the Income Tax Ordinance, 1979---First Appellate Authority found that there was no mistake floating on `the surface of record, which was unjustified rectification, but instead the Assessing Officer had changed his mind---Bank business being composite activity could not be bifurcated into sub-trade for computing income and expenditure could not be apportioned between two incomes---Order was held to be illegal and cancelled---Order of First Appellate Authority was confirmed by the Appellate Tribunal.

I.T.As. Nos.1066 to 1973 and 1084 to 1091/IB of 2004. 1975 PTD (Trib.) 63 rel.

(k) Income tax---

----Charge of concessional rate on NIT dividend income---Concessional rate @ 5 % on dividend income of bank from NIT was allowed by the First Appellate Authority---Order of First Appellate Authority being based on the decision of Appellate Tribunal was confirmed by the Appellate Tribunal.

I.T.As. Nos.17 and 18/PB) of 1998-99 rel.

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

----S.62---Assessment on production of accounts, evidence etc.---Addition in Profit & Loss expenses---Expenses under Profit & Loss Account had been disallowed without pointing out any specified defects through notice under S.62 of the Income Tax Ordinance, 1979 which were responded to by providing of vouchers to the department---Assessing Officer was duty bound to point out defects---Arbitrary disallowance without giving any specific reasons or pointing specific defects was not permissible---Case of assessee-Bank was that where system of accounting was maintained and all payments were routed through the vouchers and strictly audited periodically with the element of unverifiability remote, treating it as a no account case was not proper---Additions were deleted by the Appellate Tribunal.

(m) Income tax---

----Sale of vehicle---Sales price was not accepted by the Assessing Officer being less than market as the sales had been made to employees to the bank both serving and retired---Addition of sale price was reduced by the First Appellate Authority---In view of conflicting claims, the matter needs to be looked into afresh ensuring that depreciation claimed on vehicle was not more than the prescribed cost and to follow the relevant provisions of law---Case was set aside on the point by the Appellate Tribunal.

(n) Income tax---

----Amortization of expenses deferred---Bank (assessee) claimed amortization of expenses @ 20% of total cost to be amortized in five years---Disallowance of---Assessee contended that it was State Bank of Pakistan's requirement to computerize the banks operations, such an expense was incurred and the amount was to be amortized over five years---Validity---Held, there was no provision in the Income Tax Ordinance, 1979 for amortization of expenses though the Income Tax Ordinance, 2001 had provided for the same---Claim of the assessee/bank had rightly been rejected by the Assessing Officer---Assessee/bank was at liberty to claim depreciation of such items under the relevant provisions of law.

(o) Income tax---

----Claim on account of short recovery from customers---Assessee, a Bank---Bank from one of its customers received a short recovery from his loan liability and the amount stood written off---Claim was disallowed---Validity---Held, the .amount stood written off and addition made was unjustified and the same was deleted by the Appellate Tribunal.

Abdul Ghafoor, F.C.A./A.R. for Appellant.

Muhammad Ali Shah, D.R. for Respondent.

2007 P T D (Trib.) 2281

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 765/KB of 2005, decided on 24th March, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 62 & 13---Income Tax Ordinance (XLIX of 2001), S.122---C.B.R. Circular No.7 of 2002 dated 15-6-2002, para. (IV)---C.B.R. Circular No.8 of 2003 dated 26-8-2003---Self-assessment---Exclusion of case from the purview of Self-Assessment Scheme in violation of the basic terms and conditions of Self-Assessment Scheme as mentioned in para.8 of the C.B.R. Circular No.7 of 2002 dated 15-6-2002---Addition in respect of purchase of property---Validity---Property was purchased in the year 1995 which could not be taxed in the year 2002-2003---Further said property belonged to wife of assesses, who was existing assesses and declared the same in hex wealth tax return---Such could not be termed as concealed income and taxed in the hands of assessee---. Department before excluding the case from Self-Assessment Scheme had not taken steps as required under para. 8 of C.B.R. Circular No.7 of 2002 dated 15-6-2002---Exclusion of assessee's case from Self-Assessment Scheme was not justified---Orders of the officers below were vacated by the Appellate Tribunal and directed for acceptance of return filed by the assessee under Self- Assessment Scheme.

(1971) 23 Tax (SC Pak) (sic) rel.

1997 PTD (Trib.) 879 and 2000 PTD (Trib.) 2424 ref.

Haji Yousuf for Appellant.

Ali Akbar, D.R. for Respondent.

2007 P T D (Trib.) 2319

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No. 91(IB) of 2007, decided on 25th May, 2007.

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

----S.2(13)(65)---Commissioner---Taxation Officer---Additional Commis­sioner---Authority---In the light of provision of subsections (13) and (65) of S.2 of the Income Tax Ordinance, 2001 the Additional Commissioner was legally competent "authority" under the Income Tax Ordinance, 2001 to perform the functions of Taxation Officer as delegated to him by the Commissioner.

2006 PTD (Trib.) 1515 and 2006 PTD (Trib.) 2413 distinguished.

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

----Ss. 111 & 122(9)---Unexplained income or assets---Addition---Assessee contended that notice under S.122(9) of the Income Tax Ordinance, 2001 was issued and addition was made under S.111 of the Income Tax Ordinance, 2001 without mentioning the clause of sub-section (1) of S.111 of the Income Tax Ordinance, 2001 under which the addition was made, which was absolutely an illegal act---Validity---Held, it was legal right of a taxpayer to know as to under what law he was being proceeded again--Assessing authorities were obliged to communicate to the taxpayer as under what clause of subsection (1) of section S. 111 of the Income Tax Ordinance, 2001, he was being required to furnish his explanation---Where assessee was deprived of his right to know about the law being applied to him, the proceedings taken against him would be of no legal consequence---Additional Commissioner completed proceedings under S.111 of the Income Tax. Ordinance, 2001 but he did not indicate to the assessee as to what clause of subsection (1) of S.111 of the Income Tax Ordinance, 2001 was being applied to him, taxpayer was thus deprived of his legal, right---All the actions taken by the assessing authorities and the consequential orders passed by them were legally not maintainable--Action of the Additional Commissioner and that of First Appellate Authority was vacated by the Appellate Tribunal being legally defective.

2002 PTD (Trib.) 2106 and 2006 PTD (Trib.) 2729 ref.

2006 PTD (Trib.) 673 rel.

Ch. Naeem-ul-Haq for Appellant.

Mir Alam Khan, D.R. for Respondent.

2007 P T D (Trib.) 2325

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 544/PB of 2003 and 552/PB of 2004, decided on 21st June, 2005.

Per Javid Iqbal, Judicial Member:

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

----Ss. 80C(2)(a)(ii), 143B, 50(5) & 62---C.B.R. Circular No.12 of 1991, dated 30-6-1991---C.B.R. Circular No. 1(14) TP-H/91, dated 29-6-1991---C.B.R. Circular No.1(42)(WHT)/2000, dated 30-6-2001---Tax on income of certain contractors and importers---Import and sale installation of CNG kits and cylinders---Tax was withheld at the import stage under S.50(5) of the Income Tax Ordinance, 1979 on such imported kits and cylinders---Assessee claimed himself as manufacturer of kits and cylinders on the basis of installation of such kits and cylinders in the vehicles and computed the income under normal law instead of filing of statement under S.143B of the Income Tax Ordinance, 1979---Assessing Officer treated the amount of tax withheld under S.50(5) of the Income Tax Ordinance, 1979 on import of kits and cylinders as final liability on the basis of Central Board of Revenue's Circular No.12 of 1991, dated 30-6-1991---First Appellate Authority annulled the assessment framed under S.80C of the Income Tax Ordinance, 1979 and assessee was considered as manufacturer of gas kits and cylinders---Validity---Assessee was not involved in manufacturing or in the process of manufacturing of gas kits and cylinders, while the installation of these items in the motor vehicles could not be termed as manufacture---Sole criteria for manufacturing was that in this process a new and vendible product must come in existence, which must be distinct and different from the feed in material---No such activities had taken place, while without manufacturing activities, the question of consumption of raw material of undertaking did not arise---Order of First Appellate Authority was vacated and that of Assessing Officer was restored by the Appellate Tribunal.

United States v. Anderson, D.C. Cal. 45F. Supp. 943, 946; Blacks Law Dictionary; Cain's Coffee Co., v. City of Muskogee 171 OLD 635, 44 P. 20 50, 52; Civil &Military Press v. Pakistan 1985 CLC 1021 and 1999 PTD 793 ref.

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

----S. 13(1)---Addition---Addition made under the head "securities with Sui Gas and WAPDA" was deleted by the First Appellate Authority as the same was deposited in the preceding assessment year and it was relevant at the preceding assessment year and addition could not be made for year under consideration---Deletion of such addition was confirmed by the Appellate Tribunal, while deletion of addition for want of approval from the Inspecting Additional 'Commissioner was also approved.

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

----S. 24(ff)---Deductions not admissible---Addition on account of non payment of rent in accordance with law in the prescribed manner through cross cheques---Deletion of---Validity---First Appellate Authority was not justified to delete the addition and deletion of such addition was cancelled by he Appellate Tribunal.

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

----S. 62---C.B.R. Circular No.12 of 1991, dated 30-6-1991---Assessment on production of accounts, evidence etc:---Sale of CNG---Declaration of sale according to formula issued by the Central Board of Revenue---Rejection of sale---Validity---Order of lower authorities were set aside with the directions that sales should be adopted as per formula of C.B.R. notified vide Circular No.12 of 1991, dated 30-6-1991 while for the other assessment year trading addition made being unjustified was deleted by the Appellate Tribunal.

Per Khawaja Farooq Saeed, Chairperson, agreeing:

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

----S. 80C(2)(a)(ii)---`Manufacturing'---Basic requirement to declare an item as manufacturing by some one is the change in the shape of the goods and its utilization other than its original shape and requirement.

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

----S. 80C(2)(a)(ii)---Industrial undertaking'---Meanings---Industrial undertaking means an organization which is working as anindustry' which connotation has normally been understood for the bigger projects---Use of term `small industry' and 'cottage industry' had given. it the meanings which covers even a process of the smallest farm---One person alone involved in some manufacturing process can be considered as running an industry if he is using some input for conversion into some other-shape for making it a vendible product.

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

----S. 80C(2)(a)(ii)---Exception---Entitlement---Import of raw material and its use for own consumption provides exception.

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

----S. 80C(2)(a)(ii)---Raw'---Meanings---Raw' means something in natural shape in crude form having never been brought to any change through any manual or mechanical process.

Chambers 20th Century Dictionary and As per Black's Law Dictionary ref.

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

----Ss. 80C(2)(a)(ii), 143B, 50(5) & 62---Tax on income of certain contractors and importers---Import and sale/installation of CNG kits and cylinders---Claim of exemption from presumptive tax regime---Validity--Items imported were highly technical already° manufactured and very advanced machinery, its further attachment, not being a raw material could not help in getting exemption from 'the presumptive tax regime---Import made under S.50(5) of the Income Tax Ordinance, 1979 by the assessee was in full and final discharge of income tax as he was not consuming any, raw material in his own manufacturing process--Process through manufacturing the assessee was not entitled to the option far the assessment under normal law---Import was taxable under presumptive tax regime and tax deducted was full and final discharge.

(j) Words and phrases---

----"Raw"---Meaning.

Chambers 20th Century Dictionary and As per Blacks Law Dictionary ref.

Per Mrs. Abida Ali, Accountant Member, Contra:

Mir Alam, D.R., for Appellant.

Abdul Rehman Afridi for Respondent.

2007 P T D (Trib.) 2346

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 354/LB and 620/LB of 2002, decided on 14th June, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 65, 148 & 59(1)---Additional assessment---Re-opening of assessment on the ground that assessee had imported a new material consignment and the assessee was required to explain the source of its investments---Validity---Show-cause notice was evidently investigative in nature and based on no definite information---Assessing Officer undertook investigation to gather evidence under S.148 of the Income Tax Ordinance, 1979 and that too without affording opportunity to cross-examine the witness long after issuing notice under S.65 of the Income Tax Ordinance, 1979---Such course of action was not permissible under the law as the said notice could only be issue after completing the investigation, if such investigation had resulted in definite information in terms of S.65 of the Income Tax Ordinance, 1979, rejection of original documents without verification was not sustainable---Even otherwise, the record which was made basis for. reopening of assessment was available at the time of original assessment and existing record could not be made basis for reopening the case---Assessing Officer reviewed the proceedings of his predecessor and presumed that the figures of the creditors were fictitious which he later on investigated under S.148 of the Income Tax Ordinance, 1979 which was an afterthought---Action of Assessing Officer was not supported by legal provisions---Assessment order was unsustainable which was annulled/cancelled on the point of jurisdiction by the Appellate Tribunal.

Messrs Arfat Woollen Mills Ltd. v. I.T.O. No.1990 SCMR 697; (1976) 34 Tax 31 and 1993 SCMR 1108 = 1993 PTD 1108 rel.

Mian Ashiq Hussain for Appellants (in I.T.A. No. 354/LB of 2002).

Sajjad Ali Jaffri L.A. and Ghazanfer Hussain, D.R. for Respondent (in I.T.A. No. 354/LB of 2002).

Sajjad Ali Jaffri L.A. and Ghazanfer Hussain, D.R. for Appellants (in I.T.A. No. 620/LB of 2002).

Mian Ashiq Hussain for Respondent (in I.T.A. No. 620/LB of 2002).

2007 P T D (Trib.) 2352

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Liaquat Ali Chaudhry, Accountant Member

M.A. (Rect.) No. 10/KB of 2007, I.T.A. No. 1322/KB of 2005, decided on 23rd April, 2007.

Income Tax Ordinance (XLIX of 8001)---

----S.221---Income Tax Ordinance (XXXI of 1979), S. 156---Rectification of mistake---Issue involved was not taken at any stage of proceedings---Matter was a factual controversy first time raised in rectification application, even otherwise order did not contain. any such discussion, and such omission could not be taken as error in the order---Assessee, during the course of rectification, was issued a show-cause notice but he failed to show appearance, resulting in ex parte decision---Setting aside, in circumstances, was necessary---Rectification application was dismissed by the Appellate Tribunal in circumstances.

Abdul Tahir, ITP for Appellant.

Dr. Manzoor Memon, D.R. for Respondent.

2007 P T D (Trib.) 2358

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Muhammad Ashfaq Baloch, Judicial Member and S. A. Minam Jafri, Accountant Member

M.A. (Rect) No. 83/KB M.A. (A.G.) No. 98/KB of 2006 and I.T.A. No. 1283/KB of 1999-2000, decided on 29th June, 2006.

Per Muhammad Ashfaq Baloch, Judicial Member---[Minority view]:

Income Tax Ordinance (XLIX of 2001)---

----S.221---Rectification of mistake---Second miscellaneous application---Issues raised in the second miscellaneous application for rectification were already discussed in detail and definite findings were recorded as was evident from order of Appellate Tribunal in first miscellaneous application for rectification filed by the assessee---Application for rectification held was without any merit and was dismissed.

Per S.A. Minam Jafri, Accountant Member, contra---[Majority view]

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

----Ss.62, 13 & 30---Income Tax Ordinance (XLIX of 2001), S.221---Rectification of mistake---Issuance of notice under S.62 of the Income Tax Ordinance, 1979 for proposed addition under S.13 of the Income Tax Ordinance, 1979 and addition of same amount .under 5.30 of the Income Tax Ordinance, 1979, was an apparent contradiction---Issue of primary nature, being not apparent in the Tribunal's order amounted to recording a verdict without due consideration of the same an `omission'.

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

----S.221---Rectification of mistake---Rectification was a legal remedy which allowed a Court in certain circumstances, to correct or amend documents that do not properly record the issues on facts as well as on law---In contemporary literature of law `development rectification' also had assumed an obvious form of "damage control" on law and on facts which should be considered whenever an error was detected---However such conceptual approach should remain within domain envisaged in statutory provisions of Income Tax Ordinance, 2001.

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

----S.221---Income Tax Ordinance (XXXI of 1979), Ss.62, 13 & 30---Rectification of mistake---Show-cause notice had been issued with regard to S.13 of the Income Tax Ordinance, 1979 where an addition had been ' made under S.30 of the Income Tax Ordinance, 1979---Tribunal's order in such context fell within domain of `Non licet' and it will be fair and reasonable if Tribunal's original order was rectified under S.221 of the Income Tax Ordinance, 2001 and issue of addition under S.30 of the Income Tax Ordinance, 1979 be remanded back to the Department for a de novo order after considering all the above grounds of appeal and affording an opportunity to assessee in this behalf.

Ram Kirpal v. UOL 1998(103) ELT 8 (Guj HC DB) and Sri Budhia Swain v. Gopinath Deb 1999(3) SCALE 528= AIR 1999 SCW 1814 ref.

Per Khawaja Farooq Saeed, Chairman---[agreeing with S.A. Minam Jaffery, Accountant Member with different reasons and slight modification of the order].

(d) Income tax---

----Speaking order'---Connotation---If by an omission one tends to ignore a basic and tangible argument which goes to the very root of the proceedings; it could not be called aspeaking order'.

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

----Ss.13 & 30---Income Tax Ordinance. (XLIX of 2001), S.221---Rectification of mistake---Addition---Confrontation under S.13 of the Income Tax Ordinance, 1979 while the addition was made under S.30 of the Income Tax Ordinance, 1979---Validity---No finding had been given on the issue that after reply of the assessee against ashow-cause notice under S.13 of the Income Tax Ordinance, 1979 another notice to assessee for confronting addition under S.30 of the Income Tax Ordinance, 1979 was required or not--Charging provision for assessing the income was S.13 of the Income Tax Ordinance, 1979 and Assessing Officer accordingly confronted the assessee for taxing the same under the said provision---After obtaining reply of the assessee the Assessing Officer thought otherwise and added. the .income under S.30 of the Income Tax Ordinance, 1979 which was never confronted---Change of mind of Assessing Officer after obtaining reply of the assessee called for another notice---Since the assessee was waiting for the fate of his reply against proposed addition under S.13 of the Income Tax Ordinance, 1979 the order came with a surprise---Proposed deemed income' was assessed asincome from other sources'---Such were two separate charging provisions with separate Para meters---Principles of natural justice required confrontation before addition.

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

----S.221---Income Tax Ordinance (XXXI of 1979), S.156---Rectification of mistake---Rectification is a legal remedy which allows the courts in certain circumstances to correct the mistakes as and when the same floats on the surface of the order---Mistake may be rectified either under the provision of Income Tax Ordinance, 2001 or erstwhile Income Tax Ordinance, 1979.

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

----Ss.13 & 30---Addition---Nature of provisions---Section 13 of the Income Tax Ordinance, 1979 deals with the income which otherwise may not fall in the normal definition of the term "income"---Section 13 was a deemed income provision where certain kinds of expenditure or unexplained amounts available with the assessee or the receipts not shown in the account are treated as his income, on the other hand S.30 of the Income Tax Ordinance, 1979 deals with income from other sources and covers those sources which are not covered by other specific provisions of the Income Tax Ordinance, 1979.

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

----S.221---Income Tax Ordinance (XXXI of 1979), Ss.13 & 30---Rectification of mistake---Miscellaneous application was accepted by the Chairman, Income Tax Appellate Tribunal leaving for the Division Bench of the Tribunal to decide the question as to whether the Assessing Officer was justified in making addition under S.30 of the Income Tax Ordinance, 1979 after issuance of a notice under S.13 of the Income Tax Ordinance, 1979 or not---Main order was recalled for disposal of issue which stood ignored in original order i.e. that whether Assessing Officer could add the amount under discussion under S.30 on the strength of a notice under S.13 and that whether on the facts and in the circumstances of the case the income was chargeable under S.30 or not.

Sheikh Jalaluddin, F.C.A. for Applicant.

Rajabuddin, D.R. for Respondent.

2007 P T D (Trib.) 2381

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Masood Ali Jarnshed, Accountant Member

I.T.As. Nos. 6582/LB of 2004 and 4141/LB of 2005, decided on 25th August, 2006.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Gross profit rate---Enhancement of, in the presence of verifiable purchases and sales---Validity---Assessing Officer observed that "sales had been made to verifiable parties and most of the sales. were to limited concerns; tax at source had been deducted wherever applicable by the said concerns and deposited into the government treasury; tax at source had been deducted against supplies received as well for which copies of monthly statements being furnished; "declared sales were accepted"---Orders of both the authorities on the issue of gross profit rate in view of such observation were vacated by the Appellate Tribunal and Assessing Officer was directed to accept the declared gross profit rate.

2005 PTD 2534 rel.

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

----S.62(1)--Assessment on production of accounts, evidence .etc.---Profit and Loss expenses---Disallowance of expenses by using stock phrases like `unverifiable/personal nature of expenses' and without confronting the add-backs under S.62(1) of the Income Tax Ordinance, 1979---Validity---Orders passed by both the lower officers being in flagrant violation of settled law were nullity in the eye of law---All the add-backs made in such manner were deleted by the Appellate Tribunal.

2003 PTD (Trib.) 2668 and I.T.A. No.2609/LB of 2003 rel.

Zulfiqar Ali Sheikh, I.T.P. and Ghulam Murtaza Ch. for Appellant.

Rana Muhammad Luqman, D.R. for Respondent.

2007 P T D (Trib.) 2385

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Ch. Nazir Ahmed, Accountant Member

I.T.As. Nos. 1382/IB to 1384/IB, 1379/IB to 1381/IB of 2005, decided on 10th May, 2007.

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

----Second Sched., Cl. (176)---Exemption---Power generation plant---Interest income---Interest income was a business income as the same had been earned as a result of operation of the project .and no separate additional effort had been made for the purpose of earning income from sources like interest as well as sale of scrap---Validity---Strict interpretation of Cl. (176) of the Second Sched. of the Income Tax Ordinance, 1979 did not leave any doubt to say that the interest income could be an income of a power generation project of a company' incorporated for the purposes of operating the power generation project; it was entirely a separate and independent source for which charge had been created in S.30 of the Income Tax Ordinance, 1979 and consequently the same was not exempt at all---Even if under some special circumstances such an income could be termed as income from business, it shall still not be an income of the power generation project in terms of Cl. (176) of the Second Sched. of the Income Tax Ordinance, 1979 and there was no doubt with regard to charge of interest income and the assessee did not have any case on the issue---Appeal was dismissed in circumstances.

I.T.A. No.136/KB of 1998-99 not in field.

(2006) 81 Tax 319 and 2003 PTD (Trib.) 2213 rel.

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

----Second Sched. Cl. (176)---Exemption---Power generation plant---Income from scrap---If the scrap was not an ancillary item and was only by way of cuttings, broken office furniture or of machine parts used etc. it could not be considered as part of the income of the project from the power generation---Income from scrap was not covered in Cl. (176) of the Second Schedule of the Income Tax Ordinance, 1979 in circumstances.

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

----Second Sched., Cl. (176)---Exemption---Power generation plant---Supplemental charge on delayed payment---Additional payment of delay of the original payment was not an income of the power generation ,project from sale of electricity.

M.M. Faisal Banday, A.C.A. for Appellant (in I.T.As. Nos.1382/IB to 1384/IB of 2005).

Muhammad Ali Shah, D.R. for Respondent (in I.T.As. Nos.1382/IB to 1384/IB of 2005).

Muhammad Ali Shah, D.R. for Appellant (in I.T.As. Nos.1379/IB to 1381/IB of 2005).

M.M. Faisal Banday, A.C.A. for Respondent (in I.T.As. Nos.1379/IB to 1381/IB of 2005).

2007 P T D (Trib.) 2397

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 7356/LB and 7357/LB of 2005, decided on 16th May, 2007.

Income Tax Ordinance (XLIX of 2001)---

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), Ss.59A & 143B---S.R.O. 633(I)/2002, dated 14-9-2002---Amendment of. assessment---Statements under S.143B of the Income Tax Ordinance, 1979 were filed for which the assessment under S.59A of the Income Tax, Ordinance, 1979 was finalized---Such assessment finalized under S.59A of the Income Tax Ordinance, 1979 was amended by invocation of provisions of S.122(5A) of the Income Tax Ordinance, 2001---Validity---Order passed under S.12(5A) of the Income Tax Ordinance, 2001 for the assessment years 2000-2001 and 2001-2002 in pursuance of S.R.O. 633(I)/2002 dated 14-9-2002 was declared not tenable in the eyes of law and orders passed were cancelled by the First Appellate Authority---Such findings were found in compliance of the settled law--Order of First Appellate Authority was not interfered with and the same was maintained by the Appellate Tribunal.

2005 PTD 1316; 2006 PTD 734; 2005 PTD (Trib.) 1321 and 2006 PTD (Trib.) 1778 rel.

Muhammad Akram Tahir, D.R. for Appellant.

Sohail Mutee Babri, I.T.P. for Respondent.

2007 P T D (Trib.) 2446

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Faiyaz Khan, Accountant Member

I.T.A. No. 213/LB of 2003, decided on 11th May, 2007.

Income Tax Ordinance (XXXI of 1979)---

----S. 13(1)(aa)---Addition---Definite information---Addition on the basis of Inspector's report that show room/shop had been completed on 30-6-1998---Validity---Inspectors report transpired that no definite information had been brought on record that the show room/shop was completed on 30-6-1998---No single piece of documentary evidence was produced by the. Inspector whereas assessee had produced copy of registered Iqrar Nama between assessee 'and contractor---Valuation Certificate given by the approved Architect, wherein it had been certified that up to 30-6-1998, only foundation-work was conducted---Nothing had been confronted to assessee, except. sketchy Inspector's report, which had been made the basis for action under S.13(1)(d) of the Income Tax Ordinance, 1979---Nothing was in possession of Assessing Officer for action under S.13(1)(d) of the Income Tax Ordinance, 1979---Assessing Officer was guile unjustified in making valuation of incomplete show room/shop terming it a completed one without documentary evidence---In the presence of solid documentary evidence, provided by the assessee in support if his stand, addition was not warranted---First Appellate Authority had rightly deleted the addition with the observation that "the Assessing Officer had failed to disclose that definite information on the basis of which it was presumed that the assessee had completed show room/shop up to 30-6-1998 except that sketchy report of Income Tax Inspector---Finding of First Appellate Authority were confirmed by the Appellate Tribunal in the circumstances.

Ghulam Kasim Hussain, D.R. for Appellant.

Mumtaz Hussain, Khokhar for Respondent.

Date of hearing: 2nd May, 2007.

2007 P T D (Trib.) 2514

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 4658/LB of 1999 and 2420/LB of 2000, decided on 21st February, 2007.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Non-­issuance of notice before assessment---Effect---Before finalization of assessments, it was obligatory upon the Assessing Officer to confront the assessee with the defects noted by him in the accounts maintained by the assessee by issuance of specific notice under S.62 of the Income-Tax Ordinance, 1979---Assessing .Officer failed to do so because after examination of books of accounts and necessary details furnished by the assessee notice under S.62 of the Income Tax Ordinance, 1979 was issued but same was not specific notice under said section as the contents of the same were those of notice under S.61 of the Income Tax Ordinance, 1979 requiring the assessee to furnish further details, which could not be termed as specific. notice under S.62 of the Income Tax Ordinance, 1979---After that notice no other notice was ever issued and assessment was finalized without confronting the assessee with the defects noted by the Assessing Officer, and did not afford the assessee an adequate opportunity to explain his position---Assesses, in circumstances, had been condemned unheard---Orders passed were liable to be cancelled for non-issuance of specific notice under S.62(1) of the Income Tax Ordinance, 1979 which was mandatory under the law.

2006 PTD (Trib.) 2325; (1999) 80 Tax 241; 2001 PTD (Trib.) 2938; 2003 PTD (Trib.) 625 and 1999 PTD (Trib.) 382 rel.

(b) Income Tax---

----Notional gain---Assets and liabilities in foreign currency were translated into. Pak rupees at the exchange rate prevailing on the balance sheet date, which resulted gain on revaluation of foreign currency and did not come within the meaning of real income and was not liable to tax---Action of Assessing Officer was unsustainable and was vacated by the Appellate Tribunal.

1998 PTD (Trib.) 288 rel.

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

----S.62(1)---Assessment on production of accounts, evidence etc..---Profit and loss account---Addition---Addition under the heads of Profit and Loss Account. had been made without confronting the assessee with specific instances of unverifiability, which was clear violation of provisions of S.62(1) of the Income Tax Ordinance, 1979---Authorities while making .additions had also deviated from established history of the case---All expenses were incurred for smooth running of business and could not be termed as inadmissible merely on the basis of stock phrases and conjectures---Assessing Officer having failed to confront the assessee with specific instances of unverifiability, the additions made were illegal.

2006 PTD (Trib.) 2325 rel.

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

----S. 24(1)(i)---Deductions not admissible----Assessing Officer had admitted submission of complete details of total expenditure relating to salaries and allowances in respect of employees of the company drawing taxable as well as .non-taxable emoluments---Additions made without pinpointing specific instances of unverifiability in no way could be termed as justified due to unsustainability of the same in the eye of law---Additions were deleted by the Appellate Tribunal.

M. Ismail and Wasim Ismail for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2007 P T D (Trib.) 2528

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 1226/LB of 2006, decided on 6th July, 2007.

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

----S.13(1)(aa)(e)---Addition---First Appellate Authority deleted the addition with the observation that assessment- was made before assessment year 2000-01; that Tax Amnesty Scheme declaration was also made during assessment year 2000-2001 and accepted in goods faith; that wealth statement as on 30-6-2000 was compulsory requirement of return filed under Self-Assessment Scheme was accepted in good faith by the Department; that Return for assessment year 2000-01 was accepted under S.59(1) in good faith; that Prize bonds were purchased and encashed during 3-12-1988 to 7-3-1995; that it was beyond the control of assessee to declare these in wealth statements 30-6-1985, 30-6 2000 or 30-6-2001 and that genuineness of the gift made on 21-1-1990 had been doubted with the only plea that stamp paper was purchased on 20-1-1990 and was executed on 1-1-1990 while Assessing Officer ignored the facts that it was a typing mistake due to which date was endorsed 1st January, 1990 instead of 21st January, 1990,---Affidavit of donor was also, ignored---Validity---Genuineness of a document could not be doubted on technicalities---No notice under S.148 of the Income Tax Ordinance, 1979 was issued to be donor nor any cogent reasons were brought on record by which said factor' could be doubted that at the time of making gift such amount was available with him or not---Amount declared as cash after sale of jewellery was doubted with the only plea that as per wealth statement as on 30-6-1985 assessee was owner of 10-Tolas of gold ornaments while on the other hand, he had shown sale of 25 Tolas---Assessing Officer in such respect had ignored the affidavit of mother of the assessee that she had gifted 15-Tolas to his son and the same was sold---No Notice under S.148 of the Income Tax Ordinance, 1979 was issued to golds with which according to laws was necessary---While making addition under S.13(1)(d), element of intangible was ignored by the Assessing Officer---Appellate Tribunal, after considering such observation of the First Appellate Authority, declined interference and appeal of the Department was dismissed.

2003 PTD 2109; 1988 PTD 227; I.T.As. Nos.5803 and 5804/LB of 2003; 1996 PTD (Trib.) 334; 1986 PTD (Trib.) 188; 2004 PTD (Trib.) 1517 and 2004 PTD (Trib.) 1523 ref.

(b) Income Tax---

----Condonation of delay---Principles.

2002 PTD (HC. Lah.) and (1987) 56 Tax 130 rel.

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

----S.130(3)---Form of appeal and limitation---Condonation of delay---Assessee had established, before the First Appellate Authority that the service upon the assessee was not proper---Service of demand notice must be on proper person---No limitation against the void order---Prayer for condonation by an assessee/citizen in revenue matters should be considered sympathetically---Appellant was prevented by sufficient cause from presenting appeal within due time limit and the First Appellate Authority had rightly condoned the delay in filing the appeal.

1986 PTD (Trib.) 188; 2004 PTD (Trib.) 1517; 2002 PTD and (1987) 56 Tax 130 rel.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Mumtaz Hussain Khokhar for Respondent.

Date of hearing: 16th June, 2007.

2007 P T D (Trib.) 2544

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Member

M.A. (A.G.) No. 287/KB of 2006, decided on 25th January, 2007.

(a) Income Tax Appellate Tribunal Rules, 2005---

---R.14---Income Tax Ordinance (XXXI of 1979), Second Sched., Cls. (29) to (31), 53 & 54---C.B.R. Circular No. 7 of 2002 dated 15-6-2002, Para. 1.1---Grounds which- may be taken in appeal---Additional grounds---Contention was that additional grounds of appeal were not permissible in appeal before Income Tax Appellate Tribunal as the same were hit by R.14 of the Income Tax Appellate Tribunal Rules, 2005 which provided that the appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the Memorandum of Appeal---Validity---Validity of the return and that it fell outside the purview of Self Assessment Scheme as per Para. 1.1(b) of the Central Board of Revenue's Circular No.7 of 2002 dated 15-6-2002 was a legal ground. touching the merits of the appeal, even if it was not allowed, it may be taken during the course of arguments being a relevant legal issue---As regards additional ground pertaining to claim of exemption of compensatory allowance, even without amending the grounds of appeal, the Appellate Tribunal may consider as to whether claims fell within the ambit of Cls. (29) to (31), (53) & (54) of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979---Additional ground regarding non-reply of notice under S.61 of the Income Tax Ordinance, 1979 related to factual controversy which could be raised during the course of arguments even if not taken as ground 'of appeal---Additional grounds were necessary for proper adjudication of the matter.

(b) Income Tax Appellate Tribunal Rules, 2005---

----R.14---Income Tax Appellate Tribunal Rules, 1981, R.14---Income Tax Ordinance (XLIX of 2001), Ss.127 & 128(3)---Income Tax Ordinance (XXXI of 1979), S.131 (2)---Grounds which may be taken in appeal---Additional grounds---Provision for amending the grounds of appeal was only available in case of appeal under S.127 of the Income Tax Ordinance, 2001 which provides appeal to the Commissioner (Appeals) and the legislature had not accorded such powers to the Appellate Tribunal, whereas R.14 of the Income Tax Appellate Tribunal Rules, 1981, which refers the grounds which may be taken in appeal, provides that except by leave of the Appellate Tribunal, the appellant shall not be heard in support of any ground not set forth in the Memorandum of Appeal---Validity---Rule 14 of the Income Tax Appellate Tribunal Rules, 1981 and Income Tax Appellate Tribunal Rules, 2005, provide that additional grounds shall be allowed subject to leave of the Tribunal and be heard in support of any ground not set forth in the Memorandum of Appeal---Sufficient powers had been delegated through such rules to allow the amended/additional grounds and the miscellaneous application was nothing less than an application for leave of the Tribunal requesting to allow the Department to argue further grounds not taken in appeal---Section 131(2) of the Income Tax Ordinance, 1979 permits the Commissioner (Appeals) to allow the appellant to file new grounds of appeal and the same procedure was adopted vide S.128 of the Income Tax Ordinance, 2001---Powers to allow the amended grounds, had not been provided either in the Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001, but R.14 of the Income Tax Appellate Tribunal Rules, framed under the two Ordinances, empowers the Appellate. Tribunal to allow the grounds of appeal---Provision simply restricts the arguments on the ground for which no leave was granted by the Appellate Tribunal and miscellaneous application fell within the ambit of R.14 of the Income Tax Appellate Tribunal Rules, by virtue of which, the Tribunal had powers to allow the additional grounds---Department was allowed to add additional grounds of miscellaneous application in the memo of grounds of appeal initially furnished with the appeal---Arguments that appellant had neither applied nor obtained leave of Income Tax Appellate Tribunal to urge additional ground, was of no consequence, as the application for additional grounds of appeal, was exactly in line with R.14 of the Income -Tax Appellate Tribunal Rules.

Chaman Lal, D.R. for Applicant.

Masood Abbasi for Respondent.

2007 P T D (Trib.) 2566

[Income-tax Appellate Tribunal Pakistan]

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

M.A. Nos. 115/LB and 116/LB of 2004, I.T.As. Nos. 4526/LB to 4528/LB of 2004, 3672/LB, 3673/LB of 2005 and 5183/LB of 2004, decided on .10th October, 2006.

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

----S. 156---Rectification of mistake---Application for recall of ex parte order on the ground that assessee was condemned unheard but while disposing the application that very Appellate Tribunal treated the same as Rectification Application. under S.156 of the Income Tax Ordinance, 1979 despite the fact that there was no issue of rectification before the Bench---Validity---Miscellaneous application filed for recall of ex parte order could not be treated as Miscellaneous Application for rectification filed under S.156 of the Income Tax Ordinance, 1979---Orders passed, being not sustainable in the eyes of law, were vacated by the Appellate Tribunal in view of established principle of law that nobody could be condemned unheard---Ex parte order passed was recalled as absence marked on the date of hearing was accidental and not intentional on behalf of the assessee.

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

----S. 156---Rectification of mistake---Application for recall of order---Merits and demerits of the case could not be considered until and unless the Appellate Tribunal's ex parte order was recalled.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---

Non-issuance of notice before finalizing assessment---Effect---Before finalization of assessments, it was obligatory upon the Assessing Officer to confront the assessee with the defects noted by him in the accounts maintained by the assessee by issuance of specific notice under S.62 of the Income Tax Ordinance, 1979---Assessing Officer failed to do so because after examination of books of accounts and necessary details furnished by the assessee notice under S.62 of the Income Tax Ordinance, 1979 was issued but same was not specific notice under this section as the contents of the same were of notice under S.61 of the Income Tax Ordinance, 1979 requiring the assessee to furnish further details, which could not be termed as specific notice under S.62 of the Income Tax Ordinance, 1979---After that notice no other notice was ever issued and assessment was finalized without confronting the assessee with the defects noted by the Assessing. Officer, hence did not afford the assessee an adequate opportunity to explain his position---Assessee had been condemned unheard---Orders passed were liable to be cancelled for non-issuance of specific notice under S.62(1) of the Income Tax Ordinance, 1979 which was mandatory under the law---Orders passed by both the authorities below on the issues under consideration were vacated and the assessee's appeals were accepted on legal as well as factual plane by directing the Assessing Officer to accept the returned version of the assessee.

(1999) 80 Tax 241; 2001 PTD (Trib.) 2938; 2003 PTD (Trib.) 625 and 1999 PTD. (Trib.) 382 rel.

(d) Income-tax---

----Notional gain---Assets and liabilities in foreign currency were translated into Palo rupees at the exchange rate prevailing on the balance sheet date, which resulted gain on revaluation of foreign currency and did not come within the meaning of real income and was not liable to tax---Action of Assessing Officer was unsustainable and was vacated by the Appellate Tribunal.

1998 PTD (Trib.) 288 rel.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---Profit .and loss account---Addition---Addition under the head of Profit and Loss account had been made without confronting the assessee with specific instances of unverifiability, which was clear cut violation of provisions of 5.62(1) of the Income Tax Ordinance, 1979---While making additions authorities below had also deviated form established history of the case history of the case---All expenses were incurred for smooth running of business and could not be termed as inadmissible merely on the basis of stock phrases and conjectures---Since, Assessing Officer had failed to confront the assessee with specific instances of unverifiability, the additions made were illegal.

2006 PTD (Trib.) 2325 rel.

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

----S. 24(1)(i)---Deductions not admissible---Assessing Officer had admitted submission of complete details of total expenditure relating to salaries and allowances in respect of employees of the company drawing taxable as well as non-taxable emoluments---Additions made without pinpointing specific instances of unverifiability in no way could be termed as justified, due to unsustainability of the same in the eyes of law---Additions were deleted by the Appellate Tribunal.

Ch. Wasim Ismail and Ch. Muhammad Ismail for Appellants.

Anwar Ali Shah D.R. for Respondent.

2007 P T D (Trib.) 2583

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.As. Nos. 6370/LB and 6372/LB of 2005, decided on 17th March, 2007.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---Profit and loss expenses---Disallowance by using- stock phrases and in generalized 'terms that expenses involved were personal in nature and unverifiable--Validity---If some expenses were unverifiable and un­vouched the Assessing Officer should keep in his mind the volume and nature of the business and proportion of the expenses claimed by the assessee---Taxation Officer failed to find out any item in which personal element of expenditure was involved---Matter was an account case and the assessee was maintaining day to day account books---Audited books of accounts were produced before the Assessing Officer, consisting of all the details, explanations, vouchers and ledgers of the respective heads---Law cast a legal obligation upon the Assessing Officer before disallowing expenses where books of accounts were being produced---Taxation Officer, in terms of proviso to subsection (1) of S.62 of the Income Tax Ordinance, 1979 should have confronted the assessee with the defects found in the books of accounts; it was a mandatory provision which, was required to be followed---Mandatory notice under S.62(1) of the Income Tax Ordinance, 1979 was prerequisite condition which was added in income tax law just enabling taxpayer to know the allegation against him and give a proper reply and detail thereof so that the taxpayer be saved from the arbitrary action of the Assessing Officer---Assessing Officer having failed to do so he had no legal authority to make any disallowance---Such disallowances were ab initio void and illegal which were rightly deleted by the First Appellate Authority.

1991 PTD (Trib.) 531; 1992 PTD (Trib.) 1176; .ITA No. 176/KB of 1998-99; ITA No. 2519/KB of 1992-93 in I.T.A. No. 314/KB of 1981-82; 1989 PTD (Trib.) 39 and I.T.A. No. 922, 923, 1595/KB/84-85 ref.

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

----S. 62(1)---Assessment on production accounts, evidence etc.---Profit and loss expenses---Principles/position regarding deduction of expenditure set out by the Tribunal and High Courts recorded.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---Profit and loss expenses---Disallowances in the profit and loss account expenses were not to be made without any basis and without examining the claim in details and without due notice" and without incorporation the instances' of defects in assessment order by the Assessing Officer---Disallowances in profit and loss account expenses were made in a slipshod manner without pinpointing specific defects and instances and the assessee/taxpayers were constrained to contest those disallowances in first and second appeals---Order of First Appellate Authority in deleting the disallowance was maintained by the Appellate Tribunal in circumstances.

2006 PTD 2654 rel.

(d) Income Tax---

----Setting aside of assessment---Assessment year 2001-2002---Issue regarding setting aside of prorating of expenses was agitated on the ground that First Appellate Authority was not competent to set aside the assessment after 1st July, 2005---Validity---Powers of setting aside were withdrawn w.e.f. 1st July, 2005, which pertained to assessment year 2005-2006 (Tax Year, 2006) and not for the assessment year under appeal, as said provision of law was not applicable retrospectively.

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

----S. 156(3)---Rectification of mistake---Where any mistake was brought to the notice of any income tax authority by the assessee and no order under subsection (1) of the S.156 of the Income Tax Ordinance, 1979 was made by such authority before the expiration of the financial year, next following the date in which it was so brought to its notice, the mistake shall be deemed to had been rectified.

Dr. Ishtiaq Ahmed, D.R. for Appellant.

Jawed Zakaria for Respondent.

2007 P T D (Trib.) 2601

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No. 188/IB of 2007, decided on 20th July, 2007.

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

----S. 122---Amendment of assessment---Jurisdiction---Order for cancellation or reopening for modification of an assessment was made in disregard to the declaration of the assessee---Assessing Officer needs to be very clear in its mind as to why he wants to modify the assessment---Factual basis as well as the provision of law must be indicated for acquiring proper jurisdiction.

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

----Ss. 122, 76 & 66-A---Income Tax Ordinance (XXXI of 1979), Ss.65

& 66A---Amendment of assessment---Provisions in terms of Ss.65 and 66A of the Income Tax Ordinance, 1979 were different in their application from those of S.122 of the Income Tax Ordinance, 2001.

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

----S. 122---Amendment of assessment---Expression "subject to this section"---Meaning and scope---Provisions of S.122 of the Income Tax Ordinance, 2001 start with the language "subject to this section"---Such language restricts all further proceedings for amendment of an assessment which means it could only be amended if they were covered by the provisions of this section---Amendment of assessment for which this section had been prescribed could not be made if the requirements and qualifications prescribed in this section were not completed before making such amendment of the assessment.

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

----S. 122---Amendment of assessment---"By making such alterations or additions as the Commissioner considers necessary"---Meaning and scope---Commissioner, through this part of S.122(1) of the Income Tax Ordinance, 2001 had been allowed to make such alternations or additions as were required obviously- for the reason of the information and circumstances before him---Comment made by such provision in terms of information and circumstances with reference to the first part of the section which says subject to this section, creates an embargo on the Commissioner---Term used as "Commissioner considers necessary" in the provision was obviously subject to S.122 of the Income Tax Ordinance, 2001---Parameters had been prescribed in S.122(2)(3), (4), (4A), (5), (5A), (5B), (6), (7), (8) and (9) of the Income Tax Ordinance, 2001---All these parameters were relevant to amendment, for example subsection (2) provides for a period during which such amendment could be made in one particular situation and subsection (3) prescribes the limitation in case of multiple amendments of an assessment in certain situations while subsection (4A) also deals with the limitation but in respect of the assessment finalized under the Income Tax Ordinance, 1979.

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

----S. 122(5) & (5A)---Amendment of assessment---Amendment of the assessment was subject to provisions of subsections (5) and (5A) as well as the other provisions of section 122---Subsection (5) provides for an embargo on the Assessing Officer that he could only amend an assessment under subsection (1) or may further amend an assessment under subsection (4) if he had in his custody a definite information that any income of the assessee had escaped assessment or his income had been under assessed or had been assessed at too low a rate or had been subject to excessive relief or refund or if the income had been misclassified.

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

---S. 122---Amendment of assessment---Definite information---Accumulated reading of S.122 of the Income. Tax Ordinance, 2001 gave the impression that one could go for amendment of an assessment if he had definite information with regard to the various requirements mentioned therein.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), Ss. 62, 63 & 65---Amendment of assessment'---Re-opening of assessment'---Comparison---Definite information---In the present law it is amendment of assessments while in old law it was re-opening of the assessment and consequent assessment under the provisions of Ss.62 & 63 etc. as the case maybe of the Income Tax Ordinance, 1979--Present law appeared to be having a wider scope was the Commissioner would be simultaneously entitled to alter or amend the assessment which was not possible under S.65 of the Income Tax Ordinance, 1979---Assessment later on was again to be finalized after issuance of a notice under S.61 either under S.62 or 63 or any other provision applicable in the circumstances of-the case---In the present scheme of law the Commissioner is empowered to make alternations or additions which he considers necessary---For this purpose he is not required to invoke the other provisions of Income Tax Ordinance, 2001---Under Income Tax Ordinance, 1979 in S.65 of the Income Tax Ordinance, 1979, the. assessee was required to file fresh return in compliance with the notice issued under the said section which again was not a requirement under S.122 of the Income Tax Ordinance, 2001 and Assessing Officer could continue and proceed on the basis of deemed assessment order before him but obviously if there was any definite information available---Amendment could not be made without giving a chance to the assessee of being heard as is provided in jurisprudence---Principles of natural justice comes into picture with full force and the maximaudi alteram partem' needs to be read as a part and parcel of such proceedings---Such is not only a known and settled requirement of jurisprudence, but has also specifically been added as S.122(9) of the Income Tax Ordinance, 2001---New law definitely appears to be as more comprehensive but not without the strings which had already been prescribed by the earlier decisions of the higher and superior Courts while defining the term `definite information'---Amendment being subject to S.122(5) of the Income Tax Ordinance, 2001, chain of judgments by the Supreme Court and other subordinate Courts in Pakistan are definitely attracted.

(h) Income-tax---

--Definite information---Explanation---Tangible information and such proof that leads to the reason to believe' could only be considered as adefinite information'---Any estimate, gossip, personal whims or surmises could not be termed as the `definite information'---Prefix of definite with suffix of information makes the term more strong---Any information which creates doubts or provides reason to suspect that the income has been concealed does not form a part of the term definite information.

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

----S. 120---Assessment---Application of mind, due consideration of the facts, opinion and scrutiny of the documents---Acknowledgement slip of the filing of return had been declared to be as an assessment order duly assessed by the Commissioner of Income Tax under S.120 of the Income Tax Ordinance, 2001----Concept of application of mind, due consideration of the facts, opinion and scrutiny of the documents enclosed had totally vanished from the assessment proceedings---Such new deemed assessment order did not have any application of mind from the Assessing Officer's side.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), Ss.62, 63, 59 & 59A---Assessment---Deemed assessment order could not be equated with the assessment framed earlier under Ss.62, 63, 59 or 59A etc. of the Income Tax Ordinance, 1979.

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

----S.62---Income Tax Ordinance (XLIX of 2001), S.120---Assessment on production of accounts, evidence etc.---Sanctity attached to the assessment order under the provisions of Income Tax Ordinance, 1979 could not be equated with or extended to the deemed assessment order under the provisions of the Income Tax Ordinance, 2001.

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

----S. 122(5)---Income Tax Ordinance (XXXI of 1979), S. 65---Unlike

S.65 of the Income Tax Ordinance, 1979 which was also in respect of re-assessment of the proceedings, the new provision of S.122 (1) and S.122(5) of the Income Tax Ordinance, 2001 had some different parameters.

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

----S. 122---Amendment of assessment---Claim that mentioning of S.122 alone on the notice was enough to cover all the probabilities like concealment of income as well as erroneous assessment etc. was not correct.

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

----S. 122(1)---Amendment of assessment---Section 122(1) of the Income Tax Ordinance, 2001 is the mother provision while all other subsections are helping and the same determine the fitness of the amendment of the assessment to be made under S.122(1) of the Income Tax Ordinance, 2001.

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

----S. 122(5) & (5A)---Amendment of assessment---Issuance of notice without mentioning exact provision of law---Validity---Assessing Officer had not bothered to mention the subsection in its notice---Even if one was confident that S.122 of the Income Tax Ordinance, 2001 could be enough for acquiring jurisdiction, non-mentioning of the other provision in terms of subsection (5) or (5A) was fatal as the parameters for each of the said provisions were entirely different from the other---Besides, erroneousness of the assessment for determining prejudice to the interest of revenue in a deemed assessment order shall also need a good deal of dilation and discussion---Jurisdiction could only be acquired by Taxation Officer after receiving of an information from audit department by issuance of a notice under S.122(5) of the Income Tax Ordinance, 2001--Said notice having not properly been issued for acquiring jurisdiction, one could not agree with the department that the subsequent proceedings were justified---Notice issued under S.122 of the Income Tax Ordinance, 2001 was without jurisdiction having not mentioned the exact provision of law---Subsequent proceedings being based on all illegal notice would crumble to ground and cancelled by the Appellate Tribunal.

2006 PTD 673 rel.

Atif Waheed for Appellant.

Sardar Taj Muhammad, D.R. for Respondent.

2007 P T D (Trib.) 2635

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman, Jawaid Masood Tahir Bhatti, Judicial Member and Shahid Azam Khan, Accountant Member

I.T.As. Nos. 992/KB and 1467/KB of 2005, decided on 27th February, 2007.

Per Jawaid Masood Tahir Bhatti, Judicial Member (Minority view)

Income Tax Ordinance (XLIX of 2001)---

----Second Sched., Part-I, Cl. (132), Ss.39 & 120---Income Tax Ordinance (XXXI of 1979), Second Sched., Cl. (176)---Exemption---Tax years 2003 and 2004---Income from "Profit on Debts"---Taxation of being "Income from Other Sources"---Validity---Taxpayer being limited company incorporated under Companies Ordinance, 1984 conducting, business of power generation had filed returns declaring NIL income---Profits and gains of power generation were granted exemption previously vide Cl. (176) of the Second Schedule to the Income Tax Ordinance, 1979 which. were in similar manner exempted under Cl. (132) of the Second Schedule in the Income Tax Ordinance, 2001---Returns stood accepted under S.120 of the Income Tax Ordinance, 2001 and orders were deemed to be passed.

I.T.A. No.2145/KB of 2002; I.T.A. No.1835/KB of 2003 and R.As. Nos. 673 and 674/KB of 2002 rel.

CIT v. Shart Meattle (1973) 90 ITR 385; Commissioner of Income Tax v. Express News Papers Limited (1960) 40 ITR 38; Messrs Tri Pack Films Limited`s case I.T .A. No.955/KB of 1998-99; 1990 PTD 708 and 1998 PTD 3179 ref.

Income Tax Ordinance (XLIX of 2001)---

----S. 124A---Powers of tax authorities to modify orders, etc.---Additions on profit of debts by the Inspecting Additional Commissioner while Appellate Tribunal had already directed the Taxation .Officer to allow exemption on profits earned on bank account of the company for the previous years and upheld the order of First Appellate Authority---Validity---No justification existed for rejection of claim of exemption for Tax Year, 2003 as First Authority without keeping in view specific provisions of law i.e. 124A of the Income Tax Ordinance, 2001 regarding powers of tax authorities to modify the orders had rejected the appeal filed by the taxpayer---Order of First Appellate Authority as liable to be vacated by the Appellate Tribunal in circumstances.

I.T.A. No.2145/KB of 2002; I.T.A. No.1835/KB of 2003; .1999 PTD (Trib.) 1528 and 2003 PTD (Trib.) 1643 rel.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5A)---Amendment of assessments---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 by the Inspecting Additional Commissioner, which was an unknown authority in the Income Tax Ordinance, 2001 was liable to be vacated in circumstances.

2006 PTD (Trib.) 1778 rel.

Per Shahid Azam Khan, Accountant Member disagreeing with Jawaid Masood Tahir Bhatti, Judicial Member---(Minority view)

Income Tax Ordinance (XLIX of 2001)---

----S. 39, Second Sched., Cl. (132)---Income from other sources---Power generating project---Profit on debts---Profit on debts earned by the taxpayer was chargeable to tax under S.39 of the Income Tax Ordinance, 2001 and did not enjoy exemption under Cl. (132) of the Second Sched. of the Income Tax Ordinance, 2001.

Messrs AES Pak. Gen (Pvt.) Ltd. v. C.I.T. Civil Petitions Nos.2211-L and 2212-L of 2005; DTPSC'0016: 5 Tax 262: 1962 PTD 415: -1962 PTD 128 and 2005 PTD 296 rel.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A) & 2(65)---Amendment of assessment---Amendment of Order under S.122 (5A) of the Income Tax Ordinance, 2001 by the Inspecting Additional Commissioner---Legality---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 had shown that designation mentioned on it was that of "TO/Inspecting Additional Commissioner"---Designation TO' stands forTaxation Officer' which was defined in S.2(65) of the Income Tax Ordinance, 2001 to also include Additional Commissioner'---Order had been passed by the Departmental Officer in the capacity of aTaxation Officer' who was also an Additional Commissioner---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 had suffered from no legal infirmity and merely incorrect use of second designation as `Inspecting Additional Commissioner did not prejudice the Departmental stand on the chargeability of profit on debt under .5.39 of the Income Tax Ordinance, 2001.

Per Khawaja Farooq Saeed, Chairman Agreeing with Shahid Azam Khan, Accountant Member---[Majority view]

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

----S. 2(65}---Taxation Officer---Section 2(65) of the Income Tax Ordinance, 2001 provided that the Deputy Commissioner of Income Tax (DCIT) as well as the Additional Commissioner (BPS-19) could be made as Taxation Officer by the Commissioner of Income Tax.

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

----S. 210(1A)---Delegation---Amendment in S.210(1A) of the Income Tax Ordinance, 2001 had only drawn a line in respect of delegation of the power by the Commissioner of Income Tax---Power under S.122(5A) of the Income Tax Ordinance, 2001 was not to be assigned to an officer less than an officer of the rank of an Additional Commissioner---Prior to said date the Commissioner of Income Tax could delegate the power to cancel an order under S.122(5A) of the Income Tax Ordinance, 2001 to a Taxation Officer of Grade 17 or Grade 18 in addition to Grade 19 and that did not have any effect on the proceedings initiated and continued by the department specially for the reason that the order was cancelled after the insertion of the said provision---Such was notwithstanding the fact that the Commissioner of Income Tax had the powers to assign the powers to cancel the order under S.122(5A) of the Income Tax Ordinance, 2001 to Taxation Officer of any rank before said amendment; however, after 1-7-2004 he could now delegate the power of cancellation of an order to an Additional Commissioner only.

(c) Income-tax---

----Charging provision---Doubts---If it was a charging provision the doubt, if any, should be resolved in favour of taxpayer.

(d) Income-tax---

----Exemption---Doubts---Doubt in case of grant of exemption is fatal and is always resolved in favour of the department.

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

----Second Sched. Part-I, Cl. (132), Ss.39 & 120---Income Tax Ordinance (XXXI of 1979), Second Sched: Cl. (176)---Exemption---Power generating project---Tax years, 2003 & 2004---Interest income---Taxation of---Validity---Neither technically nor factually interest income earned form bank could be declared as exempt---Action of the Assessing Officer of charging tax on interest income by considering the same as not auxiliary or ancillary of the income of power generation was held to be fully justified.

2004 PTD 2255 rel.

Tayyab G. Adeeb, F.C.A. for Appellant (in I.T.A. No.992/KB of 2005).

Faheem ul Haq D.R. for Respondent (in I.T.A. No.992/KB of 2005)

Faheem ul Haq D.R. for Appellant (in I.T.A. No.1467/KB of 2005).

Tayyab G. Adeeb, F.C.A. for Respondent (in I.T.A. No.1467/KB of 2005).

2007 P T D 2

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

Messrs ADAMJEE INSURANCE COMPANY LTD. through Executive Director (Finance)

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE (ADJUDICATION) KARACHI-III, KARACHI

Special Customs Appeal No. 202 of 2003, decided on 26th September, 2006.

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

----S.3-D---Central Excise Rules, 1944, Rr.10 & 96ZZF---Limitation Act (IX of 1908), S.10 & Art.145---Premium received by Insurance Company from insured persons---Company charged excise duty on entire premium without first deducting therefrom agents' pay, commissions and discounts---Non-deposit of such wrongly charged excise duty in treasury---Show cause to company for recovery of such wrongly charged excise duty---Limitation---Nature of obligation under S.3-A of Central Excise Act, 1944, was not excise duty, but an amount collected wrongly/ erroneously as excise duty, which could not be termed as short levied or erroneously refunded excise duty---Period of limitation as provided under R.10 of Central Excise Rules, 1944 for short levied or erroneously refunded excise duty would not apply to proceedings initiated for 'recovery of amount under S.3-D of Central Excise Act, 1944-Person collecting amount under S.3-D of the Act would be holding same in trust for Federal Government---Holder of such amount would be regarded either as "depository" as provided in Art.145 of Limitation Act, 1908 or "trust" within meaning of S.10 thereof---Insurance Company was holding such excess recovered amount in trust for depositing same with Federal Government---Status of Insurance Company was more of an express trust as envisaged in S.10 of the Limitation Act, 1908 than of a depository as provided in Art.145 thereof---Right to recover such excess charged amount would accrue the moment such fact became known to Excise " Authority---No period of time would bar recovery of such amount---Principles.

Lala Gobind Prasad v. Chairman of Patna Municipality Calcutta Law Journal (Volume (VI) at page 535; Deputy Custodian of Enemy Property v. Karachi Electric Supply Corporation (KESC) PLD 1975 Kar. 121; Kishtappa Chetty v. Lakshmi Animal AIR 1923 Mad. 578 and ILR 62 Calcutta 393 rel.

(b) Administration of justice---

----Quoting wrong provision of law and/or rules---Effect---Such error would be regarded as a technical error and would be of no legal consequence---Principles.

(c) Words and phrases---

----"Deposit" and "depository"---Meaning.

Corpus Juris Secundum, Vol. 26-A, pp. 198 and 206 ref.

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

----S.3-D [as inserted by Finance Act (X of 1993)]---Provision of S.3-D of Central Excise Act, 1944---Retrospective effect---Word "collects" as used in S.3-D of the Act would refer to present and future collections, while words "has collected" as used therein would refer to past collections---Legislature by using both such words intended to cover amounts collected in the name of excise duty either before or after insertion of such provision in the Act by Finance Act, 1993---Principles.

Sirajul Haq and Arshad Siraj for Appellant.

Raja M. Iqbal for Respondent.

Date of hearing: 31st August, 2006.

2007 P T D 21

[Karachi High Court]

Before Muhammad Moosa K. Leghari and Muhammad Ather Saeed, JJ

ABDUL AZIZ MUHAMMAD

Versus

COMMISSIONER OF INCOME TAX

I.T.C. No.26 of 1990, decided on 3rd March, 2006.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 23 & 136(2)---Bad debt---Disallowance of bad debt---Application for---Reference to High Court---Applicant invested 'amount in a joint venture and said joint venture had informed him that for the period ending on 31-12-1974 a profit would fall to share of applicant, but said profit was never paid by the joint venture to the applicant---Applicant for assessment year in question claimed amount as bad debts under S.23(1) of Income Tax Ordinance, 1979 as the creditor had allegedly played fraud with him and there was no hope of recovery of said amount which allegedly fell to his share---Income Tax Officer disallowed claim of applicant for the reason that amount claimed by applicant as bad debt was of capital nature---Said order of Income Tax Officer was upheld by C.I.T. (Appeals), who also upheld that alleged bad debt was capital in nature---Income Tax Appellate Tribunal dismissed appeal of applicant and refused to refer questions involved in his case because in its opinion entire exercise carried out was that of finding of facts and no question of law was involved---Applicant had approached the High Court under S.136(2) of Income Tax Ordinance, 1979 seeking the opinion on the questions which were rejected by the Tribunal---Contentions of counsel for applicant, that so far as the allowance of bad debt under S.23(1)(x) of Income Tax Ordinance, 1979 was concerned, there being no distinction between category of revenue bad debt and capital bad debt, disallowance of bad debt by Income Tax Officer and dismissal of appeal by Income Tax Appellate Tribunal on ground that applicant had not been able to prove his case, could not be sustained, "carried a lot of weight because there was no hope for recovery of alleged amount from the joint venture---Appellate Tribunal was not justified to reject reference application and dismiss appeal of applicant; it was not a question of adjustment of capital loss of joint venture business, but was writing off of the investment made by applicant in joint venture as a bad debt because such investment had become irrecoverable and was claimed as bad debt under S.23(1)(x) of Income Tax Ordinance, 1979.

(1974) 94 ITR 496; Dawji Dadabhai & Co. v. Commissioner of Income Tax 1982 PTD 210 and Commissioner of Income Tax v. Muhammad Amin Muhammad Bashir Limited 1990 PTD 151 rel.

Arshad Siraj for Petitioner.

Nasrullah Awan for Respondent.

Date of hearing: 26th January, 2006.

2007 P T D 45

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

COLLECTOR OF CUSTOMS, KARACHI

Versus

Messrs ORIENTAL EXPORT INTERNATIONAL, KARACHI

Special Customs Reference Application No. 82 and C.M.A. No.1175 of 2006, decided on 25th August, 2006.

Customs Act (IV of 1969)---

----Ss.32(1) & 196---Allegation of misdeclaration in Bill of Export regarding weight of consignment---Tribunal finding such charge not based on 100% weightage of consignment---Reference to High Court---Question in reference to High Court was whether whole consignment was weighed or its 25% was weighed---Validity---Tribunal having not decided any question of law, High Court dismissed reference in limine.

Raja M. Iqbal for Applicant.

2007 P T D 60

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

Messrs MORO TEXTILE MILLS LIMITED through Chairman

Versus

CENTRAL BOARD OF REVENUE through Chairman, Islamabad and 2 others

Constitution Petitions Nos. D-154 and D-737 of 1995, decided on 29th September, 2006.

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

----S.19---Sales Tax Act (VII of 1990), S.13(1)---S.R.O. 484(I)/92, dated 14-5-1992---Import of Fibre Cans and Roving Bobbins during period specified in S.R.O. 484(I)/92 for setting up of new textile unit in designated area---Issuance of installation certificate by competent authority---Denial of exemption from duty and tax claimed on such items for having been imported separately from a different country after one year of import of main plant---Validity---Industrialist might delay import of any part of plant on account of financial constraints or he might choose to import a particular item required for his plant from a different manufacturer located in a different country as he might find same cheaper or of a better or different quality---Said S.R.O. did not impose any such restrictions on import of such items---Definition of "machinery" as used in the S.R.O. included apparatus, appliance and component parts thereof---Fibre Cans and Roving Bobbins being component parts of machinery would fall within extended definition of "machinery" entitling exemption under the S.R.O.---Benefit of exemption on such items imported during subsistence of exemption was wrongly denied.

(b) Words and phrases---

----"Machine" and "Machinery"---Meaning and distinction.

Webster's International Dictionary; Stroud's Judicial Dictionary; Blankenship v. Cox; Buchanan v. Exchange Fire Insurance Company; Seavey v. Central Mut. and Fire Insurance Company and General Parts Corporation v. First Trust and Savings Bank ref.

(c) Words and phrases---

----"Appliance" and "Apparatus"---Meaning and distinction.

Faisal Siddiqui for Appellant.

Syed Tariq Ali, Federal Counsel for Respondent.

Date of hearing: 29th August, 2006.

2007 P T D 117

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

GHANDHARA NISSAN DIESEL LTD. through Director

Versus

COLLECTOR OF CUSTOMS

Special Customs Reference Application No.157 of 2005, decided on 22nd September, 2006.

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

----S. 169---Jurisdiction of High Court in reference application---Scope---Reference application falling under advisory jurisdiction of High Court would be limited to questions of law arising out of order of Tribunal---No issue beyond the mandate of law could be considered.

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

----S. 32(2) [as amended by Finance Act (XXXI of 2000) w.e.f. 1-7-2000]---S.R.O. 225(I)197, dated 28-3-1997---S.R.O. 563(I)/2005, dated 6-6-2005---Imported goods---Assessment of duty at 30% on 5-3-1997 and payment of duty on 1-4-1997---Enhancement of duty from 30% to 40% w.e.f. 28-3-1997---Show cause notice, dated 7-11-2000 demanding 10% duty being short levied---Validity---Relevant date for purpose of S.32(2) of Customs Act, 1969 was 1-4-1997---Period of limitation for issuance of show cause notice as provided in S.32(2) of Customs Act, 1969 was 3 years upto 30-6-2000, which expired on 30-6-2000---Such period of limitation would not commence from date of discovery of short levy---Impugned show cause notice was thus barred by time, under which no recovery could be made-- Principles.

(c) Limitation---

----Subsequent enhancement in period of limitation---Not having effect of re-opening past and closed transaction---Principles.

Once a matter becomes barred by time, then subsequent enhancement in period of limitation shall not have the effect of re-opening the past and closed transaction and resuscitating the matter, which had attained finality and had gone in the annals of history.

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

----S. 32(2)---Detection of short levy of duty after expiry of period of limitation---Issuance of show-cause notice---Validity---Period of limitation would not commence from date of discovery of short levy of duty---No recovery could be made in pursuance of such notice---Remedy of department in such case would be to initiate disciplinary proceedings against its officer found to be negligent in detecting short levy of duty within period of limitation.

Aziz A. Shaikh for Applicant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 22nd September, 2006.

2007 P T D 131

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

KHURRAM JAMAL

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT)

Customs Reference Application No.145 of 2005, decided on 13th September, 2006.

Customs Act (IV of 1969)---

----Ss. 168(2) & 180---Non-issuance of show cause notice within two months from date of seizure of goods---Effect---Non-issuance of such notice would neither vitiate or invalidate entire proceedings nor washed away civil and criminal liability, but only the person from whose possession goods were seized would become entitled to return of goods.

Wajiha Mehdi for Applicant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 13th September, 2006.

2007 PTD 153

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

COLLECTORATE OF CUSTOMS

Versus

Messrs NOMAN CHUGTAI

Special Customs Reference Application No.83 and C.M.A. No. 1163 of 2006, decided on 25th August, 2006.

Customs Act (IV of 1969)---

----Ss. 194-B(2) & 196---Non-consideration of facts on record by Tribunal---Reference to High Court---Maintainability--Tribunal being final fact-finding authority, applicant for such purpose could submit rectification application before Tribunal---High Court dismissed reference application being not maintainable.

Raja M. Iqbal for Applicant.

2007 P T D 161

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

MAPLE LEAF CEMENT FACTORY LTD. through Company Secretary

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 2 others

Constitutional Petitions Nos. D-1041, 1147, 1169 and Miscellaneous Nos. 5488, 5524 and 4731 of 2006, decided on 20th September, 2006.

Customs Act (IV of 1969)---

----S. 19---S.R.O. 575(I)/2006, dated 5-6-2006---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Imported goods---Petitioner sought release of goods on payment of duty at 5% rate under S.R.O. 575(I)/2006, dated 5-6-2006, while authority demanded same at 30% rate---High Court disposed of constitutional petition with directions that petitioner, after being supplied assessment order, would deposit duty at 5% rate without objection and deposit 25% under protest without prejudice to his right to assail assessment order and application of rate of duty at 30%; that on deposit of duty at 30% rate in such manner, authority would release goods forthwith and petitioner would be at liberty to pursue his said plea in appeals before Appellate Authority and Tribunal, who would decided same within specified time; and that if petitioner succeeded finally in his plea, then duty paid in excess would be refunded to him within 15 days of his refund application.

Faisal Siddiqui for Petitioners (in all the three petitions).

Salman Akram Raja for Petitioner (in C.P. No.D-1041 of 2006).

Asghar Farooqui Standing Counsel for Respondent No. 1.

Raja Muhammad Iqbal for Respondents Nos.2 and 3.

2007 P T D 167

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Rahmat Hussain Jafferi, J

Mrs. AFROZE SHAH through Attorney

Versus

PAKISTAN through Secretary, Revenue Division, Ministry of Finance and another

C.P. No.D-1211 of 1999, heard on 31st March, 2005.

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

----Ss. 2(rr) & 168---Seizure of goods before finalizing of adjudication proceedings---Scope---Any restriction on disposal of goods pending adjudication would amount to detention, while seizure would imply physical custody of goods or deprivation of right to use them by its owner---No distinction between "detention" and "seizure" existed---Seizure could be effected even before finalizing of adjudication proceedings---Once import or possession of disputed goods finally established to be an offence under Customs Act, 1969 after due notice of its owner, then goods could be straightaway confiscated and such seizure could be termed as an interim measure prior to confiscation.

Collector of Customs v. S.M. Yousuf 1973 SCMR 11; Iqbal Akhtar v. Ch. Muhammad Mushtaq PLD 1977 Lahore 1318 and Collector of Customs V. Haji Noorul Haq PTCL 2003 CL 716 distinguished.

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

----S. 168---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Non-issuance of show-cause notice to petitioner within two months of seizure of vehicle---Non-filing of counter affidavit by authority---Validity---Initial period of two months was extendable within such initial period, but not after its expiry---After expiry of such period, goods would become liable to be returned to its owner and he could not be divested of such right after expiry of such period---In absence of counter-affidavit of authority, petitioner's contention regarding non-issuance of such notice was accepted---High Court accepted constitutional petition.

Khannan Jan and others v. Deputy Collector Central Excise and Land Customs PTCL 1983 CL 184 rel.

Dr. Muhammad Farogh Naseem for Petitioner.

Faisal Arab Standing Counsel along with Mr. Raja Muhammad Iqbal for the Respondents.

Date of hearing: 31st March, 2005.

2007 P T D 171

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

Messrs HABIB SUGAR MILLS LTD. through Law Officer

Versus

ADDITIONAL COLLECTOR, SALES TAX, CUSTOMS HOUSE, SITE HYDERABAD and 2 others

Special Sales Tax Appeal No.14 of 1999, decided on 13th October, 2006.

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

----Ss. 2(46) & 3---Sindh Abkari Act (V of 1878), S. 19---Industrial alcohol, supply of---Inclusion of Provincial excise duty for determining value of such supply for purpose of charging sales tax---Validity---Such duty was not collected by supplier at the time of sale, but was collected subsequently directly by Provincial Excise officials---Amount of such duty would not be included in the value of supply.

(b) Interpretation of statutes---

----Fiscal statute---No presumption as to a tax---Duty of Court to implement law according to plain language thereof---Principles.

While interpreting the tax statutes, the Court is required to implement the law in accordance with the plain reading of the language of statute. There is no room for any intendment by ignoring the ordinary plain language of the statute. In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no presumption as to a tax. Nothing is to be read in. Nothing is to be implied. One can only look fairly at the language used.

Cape Brandy Syndicate v. IR (1921) 1 KB 64 fol.

Muhammad Ali Sayeed for Appellant.

Nemo for Respondents.

Mrs. Sofia Saeed Shah, Standing Counsel is present on Court notice.

Date of hearing: 3rd October, 2006.

2007 PTD 198

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

MUHAMMAD ASHFAQ

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Ministry of Finance, Islamabad and 2 others

Constitutional Petitions Nos.D-964 and Miscellaneous Appeal No.4469 of 2006, decided on 13th September, 2006.

Customs Act (IV of 1969)---

----S. 25---Imported goods, valuation of---Method---Provisions of law contained in various subsections of S.25 of Customs Act, 1969 must be applied in sequential order.

Rehan Umer v. Collector of Customs 2006 PTD 909 and Messrs Pakistan Dry Battery Manufacturers- Association v. Federation of Pakistan 2006 PTD 674 fol.

Abdul Ghaffar Khan for Petitioner.

Raja Muhammad Iqbal for Respondent No.3.

2007 P T D 202

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

COLLECTOR OF CUSTOMS (APPRAISEMENT)

Versus

Messrs SHABAZ INTERNATIONAL

Special Customs Reference Applications Nos.85 and 88 of 2006, decided on 3rd October, 2006.

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

----S. 196---Constitution of Pakistan (1973), Art. 189---Reference to High Court---Order of Tribunal being based on appreciation of facts, admissions/concessions of Revenue and earlier judgments of High Court and Supreme Court---Validity---Such controversy having been settled by Supreme Court must be laid to rest---Judgment of Supreme Court was binding on all judicial and administrative forums---No question of law requiring interpretation would arise from impugned order---High Court dismissed reference in limine.

(b) Practice and procedure---

----Issue taken to Supreme Court had decided at that level---Effect---Such controversy must be laid to rest.

Raja M. Iqbal for Applicant.

2007 PTD 211

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

BACHA SAID through Duly Constituted Attorney

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Islamabad and 4 others

Constitutional Petitions Nos.D-1403 to 1411 of 2006, decided on 30th August, 2006.

Customs Act (IV of 1969)---

----Ss. 16 & 17---S.R.O. 574(I)/2005, dated 6-5-2005 [as amended by S.R.O. 179(I)/2006, dated 2-3-2006]---Constitution of Pakistan (1973), Art.199---Constitutional petition---Import of vehicle---Refusal of authority to release vehicle for its import being prohibited---Importer seeking release of vehicle on payment of 30% fine pending final decision by Authority---High Court disposed of constitutional petition with directions to authority that if importer was found qualified to import vehicle and its import was not prohibited in law, then assess the duty and taxes payable within specified time; but in case its import was prohibited, then importer would not be entitled to its release; and that till final decision of his case, vehicle shall be released on payment of assessed duty, taxes and 30% fine, and in case importer succeeded to establish that he was not liable to pay any fine, then amount paid in excess shall be refunded to him within one month of such decision.

Sohail Muzaffar for Petitioners.

Raja Muhammad Iqbal for Respondents Nos.2 to 6.

Asghar Farooqui, Standing Counsel.

2007 P T D 228

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

Messrs POPULAR BOARDS (PVT.) LTD.

Versus

CUSTOMS, EXCISE, SALES TAX APPELLATE TRIBUNAL and another

Special Sales Tax Appeal No.553 of 2004, decided on 3rd October 2006.

Administration of justice---

----Dismissal of appeal by short order---Judgment containing reasons written by Presiding Officer or Tribunal on a subsequent date---Validity---Disposal of cases by short order was exclusive prerogative of superior Courts--Subordinate Courts must announce judgment/order after recording reasons and signing same---High Court set aside impugned order for being illegal---Principles.

Abid S. Zuebri for Appellant.

Raja M. Iqbal for Respondent No.2.

2007 P T D 234

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

COLLECTOR OF CUSTOMS

Versus

Messrs AYAZ AHMED

Special Customs Reference Application No.84 of 2006, decided on 10th October, 2006.

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

----Ss. 32 (1), 121 & 196---Customs Rules, 2001, Rr.335 & 341---S.R.O. 375(I)/2002, dated, 15-6-2002---Transshipment---Mis-declara­tion---Port of entry and port of destination---Adjudication proceedings---Jurisdiction---Question not decided by Customs, Excise and Sales Tax Appellate Tribunal---Effect---Port of entry and port of destination of goods imported were different---Customs officials at port of entry examined the goods, prepared contravention report, issued show cause notice and passed order-in-original---Customs, Excise and Sales Tax Appellate Tribunal allowed the appeal of importer and set aside the order-in-original on the sole point of jurisdiction---Plea raised by the authorities was that proceedings against mis-declaration were rightly initiated at the port of entry---Validity---Deeming provision of R.341 of Customs Rules, 2001, read with R.335, thereof, merely empowered customs officials at the port of entry to examine whether the declaration made was correct and goods corresponded to the declaration---Such provisions of the rules did not empower the customs officials to initiate adjudication proceedings as well at the port of entry---Jurisdiction would still be governed by notification issued by Central Board of Revenue, conferring territorial jurisdiction on customs officials---Central Board of Revenue admittedly had conferred territorial jurisdiction on the customs officials posted at the port of destination---Customs, Excise and Sales Tax Appellate Tribunal did not decide the case on merits, therefore, question pertaining to merits of case required no consideration---Reference was dismissed in circumstances.

Baba Khan v. Collector of Customs, Quetta and 2 others 2000 SCMR 678 rel.

(b) Precedent---

----High Court judgment in field---Effect---Until and unless earlier judgments of High Court on a point are set-aside by Supreme Court, they hold the field and are to be acted upon.

Raja M. Iqbal for Applicant.

2007 P T D 250

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

COLLECTOR OF SALES TAX AND FEDERAL EXCISE

Versus

Messrs QASIM INTERNATIONAL CONTAINER, TERMINAL PAKISTAN LTD.

Special Sales Tax Reference Application No.81 of 2006, decided on 27th September, 2006.

(a) Sindh Sales Tax Ordinance (VIII of 2000)---

----S.3 (1) & (2)---Sales Tax Act (VII of 1990), Ss.3, 3-A, 3-AA & 47(1)---Reference to High Court---Sales tax, recovery of---Scope---Services rendered to unregistered persons---Stevedoring services---Question involved in the reference was with regard to charging of further sales tax under the provision of Sindh Sales Tax Ordinance, 2000, for providing services to unregistered persons---Customs, Central Excise and Sales Tax Appellate Tribunal found that by virtue of the provisions contained in S.3 (2) and (3) of Sindh Sales Tax Ordinance, 2000, Sales Tax Department of Federal Government was merely empowered to charge, levy and collect the tax leviable under Sindh Sales Tax Ordinance, 2000, and was not empowered to charge levy and collect further tax under S.3 (1A) of the Sales Tax Act, 1990, without any corresponding provision in Sindh Sales Tax Ordinance, 2000--'Validity-Chargeability of sales tax on services was restricted to 15% of the value of taxable services---Levy of further tax to the services rendered to unregistered persons was not envisaged by Sindh Sales Tax Ordinance, 2000---If further tax was chargeable in case of services rendered to unregistered persons the law would have included a. reference to rate of tax under S.3 of Sales Tax Act, 1990---In absence of any such reference, sales tax on services could only be levied at the rate of 15 % of taxable services---Legislature had merely provided an enabling provision to Federal Sales Tax Department to charge, levy and collect the tax on services under Sindh Sales Tax Ordinance, 2000, in the same manner and at the same time as it was leviable under Ss.3, 3-A or 3-AA of Sales Tax Act, 1990, as the case might be---View taken by Customs, Central Excise and Sales Tax Appellate Tribunal was not open to any exception---Reference was dismissed in circumstances.

(b) Interpretation of statutes---

----Fiscal Statute---Charging provision and machinery part of statute---Applicability---Clear distinction existed between charging provisions of statute and machinery part thereof---Mode and manner of recovery does not alter the nature of a tax nor a tax can be introduced or imposed by implication.

Crescent Pak Industries (Pvt.) Ltd. v. Government of Pakistan 1990 PTD 29; Messrs English Biscuit Manufacturers Ltd. v. Assistant Collector, Central Excise and Land Customs, Landhi Division, Karachi 1991 PTD 178; Kohinoor Textile v. Federation of Pakistan 2002 PTD 121; Al-Haj Industrial Corporation (Pvt.) Ltd. Collector of Customs (Appraisement), Karachi, (2004) 89 Tax 371 (H.C. Kar.) and Messrs Hashwani Hotels Ltd. v. Government of Pakistan 2004 PTD 901 rel.

Raja Muhammad Iqbal for Appellant.

Date of hearing: 27th September, 2005.

2007 P T D 284

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

WEST PAKISTAN TANKS TERMINAL (PVT.) LTD. through Chairman

Versus

COLLECTOR (APPRAISEMENT), APPRAISEMENT COLLECTORATE, CUSTOMS HOUSE, KARACHI

Special Custom Reference Application No.152 of 2005, decided on 19th September, 2006.

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

----Ss. 30 & 156---Illegal removal of goods from bonded warehouse without payment of duties and charges---Rate of duty to be charged on such goods---Extent---Procedure provided for determining rate of duties and charges under S. 30(b) of Customs Act, 1969 would not apply to such case---Such goods would be charged with highest rate of duty applicable either on date of in-bonding of goods or date of detection of unlawful removal of goods from warehouse or date on which ex-bond of Bill of Entry was filed after detection of unlawful removal or date which evaded duties and charges were actually paid---Act of evasion of duties and charges being a wrong much higher than misdeclaration of goods or under-invoicing---Such act of removal would be as bad as smuggling of goods into country---Importer for such fraudulent removal could be criminally prosecuted under S.156 of Act, 1969---Applicability of highest rate of duty in such cases---Reasons stated.

National Construction Co. (Pakistan) Limited v. Government of Pakistan PTCL 1990 CL 217; Messrs Saira Industries (Private bonded warehouse) v. Collector of Customs 2002 CLC 616 and Collector of Customs v. Zaman Paper Board Mills Limited 2003 PTD 1791 rel.

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

----Ss. 30 & 33---Limitation Act (IX of 1908), S.19---Illegal removal of goods from bonded warehouse without payment of duties and charges---Issuance of show-cause notice to importer for recovery of evaded duty---Payment of amount by importer after such notice and its adjustment towards evaded duty---Importer claiming refund of such amount on the ground that proceedings initiated for recovery of evaded duty were barred by time---Validity---Importer after acknowledging his such wrongful act had agreed to pay evaded duty by executing a bond on stamp paper---Such acknowledgement of liability in writing vitiated plea of limitation---Recovery of adjustment of time-barred claim would not be unlawful, thus, debtor obligor could not seek refund of such amount on plea of limitation---Had there been no such acknowledgement, even then importer could not seek refund of such recovered or adjusted amount on plea of limitation---Principles.

(c) Limitation---

----Time-barred claim of money---Recovery or adjustment of such claim---Validity---Such recovery or adjustment would not be unlawful, thus, debtor or obligor could not seek refund of such money on plea of limitation---Principles.

Tariq Kamal Qazi for Applicant.

Raja M. Iqbal for Respondent.

Date of hearing: 19th September, 2006.

2007 P T D 290

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Fasial Arab, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-II, KARACHI

Versus

TARIQ MOHSIN SIDDIQUI

I.T.C. No.134 of 1994, decided on 20th September, 2006.

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

----S.16 (2)---Income Tax Rules, 1982, R.3 (2)(c)---Term "employee"---Connotation---Definition of "employee" in Income Tax Ordinance, 1979, is much wider than the definition of "employee" in R.3 (2)(c) of Income Tax Rules, 1982, which contains a restrictive meaning.

(b) Interpretation of statutes---

----Framing of rules---Object---Inconsistency with main enactment---Effect---No rule can be regarded as valid if it is inconsistent with any provision of main enactment or tends to restrict meaning and scope of main enactment in absence of any restrictive meaning deduced from any provision of main enactment itself---Purpose of framing rules under any enactment is to give effect to the provisions of main enactment or to facilitate realization of objects and purposes of main enactment---Rules made to an enactment cannot narrow down application and scope of main enactment---Ii no circumstances, rules can be made or interpreted in a manner so as to restrict the meaning of main enactment when no such restrictive meaning can be gathered from the provisions of said enactment---Nothing inconsistent is to be read into the provisions of main enactment on the basis of some provision contained in rules.

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

----Ss.16, 30 & 136 (2)---Income Tax, Rules, 1982, R. 3(2)(c)---Term "employee"---Scope---Director of more than one companies---Salaries from all companies---Assessee being director of two companies and treating remuneration received from both the companies as salary income, sought assessment under S.16 (1) of Income ' Tax Ordinance, 1979---Assessing Officer treated remuneration received from only one company as salary income, assessed the same under S.30 of Income Tax Ordinance, 1979---Income Tax Appellate Tribunal held remuneration from both the companies to be assessed under S.16 and not under S.30 of Income Tax Ordinance, 1979---Validity---Income Tax Appellate Tribunal rightly decided the question of law in favour of assessee by giving wider meaning to word "employee" and treating remuneration received by director from more than one company as salary income---No restricted meaning could be given to word "employee" for the purpose of head of income when it could not be spell out from the provision of S.16 (2)(c) of Income Tax Ordinance, 1979---Question of law was answered in affirmative in circumstances.

Commissioner of Income Tax v. S. Mazhar Hussain 1988, PTD 563 distinguished.

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

----S.16 (2)(a)---Income Tax Rules, 1982, R.3 (2)(b)---Expression "salary" as used in Income Tax Ordinance, 1979 and Income Tax Rules, 1982---Comparison---Expression "salary" is defined in S.16 (2)(a) of Income Tax Ordinance, 1979, as well as in R.3 (2)(b) of Income Tax Rules, 1982---Both definitions are not same or similar but they differ from each other---No repugnancy being there, both definitions are for different purposes and operate in different fields.

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

----S.16 (2)(e)---Income Tax Rules, 1982; R.3 (2)(c)--Term "employee" as used in Income Tax Ordinance, 1979 and Income Tax Rules, 1982---Comparison---Term "employee" defined in S.16 (2)(e) of Income Tax Ordinance, 1979, is for the purpose of determining head of income under which assessment is to be made and definition given in R.3 (2)(c) of Income Tax Rules, 1982, is for the purpose of determining value of perquisite, allowances and benefits to be included in salary income---No conflict exist in two definitions as purpose of both is different and they operate in different fields at the same time without being mutually exclusive of each other---No question of any repugnancy being there, definition of "employee" contained in rules is not violative of definition of terms "employee" given in the main enactment.

Nasrullah Awan for Applicant.

Sardar M. Ejaz Khan for Respondent.

Date of hearing: 20th September, 2006.

2007 P T D 369

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Ather Saeed, JJ

Messrs DADA STEEL MILLS (PVT.) LTD., KARACHI

Versus

CENTRAL BOARD OF REVENUE through Chairman, Islamabad and 2 others

Constitutional Petition No.D-997 of 1996, decided on 24th November, 2006.

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

----Ss. 3(4), 13(4) & 50---S.R.O. 630(I)/1995, dated 2-7-1995---S.R.O. 639(1)/1995, dated 2-7-1995---Non-automatic Steel Re-rolling Factory consisting of two manufacturing units of different diameter---Exemption claimed from sales tax due to continuous closure of one production unit for more than 75 days---Validity---Word "mill" had been used in S.R.O. 630(I)/95 in a limited sense to denote a manufactory unit/plant falling under particular classification of the S.R.O., for working out figure of payable fixed amount of sales tax on such basis---Word "factory" as used in S.R.O. 639(I)/95 had much wider meaning as denoting a building where goods were manufactured or assembled chiefly by machine process---Benefit of S.R.O. 639(1)/95 would be available in case of complete closure of factory and not some particular production unit or machinery being termed as "mill" by assessee---Mere installation of two manufacturing units of different diameter covered by S.R.O. 630(I)/95 and closure of one such production unit would not bring case within scope of S.R.O. 639(I)195---Factory of assessee never remained wholly closed even for a single day during such period---Abatement or partial exemption from sales tax had been provided by S.R.O. 639(1)/95 and not by S.R.O. 630(1)/95---Case of assessee would not be governed by S.R.O. 630(1)/95, but by S,R.O. 939(I)/95 specifying condition of closure of factory and not one of its mills for purposes of waiver of sales tax---Assessee was not entitled to such claim.

Additional Collector Sales Tax Lahore and another v. Rapafab Ltd. and others 2001 PTD 2383 distinguished.

(b) Words and phrases---

----"Mill" and "Factory"---Definition.

Black's Law Dictionary 7th Edition ref.

(c) Interpretation of statutes---

----Fiscal statute---Exemption provisions would be construed strictly, and unless person claiming such exemption proved satisfactorily that his case fell within four corners of exemption clause, he would not be entitled thereto.

Junaid Ghaffar for Petitioner.

None present for Respondents.

Date of hearing: 14th November, 2006.

2007 P T D 398

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

DEFENCE AUTHORITY CLUB, KARACHI and 5 others

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and 2 others

Constitutional Petitions Nos. D-1432, D-1433 of 2000, D-1861, D-1862 of 2001 and D-188 of 2002, decided on 7th October, 2005.

(a) Sindh Sales Tax Ordinance (VIII of 2000)---

----Sales Tax Act (VII of 1990), 5.246---Central Excise Act (I of 1944), S.2(20)---Customs House Agents Lincence Rules, 1971---Sale of Goods Act (III of 1930), S.2(7)---Constitution of Pakistan (1973), Arts.70, 199 & 142(c)---Constitutional petition---Concurrent List and Legislative List---Provincial Assembly; power to legislate on subject not mentioned in Concurrent and Legislative Lists---Levy of Sale Tax on "Services"---",Services"---Meaning---Petitioners/clubs called in question levy of sale tax on services rendered by clubs under Sindh Sales Tax Ordinance, 2000---Respondents/Province of Sindh, also filed constitutional petitions asserting therein that levy of sales tax on services under Sindh Sales Tax Ordinance, 2000 was lawful and intra vires of the Constitution---Petitioner clubs contended that Sindh Sales Tax Ordinance, 2000 was ultra vires of Constitution and beyond legislative authority of Provincial Legislature, hence, liable to be struck down; that in terms of Item No.49 to Fourth Schedule of the Constitution, only Federal Government could legislate in respect of taxes on sales; that item of tax for "services" was nowhere mentioned in Concurrent List, therefore, Provincial Legislature had no power to legislate on the subject as it was beyond its legislative power; that sales tax on services rendered by clubs could not .be demanded in respect of entrance fee, annual subscription, monthly subscription, gratuity, staff bonus etc.---Validity---Federation had got exclusive authority under Entry No.49 of Federal List to legislate law in respect of taxes on sale and purchase of goods---Legislation with reference to sales tax on services was not enumerated either in Federal List or Concurrent List and Art.142(c) of the Constitution, conferred exclusive powers to Provincial Assembly to make law with respect to any matter not enumerated in Federal List or Concurrent List---Expression "goods" according to S.2(7) of Sale of Goods Act, 1930, meant every kind of movable property other than actionable claims and money, and included stock and shares, growing crops, grass or things attached to or forming part of land which were agreed to be served before sale or under contract---Central Excise Act, 1944, did not define goods, but defined "excisable goods", as goods specified in First Schedule of the said Act and legislature was to be taken to have used the word in its ordinary dictionary meanings, hence, to become "goods", it was to be something which could ordinarily come to the market to be bought and sold and was known to the market---Expression "goods" used in Entry No.49 of Fourth Schedule of the Constitution was a controlling expression and could not be extended to include "Services" which one could render while offering goods for sale and could not be enlarged to include in it anything other than sale and purchase of goods, imported, exported, produced, manufactured or consumed, particularly after amending Entry No.49 by replacing "taxes on sales and purchase" with "taxes on sales and purchase of goods"---Oily services provided or rendered by clubs were made liable for sales tax under Sindh Sales Tax Ordinance, 2000, which did not define term "Services"---Section 2(20) of Central Excise Act, 1944 defined "excisable service" as services, facilities, and utilities specified in First Schedule read with Chapter 98 and heading 9801.4000 gave description of excisable service as service provided or rendered by club---Section 2(46) of Sales Tax Act, 1990 defined "value of supply" in respect of' a taxable supply, the consideration in money including all federal and provincial duties which supplier received from recipient and in case consideration for a supply was in kind or partly in kind and partly un money, the value of supply was to mean open market price of supply excluding the amount of tax---None of the definitions of "Service" given in S.2(20) of Central Excise Act, 1944, or S.2(46) of Sales Tax Act, 1990, was of any help to respondents because excise duty as well as sales tax leviable on excisable services provided under both the Acts advanced the stance of respondents---Term "Services provided" used in Schedule could not in any manner include membership fee or monthly subscription as the same had no nexus with services which club

Provided to its members like boarding, lodging, arranging parties, supply of foods and other stuff---Petition filed by petitioner clubs was partly allowed.

Messrs Nafees Dry Cleaners V. Government of Pakistan 2001 PTD 2018; Hafeezullah Malik and Co. v. Province of Punjab 2003 PTD 1852; and Messrs Gurgson Dry Cleaners v. Sales Tax Officers, Rawalpindi 2004 PTD 1987 rel.

The Province of Punjab and another v. National Industrial Cooperative Credit Corporation and another 2000 SCMR 567; The Chief Secretary to the Government of East Pakistan v. Moslem-ud-Dn Sikdar and another PLD 1957 SC 1 and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 ref.

(b) Interpretation of statutes---

----Ordinary dictionary meanings had to be given to words used in statute, while interpreting any of its provisions.

(c) Constitution of Pakistan (1973)---

----Arts. 70 & 142(c)---Interpretation of entries in legislative lists---Scope---General principle for interpretation or construction of entries in Legislative Lists are that entries are to be interpreted broadly and liberally and widest amplitude is to be given to words employed therein---Entries in the lists are mere legislative heads having an enabling character that define and delimit the respective areas of legislative competence for Federation and Provincial Legislatures.

(d) Interpretation of Constitution---

----Interpretation of entries in legislative lists---Scope---General principle for interpretation or construction of entries in Legislative Lists are that entries are to be interpreted broadly and liberally and widest amplitude is to be given to words employed therein---Entries in the lists are mere legislative heads having an enabling character that define and delimit the respective areas of legislative competence for Federation and Provincial Legislatures.

(e) Sale of Goods Act (III of 1930 )---

----S. 2(7)---Expression "goods"---Meaning---Expression "goods" according to S.2(7) of Sale of Goods Act, 1930, meant every kind of movable property other than actionable claims and money and included stock and shares, growing crops, grass or things attached to or forming part of land which were agreed to be served before sale or under contract.

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

----First Schedule---"Excisable goods"---Meaning---Word "Goods" was not defined in Central Excise Act, 1944 but expression "excisable goods" was defined as goods specified in First Schedule of the Act---Legislature was to be taken to have used the word in its dictionary meanings, that is, to become goods, it was to be something which could ordinarily come to the market to be bought and sold and was known to the market.

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

----Goods---Definition---Sales Tax 'Act, 1990, defined "goods as goods including every kind of movable property other than actionable claims, money, stocks, shares and securities.

Mian Abdul Ghaffar, Khalid Rahman and Khalid Jawed Khan for Petitioners.

Faisal Arab, Standing Counsel, Raja Muhammad Iqbal and Muhammad Qasim Mirjat, A.A.-G. for Respondents.

Date of hearing: 10th March, 2005.

2007 P T D 463

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE-I, KARACHI

Versus

GLOBE TEXTILE MILLS (OE) LIMITED, KARACHI

Income Tax Appeal No. 260 of 1999, decided on 13th October, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Third Sched. Rr.1(3A) [as inserted by Finance Act (VII of 1992) w.e.f. 1-7-1992) & 8(7)(b)(ii)---Central Board of Revenue Circular No.23/88---Depreciation admissible in tax holiday period---Reduction of depreciation from actual cost of assets for working out written down value---Scope---Rule 1(3A) of Third Sched. of Income Tax Ordinance, 1979 as inserted by Finance Act, 1992 had no retrospective effect---Depreciation admissible but not allowed on account of tax holiday could not be reduced from actual cost of assets for determining written down value---If depreciation could be reduced from actual cost of assets without allowing same in tax holiday period, then there would have been no necessity of enacting a deeming provision through R.1(3A) of Third Sched. of Income Tax Ordinance, 1979---Wear and tear caused to plant, machinery or building would not be relevant for purpose of depreciation, which was not allowable on basis of actual amount of wear and tear, but on basis of fixed formula contained in Third Sched. of Income Tax Ordinance, 1979---When assessee suffered more loss than prescribed rate of depreciation, then same would not be allowed in excess of such rate---When value of assets actually increased, then depreciation would not be refused, but would be allowed in accordance with prescribed rate---When asset was used for business for first time in assessment year enjoying tax holiday, then actual cost and written down value both would be same on expiry of tax holiday period---With effect from 1-7-1992 on account of deeming provision inserted through R.1(3A) of Third Sched of Income Tax Ordinance, 1979, admissible depreciation would be reduced from actual cost through fiction of law.

Jawaid Farooqui for Appellant.

Iqbal Salman Pasha for Respondent.

Date of hearing: 13th October, 2006.

2007 P T D 501

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

PAK SUZUKI MOTOR COMPANY LTD. through Sr. General Manager (I&LP), Karachi

Versus

SECRETARY REVENUE DIVISION, GOVERNMENT OF PAKISTAN through Member Customs, Islamabad and another

Constitutional Petition No.D-534 of 2006, decided on 12th October, 2006.

Customs Act (IV of 1969)---

----S.33---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Refund of service charges---Claim for---Petitioner submitted 128 refund claims, which remained pending without any progress, petitioner filed constitutional petition and High Court directed authorities to dispose of claims of petitioner within two months---Claims of petitioner having not been decided within period of two months, petitioner filed application for contempt of the Court---Authorities, in the meanwhile, having rejected all claims of petitioner, appeal was filed by petitioner before Customs, Excise and Sales Tax Appellate Tribunal which after allowing three appeals, directed the Authority to decide case of petitioner within thirty days on merits---Even after direction of Tribunal claims having remained pending, petitioner filed complaint with Federal Tax Ombudsman in respect of remaining undecided claims not covered by appellate order of the Tribunal---Finally after dismissal of review application, petitioner had filed present constitutional petition---Maintainability of the constitutional petition was challenged on the ground that petitioner had not availed statutory remedy before filing of constitutional petition---Validity---Reference application on the point of law could be submitted before the High Court against order of the Appellate Tribunal---Independent and impartial dispensation of justice by the Appellate' Tribunal in the case was evident from the fact that in earlier rounds of litigation, Appellate Tribunal set aside the orders passed by Additional Collector Customs---Contention of petitioner was that petition could be filed challenging the order of Additional Collector on merits after rejection of complaint by Federal Tax Ombudsman---Held, remedy provided in the statute was not illusory as Appellate Tribunal was not under administrative control of Central Board of Revenue, but was performing quasi-judicial functions under the administrative control of Ministry of Law and Justice---Even on merits, petitioner had no case, because refund on account of service charge was not to be made automatically---Sufficient opportunity was provided to petitioner to establish by producing documentary evidence that burden of service charges was not passed on to the end consumer, but petitioner had failed to do so---Order of Additional Collector was not open to any exception as same was neither in excess of jurisdiction vested in him nor suffered from any illegality---Constitutional petition by petitioner, which was not maintainable in law and on facts, was dismissed by the High Court.

Collector of Customs v. Shaikh Spinning Mills 1999 SCMR 1402; Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652; Collector of Customs v. Messrs S.M. Ahmed & Co. 1999 SCMR 138; Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 and Messrs Fecto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 = 2005 PTD 2286 ref.

Aziz A. Shaikh for Petitioner.

Raja M. Iqbal for Respondents.

Date of hearing: 12th October, 2006.

2007 P T D 523

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs KAPRON OVERSEAS SUPPLIES CO. (PVT.)

LIMITED through Director

Versus

DEPUTY DIRECTOR OF CUSTOMS VALUATION & P.C.A., KARACHI and 3 others

Constitution Petitions Nos. D-1978 to D-1986 of 2006, decided on 16th November, 2006.

Customs Act (IV of 1969)---

----Ss. 25 & 81(1)(2)---Valuation Ruling No.708/2006---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Provisional assessment of duty---Case of petitioners was that on import of their respective goods/consignments, department instead of accepting their declared value as per bills of entry for finalizing their assessment, had provisionally assessed and released their goods in terms of S.81(1) of Customs Act, 1969; and subsequently without following the due course for determining the valuation of their goods for assessment as contemplated under S.25 of Customs Act, 1969, they were threatening them to finalize their assessments in terms of S.81(2) of Customs Act, 1969 on basis of valuation ruling No.708/2006 received by them from the Directorate of Customs Valuation and Appraisement vide letter dated 31-8-2006---Only contention of petitioners was that such valuation was not binding on them and could not be made basis for finalization of provisional assessments in terms of S.81(2) of Customs Act, 1969---Validity---Constitutional petitions were premature as only the valuation ruling had been received by department from the Directorate of Customs Valuation and Appraisement, but based on such valuation ruling no final assessment had been made by concerned officials of Customs Authorities in terms of Ss.25 and 81(2) of Customs Act, 1969---In such circumstances it could not be presumed at that stage that only valuation ruling received by Customs Authorities, would form basis for valuation and final assessment of the goods of the petitioners---Constitutional petitions were disposed of by the High Court with the observations that whenever the final assessment of the goods of petitioners would be undertaken by the Customs Authorities, under S.81(2) of Customs Act, 1969, they would consider all the record available before them and the valuation ruling about the goods in question received from the Directorate of Customs Valuation, would not be taken as conclusive evidence for valuation of such goods---Final assessment in terms of S.25 of Customs Act, 1969, would be done after giving proper opportunity to petitioners to put up their ease and place the relevant material on record in support of their claim or in rebuttal to the claim of respondents.

Rehan Umer v. Collector of Customs, Karachi and 2 others 2006 PTD 909 and Messrs Habib-ur-Rehman & Company v. Collector of Customs (Appraisement), Karachi and 4 others 2005 PTD 69 ref.

Javed Farooqui for Petitioner.

Raja Muhammad Iqbal for Respondents Nos.1, 2 and 3.

2007 P T D 800

[Karachi High Court]

Before Sabihuddin Ahmad, C.J. and Faisal Arab, J

Messrs RIAZ BOTTLERS (PVT.) LTD., LAHORE

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 4 others

Constitutional Petition No.D-272 of 2006, decided on 21st December, 2006.

Customs Act (IV of 1969)---

---Ss. 18, 18-A & 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Assessment of imported machine and apparatus as one complete unit---Liability to pay customs duty--- Petitioner sought assessment of imported machines and apparatus as one composite unit under Heading 8422.3000 by describing those as "machinery for aerating beverages" liable to 5% customs duty---On disagreeing with petitioner's claim, petitioner sought their assessment under Heading 8438.8000 which was a residuary heading meant for "other machinery"---Customs Authorities having not agreed with that classification also, matter was referred to the concerned group of Customs Appraisement which came to the conclusion that imported machines and apparatus did not constitute a `single unit'--Validity---Commercial invoice relied upon by petitioner appeared to describe the machinery as a "complete continuous sugar dissolving system" and spoke nothing of the process of aerating beverages---Whenever a set of machines consisting of individual components was intended to constitute to a defined function under a heading, duty was to be charged at the rate prescribed for such defined function irrespective of separate rates of duties provided under distinct headings for each machine according to its individual function---When collective function of a set of machines was not clearly defined under any heading, then in terms of Note No.4 of Chapter XVI of Harmonized Customs Tariff and Trade Control, each machine of set, was to be assessed under the heading appropriate to its functions---As function of the entire set of machine working collectively was not clearly defined under any of the headings, each machine, had to be assessed under the heading, which was appropriate to its function---In absence of any reason to interfere with the classification placed by concerned Group of Customs Appraisement, constitutional petition was dismissed.

Ali Sibtain Fazli for Petitioner.

Haider Iqbal Wahniwal for Respondent No. 5.

Date of hearing: 23rd November, 2006.

2007 P T D 878

[Karachi High Court]

Before Sajjad Ali Shah, J

Messrs ROHI GHEE INDUSTRIES (PVT.) LTD. and others

Versus

COLLECTOR OF CUSTOMS and others

Suits Nos. NIL of 2004 and NIL of 2005, decided on 17th January, 2007.

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

----Ss. 33, 168 & 181---Confiscation of imported goods---Payment of redemption fine---Claim of refund---Once importers had paid redemption fine with an undertaking not to claim its refund they had impliedly accepted the amount of duties and taxes so levied---Redemption fine was assessed on the duties and taxes leviable and in case the quantum of duties was altered, redemption fine would also fall on ground---Acceptance of redemption fine and its payment without prejudice and undertaking, not to claim its refund, tantamount to accepting the quantum of duties and taxes---Importers, in circumstances could not have re-agitated same controversy before Collector of Customs and rejection of application for refund, apparently appeared to be valid---Very fact that importers had neither annexed with the plaint copies of order whereby their application for refund was rejected nor their counsel pointed out any illegality or mala fide, which would go to prove that the orders passed were valid and for good reasons.

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

----Ss. 33, 168 & 217---Confiscation of imported goods---Refund of customs duty---Suit for declaration---Competence---Application of importers for refund of customs duties having been rejected, appeals before Customs Excise and Sales Tax Appellate Tribunal having also been 'dismissed, importers/plaintiffs filed suit for declaration in High Court--Maintainability of suit---Once importers opted to avail the remedy as provided under Customs Act, 1969 by way of statutory forums upto the stage of Customs, Excise and Sales Tax Appellate Tribunal and issue was decided against them, they could not be allowed to switch the forum by way of a civil. suit and seek re-adjudication of same controversy on factual plane though the legality of such orders, in certain circumstances could be questioned by invoking constitutional jurisdiction of High Court---Importers/plaintiffs had neither pleaded mala fide or want of jurisdiction nor had brought to light' any illegality--Assumption of jurisdiction and re-adjudication of same disputes, would be a sheer abuse of the process of High Court---Even otherwise in view of bar contained in S.217 of Customs Act, 1969, suits filed by importers were incompetent.

Messrs Binaco Traders v. Federation of Pakistan 2006 PTD 1491; Malik Muhammad Saeed v. Federation of Pakistan and others 2006 PTD 2167; Muhammad Jamil Asghar v. The Improvement Trust Rawalpindi PLD 1965 SC 698; Hamid Hussain v. Government of Pakistan 1974 SCMR 356; Abbasia Cooperative Bank v. Hakim Hafiz Muhammad Ghous PLD 1997 SC 03 and Al-Ahram Builders (Pvt.) Ltd v. Income Tax Appellate Tribunal 1993 SCMR 29 rel.

Mansoor Ahmed Sheikh for Plaintiffs.

Raja Muhammad Iqbal for Defendants.

2007 P T D 901

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

COMMISSIONER OF INCOME TAX

Versus

HABIB BANK LTD.

I.T.Cs. Nos.l73 to 182 of 1993, decided on 21st December, 2006.

(a) Income-tax---

----Penalty provisions under Income Tax Law are quasi-criminal in nature.

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

----S.111---Penalty for concealment of income, levy of---Essential condition---Nature of penal provisions of Income Tax Ordinance, 1979 being quasi-criminal, existence of mens rea was mandatory condition for levying such penalty---Department must establish mens rea before levying such penalty.

Syed Akhtar Ali v. Commissioner of Income Tax, Hyderabad (1994) 69 Tax 38 and Gharibwal Cement Limited through General Manager v. Income Tax Appellate Tribunal of Pakistan, Lahore and 2 others 2005 PTD 1 ref.

D.G. Khan Cement Company Ltd. v. Federation of Pakistan and others 2004 PTD 1179; Commissioner of Income Tax, West Bengal I, and another v. Anwar Ali (1970) 76 ITR; Commissioner of Income Tax, Andhra Pradesh v. C.V.C. Mining Company, Gudur (1976) 102 ITR 830; Commissioner of Income Tax v. Hari Ram Sri Rain (1988) 57'Tax 51; Muhammad Muslim v. Commissioner of Income Tax Karachi (1980) 42 Tax 129; Commissioner of Income Tax, Lahore Zone, Lahore v. Kamran Steel Re-Rolling Mills (1989) 60 Tax 13 and Commissioner of Income Tax (Rawalpindi Zone), Rawalpindi v. Ch. Fazal Din and Sons, Sialkot (1974) 29 Tax 1 10 rel.

2000 PTD (Trib.) 1649 overruled.

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

----Ss. 135, 136 & 137---Order of Appellate Tribunal could not overrule judgments or Supreme Court and High Court.

Jawaid Farooqui for Applicant.

Iqbal Salman Pasha for Respondent.

2007 P T D 1005

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Muhammad Ather Saeed, J

MOLASSES TRADING AND EXPORT CO. (PVT.) LIMITED and others

Versus

GOVERNMENT OF PAKISTAN and others

Constitution Petitions Nos. D-364, 389, 390, 391, 415, 429; 431, 432, 436, 437, 439, 468, 473, 485, 491, 515, 516, 542, 564, 567, 576 and 579 of 1986, decided on 15th February, 2007.

Customs Act (IV of 1969)---

----Ss.18 & 31-A---Constitution of Pakistan (1973), Arts.199, 18 & 23---Constitutional petition---Petitioners, who were commercial importers, after obtaining import licence, placed orders for import of 2300 metric tons of edible oil from abroad and letters of credit were established on 24-3-1986 for 2000 metric tons and on 1-4-1986 for the remaining 300 metric tons---Said edible oil, at that time, was on free list under the Import Policy Order and no customs duty was leviable, however, before the goods arrived at the Port, authorities imposed regulatory duty on the said oil at the rate of Rs.3000 per metric ton under notification dated 7-4-1986 and through a subsequent notification, rate of duty was reduced to Rs.2350 per metric ton---Petitioner, called in question the levy of duty and contended that the levy was hit by Arts.18 & 23 of the Constitution and that in circumstances, the petitioner was unable to pass the burden of tax to consumers in new market conditions of the imported commodity---Question therefore, arose as to whether the inability of the petitioner to pass on the burden of customs duty only on account of market conditions and not because of any further restrictions imposed by the government, was sufficient to hold the tax to be confiscatory in nature---Held, no vested right was created in favour of petitioner having entered into a contract prior to levy of duty to claim exemption from such duty---Very concept of regulatory duty leviable under S.18(2), Customs Act, 1969 was a power delegated to the executive to levy additional customs duty in the wake of a fluctuating market, it was at times levied to protect the domestic industry as against free inflow of foreign goods---Fact of the petitioner's inability to market imported goods could possibly be treated as normal loss incidental to any kind of business or trading activity---All that Article 18 of the Constitution guaranteed was the freedom to carry on lawful trade subject to the power to regulate it in the interest of free competition---State was not obliged to assure every person undertaking any business a particular margin of profit as profits and losses were the normal incidents of business in a market economy---If the petitioner was unable to pass on the burden of indirect taxes upon consumers for some time he could only blame himself for such omission---Losses stated to have been sustained were incidents of risk, which every businessman takes and the measures of duty levied could in no sense be treated as confiscatory or expropriatory---Principles---Constitutional petitions were dismissed in circumstances.

Al-Samrez Enterprises v. Federation of Pakistan 1986 SCMR 1917; Government of Pakistan v. Muhammad Ashraf and others PLD 1993 SC 176; Dewan Sugar Mills v. Union of India AIR 1959 SC 626; K.T. Moopil Nair v. State of Kerala AIR 1961 SC 552; Tata Iron Steel Company v. State of Behar AIR 1958 SC 452; Jagan Nath v. State of U.P. AIR 1962 SC 1563; Express Newspaper v. Union of India AIR 1986 SC 515; Dev Kumarsingji v. State of Madiah Paradesh AIR 1967 M.P. 268; Corporation of Calcutta v. Liberty Cinema AIR 1965 SC 1107; Attorney General of Alberta v. Attorney General of Canada AIR 1939 PC 53; Alaska Fish Sold Inn and Buy Products Company v. Smith (255 US 48); A. Magnano v. Hamilton (292 US 40); Folks v. Stander Oil Company (294 US 87) and Illahi Cotton Mills, v. Federation of Pakistan PLD 1997 SC 582 ref.

Khalid Anwar, Dr. Farogh Naseem and Abdul Sattar Osman for Petitioners.

Mehmood Alam Rizvi, Standing Counsel and Raja Muhammad Iqbal for Respondents.

Dates of hearing: 16th December, 2005 and 12th February, 2007.

2007 P T D 1094

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

COMMISSIONER OF INCOME TAX, ZONE-A, KARACHI

Versus

Messrs SYED IQBAL HAMID C/o Greenwich Public School, Karachi

Wealth Tax Appeal No.998 of 1999, decided on 28th February, 2007.

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

----Second Sched., Part, I, Cl.12(2)--"Shop"---Connotation---Assessee who is running a school in his own house is not entitled to the exemption under Cl.12(2) of Part I of Second Schedule to the Wealth Tax Act, 1963---Principles.

Assessee v. Department PTCL 2000 CL 38 and Commissioner of Income Tax v. Smt. Shushila Devi Tamakuwala (1996) 73 Tax 174 ref.

(b) Words and phrases----

---Shop---Meanings.

Jawaid Farooqui for Appellant.

Muhammad Aleem for Respondent.

2007 P T D 1131

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs BUILDING HARDWARE STORES

Versus

COMMISSIONER OF INCOME TAX

I.T.A. Nos. 5 of 1994 and I.T.C. No. 15 of 1995, decided on 28th February, 2007.

Income Tax Ordinance (XXXI of 1979)---

----S. 13(1)(d)---Stamp Act (II of 1899), S.27A---Assessing Officer, for the purpose of making addition under S.13(1)(d), Income Tax Ordinance, 1979, can ignore the valuation shown in the sale deed and for the purpose of ascertaining reasonable value of a property can adopt various measures including placing reliance on the Valuation Table issued by Collector under S.27A, Stamp Act, 1899 and more particularly when the assessee making the investment has accepted valuation of the same property for the purpose of another revenue generating act, to wit, Stamp Act, 1899, without raising any grievance and having recourse to the redress provided under the Stamp Act, 1899.

Commissioner of Income Tax v. Siemens A6 1991 PTD 488; Shoaib Khan v. Collector of Customs 2005 PTD 1069; Income Tax Officer and another v. Messrs Chappal Builders 1993 SCMR 1108; Commissioner of Income Tax v. Safdar Pervaiz 2001 PTD 3939; Durga Sharan UDHO Prasad v. Commissioner of Income Tax, Bihar (1976) Income Tax Reports (Vol. 103) Page 270); Babubhai M. Sanghvi v. Commissioner of Income Tax, Bombay City II (1974) 97 ITR 213; Sivakami Company Private Ltd. and others v. Commissioner of Income Tax, Madras (1973) 88 ITR 311; Commissioner of Income Tax v. Roshan Lal Seth (1989) 178 ITR 660; Syed Azhar Ali v. Director-General, Excise and Taxation and others 2002 PTD 700 and Saitex Spinning Mills, Lahore v. Commissioner of Income Tax, Zone-3, Lahore 2003 PTD 808 distinguished.

Dr. Faroagh Naseem for Applicant.

Aqeel Ahmed Abbasi for Respondent.

Dates of hearing: 25th January and 2nd February, 2007.

2007 P T D 1151

[Karachi High Court]

Before Anwar Zaheer Jamali and Mohammad Athar Saeed, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Versus

Messrs ORIX LEASING PAKISTAN LTD., KARACHI

I.T.A. No. 772 of 2000, decided on 8th March, 2007

Income Tax Ordnance (XXXIX of 1979)---

----S. 50(7D)---Interpretation of S.50(7D), Income Tax Ordinance, 1979-Words "or instrument of any kind" occurring in S.50(7D) are to be read in conjunction to the category of financial instruments particularly referred in S.50(7D)---Word 'issued' is also significant for proper understanding of the spirit, aim and objective of S.50(7D)---Loan agreement executed between the' Bank and the assessee, a Leasing Company, as evident from its terms and conditions, is not a negotiable instrument, therefore cannot be said to be a 'financial' instrument issued by the Leasing Company in favour of Bank on which advance tax is to be deducted by the Leasing Company in terms of S.50(7D)---Provision of S.50(7D), Income Tax Ordinance, 1979 refers only to the income generated from the negotiable instruments of like nature as required by it, and not on the instruments of any other kind, having no nexus with the financial instruments referred in the section---For ascertaining the intention of legislature as to the category of instruments on which the assessee has to deduct tax in terms of S. 50(7D), the doctrine of ejusdem generis is squarely applicable---Principles.

Noor Alam Khah v. Sohbat Khan and others 1991 SCMR 661; National Insurance Corporation and others v. Pakistan National Shipping Corporation and others (2006 CLD 85); Zamiruddin Ahmed v. Havas Khan (PLD 1969 SC 57) and The Commissioner of Income Tax Karachi v. Mst. Khatija Begum, Partner, Shakil Impex, Karachi (1965 PTD 540) and Jamat-I-Islami Pakistan v. Federation of Pakistan PLD 2000 SC 111 ref.

(b) Ejusdem generis, doctrine of---

----Scope and applicability---Conditions.

Jamat-I-Islami Pakistan v. Federation of Pakistan PLD 2000 SC 111 quoted.

(c) Interpretation of statutes---

----No redundency can be attributed to the use of any word or phrase, incorporated in any particular provision of law by the legislature.

Jawaid Farooqui for Appellant.

Arshad Siraj for Respondent.

2007 P T D 1418

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COLLECTOR, SALES TAX AND CENTRAL EXCISE

Versus

EVIAN FATS AND OIL (PVT.) LTD.

S. Sales Tax A. No. 620 of 2003.

Sales Tax Act (VII of 1990)-

----S.47---Appeal to High Court---Limitation---Delay---Attested copy of impugned order of the Tribunal was delivered in the office of appellant/ Collector on 13-5-2003---Prescribed period of sixty days for filing appeal to High Court against order of Tribunal was to start running from 13-5-2003, but appeal to High Court was filed on 9-9-2003, after about three months and twenty four days from said date, which was hopelessly barred by time---If any delay was caused in supplying certified copy to relevant branch in the Large Taxpayer Unit, respondent was not responsible for same and the vested right created in his favour could not be taken away for the reason that the delay was caused in the Sales Tax Office---Opposite party could not be penalized for negligent handling of the case by appellant or its counsel---If the officials of the Sales Tax Department were not vigilant enough to file appeal before High Court within period of limitation and were negligent, respondent could not be penalized---Appeal being hopelessly barred by time, stood dismissed in circumstances.

Market Committee v. Cantonment Board, Shorkot, 2001 SCMR 639 rel.

Shakeel Ahmed for Appellant.

Moula Bux Khoso for Respondent.

2007 P T D 1436

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

COMMISSIONER OF INCOME-TAX

Versus

LEVER BROTHERS LTD.

I.T.C. No.1077 of 1999, decided on 16th December, 2006.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 26, 62-B & 136---Depreciation allowance---Computation of---Appeal to High Court---Assessee company, which had been following calendar year as its income year, filed its return covering 12 months' period commencing from 1-1-1994 to 31-12-1994---Return of income showed a sum of Rs.98,961,619 as 12 months' depreciation allowance---Assessee company had also filed return covering the entire 18 months' period starting from 1-1-1994 and ending 30-6-1995 wherein a total sum of Rs.35,27,08,833 was claimed as 18 months' depreciation allowance worked out on the basis of written down value of the assets as stood on 1-1-1.994---Validity---Depreciation was to be computed on the basis of "income year" as defined in Finance Act, 1995 which for the purposes of assessment year 1995-96, covered the entire period of 18 months, without any break in the computation---Said 18 months, on account of transaction in the income year i.e. from calendar to financial year, had to be treated as one income year---No lawful justification was available to split the income year into two parts, first comprising 12 months and the second 6 months and then compute depreciation, which obviously would give different quantum of depreciation.

Nasarullah Awan for the Appellant.

Arshad Siraj for Respondent.

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2007 P T D 1553

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-II, KARACHI

Versus

Messrs SAMAD CHARITABLE TRUST, KARACHI

Income Tax Appeals Nos. 336 to 343 of 1998, decided on 20th January, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Cls. (93) & (94)----Charitable and religious trust---Exemption from tax, claim for---Scope---Not necessary for trust to spend its entire income of assessment year in the year in which same was earned for charity---Even setting apart income for purposes of fund to be in accord with provision of CL. (93) of Second Sched., of Income Tax Ordinance, 1979 would be enough to avail exemption there under---Trust would be entitled to such claim in absence of any proof regarding misuse of any part of income for purposes other than purposes of funds or acquisition of any personal benefit by its members---Principles.

Aqeel Ahmed Abbasi for Appellant.

2007 P T D 1560

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs CITIBANK N.A. through Resident Vice-President

Versus

COMMISSIONER OF INCOME TAX

Income Tax Cases Nos. 136 and 346 of 1990, decided on 5th April, 2007.

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

---S. 65---Definite information---Re-opening of assessment on basis of acquiring belated knowledge of judgment of superior Courts---Income Tax Officer was in possession of definite information' for re-opening of assessment.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 PTD 766 fol.

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

---S. 65(2)---'Definite information', availability of---Determining factors stated.

The following principles would apply to determine the availability of definite information:---

(1) where the information is true and correct state of the law derived from relevant judicial decisions;

(2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income Tax Officer. This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority;

(3) where the information is derived from an external source would include discovery of new and important matters or knowledge of fresh facts, which were not present at the time of the original assessment;

(4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record or the facts disclosed thereby or from other enquiry or research into facts or law.

If these conditions were satisfied, then the Income Tax Officer would have complete jurisdiction to re-open the original assessment. It is obvious that where the Income Tax Officer gets no subsequent information, but merely proceeds to re-open the original assessment without any fresh facts or materials or without any enquiry into the materials, which form part of the original assessment, then section 65(2), Income Tax Ordinance, 1979 would have no application.

Once all the facts have been fully disclosed by the assessee and considered by the Income Tax Authorities and the assessment has been consciously completed and no new fact has been discovered, then there can be no scope for interference with these concluded transaction under the provisions of section 65 of the Income Tax Ordinance, 1979 on the ground that the income chargeable to tax under the Ordinance has escaped assessment or has been under-assessed etc., in the meaning of clause (a) or (b) of subsection (1) of section 65 of the Ordinance.

Edulji Dinshaw Limited v. Income Tax Officer 1990 PTD 155; Gemini Leather Stores v. The Income Tax Officer, B. Ward Agra and others AIR 1975 SC 1268; Kalyanji Mavji and Co. v. Commissioner of Income Tax, West Bengal II, Income Tax Reports Vol.102 1976 286; (1968) 67 ITR 11, 15, 16 (SC) and (1959) 35 ITR 1 (SC) fol.

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

----S. 65---Re-opening of assessment finalized after consciously considering facts disclosed by assessee and available on record---Scope---Unless new facts had come into possession of Income Tax Officer subsequent to passing of original order, he could not take action under S.65 of Income Tax Ordinance, 1979 even by making further enquiry, research and investigation into the facts or on reappraisal of facts, which were already available on record---When original order was passed unconsciously or without considering the facts on record, then action might be taken under S.65 of Income Tax Ordinance, 1979---Principle.

Edulji Dinshaw Limited v. Income Tax Officer 1990 PTD 155; Gemini Leather Stores v. he Income Tax Officer, B. Ward Agra and others AIR 1975 SC 1268; Commissioner of Income Tax, Bombay City-I v. Bhagwandas K. Bros. Income Tax Reports Vol. 91 1973 256; Messrs National Beverages (Pvt.) Ltd. v. Federation of Pakistan and others 2001 PTD 633; Messrs Pakistan Tobacco Co. Ltd. v. Government of Pakistan and 3 others 1993 SCMR 493; Kalyanji Mavji and Co. v. Commissioner of Income Tax, West Bengal II, Income Tax Reports Vol. 102 1976 286 and Commissioner of Income Tax, Lahore Zone (West Pakistan), Lahore v. Dr. Khurshid Alam Malik, Sheikhupura 1988 PTD 771 ref.

Abdul Ghaffar for Applicant.

Aqeel Ahmed Abbasi for Respondent.

2007 P T D 1577

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs SUPERIOR STEEL, KARACHI

Versus

COMMISSIONER OF INCOME TAX, ZONE-D, KARACHI and another

Income Tax Case No. 3 of 1996, decided on 5th April, 2007.

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

----S. 136(2)---Reference to High Court---Questions proposed before Tribunal changed before High Court---Effect---After rejection of reference application by Tribunal, applicant was required to propose same questions before High Court and had no power to change same in any manner---Such change would render reference application before High Court non-maintainable---Principles.

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

---S. 136(2)---Reference to High Court---Additional question, raising of---Scope---Additional question could not be raised after expiry of period of limitation for filing of reference application.

Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi 1982 SCMR 489 ref.

Messrs Saifuddin Ghulam Ali and Sons v. The Commissioner of Income Tax, Hyderabad Zone 1989 PTD 1038; Messrs N.A. Industries, Karachi v. Commissioner of Income Tax 1992 PTD 50 and Commissioner of Income-Tax, Faisalabad v. Messrs Rashid Textile 2005 PTD 1456 rel.

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

----S. 13(1), second proviso----Chargeability of income to tax in cases referred to in S.13(1)(aa) to (e) of Income Tax Ordinance, 1979---Pre­condition of obtaining second approval by Income Tax Officer in such cases stated.

The question for second approval only arises where the Income Tax Officer considers that the value of any investment or article referred to in clauses (aa), (b), (c) or (d), amount of expenditure referred to in clauses (e) of subsection (1) of section 13 of Income Tax Ordinance, 1979 is too low and intends to determine a reasonable value or the amount thereof.

The Commissioner of Income Tax, Companies, Lahore v. Punjab Cooking Oil Ltd., Lahore 2001 PTD 2161; Commissioner of Income TO Zone-B, Lahore v. Messrs East Pakistan Chrome, Lahore 2002 PTD 2312; Income Tax Officer and another v. Chappal Builders 1993 SCMR 1108 = 1993 PTD 1108; Messrs Jennings Private School v. Income Tax Officer, Salary Circle-III, Central Zone-D and another 1990 PTD 873: Messrs National Beverages (Pvt.) v. Federation of Pakistan 2001 PTD 633; Messrs Pakistan Tobacco Co. Ltd. v. Government of Pakistan and other T 1993 SCMR 493; Messrs Pakistan Insurance Corporation v. Commissioner of Income Tax and Commissioner of Income Tax v. Pakistan State Oil Ltd. in I.T.As. Nos.60 and 61 of 1999 ref.

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

----S. 136(2)---Reference to High Court---Question raised in reference based on finding of fact rendered by Tribunal---Validity---High Court in its advisory jurisdiction could not adjudicate such question---Principles.

Chief Secretary, Government of the Punjab v. Commissioner of Income Tax, Lahore Zone, Lahore 1976 PTD 56 ref.

Muhammad Farid for Applicant.

Aqeel Ahmed Abbasi for Respondents.

Date of hearing: 8th March, 2007.

2007 P T D 1618

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Sneed, JJ

PAKISTAN STATE OIL COMPANY LIMITED

Versus

COLLECTOR OF CUSTOMS, EXCISE AND SALES TAX (ADJUDICATION-II)

Customs Reference Applications Nos.201 to 206 of 2006, decided on 20th March, 2007.

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

----Ss. 196 & 194-B---Appeal to High Court---Raising question of limitation---Scope---High Court would decide such question, if raised before Customs hierarchy.

2005 PTD 78; Collector of Customs, E&ST and Sales Tax v. Pakistan State Oil Company Ltd. 2005 SCMR 1636 and Pakistan State Oil company Ltd. v. The Collector of Customs, Excise and Sales Tax Appellate Tribunal and others 2006 SCMR 425 rel.

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

----S. 32---Categories of cases falling under mischief of S.32 of Customs Act, 1969 and limitation provided therefor stated.

For the purpose of limitation, cases falling under the mischief of S.32 of Customs Act, 1969, have been placed in two categories. Subsection (2) is to be read in conjunction with subsection 1(a) & (b) and it deals with the matters, where, by reason of some collusion, any duty or charge has not been levied or has been short levied or has been erroneously refunded. The period of limitation prescribed under this subsection in five years, which was earlier three years upto 30-6-2000. While in subsection (3), the period of limitation prescribed is three years, which was earlier six months upto 30-6-2000, and it covers those matters where by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short levied or has been erroneously refunded.

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

----Ss.32(1)(2) & 106---Supply of High Speed. Diesel to Pakistan Navy---Collection of duty and taxes on such supplies by supplier, but its non-payment to department claiming such supplies to be duty free provisions and stores---Show-cause notice, dated 30-1-2002 alleging that such non-payment of duty by supplier was due to wrong interpretation of S.106 of Customs Act, 1969, and that supplier had since long hoodwinked department and succeeded in evading duty and taxes on a large number of consigmnents---Limitation---If such supplies were duty free provisions and stores admissible under S.106 of Customs Act, 1969, then supplier should not have collected duty and taxes from Pakistan Navy---Such allegations would bring impugned show-cause notice within scope of subsections (1) and (2) of S.32 of Customs Act, 1969, which provided three years' period of limitation at relevant time---Principles.

PLD 1963 SC 322; PLD 1969 SC 187; PLD 1970 SC 80; PLD 2001 SC 38; 1984 MLD 562; 2000 PCTL 117; PLD 1999 Kar. 391; 2005 PTD 78; PLD 1986 Kar. 373; PLD 1990 338; 1999 CLC Kar. 520; 2005 PTD SC 1654; PLD 2000 SC 825; 2000 SCMR 678; Collector of Customs, E&ST and Sales Tax v. Pakistan State Oil Company Ltd. 2005 SCMR 1636 and Pakistan State Oil Company Ltd. v. The Collector of Customs, Excise and Sales Tax Appellate Tribunal and others 2006 SCMR 425 ref.

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

---S. 32---Substance of show-cause notice, if read as whole, would determine, whether same was issued under subsections (1) and (2) or under subsection (3) of S.32 of Customs Act, 1969.

(e) Words and phrases---

----"Hoodwink"---Meaning.

Oxford Dictionary ref.

(f) Words and phrases---

----"Evade"---Meaning.

G The Oxford Dictionary ref.

Taha Ali Zai for Applicant.

Raja Muhammad Iqbal for Respondent.

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2007 P T D 1670

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Syed Zawwar Hussain Jaffery, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Versus

Messrs NATIONAL BANK OF PAKISTAN, KARACHI

I.T.C. No. 71 of 1993, decided on 2nd June, 2006.

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

----S. 27---Banking Companies Ordinance (LVII of 1962), S.29---Investment by Bank in Government securities and treasury bills---Securities and treasury bills, sale of---Profits earned on such sale claimed by Bank to be capital gain not liable to tax---Validity---Such investment would necessitate fulfilment of statutory obligations being necessary for carrying on business operations---Such investment would remain part of circulating capital of Bank, thus, would not be excluded from floating capital and would not become its capital investment---Nature of such investment would be stock-in-trade and not long term investment---Profits earned on such sale, would amount to revenue gain/income chargeable to tax and would not be a capital gain.

Messrs Citibank N.A., Karachi v. Commissioner of Income Tax 1994 PTD 1271; Commissioner of Income Tax v. Emirates Bank International ?'?; Punjab Cooperative Bank Ltd. v. C.I.T. (1983) 6 ITR 355; (1940) 8 ITR 635; Bihar Cooperative Bank Ltd. v. C.I.T. (1960) 39 ITR 114 and Malabar Cooperative Bank Limited v. C.I.T. (1975) ITR 87 ref.

Grindlays Bank Ltd.', Karachi v. Commissioner of Income Tax (1985) 51 Tax 102 distinguished.

(b) Banking Companies Ordinance (LVII of 1962)---

---S. 29---Provision of S.29 of Banking Companies Ordinance, 1962---Purpose of such provision was to maintain liquidity of funds for meeting time and demand liabilities.

Jawaid Farooqi holding brief for Aqeel Ahmed Abbasi for Applicant.

Iqbal Salman Pasha for Respondent.

Date of heating: 5th May, 2006.

2007 P T D 1720

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs INDEPENDENT NEWSPAPERS CORPORATION (PVT.) LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX, COMPANIES-II, KARACHI

I.T.Cs. Nos. 28, 29, 30, 31 and 32 of 2006, decided on 2nd May, 2007.

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

----Ss. 136(2) & 32---Reference to High Court---Scope---Question of fact---Questions proposed by the applicant were questions challenging the decision of the Appellate Tribunal which was made on the appreciation of facts, therefore such questions were questions of facts and did not challenge any finding of law by the Tribunal---Question of rejection of accounts not challenged on the basis of misreading of facts or distortion of evidence was not a question of law---Limited advisory jurisdiction under S.136(2), Income Tax Ordinance, 1979 did not empower the High Court to answer questions which were questions of fact and no allegation had been made in the questions that decision of the Tribunal was based on misreading of facts or distortion of evidence---High Court, in circumstances, declined to answer the questions.

Commissioner Income Tax Companies-III, Karachi v. Krudd Sons Ltd. 1994 SCMR 224 = 1994 PTD 174; Messrs Ghazi Tanneries v. CIT Central Zone, Circumstances No.3 of 1995; I.T.R. No.235 of 1990; Star Rolling Mills v. Commissioner of Income Tax 1974 PTD 2000; PIMPA (Pvt.) Ltd., Karachi v. Commissioner of Income Tax, Companies-I, Karachi 1994 PTD 123 and COCA COLA Export Corporation v. IAC of Income Tax (I&C), Range II, Companies Zone-1, Lahore 2002 PTD 1496 ref.

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

----Ss. 135 & 32---Disposal of appeal by Appellate Tribunal---Assessee, in the present case, had filed appeals against the order of Commissioner of Income Tax (Appeals) for all the assessment years in question, the department had filed appeal against the order of the Commissioner for the "assessment year 1988-89 (and not in 1989-90 to 1992-93) therefore, for the other four years against which the department had not filed any appeal, the maximum the Tribunal could do was to dismiss the appeals of the appellant and maintain the order of the Commissioner---Tribunal's decision of vacating the orders of the Commissioner on the point of the rejection of trading accounts and restoring the rejection of trading accounts and maintaining the estimates of sales and reducing the gross profit from 30% to 27% was in excess of Tribunal's power under S.135, Income Tax Ordinance, 1979, specially, as the Tribunal had not issued any mandatory notice for enhancement, which was necessary to disturb the orders of the Commissioner of Income Tax (Appeals)---Such orders, in circumstances, could not be sustained.

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

----Ss. 135 & 32---Disposal of appeal by Appellate Tribunal---Rejection of accounts---Consent of parties---Effect---Appellate Tribunal had, with the consent of parties maintained the rejection of accounts for the assessment years 1989-90 to 1992-93 on the basis of the finding given for the year 1988-89---Validity---Such was an error committed by the Tribunal as for the purposes of the assessment of the Income Tax every assessment year was a separate year ,and therefore, basing the rejection of accounts for the assessment years 1989-90 to 1992-93 on the basis of findings given for the assessment year 1988-89, could not be sustained---Alleged consent given by the parties could not legalize the judgment of the Tribunal as there could be no consent/agreement against the law---Principles.

Iqbal Salman Pasha for Applicant.

Nasrullah Awan for Respondent.

2007 P T D 1810

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Miss SABIRA B. NANJIANI, KARACHI

Versus

DEPUTY COMMISSIONER OF INCOME TAX, SALARY CIRCLE-03, ZONE-D, KARACHI

I.T.R. No.379 of 1997, decided on 31st January, 2007.

Income Tax Ordinance (XXXI of 1979)---

-----Ss. 57, 58 & 136---Reference to High Court---Submission of wealth statement---Where wealth statement had been filed in terms of sub-section (2) to S.58 of Income Tax Ordinance, 1979 and not under subsection (1) of said section, assessee had the right to submit his revised wealth statement within the parameters of S.57 of Income Tax Ordinance, 1979---Observations of the Appellate Tribunal that such interpretation would lead to a very unbalanced conclusion, seemed to be untenable in law---Other observations of the Tribunal contained in impugned order that provisions of S.58(2) of Income Tax Ordinance, 1979 being general in nature could not be given overriding effect to the special provisions of S.57 of Income Tax Ordinance, 1979; was also misconceived as S.58(2) had no overriding effect on S.57, but it simply extended its application to statement of. wealth filed in terms thereof for filing of revised wealth statement---When the law-makers in their wisdom had categorized the assessees in two categories for filing of wealth statement in terms of Ss.58(l) & 58(2) of Income Ordinance, 1979 benefit extended to one category of assessee, falling under S.58(2) in clear and unambiguous words, for filing of revised wealth statement, could not be denied to them for the reason that such benefit was not available to other category or it would create unbalanced conclusion which would be open to objection in legal norms---Said interpretation of two provisions of Income Tax Ordinance, 1979 had got support from newly-inserted subsection (2) of S.58, which had shown that shortcoming/lacuna in the statute noticed by the Tribunal in its impugned order, was taken care of by the law-makers at the subsequent stage and consequently, the new subsection (2) was inserted by Finance Ordinance, 2001.

Rehan Hasan Naqvi and Miss Lubna Pervaiz for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 31st January, 2007.

2007 P T D 1848

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

COLLECTOR OF CUSTOMS (EXPORTS), KARACHI

Versus

Messrs QAISER, L.G. PETROCHEMICAL (PVT.) LIMITED, KARACHI

Special Customs Reference Application No. 227 of 2006, decided on 27th April, 2007.

Customs Act (IV of 1969)---

----S.21---S.R.O. 415(I)/2001, dated 18-2-2001---Duty drawback---Entitlement---S.R.O. 415(I)/2001, dated 18-6-2001 had made the exporter entitled to claim the duty draw-back at 16% of the FOB value, but only subject to the fulfilment of all the conditions envisaged therein---Such conditions having not been met, exporter was not entitled to claim duty drawback---Principles---Free on board (FOB) value in its technical term being inclusive of packing charges and all after charges incurred by the exporter till the delivery of goods to the shipper, the question of deduction of packing material charges etc. would not arise.

Raja Muhammad Iqbal for Applicant.

Qaiser Ahmed Shaikh for Respondent.

2007 P T D 1862

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

PAKISTAN STATE OIL COMPANY LIMITED

Versus

COLLECTOR OF CUSTOMS, EXCISE AND SALES TAX (ADJUDICATION-II)

Customs Reference Applications Nos. 201 to 206 of 2006, decided on 20th March, 2007.

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

---S.32---Untrue statement, error, etc.---Limitation---Categories of cases falling under the mischief of S.32 Customs Act, 1969 stated.

A bare reading of S.32 of the Customs Act, would show that for the purpose of limitation, cases falling under the' mischief of this section, have been placed in two categories. Subsection (2) is to be read in conjunction with subsection 1(a) & (b) and it deals with the matters, where by reason of some collusion any duty or charge has not been levied or has been short-levied or has been erroneously refunded. The period of limitation prescribed under this subsection is five years, which was earlier three years up to 30-6-2000, while in subsection (3) the period of limitation prescribed is three years, which was earlier six months up to 30-6-2000, and it covers those matters where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short-levied or has been erroneously refunded.

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

----S.32(1)(2)---Untrue statement---Allegation of "hoodwinking" by assessee in the show-cause notice---Limitation---"Hoodwink" connotation---Such allegation clearly brings. the show cause notice within the scope of S.32(1) & (2) of Customs Act, 1969 which provided three years limitation at the relevant time---Principles.

(c) Words and phrases---

--"Hoodwink"-Connotation.

(d) Words and phrases---

----"Evade"---Meaning.

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

----S.32(1)(2)---Untrue statement---Act of assessee of charging the value of products inclusive of customs duty etc. from the buyer and making a wilful declaration that the supplies were duty free provisions and stores as admissible under S.106 Customs Act, 1969 fell under the mischief prescribed under subsections (1) and (2) of S.32, Customs Act, 1969 and not under S.(3) of S.32 thereof.

PLD 1963 SC 322; PLD 1969 SC 187; PLD 1970 SC 80; PLD 2001 SC 38; 1984 MLD 562; 2000 PCTL 117(sic); PLD 1999 Kar. 391; 2005 PTD 78; PLD 1986 Kar. 373; PLD 1990 Kar. 338; 1999 CLC Kar. 520; 2005 PTD 1654; PLD 2000 SC 825; 2000 SCMR 678; Collector of Customs, E&ST and Sales Tax v. Pakistan State Oil Company Ltd. 2005 SCMR 1636; Pakistan State Oil Company Ltd. v. The Collector of Customs, Excise and Sales Tax Appellate Tribunal and others 2006 SCMR 425 and Oxford Dictionary ref.

Taha Ali Zai for Applicant.

Raja Muhammad Iqbal for Respondent.

2007 P T D 1946

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs CYNAMID (PAKISTAN) LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX, COMPANIES-II, KARACHI

Income Tax Case No. 43 of 1996, decided on 16th May, 2007.

Income Tax Ordinance (XXXI of 1979)---

----S. 79---Addition---Assessee company was carrying on the business of manufacture and sale of pharmaceutical drugs---Import of raw material by assessee from its associated companies on higher rates as compared to the other sources---Assessing officer therefore, directed the assessee to show cause as to why the purchases made by them may not be estimated and difference be added under S.79 of the Income Tax Ordinance, 1979-Validity---Held, case of assessee fell without the ambit of S.79, Income Tax Ordinance, 1979 and no interference of High Court was called for---Principles.

Commissioner of Income Tax v. Pakistan Industrial Engineering Agencies Ltd. 1992 PTD 954; Messrs Industrial Management v. The Commissioner of Income Tax 1978 PTD 208; Lal Muhammad Abdul Sattar acid Co. v. Commissioner of Income Tax 1995 PTD 752; Mehran Girls College v. Commissioner of Income Tax 2001 PTD 987 and Commissioner of Income Tax, Companies-II, Karachi v. Marck Sharp and Dhome of Pakistan Ltd. C.P.L.A. No.159/K of 1989 distinguished.

I.T.R.A. No.76 of 2002; I.T.O. v. Beecham Pakistan Ltd. 1988 PTD (Trib.) 447; Smith Kline and French of Pakistan Ltd. v. IAC Range-I, Companies-II, Karachi LT.A. No. 2202/KB of 1987-88; Messrs Bayer Pharma (Pvt.) Ltd. v. I.T.O.. I.T.A. No. 17961KB of 1993-94; Sindh High Court CIT v. Glaxo Laboratories Ltd. 1991 PTD 393; and Galaxo Laboratories Ltd. v. CIT Karachi, Civil Appeal No. 237-K of 1991 ref.

Iqbal Salman Pasha for Applicant:

Aqeel Ahmed Abbasi for Respondent.

2007 P T D 2250

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Faisal Arab, J

KASHIF NASEEM

Versus

FEDERATION OF PAKISTAN and others

C. P. No. D-2160 of 2006, decided on 20th July, 2007.

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

----Ss. 25C & 25---Take-over of imported goods under S.25C of the Customs Act, 1969--Scope---Unless it was established that under invoicing had been committed, the take over of imported goods under S.25C, Customs Act, 1969 could not be allowed---Under invoicing could only be established when resort to the provisions of S.25, Customs Act, 1969 was taken in order to ascertain the actual market value of the imported consignment.

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

----Ss. 25C & 25---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Object and purpose of S.25C Customs Act, 1969---Take over of imported goods under S.25C of Customs Act, 1969---Procedure to be adopted by the Customs Authorities before taking-over the imported goods under S.25C Customs Act, 1969 and obligations of importer in such a situation, elaborated with illustrations by High Court.

Section 25 of the Customs Act provides several steps for the purposes of determining customs value of imported goods. The customs value so determined is then treated as their transactional value and applicable rate of duty is computed on such value. While determining customs value, there is always a .chance that customs official may determine such value that might be substantially lower than the actual transactional value of the imported goods. In order to curb clearance of goods at under-invoiced value, section 25C has been incorporated in the Customs Act. Under section 25C, under-invoicing of imported goods can be detected with the aid of a third party. As a first step, section 25C allows a third party to make an offer to the Customs Authorities for purchase of the imported goods at a price which is substantially higher than the declared value. Upon receiving such offer, the matter is placed before the highest official of the Customs i.e. the Collector of Customs, who is to first satisfy himself that the declared value is not the actual transactional value. The satisfaction of the Collector of Customs precedes all other steps that are required to be taken under section 25C for the take over of the imported goods. Therefore, before any step for take-over of the imported goods mentioned in section 25C(1)(i)(ii)(iii), (2) and (3) is taken, the Collector of Customs has to satisfy himself as to the actual value of the imported goods. If he finds the actual value of the imported goods is higher than its declared value, only then he would take further steps provided for take-over of imported goods under section 25C (1)(i)(ii)(iii), (2) and (3) of the Customs Act. Mere getting a substantially high offer from a local purchaser without any finding as to the under invoicing of the imported goods, is not sufficient to set in motion the process of take-over under section 25C.

It is for this reason that the word "satisfy" appears in section 25C of the Customs Act. If the satisfaction of Collector of Customs as to the real transactional value is not treated as a condition precedent, then, it would be giving an altogether different, meaning to section 25C and permitting levy of customs duty at a value which a local buyer is willing to pay for the imported goods ignoring altogether the actual transactional value of the imported goods. Without under-invoicing being established, accepting an offer of a third party would amount to forced take-over of importer's goods without any fault on the part of the importer. Therefore, forced take-over of goods belonging to one by another can only be legitimate if it is established that the importer has under-invoiced his imports. Unless under-invoicing is determined by the Collector of Customs by resorting to the modes provided under Section 25, forced take-over of imported goods under section 25C cannot be justified on any principle of law.

The object of section 25C of the Customs Act can never be to allow take-over of goods of an honest importer by accepting a higher price for his goods but the object is to curb, the tendency of under invoicing by a dishonest importer. The right of an importer to clear his goods upon payment of duties and charges at the actual transactional value cannot be taken away merely because someone from 'the local market is prepared to buy his goods at a higher price than what is prevalent in the local market for the imported consignment. No importer should be penalized or deprived of his imports under section 25C when he has not committed under-invoicing and is seeking clearance of his goods at the actual transactional value. If the process of take over of importer's goods as provided in section 25C is set in motion without first determining their actual transactional value then it would lead to abuse of section 25C. Such abuse could be on the part of a local businessman who, on the basis of prevalent market conditions at the time of import, may be willing to offer a price that is substantially higher from the actual transactional value. This abuse could also be at the behest of a dishonest importer himself. An importer may value an imported item at US $ 1.00 in his Goods Declaration though the real import value is US $ 2.00. The importer then sets up a fake buyer and through him seeks take over of the goods under the provisions of section 25-C with an offer of US $ 1.50. If the Collector of Customs is not obliged to determine the actual transaction value then he is certainly going to consider the offer of US $ 1.50 to be substantially higher than the declared value of US $ 1.00. In this manner, the Collector of Customs would charge customs duty at the offered value of US $ 1.50 instead of the actual transactional value of US $ 2.00. Such a course would definitely deprive the exchequer customs duty on actual transaction value which is US $ 2.00. This short levy of duty can easily be prevented if the Collector of Customs first determines the transaction value of the imported goods under section 25 of the Customs Act before taking steps for their take-over under section 25C.

In the present case, before the Collector of Customs could have determined the actual transactional value, the petitioner (Importer) rushed to High Court to file the present petition. The Customs Authorities on their part had even issued notice to the petitioner seeking necessary information in order to ascertain transactional value but certain pertinent information, such as the origin of the imported goods, was not provided to the Customs Authorities. It is the duty of an importer to divulge all information with regard to his imports so that the Customs Authorities may proceed smoothly with their obligation to ascertain the actual transaction value. Withholding necessary information that solely rests with the importer or is within his exclusive reach would recoil aversely upon the intentions of an importer. The Customs Authorities are not expected to embark upon a roving inquiry in order to gather information for determining transactional value of the imported consignment when information like the name and address of the exporter, the payment made to the exporter and the mode of payment and/or any other information that is in possession of the importer or is within his exclusive reach is not divulged to the Customs Authorities to facilitate them in determining the real transactional value of the imported goods. In the present case the petitioner (Importer) failed to provide all information sought by the Customs Authorities vide their letter and rushed to file the present petition thereby leaving halfway the process of determining the actual transactional value of the imported goods.

The petitioner (Importer) instead of providing all necessary information as sought by the Customs Authorities vide their notice for determining transactional value of the imported goods, unduly rushed to High Court and filed the present constitutional petition. This constitutional petition is therefore liable to be dismissed.

The petitioner (Importer) was directed by the High Court to appear before the Collector of Customs and provide all requisite information, which is within his possession or is within his control with regard to the consignment in question: The Collector of Customs, after hearing the parties, shall determine the actual transactional value of the imported goods and in case he finds that petitioner committed under-invoicing or misdeclaration of goods he shall take appropriate action in accordance with law.

(c) Customs Act (IV of 19G9)---

----Ss. 25C & 25---Take-over of imported goods under S.25C, Customs Act, 1969---Protection under intellectual property laws---Scope and effect---Object and purpose of S.25C of the Act being to curb the tendency of under-invoicing by a dishonest importer, irrespective of the fact whether imported goods were protected or not under the laws governing intellectual property, if an offer is received under S.25C, Customs Act, 1969 and pursuant thereof under-invoicing is detected then the imported goods would be subject to take-over under the provision of S.25C, Customs Act, 1969---Protection of imported goods under the intellectual property laws could not be used as a shield to resort to under-invoicing and deprive the exchequer of the customs duties and charges at the actual transaction value.

M. Shafi Siddiqui for Petitioner.

Aqeel Ahmed Abbasi and M. Haseeb Jamali for Respondents.

Date of hearing: 21st February, 2007.

2007 P T D 2293

[Karachi High Court]

Before Sarmad Jalal Osmany and Amir Hani Muslim, JJ

NATIONAL HIGHWAY AUTHORITY through Director Construction

Versus

CENTRAL BOARD OF REVENUE through Chairman and 5 others

Constitutional Petition No. D-2169 of 2004, decided on 4th June, 2004.

Customs Act (IV of 1969)---

----S.19---Constitution of Pakistan (1973), Art.199--Constitutional petition---Contention of the petitioner was that machinery, equipment and spare parts etc. which were lying at the ports had not been released into the custody of the National Highway Authority due to ongoing dispute with the Customs Authorities in respect of applicability of exceptions from customs duties, and that for the time being these items be ordered to be released subject to payment of duties etc. to the Customs Authorities by the National Highway Authority---Validity---Held, National Highway Authority being entitled to get the machinery released in its favour, it would be deemed proper that the machinery in question be released in favour of National Highway Authority, provided that the regular customs duties etc. were paid which shall in first instance be adjusted from the balance amount lying with the Nazir of the Court and these amounts shall be deposited with the Nazir of High Court which would secure the interest of Customs authorities---High Court further observed that present order was subject to exemptions of customs duties etc. if any, which may be obtained by the National Highway Authority from the Central Board of Revenue regarding the machinery.

Nisar A. Mujahid for Petitioner along with Sabir Hussain, General Manager, M.I. NHA and Farid Khan Asstt. Director Legal NHA.

2007 P T D 2432

[Karachi High Court]

Before Muhammad Athar Saeed and Mrs. Qaiser Iqbal, JJ

Messrs N. J. AUTO INDUSTRIES (PVT.) LTD. through Director

Versus

COLLECTOR OF CUSTOMS, APPRAISEMENT CUSTOMS HOUSE, KARACHI and 5 others

Constitutional Petition No. D-1222 and Miscellaneous No. 4302 of 2007, decided on 27th June, 2007.

Customs Act (IV of 1969)---

----S. 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs vales of goods---Petitioner in his constitutional petition had assailed the assailed the action of authorities whereby consignment of the petitioner was assesse against declared value---Petition was disposed of with the consent of parties to the effect that upon payment of customs duties, sales tax etc., imported consignment at the declared value and furnishing of bank guarantees/post-dated cheques with the authorities far the differential amount as per the value of the consignment assessed by them, the disputed consignment of the petitioner, would be released by the respondent; and that the concerned officer of customs would afford proper opportunity of hearing to the petitioner before determining the final valuation of the goods involved in the imported consignment of the petitioner and that the passing of final order; it would be open to the aggrieved party to follow further remedy under the Customs Act, 1969 in accordance with law.

Hafeez Saeed Akhtar for Petitioner.

Raja Muhammad Iqbal for Respondents.

2007 P T D 2449

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

NOOR ALI

Versus

COLLECTOR CUSTOMS, SALES TAX, HYDERABAD

S.C.R. Application No. 209 of 2006, decided on 19th December, 2006.

Customs Act (IV of 1969)---

----Ss.3, 156(1)(8)(89), 157, 171 & 196---Appeal/Reference to High Court---Section 3 of Customs Act, 1969, had categorized the Collector of Customs and Deputy Collector of Customs, both as "officers of Customs"---Nothing was on record to conclude that memo. of appeal preferred before the Tribunal was not signed by -the Collector of Customs or Deputy Collector of Customs as shown in the title of memo of appeal and index annexed with the memo of appeal---Verification of memo. of appeal made by the Inspector of Customs, who, according to the counsel, was not a `Customs Officer', could, at best, be a procedural lapse, which would not vitiate the whole proceedings before the Tribunal on that count alone---Findings recorded by the Tribunal being findings of facts based on the evidence available before the Tribunal, same could not qualify as the questions of law within the ambit of S.196 of the Customs Act, 1969.

Ch. Muhammad Iqbal for Appellant.

Shaukat Ali Qureshi for Respondent.

2007 P T D 2458

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs BATTLA ENTERPRISES, KARACHI

Versus

DIRECTORATE GENERAL OF INTELLIGENCE, AND INVESTIGATION, (CUSTOMS & EXCISE), KARACHI

Special Customs Appeal No. 154 of 2005, decided on 23rd August, 2007.

Customs Act (IV of 1969)---

----Ss.32 & 196---Appeal to High Court---Jurisdiction- of Customs Authorities to seize and re-examine imported goods after payment of customs duty---Once the imported consignment of goods was out of charge after payment of customs duties, the Collectorate of Customs, Intelligence and Investigation, undoubtedly, had no jurisdiction to detain, seize or re-examine such consignment, but in case the Authority had provided information to the concerned officers of the customs about the misdeclaration of goods by the appellant, all proceedings could be initiated and action undertaken by the concerned officials of customs department---Issuance of show-cause notice under S.32 of Customs Act, 1969, clue to gross misdeclaration of nature of consignment, resulting in incorrect valuation, was fully justified and warranted by law.

Shahzad Ahmed Corporation v. Federation of Pakistan and 2 others 2005 PTD 23 and Mazhar Iqbal v. Collector of Customs (Preventive) Karachi and 2 others 2004 PTD 2994 ref.

Amir Malik for Appellant.

Raja Muhammad Iqbal for Respondent.

2007 P T D 2478

[Karachi High Court]

Before Anwar Zaheer Jamali and Mrs. Qaiser Iqbal, JJ

Messrs METRO INTERNATIONAL through Proprietor

Versus

COLLECTOR OF CUSTOMS and 2 others

C.P. No. D-1215 and Misc. No. 4265 of 2007, decided on 19th June, 2007.

Customs Act (IV of 1969)---

---S.25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---High Court, with consent of the parties, disposed of the petition in the terms that petitioner would make payment of all the customs duties, sales tax and other charges on the imported consigmnent at the declared value of each consigmnent and furnishing of bank guarantee/post-dated cheques with the authorities for deferential amount as per value of consignments assessed by them and on doing so disputed consignment of petitioner could be released by the respondent; that concerned officer of the authorities would offer proper opportunity of hearing to the petitioner before determining the final valuation of goods involved in the imported consigmnent of the petitioner and after passing of final order, it would be open for aggrieved party to follow further remedy, if airy, under the Customs Act, 1969 in accordance with law.

Ziaul Hassan for Petitioner.

Aqeel Ahmed Abbasi for Respondent No. 1.

Raja Muhammad Iqbal for Respondent No.2.

2007 P T D 2484

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs T. N. INTERNATIONAL through Proprietor

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), PORT MUHAMMAD BIN QASIM, KARACHI and 2 others

C.P. No. D-06 of 2007, decided on 24th January, 2007.

Customs Act (IV of 1969)---

----S.25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Petitioner had assailed action of authorities whereby its consignment had been assessed on the basis of valuation ruling as against declared value---High Court, with consent of parties- disposed of the petition on grounds that upon 'payment of customs duties, sales tax etc. on the imported consignment at the declared value and furnishing of bank guarantee with the authorities for the differential amount as per the value of the consignment assessed by them, disputed consignment of the petitioner would be released by the respondent; that concerned officer of customs would offer proper .opportunity of hearing to the petitioner before determining the final valuation of the goods involved in the imported consignment of the petitioner and that After passing of final order, it would be open to the aggrieved party to follow further remedy under the Customs Act, 1969 if any.

Ziaul Hassan for Petitioner.

Raja Muhammad Iqbal for Respondents Nos.1 and 2.

Sofia Saeed Shah for Respondent No.3.

2007 P T D 2500

[Karachi High Court]

Before Anwar Zaheer Jamali and Gulzar Ahmed, JJ

COLLECTOR, COLLECTORATE OF CUSTOMS (PREVENTIVE), KARACHI

Versus

ABDUL SALAM KHAN and another

Special Custom Reference Application No. 33 of 2007, decided on 29th August, 2007.

Customs Act (IV of 1969)---

----S. 196---General Clauses Act (X of 1897), S.24-A---Appeal to High Court---Order of the Member; Technical of the Appellate Tribunal, showed that he had not gone through the earlier orders passed by the lower forums .and other material available on record, which was explicitly referred to and discussed therein---Mere fact that the respondents had failed to appear in response to the notice, Member Technical of the Appellate Tribunal was not supposed to decide the case against them without recording arty valid reasons and without application of mind---Impugned order passed by the Tribunal being violative of provisions of S.24-A of General Clauses Act, 1897, was set aside, with direction t~ the Tribw~al to decide the same afresh.

Raja Muhammad Iqbal for Applicant.

Respondent in person.

2007 P T D 2521

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs PREMIER MERCANTILE SERVICES (PVT.) LTD.

Versus

COMMISSIONER OF INCOME TAX, KARACHI

I.T.R.A. No. 22 of 2007, decided on 3rd October, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss.115(4), 122(5A), 153(1)(c) & 153(6)---Final tax liability---Stevedoring, business of---Assessee was providing stevedoring services through contract---Assessee filed income tax statement under S.115(4) of Income Tax Ordinance, 2001, treating tax deducted on receipts as final tax liability---Income tax return filed, by assessee was not accepted by Assessing Officer as final discharge of tax liability but Appellate Authority accepted the tax return filed by assessee---Income Tax Appellate Tribunal set aside the order passed by Appellate Authority and restored that of the Assessing Officer---Validity---Receipts from business of stevedoring fell within the ambit of S.153(6) of Income Tax Ordinance, 2001---Tax deducted on such receipts was final discharge of tax liability of the receipts---Order passed by Income Tax Appellate Tribunal was set aside---Question raised in reference answered in negative in favour of assessee---Reference was disposed of accordingly.

2002 PTD 288 = (2001) 84 Tax 183 (Trib.) ref.

Iqbal Salman Pasha for Applicant.

Aqeel Ahmed Abbasi for Respondent.

2009 P T D 2537

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

PAKISTAN INTERNATIONAL AIRLINES CORPORATION, KARACHI

Versus

COLLECTOR, SALES TAX AND FEDERAL EXCISE LARGE TAX PAYERS UNIT (LTU); KARACHI

Sales Tax Reference Application No. 213 of 2006, decided on 12th October, 2007.

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

----S.47---Advisory jurisdiction of High Court---Scope---In tax reference/appeals, advisory jurisdiction of High Court is restricted to answering only question of law arising from order of Tribunal.

Caltex Oil (Pakistan) Limited v. Collector, Central Excise and Sales Tax and others 2005 PTD 480 and Collector of Customs E & St and Sales Tax v. Pakistan State Oil Company Ltd. 2005 PTD SC 2446 rel.

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

----Ss. 2 (35), 19, 45 (2) & 47---Sales tax, imposition of---Self-consumption---Principles---Book adjustment---Products printed in printing press owned by assessee were for assessee's own internal use and consumption---Authorities issued notice for recovery of-sales tax on the products of the printing press---Validity---Produce of the press was supplied to other departments of assessee-company for their business use for consideration recovered through book adjustment---Value of such adjustment was more than Rs.2.5 million per annum which was threshold over which supply was liable to tax--Printing and self-use of stationery by printing press of assessee constituted taxable activity within the meaning of S.2 (35) of Sales Tax Act, 1990---Reference was dismissed in circumstances.

Caltex Oil (Pakistan) Limited v. Collector, Central Excise and Sales Tax and others 2005 PTD 480; Shahi Carpet (Pvt.) Ltd. v. CWT/IT, Companies-II, Karachi and another 2003 PTD 1377 and Collector of Customs E & ST and Sales Tax v. Pakistan State Oil Company Ltd. 2005 PTD SC .2446 ref.

Sheikhoo Sugar Mills Ltd. and others v. Government of Pakistan and others 2001 SCMR 1376 fol.

Yawar Farooqi for Appellant.

Raja Muhammad Iqbal for Respondent.

2007 P T D 2549

[Karachi High Court]

Before Muhammad Athar Saeed and Nadeem Azhar Siddiqi, JJ

Messrs INTERQUEST INFORMATION SERVICES

Versus

COMMISSIONER OF INCOME TAX

I.T.Rs. Nos. 71 of 1997 and 99 of 2006, I.T.R.As. Nos. 514 to 516 of 2006 and I.T.As. Nos. 274 to 281 of 1998, decided on 12th October, 2007.

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

----Ss.30, 33 & 136---Treaty for Avoidance of Double Taxation between Pakistan and Netherland, Art.12.3---Double taxation---Business profits or royalty---Determination---Receipts of assessee from leasing FLIC Tapes were held by Income Tax Appellate Tribunal to be income from royalty and not business profits---Validity---Agreement between parties clearly showed that payments received by assessee were' not for use or exploitation of copy .rights patent, know-how, secret process or formula or for supply of specialized knowledge, invention or patent but for its business use of patented software product and system---As the product could only be utilized for its technical use and could not be passed off to any other person, therefore, it did not fall within the definition of royalty as defined in para. 3 of Art.12 of Double Taxation Agreement between Pakistan and Netherlands---Such receipts fell in other income which might be covered-under business profits---Order of Income Tax Appellate Tribunal could not be sustained, and was set aside in favour of assessee---Reference was answered accordingly.

Glaxo Industries Ltd. v. Commissioner of Income Tax, Karachi 1991 PTD 195 rel.

Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdur Rahman 1989 PTD 909; Khalid Qureshi and 5 others v. United Bank Limited I.I. Chundrigar Road, Karachi 2001 SCMR 103; Oxford University Press v. Commissioner of Income Tax 2001 PTD 2484; K. Govindan and Sons v. Commissioner of Income Tax 2001 PTD 225.8; C.W.S. (India). Ltd. and others v. Commissioner of Income Tax 1995 PTD 741; Don Basco High School v. The Assistant Director, E.O.B.I. and others PLD 1989 SC 128; International Law in Relation to Double Taxation of Income" by I.P. Gupta; Taxmann's "Indian Double Taxation Agreements and Tax Laws" Vol. I, 4th Edition" by D.P. Mittal; "Principles of International Taxation" by Karl Sonntage and C.S. Mathur; International Tax Review for February, 2007; International Tax Review for March, 2005; Taxation of Computer Programs In Cross Border Transactions" by Sandeep Tandon; Application of the OECD interpretation to tax treaties in New Zealand; Advance ruling from India bearing P. No.30 of 1999 reported in (1999) 238 ITR 296 (AAR) (1999) 105 and Taxman 240 and UOI v. Azadi Bachao Andolan 263 ITR 706 ref.

Faroagh Naseem and Iqbal' Salman Pasha for Applicants.

Jawed Farooqui for Respondent.

Date of hearing: 12th October, 2007.

2007 P T D 2582

[Karachi High Court]

Before Anwar Zaheer Jamali and Arshad Siraj, JJ

COLLECTOR, SALES TAX (WEST), KARACHI

Versus

Messrs WAZIR INDUSTRIES (PVT.) LTD., KARACHI

Spl. Sales Tax Appeal No. 25 of 2000, decided on 18th October, 2007.

Sales Tax Act (VII of 1990)---

----S.47---Reference to High Court---No specific finding had been recorded by the Appellate Tribunal on the point involved as well as on the point of limitation raised by the party before the Tribunal---By consent Reference Application was allowed by High Court in the terms that impugned order of the Tribunal was set aside and the case was remanded to the Tribunal with directions to decide the case afresh in accordance with law, after affording full opportunity of hearing to both the parties.

Raja Muhammad Iqbal for Appellant.

Farrogh Naseem for Respondent.

Date of hearing: 18th October, 2007.

2007 P T D 1

[Lahore High Court]

Before Mian Saqib Nisar and Muhammad Sair Ali, JJ

Sh. MUHAMMAD NADEEM

Versus

COMMISSIONER OF INCOME TAX, SIALKOT

P.T.R. No.383 of 2004, decided on 31st May, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference to High Court---Limitation---Impugned order of Income Tax Tribunal was not served upon applicant/assessee, but was served upon his Authorised Representative which was not in accordance with law---Applicant, for the first time, upon his application obtained certified copy of said order on 11-4-2004 and filed application for reference to High Court on 11-5-2004 within prescribed period of 90 days---Time would commence from 11-4-2004 when copy of impugned order was obtained by applicant/assessee---Application filed by assessee on 11-5-2004 before Income Tax Appellate Tribunal for reference to High Court, was not barred by time, but was within prescribed period of limitation---View taken by the Tribunal that application for reference filed by assessee was barred by time, was illegal and erroneous---Impugned order was set aside and matter was sent back to the Tribunal for decision afresh upon application of applicant/assessee, which should be deemed to be under S.133(1) of Income Tax Ordinance, 2001.

Dr. Ilyas Zafar for Applicant.

Shahid Jamil Khan for Respondent.

2007 P T D 20

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, LAHORE

Versus

MUHAMMAD SHAFIQ

W.T.As. Nos.432 to 479, 484 to 497, 499 to 531, 533 to 598, 601 to 647 and 649 of 2006, decided on 19th September, 2006.

Wealth Tax Act (XV of 1963)---

----S.17-A(1)(b)---Assessment, framing of---Limitation---Assessment made after two years from date of filing of return or revised return---Validity---Such assessment would be invalid and coram non judice.

Muhammad Ilyas Khan for Petitioner.

2007 P T D 27

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs TREAT CORPORATION

Versus

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHORE

Civil Appeal No.494 of 2002, decided on 16th November, 2002.

Sales Tax Act (VII of 1990)---

----Ss. 2(46), 3, 7, 33, 34 & 47---Determination of tax liability---Supplies made under Consumers Promotion Scheme---Trade discount---Appeal to High Court---Appellant Corporation which was engaged in manufacturing and marketing of shaving blades, was supplying blades in packets containing 10 blades, but in the relevant year appellant supplied in special packing in which one blade was added extra in the packet and one packet containing 11 blades was sold at the price of 10 blades as discount under Consumers Promotion Scheme---Appellant was served with a show-cause notice by Authorities observing that appellant had made taxable supplies of shaving blades without payment of Sales Tax amounting to Rs.14,02,356 for relevant year leviable thereon---Claim of Department was that there was no provision in Sales Tax Act, 1990 to allow a registered person to give any discount in a 'quantitative form' in 'money terms'---Appellant was found to be liable not only for amount to Sales Tax, but also to additional tax under S.34 and a penalty under S.33 of Sales Tax Act, 1990---Validity---Extra blade was a taxable supply made by appellant in the course of taxable activity carried out by it---Selling of 11 blades for the price of 10, though amounted to discount as far the market practice of similar sales promotion schemes was concerned; but said discount was made in quantitative terms which was not countenanced by the definition of "value of supply"---Proviso to S.2(46)(d) of Sales Tax Act, 1990 had clearly stated the modes in which a discounted price had to be mentioned in the invoice---Invoices issued in the case did not show price of one blade which stood excluded from computation of "value of supply"---Department had not disputed offer of a discount in the form of making supply of more quantity at the price of lesser quantity, but such discount could be claimed and allowed only where value of quantity offered more than the normal supply was expressly indicated in the invoices as a "trade discount", but it was not shown in that manner---Claim of appellant could not be allowed in circumstances.

Mian Sultan Tanvir for Appellant.

A. Karim Malik for the Respondent.

2007 P T D 47

[Lahore High Court]

Before Nasim Sikandar and Sh. Azmat Saeed, JJ

Messrs TAUQIR ASHRAF & CO., LAHORE through Managing Partner

Versus

CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE and 2 others

Sales Tax Appeal No. 309 of 2002, decided on 25th July, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 3(1), 33(4)(c), 34 & 47---S.R.O. No.630(I)/95, dated 2-7-1995---Payment of fixed amount of sales tax under agreement---Reference/appeal to High Court---Appellant who was engaged in running a steel Re-Rolling Mills, was paying fixed amount of sales tax during the period 1995-96 in terms of Notification S.R.O. No. 630(I)/95 dated 2-7-1995---Subsequently, appellant was directed to pay the amount alleged to have been evaded by it along with additional tax and penalty---Appeal filed by appellant against said order was dismissed by Appellate Tribunal holding that Association of Re-Rolling Mills of which appellant was a member itself approached with the request to continue with the fixed tax regime---Appellate Tribunal found that since most of the members of association had complied with the terms of agreement with the Revenue, no legal or moral justification existed on the part of appellant to refuse compliance after having initially accepted the same---Tribunal found that appellant was estopped from taking plea of non-acceptance of said agreement at such belated stage---Validity---Mere minutes of meeting between the association and the Revenue, were not enough to charge the existing tax regime fully supported by the provisions of S.3(1) of Sales Tax Act, 1990---View of the Tribunal that matter stood settled by way of an administrative arrangement, could not be accepted as correct statement of law---No levy against the express words of the statute could be made on the basis of such an agreement, much less to say of imposition of additional tax or penalties in case of non-compliance with the terms of the agreement---Levy of tax rate and collection would not depend upon the will or agreement of some gentlemen who were supposed to represent other taxpayers of their class---Impugned order of Appellate Tribunal, was set aside by the High Court, in circumstances.

Crescent Re-rolling Mills, Lahore v. Assistant Collector of Sales Tax, Lahore 2005 PTD 2436 ref.

A. Karim Malik for Appellant.

Mian Mehmood Rashid for Respondent-Revenue.

2007 P T D 137

[Lahore High Court]

Before Maulvi Anwarul Haq and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

AAMIR NASEEM

W.T.A. No. 9 of 2006, decided on 6th September, 2006.

Wealth Tax Act (XV of 1963)---

----Ss. 15 & 17-A(1)(b)---C.B.R. Circular No.2---Filing of return or revised return under S.15 of Wealth Tax Act, 1963---Wealth assessment, setting aside of---Limitation---Word "or" as used in S.17-A(1)(b) of Wealth Tax Act, 1963 separated its first part providing limitation of "four years from the end of assessment year in which the net wealth was first assessable" from its second part providing a period of "two years from the date of furnishing of a return or a revised return under section 15, of the Act whichever is later"---Expression "whichever is later" being a rider related to date of return or revised return filed under S.15 of Wealth Tax Act, 1963, which did not allow comparison between "four years" of first part and "two years" of second part of S.17-A(1)(b) thereof---C.B.R.'s Circular No.2 would be read in consonance with provision of S.17-A of Act, 1963---Such Circular being contrary to provisions of clause (b) of S. 17-A(1) of Wealth Tax Act, 1963 would not be binding on Assessing Authorities---Assessment made beyond two years from date of return or revised return, would be invalid and coram non judice.

Ch. Saghir Ahmed for Appellant.

2007 P T D 178

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs DREAMLAND TRAVEL SERVICES (PVT.) LTD.

Versus

DEPUTY COMMISSIONER OF INCOME TAX/WEALTH TAX

I.T.A. No.119 of 1999, heard on 3rd October, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 12(18)---Sum not claimed as loan---Deeming such sum as income of assessee---Scope---Such addition could not be made in absence of assessee's such claim---Neither such addition could be made nor could defence taken by assessee be rejected without recording a finding of fact that such sum was injected in business and used as capital, circulating or otherwise; in other words, assessee's explanation could not be demolished only by ruling that alleged sum introduced in account of assessee was factually used in business, thus, could be treated as loan taken for catering capital needs of assessee.

Messrs Micropak (Pvt.) Ltd. v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1180 rel.

Ch. Anwar-ul-Haq for Appellant.

Ch. Jan Muhammad for Respondent.

Date of hearing: 3rd October, 2006.

2007 P T D 239

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs SYED BHAIS (PVT.) LTD. through Director

Versus

CENTRAL BOARD OF REVENUE, ISLAMABAD through Chairman and another

Writ Petitions Nos. 5471, 5472, 5473, 5398, 5417 and 6331 of 2006, decided on 30th June, 2006.

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

----S.177---Total audit---Import, object and scope---Conduct of audit into income tax affairs (including examination of accounts and record, inquiry into expenditure, assets and liabilities), is a new concept introduced for the first time in income tax laws in Pakistan which has to be understood in the scheme of Income Tax Ordinance, 2001---Power to select a case for audit is power, vested with Commissioner, who in relation to income tax affairs of person, having regard to clauses (a) to (d) of S.177 (4) of Income Tax Ordinance, 2001, can select a case for audit---Central Board of Revenue in view of S.177 (1) of Income Tax Ordinance, 2001, is also given the authority, in its supervisory capacity to lay down a criteria for selecting any person' for audit through Commissioner---On the basis of such criteria, Commissioner is to select a person for audit, besides the powers vesting in him under S.177 (4) of Income Tax Ordinance, 2001---Concept of audit, subsequent to completion of assessment, has been introduced in new enactment, to keep a check on the veracity of declaration made in the return.

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

---S.122---Income Tax Ordinance (XXXI of 1979), S.65---Self­-assessment---Old and new law---Distinction---New law is enacted with main difference that previously, Assessing Officer used to examine return of assessee and satisfy himself as to its correction before passing an assessment order---Concept of enactment of Income Tax Ordinance, 2001, is to "let the taxpayer make his own assessment"---Now assessment order is made by operation of law on furnishing of complete return.

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

----S. 177---Selection of a case for total audit---Authority of Commissioner--Scope---Authority of Commissioner to select a person for audit under S.177 of Income Tax Ordinance, 2001, is two-fold, firstly on the guidelines of Central Board of Revenue as envisaged in subsections (1) and (2) and secondly at his own by resorting to provisions of subsection (4) of S.177, Income Tax Ordinance, 2001---Commissioner, for the purposes of selecting for audit, has to resort to the criteria laid down by Central Board of Revenue, in cases falling under first category---Disclosure of reason that regard having been given to clauses (a) to (d) of S.177 (4) of Income Tax Ordinance, 2001, is requirement for the cases falling under second category.

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

---S. 177 (3)---Selecting a case for total audit---Criteria laid down by Central Board of Revenue---Confidentiality---Object---Previous publication of criteria/guidelines in objective form is not the requirement of law, nor it is justified---Central Board of Revenue, under the provisions of S.177 (3) of Income Tax Ordinance, 2001, has to keep the criteria confidential---Previous publication of criteria/guidelines can be an instrument in the hands of taxpayers, who by knowing beforehand that their cases would not be selected or scrutinized, may take full benefit of the situation---Previous publication of criteria, fore-arms taxpayer to evade tax---Issuance of criteria either before or at the time of announcement of scheme may frustrate the very object of provision of S.177 (3) of Income Tax Ordinance, 2001.

(e) Constitution of Pakistan (1973)---

---Art. 189---Income tax---Direction of Supreme Court---Effect---Revenue is bound to follow the arrangement and slightest departure from the observation/direction of Supreme Court cannot be expected.

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

---Ss.114, 120 & 177---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Maintainability---Self-assessment---Selection of case for total audit---Assesses had self-assessed their income and accordingly filed their tax returns but Authorities selected their cases for total audit--Assessees assailed notices of audit, issued by Authorities on the ground that their income tax returns had become assessment order under the provisions of S.120 of Income Tax Ordinance, 2001, thus without any criteria laid down by Central Board of Revenue, the cases could not be selected for total audit, on pick and choose policy---Validity---Cases of assessees were selected under S.177 (4) of Income Tax Ordinance, 2001, therefore, Commissioner was to disclose reasons that while selecting cases for audit, due regard was given to the provisions of clauses (a) to (d) of S.177 (4) of Income Tax Ordinance, 2001---Selection of cases for audit was open to exception only when selection involved personal bias; mala fide or suffered from unfair treatment---No element of bias or mala fide either existed or had been pleaded by assessees---Taxpayer was legally and morally bound to furnish true declaration of income in his/its return---Taxpayer, while filing return made a declaration under S.114 (2) (b) of Income Tax Ordinance, 2001, to the effect that relevant record along with other particulars was kept, true statement in return had been made and record was maintained as per declaration---No prejudice was caused to a taxpayer on being selected for audit, if he made true statement and maintaining record as per declaration---Grounds on which notices had been assailed were without any force---Constitutional jurisdiction of High Court could not be invoked on mere issuance of a notice when no adverse action had been taken---Petition was dismissed in circumstances.

Muhammad Hussain v. Commissioner Income Tax 2005 PTD 152; Reference No.2 of 2005 by the President of Pakistan PLD 2005 SC 873; Messrs Sahib Textile (Pvt.) Ltd. through Managing Director, Faisalabad v. Federation of Pakistan though Secretary Finance, Secretariat, Islamabad and 4 others 2004 PTD 1; Messrs Fazal Sweets, Lahore v. Secretary Revenue Division Islamabad 2004 PTD 171; Akhlaq Cloth House Faisalabad v. Secretary Revenue Division Islamabad 2003 PTD 1513 and Messrs Decent Rice Corporation, Sheikhupura v. Secretary Revenue Division Islamabad 2005 PTD 1847 ref.

Mir Nabi Bakhsh Khan Khosoo v. Branch Manager, Jhatpat 2000 SCMR 1017; Niaz Ali and others v. Federation of Pakistan 2004 MLD 460 and Commissioner of Income Tax and others v. Messrs Media Network and others C.As. Nos. 233 to 315 of 2004 rel.

Syed Mansoor Ali Shah and Safqat Mehmood Chohan for Petitioners.

Muhammad Ilyas Khan and Shahid Jameel Khan for Respondent-Revenue.

2007 P T D 333

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME TAX/ WEALTH TAX, MULTAN ZONE

Versus

MUHAMMAD RAFI, MEDICAL OFFICER, D.H.Q. KHANEWAL

Tax Reference No.53 of 2004, heard on 11th October, 2006.

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

----Ss.128(5) & 133---Reference to High Court---Power of Commissioner (Appeals) to entertain documentary material or evidence---Scope---Ex pane order passed by assessing officer---Effect---Reference of question of law to High Court---Scope---Assessec had filed his return for the year 1998-99 declaring his income as Rs.2,52,000 but assessing officer refused to allow claim of immunity on ground that under scheme, assessee was required to pay enhanced tax by 20% as compared with tax paid in the immediate preceding year and that assessee could avail immunity only by paying tax at Rs.22,560 while he had paid total tax for the year 1998-99 at Rs.20,800---Allegedly as assessee failed to participate, assessing officer proceeded to frame assessment at his own estimation---Assessee before Appellate Authority pleaded that before closing date he had revised his return and had paid tax at Rs.24,827---Return and challan were alleged to have been submitted at the office of Commissioner Income Tax (CIT) which contention was controverted by assessing officer stating that no such return was transferred from CIT Office to local District Office---First Appellate Authority, while going through acknowledgement slip filed by assessee, agreed that return had actually been revised and tax was deposited with an increase of 20% as compared with immediate preceding year, therefore, assessee was entitled to immunity---Income Tax Appellate Tribunal maintained the order of first Appellate Authority on the ground that acknowledgment slip and filing of revised return was supported by statement of receiving official who on oath confirmed before lower Appellate Authority/CIT(A) as to receipt of return as per acknowledgment relied upon by assesee---Revenue framed three questions of law for reference to High Court; firstly, whether Appellate Authorities were justified to entertain evidence produced by assessee regarding filing of revised return without perusing/ examining the record of office of Commissioner Income Tax; secondly, whether evidence of an official regarding receipt of return was entertainable when he was not authorized to do so and thirdly, whether Appellate Authorities were justified to entertain a piece of evidence which was not bona fide but a result of collusive arrangement with an unscrupulous official---Validity---Subsection (5) of S.128 of Income Tax Ordinance, 2001 certainly empowered Commissioner(Appeals) to entertain any documentary material or evidence although such admission was subject to his satisfaction that appellant was prevented by sufficient cause from producing such material or evidence before Commissioner---Revenue had not questioned the satisfaction of Commissioner (Appeals) recorded in his order when he summoned and examined on oath the concerned official---Assessment order recorded by Assessing Officer being ex parte, there did not appear any illegality on the part of Commissioner (Appeals) to entertain evidence, especially when assessing officer had summarily rejected plea of filing of revised return on the only ground that revised return had not been forwarded to his District Office by Commissioner's Office---Commissioner (Appeals), in that regard, had rightly observed that assessee could not be penalised for a default on the part of receiving office to forward revised return when its acknowledgment had duly been submitted before Assessing Officer---Every question of law need not be referred to High Court and only a question having some substance needed to be so referred---Eligibility of an individual assessee in a particular year to avail immunity from detailed scrutiny could hardly be said to be a question having a substance---Questions framed by Revenue were neither of law nor had raised a substantial legal controversy between the parties---High Court declined to entertain and answer the questions.

CIT v. Messrs Imminan International Lahore; The Lungla (Sylhet), Tea Co. Ltd. v. Commissioner of hicome Tax Dacca Circle Dacca 1970 SCMR 872 and CIT v. Basanta Kumar Agarwalla (1983) 140 ITR 418 rel.

(b) Interpretation of statutes-

----"Point of law" could not be equated with expression "question of law".

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

----S. 133(4)---Income Tax Ordinance (XXXI of 1979), S.136(1)(2)---Reference to High Court---Jurisdiction of High Court to entertain reference---Nature of---Purpose of reference to High Court---"Question of law" not to be equated with "point of law"---Jurisdiction of High Court to entertain reference under S.133(4) of Income Tax Ordinance, 2001, was advisory in nature and was required to be invoked only when the issues raised before and decided by Tribunal were of substantial nature and of general application to a sizeable class of assessees---Nature of jurisdiction of High Court was clearly distinguishable from its appellate or revisional jurisdiction---Most important difference which needed to be noted was that during pendency of a reference the appeal before Tribunal was deemed to be pending and in case the view adopted by Tribunal was varied, it was again listed before it and then decided in the light of opinion expressed by High Court---Purpose of reference was not to get a decision for or against a party before Tribunal, rather it was only the resolution of a problematic or debatable legal question---"Point of law" could not be equated with expression "question of law" and that question referred was to be a disputed or disputable question of law---Unless a question framed by Tribunal at the instance of an assessee or the revenue under S.136(1) or brought directly before High Court under S.136(2) of the late Income Tax Ordinance, 1979, fulfilled the aforesaid standard of general interest, application and relevancy to overall assessment proceedings, it was to be deemed to be a question of fact.

CIT v. Messrs Imminan International Lahore; The Lungla (Sylhet), Tea Co. Ltd. v. Commissioner of Income Tax Dacca Circle Dacca 1970 SCMR 872 and CIT v. Basanta Kumar Agarwalla (1983) 140 ITR 418 rel.

Ch. Saghir Ahmed for Appellant.

Mirza Muhammad Waheed Baig for Respondent.

?Date of hearing: 11th October, 2006.

2007 P T D 453

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX, GUJRANWALA ZONE, GUJRANWALA

Versus

Messrs PAKISTAN ELECTRONICS, GUJRANWALA

I.T.As. Nos. 4531/LB of 1997, 504 to 507 of 1998, decided on 25th October, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.70, 71, 72, 73 & 108---Non-intimating department regarding change in status of assessee---Effect---Assessment could not be cancelled on such ground, which would entail penal consequences as provided under 5.108 of Income Tax Ordinance, 1979---Intimation required to be submitted in terms of S.72 of Income Tax Ordinance, 1979 pertained to an assessee, who discontinued business, but would not apply to change of status of assessee---Provisions of Ss.70 & 71 of the Ordinance did not require intimation to department in case of change in constitution of firm or 'dissolution of firm---Assessee according to S.73 of Income Tax Ordinance, 1979 would be assessed in its own status on date of its succession in following income year.

Shehbaz Butt for Appellants.

Waqar Azeem for Respondent.

2007 P T D 486

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

Messrs SHAFI SONS ENGINEERING (PVT.) LTD., LAHORE

Versus

COLLECTOR (APPEALS) CUSTOMS, EXCISE & SALES TAX, LAHORE and another

Customs Appeal No.22 of 1999, heard on 12th October, 2006.

Central Excise Act (I of 1944)---

----Ss. 3-B, 12-A & 36-C---S.R.O. 798(I)/90, dated 30-7-1990---Liability to pay central excise duty and additional duty-Exemption--Claim for---Appeal against judgment of Excise and Sales Tax Appellate Tribunal---Appellant who was a manufacturer of PVC pipes, had supplied UPVC riser pipe and top sleaves to UNICEF and cleared same without payment of central excise duty payable thereon, presuming the same to be exempted under S.R.O. 798(I)/90 dated 30-7-1990---Order­ in-original was passed against appellant holding him liable to pay central excise duty along with additional duty as stipulated under S.3-B of Central Excise Act, 1944 in addition to a penalty---Contention of appellant was that parts of machinery used in process directly connected with extraction of minerals, were covered by definition of machinery---S.R.O. 798(I)/90 dated 30-7-1990, contained exemption to central excise duty only to machinery and equipment which were produced by a unit and supplied against international tenders to the projects financed out of funds provided by the international loans or aid giving agencies--Definition of machinery was also provided in the said S.R.O.---UPVC riser pipes supplied by appellant to UNICEF were classifiable under PCT heading 3917 of the Tariff and those pipes could not be termed as machinery and equipment as said pipes were of specific size, length and diameter and were neither machinery nor equipment---Meaning of term "machinery" could not be stretched too far to bring in its ambit the UPVC riser pipes---Non-payment of central excise duty in the present case, was not deliberate, but was due to misinterpretation of S.R.O.---Appellant, in circumstances was not liable to pay any additional central excise duty---Appeal was allowed to the extent of waiver of additional tax, but impugned order to the extent of levy of central excise duty, was upheld.

Hasham Ahmad Khan for Appellant.

Zahid Farani Sheikh for Respondents.

Date of hearing: 12th October, 2006.

2007 P T D 512

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs SHAN TRADERS, LAHORE

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and 2 others

P.T.R. No.92 of 2001, decided on 15th November, 2006.

(a) Income Tax Rules, 1982---

---R.207-A---Object of Rule 207-A of Income Tax Rules, 1982.

The object of Rule 207-A of Income Tax Rules, 1982 is to curtail the discretionary powers of Income Tax Authorities while estimating the value of a property purchased by an assessee or the exact value/amount of the investment made by him in purchase of a property.

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

----S.13(1)(d)--- Income Tax Rules, 1982, R.207-A---Under-statement of investment in plot purchased from Development Authority charge of---Enhancement of value of plot shown in Transfer Letter and its addition towards income while declining to assessee benefit of R.207-A of Income Tax Rules, 1982---Validity---Assessing Officer by enhancing value indicated in Transfer Letter had indirectly found that actually a higher sum had been paid by assessee to the Authority and not the one indicated therein---Such findings were erroneous and were not supported by direct or even circumstantial evidence---Assessee had explained source of such investment by encashment of FEBCs---When valuation of property was being made, such rule was very much in field, thus, principle laid therein for valuation of immovable property could very well be borrowed both on equity and fair play---Section 13(1)(d) of Income Tax Ordinance, 1979 provided that only unexplained investment or amount under stated in books of accounts or wealth statement could be deemed to be income of assessee in relevant assessment year--Transfer Letter issued by Development Authority supporting transaction at a certain amount could not be declared to have been a case of under-statement except by showing an active connivance between assessee and officials of Authority in settling price---Investment in plot declared in wealth statement was supported by Transfer Letter of the Authority, thus, there was no occasion to place a higher valde to plot and deem balance as unexplained income---Provision of S. 13(1)(d) of Income Tax Ordinance, 1979 would not apply to such facts---Impugned order was set aside in circumstances.

(c) Interpretation of statutes----

---Rules are generally not retrospective in operation.

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

----S. 13(1)(d)--- Income Tax Rules, '1982, 8.207-A---Under-statement of investment in property---Scope---Such question would be relevant only in a transaction between private parties---Where one of the parties to transaction was a government agency, then possibility of under-statement of value of property would almost be nil---While settling value of property, always open to revenue to bring on record an impropriety or collusion between officials of agency and assessee as private individual.

(e) Interpretation of statutes---

----Fiscal statutes---Deeming clause in a taxation statute must he construed very very strictly.

Rana Munir Hussain for Petitioner.

Sajjad Ali Jafri for the Revenue.

2007 P T D 663

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

Messrs ITTEHAD TEXTILE INDUSTRIES (PVT.) LTD.

Versus

COLLECTOR OF SALES TAX, COLLECTORATE OF SALES TAX AND CENTRAL EXCISE, FAISALABAD and 2 others

Sales Tax Reference No.22 of 2006, decided on 18th September, 2006.

Sales Tax Act (VII of 1990)---

---Ss. 10 & 47---Reference to High Court---Adjustment of input tax---Two questions had been raised; firstly, whether assessee could be declined input tax adjustment on electricity consumed in its administrative offices; and secondly, whether assessee could be declined input tax adjustment on supplies received---Genuineness of tax invoice was essential for sustaining a claim of input tax adjustment under the law---Whether in the facts of the case, disputed invoice was genuine or false was a question of fact---Counsel for assessee had not disputed the validity or propriety of any test applied by department to establish genuineness of invoice tendered by assessee---Where department disputed the genuineness of tendered invoices, question raised was one of fact and no legal issue had arisen for determination of High Court; other question posed in the reference not being a question of law, was outside the statutory ambit of jurisdiction of High Court.

Muhammad Akram Nizami for Appellant.

2007 P T D 671

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

KHALIQ DAD RANA

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and 3 others

Income Tax Appeals Nos.393 and 394 of 1999, decided on 21st September, 2006.

Wealth Tax Act (XV of 1963)---

---Ss. 3 & 27---Charge of wealth tax---Reference to High Court---Assessee filed eleven appeals before High Court arising from a consolidated order raising common question of law---Among said eleven appeals, nine were disposed of by a Division Bench of High Court, remanding all appeals. with direction to amend assessment order and charge Wealth Tax on the property of assessee only to the extent of his share in the property as determined in the civil court, after the agreement reached between assessee and other legal heirs on respective shares in the property---Remaining two appeals, which also involved identical question of law, were also disposed of in said terms.

Imtiaz Javaid for Appellant.

Khadim Hussain Zahid for Respondents.

Date of hearing: 21st September, 2006.

2007 P T D 744

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

MEHMOOD AHMAD

Versus

INCOME TAX APPELLATE TRIITUNAL, LAHORE through Chairman and 2 others

I.T.A. No.683 of 1999, decided 30th November, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 65(1), 134 & 136---Notice under S.65 of Income Tax Ordinance, 1979---Notice was alleged to be invalid for not specifying as to whether same was issued in terms of S. 65(1)(a) or (b) or (c) thereof---Raising of such question by assessee before Appellate Authority finding mentioned in its order---Appellate Tribunal dismissed appeal of assessee for not raising such question before Appellate Authority---Validity---Real matter in controversy having not been adjudicated upon by Tribunal, High Court remanded case to Tribunal to decide the same afresh after hearing parties.

Shahbaz Butt for Appellant.

Shahid Jamil for Respondents.

2007 P T D 774

[Lahore High Court]

Before Sh. Azamat Saeed and Umar Ata Bandial, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE-III, LAHORE

Versus

Mian IJAZ AHMAD

I.T.A. No.165 of 2000, decided on 9th January, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.65 & 136---Appeal to High Court---Maintainability---Disputed question of fact---Service of notice under S.65 of Income Tax Ordinance, 1979---Authorities, after finalization of assessment, issued notice under S.65 of Income Tax Ordinance, 1979, which was served through affixation and ex parte assessment was framed against the assessee---Appeal filed by assessee was allowed by Commissioner Income Tax (Appeals) on the ground that notice was not served upon the assessee---Order passed by Appellate Authority was maintained by Income Tax Appellate Tribunal---Plea raised by authorities was that notice under S.65 of Income Tax Ordinance, 1979, was duly served upon assessee---Validity---Factum of service of such notice or otherwise was a question of fact and could not be adjudicated upon by High Court while exercising jurisdiction under S.136 of Income Tax Ordinance, 1979---No question of law arose requiring expression of opinion by High Court---Appeal was dismissed in circumstances.

Sajjad Ali Jafri for Appellant.

2007 P T D 796

[Lahore High Court]

Before Sh. Hakim Ali, J

Messrs SUBHAN CONSTRUCTION COMPANY

Versus

GOVERNMENT OF PAKISTAN, CENTRAL BOARD OF REVENUE, ISLAMABAD and others

Writ Petition No. 1532/BWP of 2006, decided on 18th September, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S. 153 & First Sched., Division III---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Deduction of tax from gross amount payable on execution of contract---Rate of tax---Contracts arrived at between parties were executed---Differences between petitioner/construction company and respondent/Department had arisen with regard to rate of tax---Department was demanding payment of income tax at the rate of while cording to petitioner it was 5% of the gross amount payable---6% Validity---as Clause (c) of subsection (1) of S.153 of Income Tax Ordinance, 2001 had provided that time of payment was the crucial date when the tax had to be deducted---Sub-clause (3) of Division III of Part-III of First Schedule of Income Tax Ordinance, 2001, the words used had left no ambiguity that rate of tax to be deducted from a payment referred in clause (c) of subsection (1) of 5.153 of' Income Tax Ordinance, 2001 would be 6% of the gross amount payable---Execution of' contract was in fact the prerequisite for completion of a project, otherwise in government contracts, no work could be assigned/allotted/ executed, unless it was executed through a written contract---Five per cent of the gross amount was payable under unamended provision of law which was substituted through the enforcement of Finance Act, 2005 which had taken its birth from 1-7-2005, resultantly after said date rate of tax would be applied and deducted at the rate of 6% of the gross amount payable---In the present case last date of payment was 31-2-2006, demand and claim of department which was 6%, could not he held illegal and unlawful in circumstances.

Ijaz Ahmad Chaudhry for Petitioner.

Muhammad Akhtar Qureshi for Respondents.

Ch. Shafi Muhammad Tariq A.A.-G.

2007 P T D 833

[Lahore High Court]

Before Sh. Azmat Saeed and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES ZONE, FAISALABAD

Versus

MUSHTAQ ALI CHEEMA C/o M.S.C. TEXTILES (PVT.) LTD., FAISALABAD

I.T.As. Nos.103, 106 and 107 of 1999, heard 16th November, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S.136---Income Tax Rules, 1982, R.3(2)(c)---Appeal to High Court---Appellate Tribunal finding assesses not to have received salary from both companies as their Director, but had worked only for one company during the relevant year---Validity---Such factual conclusion could not be interfered with in appeal by High Court---No question of law having arisen from impugned order, High Court dismissed appeal in circumstances.

1998 (78) Tax 179 (Trib.) and C.I.T., Faisalabad v. Waseem Ashfaq C/o Ashfaq Textile Mills (Pvt.) Ltd.) I.T.A. No.427 of 1999 rel.

Khadim Hussain Zahid for Appellant.

Nemo for Respondent.

Date of hearing: 16th November, 2006.

2007 P T D 889

[Lahore High Court]

Before Mian Hamid Farooq and Syed Sakhi Hussain Bokhari, JJ

C.W.T., CENTRAL, LAHORE

Versus

Messrs Malik MUHAMMAD ASHIQ, LAHORE

C.T.R. No.26 of 1995, heard on 7th September, 2006.

Wealth Tax Act (XV of 1963)---

----S.5 (1)(xv) & Sched. Cl. (7)(i)(ii)---Income Tax Ordinance (XXXI of 1979), S.136 (1)---Wealth tax---Foreign remittance---Change of residential status---Assessee claimed exemption on the basis of foreign remittance but assessing officer rejected the claim on the ground that residential status of assessee was that of `Resident'---Appellate authority allowed the appeal filed by assessee and found the assessee to be entitled for exemption---Order passed by appellate authority was maintained by Income Tax Appellate Tribunal---Opinion of High Court was sought on the questions whether Income Tax Appellate Tribunal was justified in holding that foreign remittance brought or sent to Pakistan by a non-resident in year 1984-85, enjoyed the exemption from wealth tax for the year in which remittances were brought and also in the following five years irrespective of the fact whether assessee remained a non-resident; and whether Income Tax Appellate Tribunal was justified in holding that once asset was allowed exemption under S.5 (1)(xv) of Wealth Tax Act, 1963, it could not be subsequently withdrawn with the change of residential status of assessee---Validity---Questions referred to High Court had already been answered in the affirmative and decided by High Court in earlier cases---High Court declined to take any contrary view to the judgments already delivered---Reference was disposed of accordingly.

Mst. Zarina Yousaf v. Inspecting Additional Commission of Income Tax/Wealth Tax Sialkot Range, Sialkot and another 2005 PTD 108 and Commissioner of Income Tax/Wealth Tax Companies Zone-I, Lahore v. Zoraiz Lashari 2005 PTD 2064 fol.

Sajjad Ali Jaffari for Appellant.

Khawaja Ibrar Jamal for Respondent.

Date of hearing: 7th September, 2006.

2007 P T D 896

[Lahore High Court]

Before M. Bilal Khan and Sh. Azmat Saeed, JJ

COLLECTOR OF CUSTOMS

Versus

Mian MUHAMMAD FAROOQ

Customs Appeal No.531 of.2003, decided on 8th December, 2006.

Customs Act (IV of 1969)---

----Ss. 168 & 196---Confiscation of vehicle---Appeal to High Court---Vehicle in question was seized by Customs Authorities from the possession of respondent for having failed to establish lawful import thereof --Appeal filed by respondent against confiscation of vehicle was accepted by the Tribunal vide impugned order declaring confiscation of vehicle as invalid---Vehicle, in the meantime having been auctioned, the Tribunal directed that proceeds from said auction be given to respondent by way of compensation---During the course of proceedings before the Adjudicating Officer, respondent produced the bill of entry and other documents purportedly evidencing lawful import of said vehicle---Said documents were never got verified by Adjudicating Officer nor their authenticity was displaced---Tribunal, in circumstances concluded that Revenue had been unable to establish that chassis number of the vehicle in question was cut and welded or otherwise tampered with or proved that vehicle had not been lawfully imported---Such pure question of fact had already been determined by the Tribunal on the basis of material before it---Findings returned by the Tribunal were not perverse---No question of law having arisen requiring expression of opinion by High Court, appeal being devoid of any merit, was dismissed.

Izhar ul Haq for Petitioner.

Ahmed Awais for Respondent.

2007 PTD 921

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COLLECTOR OF CUSTOMS, LAHORE

Versus

NESTLE MILK PACK LIMITED, SHEIKHUPURA

C. As. Nos.260 to 263 of 2002, decided on 10th January, 2007.

Sales Tax Act (VII of 1990)---

---Ss. 13, Sixth Sched. VI, (3)(iv), 32(2), 36(2), 47, 55, 65 & 72---Exemption---Claim for---Appeal to High Court---Respondent/importer, imported various consignments of `Nan Lactogen' A 1 110' and sought its clearance under PCT heading 1901.1010 claiming exemption of Sales Tax per Sched. VI of Sales Tax Act, 1990 in the light of opinion expressed by Central Board of Revenue on 27-6-1996 through letter No.1/42-STT/96 addressed to the Collectors and Deputy Collectors---Consignments of importer were accordingly released oil basis of opinion expressed by Central Board of Revenue---Adjudication proceedings were subsequently initiated on the ground of the audit paras made by Revenue Receipt alleging that exemption of sales tax was admissible to fresh and dried milk of all sorts covered by PCT heading 0401 only and not the milk-based food preparations classified under PCT heading 1990.1010---Audit para went on to say that clarification issued by Central Board of Revenue by way of said letter, was improper inasmuch as Central Board of Revenue was not empowered to amend or modify Schedule VI of Sales Tax Act, 1990 through a letter---Excise and Sales Tax Appellate Tribunal had agreed that clarification issued by Central Board of Revenue by its letter on 27-6-1996 extended/enlarged scope of exemption available in Serial No.3(iv) of Sixth Schedule to Sales Tax Act, 1990 and found that said letter having remained in the field till initiation and completion of adjudication proceedings, orders-in-original were bad both on fact as well as in law---Validity---Held, no case for interference had been made out for the reasons; that Tribunal had rightly observed that interpretation/clarification made by Central Board of Revenue by way of said letter dated 27-6-1996, which could not be brushed aside merely on the ground that earlier to the issuance of S.R.O. 198(I)/98 dated 28-3-1998, exemption was relatable only to milk products contemplated in Chapter 4 of the First Schedule to Customs Act, 1969; that Central Board of Revenue being the apex body to collect revenue was the most relevant official agency to place an .interpretation upon a particular provision-appearing in a fiscal statute---Mere fact that a subsequent change in law by way of issuance of said S.R.O. was more particular and specific in extending the exemption would not derogate from the interpretation of C.B.R. already made in that regard; that concession of exemption having been allowed to respondent/importer on the bases of said letter of C.B.R., initiation of adjudication proceedings on the opinion expressed by the auditors, amounted to re-opening of the case, which was improper and illegal; that though S.55 of Sales Tax Act, 1990 as it existed, was not in the field at the relevant time when C.B.R. letter was issued on 27-6-1996, but in view of provisions of S.72 of Sales Tax Act, 1990, reference of the matter to adjudication Authority by the Executive Wing of the Revenue, was legally improper; that even if equal interpretations were possible, the one in favour of the taxpayer, was needed to be adopted.

A. Karim Malik for Appellant.

Nasar Ahmad for Respondent.

Date of hearing: 4th December, 2006.

2007 P T D 948

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs REHMAT STEEL MILLS through Chief Executive, Lahore

Versus

GOVERNMENT OF PAKISTAN through Secretary Finance, Islamabad and 3 others

Writ Petition No.17114 of 2002, decided on 13th December, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 3, 7 & 11---Constitution of Pakistan (1973), Art.199---Constitutional petition--Charge of sales tax---Determination of tax liability and assessment of tax---Petitioner/(Re-rolling Mills) were charged with Sales Tax pursuant to C.B.R. Order dated 25-10-1997, wherein 200 units of electricity consumption was treated as reflecting manufacture of one metric ton of mild steel products---Such indirect calculation of production based on electricity consumption, was devised with the consent of Re-rolling Mills Association, of which petitioner was a member---Subsequently by order dated 24-4-2001 C.B.R. amended the calculation and reduced to 130 units electricity consumption that represented the manufacture of one metric ton of mild steel products---New formula for assessing production was challenged by petitioner solely on the ground that department had applied it retrospectively with effect from 1-7-2000---Maintainability of constitutional petition filed by petitioner was opposed on grounds of estoppel, laches and availability of alternate remedy---On the merits, department, however was unable to show law authorizing C.B.R. to impose a retrospective formula of assessment on the bases of alleged consent of petitioner's Association rather than the petitioner itself --Validity---Taxing Department must justify its taxing measures on the basis of lawful authority and taxing measures could not be validated on the basis of the consent of an assessee---Executive measures having adverse effect on the propriety or rights of a citizen, could not be applied retrospectively---Important factual point in the case was that petitioner had accepted the validity and binding effect of the assessment formula agreed to by petitioner's Association---That agreement, however was about assessment rather than charging of a tax---Consent in such matters was a means of settlement---Question being whether agreement with Association had provided retrospective application of assessment formula; matter was sent back to department for verification, whether the date of enforcement of new assessment formula was needed as stated in the impugned order---If such date was determined in the documents constituting the agreement, then petitioner would be bound by it, otherwise demand in question would be illegal.

Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others PLD 1998 SC 64 rel.

Ch. Abdur Razzaq for Petitioner.

Waqar Azeem for Respondents

2007 P T D 983

[Lahore High Court]

Before Mian Hamid Farooq and Iqbal Hameedur Rahman, JJ

AMAN ULLAH

Versus

CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE and 4 others

Customs Appeal No.13 of 2004, decided on 12th December, 2006.

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

----Ss.156(89) & 196---Transfer of Property Act (IV of 1882), S.41---Seizure and confiscation of vehicle---Order of Tribunal directing release of vehicle on payment of leviable duties and taxes---Owner of vehicle (appellant) claimed its unconditional release for being an innocent and bona fide purchaser thereof for consideration---Validity-.Appellant had already got maximum relief---Principle of bona fide purchaser would not apply to goods confiscated under the provisions of Customs Act, 1969---Bona fide purchaser for consideration would not be absolved from liability to pay customs duty, taxes and fines etc.---High Court dismissed appeal in circumstances.

Collector of Customs, Lahore v. Azeem Ahmad 2003 PTD 960; Collector of Customs, Multan v. Muhammad Tasleem 2002 MLD 296 and Abdur Rauf Khan v. Collector, Central Excise and Land Customs 1980 SCMR 114 rel.

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

----S.156---Transfer of Property Act (IV of 1882), S.41---Goods confiscated under Customs Act, 1969---Principle of bona fide purchaser would not attract to such cases---Bona fide purchaser for consideration would not be absolved from liability to pay customs duty, taxes and fines etc.

Collector of Customs, Lahore v. Azeem Ahmad 2003 PTD 960; Collector of Customs, Multan v. Muhammad Tasleem 2002 MLD 296 and Abdur Rauf Khan v. Collector, Central Excise and Land customs 1980 SCMR 114 rel.

Malik Muhammad Shabbir Langrial for Appellant.

Ch. Saghir Ahmad for Respondent No.1.

2007 P T D 1161

[Lahore High Court]

Before Mian Allah Nawaz, J

DAWOOD HERCULES

Versus

COLLECTOR OF SALES TAX

Writ Petition No.15851 of 1996, decided on 16th September, 1997.

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

----Art. 199---Constitutional jurisdiction of High Court---Doctrine of exhaustion---Applicability and scope.

Principle of exhaustion/that no one is entitled to invoke the constitutional jurisdiction of High Court against any supposed/threatened injury/adverse order/proceedings adios until the said aggrieved party has availed remedies available to him under the relevant statute, does not bar the jurisdiction but regulates its exercise.

Doctrine of exhaustion embodied in Article 199 of the Constitution is not absolute bar against exercise of jurisdiction under Article 199 of Constitution. This rule is regulatory in nature and ordinarily High Court insists that aggrieved person must, in the first instance, avail the statutory remedies available to him and invoke the constitutional jurisdiction of High Court after undertaking that exercise. However, this rule is not absolute and if High Court comes to conclusion that assailed order/action/proceedings is/are wholly without jurisdiction or in excess of jurisdiction or is/are manifestly unjust and oppressive, then High Court has power to come to rescue of aggrieved party and keep functionaries of the State within defined sphere of their powers.

Champion Clocks Co. v. C.B.R. 1991 PTD 778; Commissioner Income Tax v. Messrs Shaiq Corporation Ltd. PLD 1986 SC 731; Noorani Cotton Corporation v. Sales Tax Officer PLD 1965 SC 161; Commissioner of Sales Tax v. Messrs Lah. Textile and Gen. Mills Ltd. PLD 1992 SC 39; Latif Bawany Jute Mills Ltd. v. S.T.O. 1971 PTD 26; Shamas Din and Bros v. Income Tax and Sales Tax Officer PLD 1959 (W.P.) Lah. 955; The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan Works Division and 2 others PLD 1972 SC 279; Syed Ali Abbas and others v. Vishan Singh and others PLD 1967 SC 294; Ali Muhammad v. Hussain Bakhsh and others PLD 1976 SC 37; Mst. Hussain Bibi v. Haji Muhammad Din and 3 others 1976 SCMR 395; Hydri-Ship Breaking Industries Ltd. v. Sindh Government and others 2007 MLD 770 and Messrs Julian Hoshang Dinshew Trust and others v. Income Tax Officer, Circle XVIII South Zone Karachi and others 1992 SCMR 250 ref.

(b) Sales Tax---

----Concept---Sales Tax is a levy on sales of goods and services.

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

----S. 3---Sales Tax Act (III of 1951), S.3---Comparison of S.3 in each of Sales Tax Act, 1990 & 1951.

Noorani Cotton Corporation v. Sales Tax Officer PLD 1965 SC 161; Latif Bawany Jute Mills Ltd. v. Sales Tax Officer 1971 PTD 26; Commissioner of Sales Tax v. Shaiq Corporation Ltd. PLD 1986 SC 731; Champion Clock Company v. Central Board of Revenue and others 1991 PTD 778 and Commissioner of Sales Tax v. Messrs Lahore Textile and General Mills Ltd. PLD 1992 SC 39 ref.

(d) Words & phrases-

----'Other'-Meaning-'Other' means `different or distinct from that already mentioned; additional or further.

Black's Law Dictionary (Sixth Edn.) ref.

(e) Interpretation of statutes---

----Fiscal/taxing statute is to be construed strictly and no word is to be added therein and subtracted therefrom.

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

----Ss. 13 & 2(41)---Exemption---Expressions "other than a supply of goods which is exempt under S.13" occurring in S. 2(41), Sales Tax Act, 1990---Significance---Word other' completely obliterates any other circumstance i.e. the use of partly manufactured goods/finished products/end-products---Whatever is covered by expressiontaxable supply' shall be subject to leviability of Sales Tax.

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

----Ss. 13 & 2(41)---S.R.O. 492(I)/93 dated 14-6-1993---S.R.O. 555(I)/94 dated 9-6-1994---Exemption---Polythene liners/plastic bags, manufactured and used for packing end product produced by the assessee are not immune from levy of Sales Tax under Notification No.S.R.O. 492(I)/93 dated 14-6-1993 (superseded by S.R.O. No.555(I)/94 dated 9-6-1994).

Champion Clocks Company's case 1991 PTD 778 dis­tinguished.

Dr. Ilyas Zafar for Petitioner.

Sheikh Izhar-ul-Haq for Respondent.

Dates of hearing: 18th, 23rd June and 1st July, 1997.

2007 P T D 1184

[Lahore High Court]

Before Nasim Sikandar, J

MUHAMMAD HANIF

Versus

ASSISTANT COMMISSIONER OF INCOME TAX AUDIT, LAHORE

Writ Petition No.11316 of 2005, decided on 14th December, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 22(9), 122(1) & 137(2)---S.R.O. 633(I), dated 14-9-2002---Constitution of Pakistan (1973), Art.199 Constitutional petition---Deduction for depreciation, computation for---Amendment of assessments---Notice for payment of tax---Assessee had prayed that impugned notice issued under S.22(9), Income Tax Ordinance, 2001 along with superstructure built thereon by way of order passed under S.122(1) of Income Tax Ordinance, 2001, be declared illegal---Assessee also prayed to restrain the Authority from proceeding to effect recovery of tax on basis of demand notice issued under S.137(2) of Income Tax Ordinance, 2001 till the decision of constitutional petition---Petitioner had stated that issue raised in the petition, had already stood resolved by judgment of the High Court reported as 2005 PTD 1621---Counsel for Revenue, did not dispute that per ratio in said judgment, S.R.O. 633(I)/2002 dated 14-9-2002 was declared to be not a valid piece of Legislation---During the period in which said S.R.O. remained in force, no legally valid action under it could be initiated under S.122 in respect of assessments already completed under repealed Income Tax Ordinance, 1979---For the various reasons stated in the said reported judgment of High Court, impugned notice and amended assessment order recorded under S.122(1) of Income Tax Ordinance, 2001, were declared to be illegal and without lawful authority.

Kashmir Edible Oil Ltd. v. Federation of Pakistan and others 2005 PTD 1621 rel.

Siraj-ud-Din Khalid for Petitioner.

Muhammad Ilyas Khan for Respondent.

2007 P T D 1211

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs ABDULLAH CORPORATION

Versus

DEPUTY COLLECTOR CUSTOMS and others

Writ Petitions Nos.2111 to 2136 of 2007, decided on 6th March, 2007.

Customs Act (IV of 1969)---

----Ss. 25 & 32---Constitution of Pakistan (1973), Art.199---Constitutional Petition---Untrue statement, error, etc.---Show-cause notice---Constitutional petition was tiled against a show-cause notice under S.32 of Customs Act, 1969, re-opening the assessment of goods imported by petitioner and cleared by him after payment of duties---Goods of the petitioner stood released and all that he was being asked to do, was to answer impugned show-cause notice---No final action against petitioner had been taken by the authorities---Proceedings under the impugned show-cause notice were subject to hearing of the petitioner---All objections by the petitioner were liable to be heard and decided in those proceedings in accordance with law which included the obligation of the authorities to deal with the objections and the law, if same were raised before them---No ground was available at that stage to interfere with the impugned action in exercise of constitutional jurisdiction of High Court.

Messrs Sohrab Global Marketing (Pvt.) Ltd. through Director v. Deputy Collector of Customs Lahore and 4 others 2005 PTD 67; Messrs Punjab Arms Co., Lahore through Proprietor v. Deputy Collector of Customs (Group-IV) Lahore and 4 others 2005 PTD 86 and Messrs S.T.B. International through proprietor v. Collector of Customs Lahore and 5 others 2006 PTD 232 ref.

Mian Abdul Ghaffar for Petitioner.

Muhammad Nawaz Cheema for Respondents.

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2007 P T D 1630

[Lahore High Court]

Before Umar Ata Bandial, J

Syed WAQAR ASHRAF

Versus

SECRETARY TO THE GOVERNMENT OF PAKISTAN and others

Writ Petition No.17292 of 2005, decided' on 13th September, 2006.

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

----Ss.80, 81 & 83---S.R.O. 506(I)/88, dated 26-6-1988---Constitution of Pakistan (1973), Art.199---Constitutional petition---Imported goods may be cleared for home consumption after those have been assessed to duty and the same is paid---Exemption from duty does not mean exemption from assessment---Process of assessment of duty must be completed even for wholly exempted goods so that their eligibility to exemption and the quantum of exempted liability to duties and taxes are duly established prior to their clearance for home consumption---S.R.O. 506(I)/88 dated 26-6-1988 does not contain any provision which authorizes the Customs Authorities to postpone the event of assessment of exempted goods after their clearance--Section 81, Customs Act,. 1969 vests power in Customs Authorities to postpone final assessment of imported goods but exercise of such power is subject to certain conditions.

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

----Ss.81 & 32----S.R.O. 506(I)/88 dated 26-6-1988---Constitution of Pakistan (1973), Art.199---Constitutional petition---Exemption---Provisional assessment of duty---Foreign Mission in breach of S.R.O. 506(I)/88, dated 26-6-1988 sold the vehicle to the petitioner who used the same for about one year when the same was seized by the customs intelligence---Such seizure was challenged before the Collector Customs Adjudication who passed an order ,directing release of the vehicle upon payment of a redemption fine along with customs duty and taxes leviable on its imports in accordance with law---Said decision of Collector Adjudication was affirmed by the Customs, Central Exercise and Sales Tax Appellate Tribunal---Pursuant to the said orders when the assessing authorities subsequently took up the matter of calculating the leviable duties and taxes on the vehicle that was far higher than its declared value recorded on the Bill of Entry---Customs department had never previously disputed the declared value of the vehicle---Petitioner's claim was that when the Bill of Entry for the vehicle was processed without objection to its declared value and it was cleared from customs port by the authorities, in the absence of any allegation of fraud or misdeclaration the declared value. was considered to be accepted---Validity---Power of provisional assessment is exercised where final assessment of imported goods could not be completed immediately for want of test reports, complete documents or other further enquiry about the imported goods for purpose of final assessment---Provisional assessment, in such cases, must be passed allowing clearance of the imported goods subject to furnishing security---In the present case, there was no indication on the Bill of Entry and the remaining record that at the time of clearance of the vehicle for home consumption its provisional assessments had been made by the customs authorities for want of further enquiry, other verification or complete documents; no security was taken by the customs authorities as visualized by S.81, Customs Act, 1969---True essence of the case of customs authorities was that the value of the vehicle was not assessed properly at the time of its clearance for home consumption and therefore customs authorities could reassess the same later---Such a view might have substance if allegations under S.32, Customs Act, 1969 for dishonest misdeclaration of value by the importer or inadvertence or error by the Assessing Officer had been made---Past assessment, in such event might be validly reopened, however, that was neither the position on the customs record nor was possible under the adjudicative orders made in the case which had also attained finality and thereby had created vested rights---Such was an admitted violation of a term of the S.R.O. 506(I)/88 dated 26-6-1988 and had gone unpunished and was breach of the condition that vehicle could not be sold and transferred without consent of the Federal Government---Importing Mission and not the buyer of the vehicle committed the said breach and the record and order of Appellate Tribunal had attained finality ignoring the breach of terms of said S.R.O.---Buyer of the vehicle could not be saddled with the liability of an errant Diplomatic Mission which was the importer in the present case---Customs Authorities could not assume the authority to start a brand new case against the buyer of the vehicle from the Diplomatic Mission---Impugned order by customs authorities wrongly arrogated a power to re-determine value of vehicle afresh, when law did not confer such power---Demand of customs authorities from the buyer and its underlying reassessment of value of the vehicle were declared to be illegal and without lawful authority by the High Court---Order of Appellate Tribunal had allowed the customs authorities to `calculate' the leviable duties and taxes on the vehicle in accordance with law, the vehicle therefore, must remain seized with the authorities until payment of the lawfully payable duties/taxes assessed on the basis of its declared value, the amount of adjudicated redemption fine and the amount of penalty, if any, that was lawfully determined for breach of condition of S.R.O. by the department was duly paid---High Court, however, directed that the concerned authorities should endeavour to decide the matter of quantum of liability within two months of the receipt of certified copy of the present order.

Collector of Customs (Appraisement) Karachi v. Messrs Automobile Corporation of Pakistan 2005 PTD 2116 ref.

A. Karim Malik for Petitioner.

Izharul Haque for Respondents.

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2007 PTD 1667

[Lahore High Court]

Before Mian Haimd Farooq and Iqbal Hameedur Rehman, JJ

COMMISSIONER INCOME TAX

Versus

Mst. KUNDAN BIBI

W.T.As. Nos. 11, 12 and 13 of 2007, decided on 2nd April, 2007.

Wealth Tax Act (XV of 1963)---

----Ss.16(4) & 27---Notices under S.16(4) Wealth Tax Act, 1963 were issued to assessee, a dead person instead of her legal heirs---Validity---Held, notices under S.16(4), Wealth Tax Act, 1963 which required a person to file return, was a basic notice on which the whole structure of assessment was based, therefore strict compliance of S.16(4) was imperative and said section was to be strictly construed---Notices having not been issued in the names of legal 'heirs of the deceased assessee, assessment, standing in their names were of no legal effect---Legal heirs were entitled to be issued notices of assessment in their names so as to enable them to file proper representation---Department may initiate fresh proceedings against legal heirs of deceased assessee, if permissible under the law, after sending proper notice to them.

Ch. Saghir Ahmad for Appellant.

Sh. Zafar ul Islam for Respondent.

2007 PTD 1757

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX, SIALKOT ZONE

Versus

Messrs MAQBOOL AHMED GILL

I.T.A. No. 94 of 1999, decided on 29th November, 2006.

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

----S. 136---Remand order of Appellate Tribunal generally would not give rise to a question of law.

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

----S. 19---Income Tax Rules, 1982, Rr. 4 & 5---Self-hired house by a salaried owner---Receipt of 80% of basic pay by assessee as rent from employer---Such receipt treated as income from property after allowing 1/5th thereof on account of repair etc.---Addition in such receipt of 15% of basic pay of assessee on account of unfurnished accommodation provided to him by employer---Validity---If such receipt was treated as income from property, assessee as employee was still entitled to exemption of 45 % of basic salary as admissible house rent allowance contemplated in R.4 of Income Tax Rules, 1982---Such addition would amount to tax same amount twice---Such self-hired house could not be treated as rent free unfurnished accommodation provided by employer.

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

----S. 136---Jurisdiction of High Court under S.136 of Income Tax Ordinance, 1979---Nature, purpose and scope---Such jurisdiction was not that of a court of appeal---Such jurisdiction being advisory in nature and its purpose being resolution of problematic or debatable legal question of substantial nature and of general application to a sizable class of assessee---Tribunal must refuse to make reference, if not certain, as to whether question framed raised a substantial legal issue---Principles.

Jurisdiction of High Court under section 136, Income Tax Ordinance, 1979 is advisory nature and is required to be invoked only when the issues raised before and decided by Tribunal were of substantial nature and general application to a sizable class of assessees. The nature of jurisdiction of High Court is clearly distinguishable from its appellate or the revisional jurisdiction. The most important difference is that during the pendency of a reference, the appeal before the Tribunal is deemed pending and in case the view adopted by the Tribunal is varied, it is again listed before them and then decided in the light of the opinion expressed by High Court. The purpose of reference is not to get a decision for or against a party before the Tribunal. It is only the resolution of a problematic or debatable legal question. A "point of law", cannot be equated with the expression "question of law", and that the question referred must be a disputed or disputable question of law. The object of reference is to get decision from the High Court on a problematic or debatable question and not on an obvious or simple point of law. Accordingly, the reply to a question affirmative or negative should settle a pattern of guidance both for the revenue as well as the assessee besides the Tribunal, who had sought the advice in the first instance. Therefore, the practice on the part of the revenue or the assessees, which at times is aided by the Tribunal to treat High Court as a court of appeals needs to be disapproved. Factual controversies should not be allowed to be converted into legal issues only by dint of draftsmanship or employment of legal language in style, which is usual to the framing of such questions. In case, the Tribunal is not certain if the question framed raises a substantial legal issue, it must refuse to make a reference as in that case, the assessed or the revenue will have to approach High Court under subsection (2) of section 136 of Income Tax Ordinance, 1979 and satisfy, before admission, that the question raised/ framed is of substance. Therefore, unless a question framed by the Tribunal at the instance of an assessee or the revenue under section 136(1) of the Income Tax Ordinance, 1979 fulfils the aforesaid standard of general interest, application and relevancy to the over all assessment, it shall be deemed to be question of fact. The principle that an advice should never be given unless asked for also has another angle. With regards to reference proceedings under the Income Tax Ordinance, 1979, it means that an advice should not be sought unless it is absolutely necessary for the guidance of the parties and for smooth and effective flowing of the assessment stream.

C.I.T. v. Messrs Immninon International, Lahore 2001 PTD 900; Lungla (Sylhet) Tea Co. Ltd. v. Commissioner of Income Tax, Dacca Circle, Dacca 1970 SCMR 872 and C.I.T. v. Basanta Kumar Agarwalla (1983) 140 ITR 418 fol.

Khadim Hussain Malik for Appellant.

Nemo for Respondent.

Date of hearing: 29th November, 2006.

2007 P T D 1770

[Lahore High Court]

Before Nasim Sikandar, J

ALI MEDICINE CO., FAISALABAD

Versus

I.A.C. OF INCOME TAX/WEALTH TAX, RANGE-V, FAISALABAD

Writ Petition No. 3730 of 2000, decided on 6th April, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 135, 136 & 156---Refusal of Tribunal to rectify/amend its original order recorded under S.135 of Income Tax Ordinance, 1979---Reference or appeal to High Court against such refusal order---Maintainability---Limitation---Appeal to High Court would be competent only on a question of law with reference to original order of Tribunal, which was either pleaded, argued or decided by Tribunal or which arose as a natural consequence thereof---Order refusing rectification would not merge in or become part of original order of Tribunal for purpose of reference or appeal to High Court---High Court, in case of unsuccessful rectification application, would not entertain issue as a question of law, if Tribunal was justified in refusing to rectify its original order---Rectified/amended order of Tribunal passed on rectification application or in exercise of its suo motu powers, if prejudiced interest of either party, then appeal thereagainst to High Court would be competent by virtue of S.135 of Income Tax Ordinance, 1979 alone for being part of order made at subsequent stage giving rise to fresh cause of action and limitation--Principles.

Commissioner of Income Tax v. Ateed Riaz 2002 PTD 570 ref.

Messrs Hong Kong Chinese Restaurant, Main Boulevard Gulberg, Lahore v. Assistant Commissioner of Income Tax, Circle-6, Lahore and another 2002 PTD 1878 fol.

Muhammad Bashir Malik for Petitioner.

Sajjad Ali Jaffrery for Respondent.

Date of hearing: 6th April, 2006.

2007 PTD 1840

[Lahore High Court]

Before Nasim Sikandar, J

MUHAMMAD HANIF

Versus

ASSISTANT COMMISSIONER OF INCOME TAX, AUDIT, LAHORE

Writ Petition No.11481 of 2005, decided on 10th November, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122 & 137(2)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Amendment of assessment---Petitioner/assessee for the assessment year 2000-01 was assessed under S.62 of Income Tax Ordinance, 1979 by way of assessment order dated 12-6-2003---For the assessment years 2001-02 and 2002-03, assessee returned net income from property assessed under S.59(4) of Income Tax Ordinance, 1979 on 30-6-2002---Subsequently, Commissioner while proceeding under S.122 of Income Tax Ordinance, 2001, amended said three assessments and enhanced the income from rent---Notices issued in that respect to assessee and subsequent amendment of assessments made by the Commissioner had been challenged through constitutional petitions---Validity---Provisions of S.122(5-A) of Income Tax Ordinance, 2001 relating to amendment of assessment, were not retrospective in operation---Assessments finalized before 1-7-2003, could not be reopened/revised or amended in exercise of jurisdiction under said provisions---Since three orders were made or deemed to have been finalized in the case of assessee before 1-7-2003, Revenue was not competent to initiate impugned proceedings or to pass impugned assessment orders by resorting to said provisions of Income Tax Ordinance, 2001---Amendment of original assessments was declared to be illegal and without jurisdiction.

Honda Shahrah-e-Faisal v. RCIT 2005 PTD 1316 and Messrs Sarina Ind. (Pvt.) Ltd. v. C.I.T., Peshawar 2006 PTD 2474 ref.

Siraj-ud-Din Khalid for Petitioner.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 10th November, 2005.

2007 P T D 1895

[Lahore High Court]

Before Nasim Sikandar, J

Messrs NEW AMMAUR INDUSTRIES through Proprietor

Versus

FEDERATION OF PAKISTAN through Chairman C.B.R./Secretary Revenue Division, Islamabad and 2 others

Writ Petition No. 6846 of 2006, heard on 14th March, 2007.

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

----S. 45-A---Customs Act (IV of 1969), S. 195---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Order-in-original recorded by Additional Collector (Adjudication) re-opened by Collector exercising powers on executive side resorting to provisions of S.45-A of Sales Tax Act, 1990---Validity---Collector (Adjudication) on adjudication side could exercise his revisional powers under S.45-A of Sales Tax, Act, 1990 in respect of an order passed by an officer subordinate to him---Collector on executive side could exercise his powers in respect of a subordinate officer under him functioning on executive side---Title of S.45-A of Sales Tax Act, 1990 made a clear distinction between a Collector and Collector (Adjudication)---Jurisdiction conferred by S.45-A of the Act was supervisory in nature and as a natural corollary could be exercised only by a person or an authority, which was assigned with job of supervising subordinate authorities and officers---Collector on, executive side could not lay his hands upon any order passed by adjudication side---Collector (Adjudication) could not exercise any executive power in relation to Collector or his subordinate officers functioning on executive side---Term "Collector of Customs" used in section 195 of Customs Act, 1969 would not include a Collector acting as an adjudicating authority---Impugned order was bad as Collector on executive side could not find faults with order recorded on adjudication side---High Court declared impugned order to have been passed without lawful, authority---Principles.

Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore PTCL 2001 CL 615 and Messrs Muskzar Knitwear (Pvt.) Ltd. v. Collector of Sales Tax, Lahore 2004 PTD 714 rel.

(b) Interpretation of statutes---

----Title of a section of a statute not relevant to interpret its provisions, but superior Courts in Pakistan at times resorted thereto.

(c) Revision---

----Revisional jurisdiction---Background and purpose stated.

The revisional jurisdiction now vested in courts and judicial or quasi-judicial authorities is an offshoot of the writ of certiorari issued by the Kings of England and then by the King's Bench. It was issued to ensure that a court or a Tribunal (particularly exercising criminal jurisdiction) was acting in accordance with law. Its historical background has been given in the "Anglo American Heritage by Denial R. Coquillette at page 248, Edition 1999", in the following words:

"The writ of certiorari from the Latin certiorari "in form" is used today in the United States as a general vehicle of discretionary appeal. Historically, the writ had a much narrower function. It lays only to inferior Courts and only to demand that the record be "certified" and sent to the King's Bench to sue if that (inferior) Court had exceeded its power in particular cases. It was most frequently used to review criminal indictments and local administrative orders, and was often used to examine the statutory authority for acts of administrative bodies created by statute."

Anglo American Heertage by Denial R. Coquillette at page 248 Edition 1999 ref.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Petitioners.

Ms. Munaza Shaheen for Respondents.

Date of hearing: 14th March, 2007.

2007 P T D 1922

[Lahore High Court]

Before Nasim Sikandar, J

NASEER AHMAD AWAN

Versus

SUB-REGISTRAR, NISHTER TOWN, LAHORE and another

Writ Petition No. 12256 of 2006, decided on 28h March, 2007.

(a) Finance Act (V of 1989)---

----S.7 [as amended by S.15 of Punjab Finance Act (III of 2006)]---Capital Value Tax---Levy---Date and time of purchase or acquisition of right from seller by purchaser provides for levy of Capital Value Tax and not the day or date of its registration under Registration Act, 1908.

(b) Transfer of Property Act (IV of l 882)---

----S.54---Sale---Scope---Sale transaction, in case it is brought in black and white, is complete when it is confirmed by parties.

(c) Registration Act (XVI of 1908)---

----Ss.71, 72, 73 & 77---Finance Act (V of 1989), S.7 [as amended by S.15 of Punjab Finance Act (III of 2006)]---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Capital Value Tax, levy of---Past and closed transaction---Deposit of sale deed for registration prior to the cut-off date---Petitioner sold his land vide sale-deed which was completed in presence of Local Commissioner and petitioner had received consideration amount---Sale-deed was presented for registration before 1-7-2006 but it was not registered on certain objections---Later on the Registration authorities asked the petitioner to pay Capital Value Tax as registration was not completed before cut-of date--Validity---Transaction was. completed when petitioner as seller put his signatures and thumb-impressions on the document in presence of witnesses as also the Local Commissioner appointed by the authorities---Seller having accepted the consideration, the purchase or acquisition of title by purchaser was complete---Since the amendment in S.7 of Finance Act, 1989, by way of S.15 of Finance Act, 2006, providing for levy on such like transactions came into effect on 1-7-2006, the transaction of sale in question was a past and closed transaction as far the levy was concerned---Transaction could not be brought to the levy, merely for the reason that the document number, book number, volume number or date of registration could not be filled in though the stamped recitals had been signed by Registrar for whatever reason---Refusal on the part of Registrar to fill in blanks or to give document number; book number, volume number or date of registration data was nothing but crude and unacceptable attempt to avoid the charge of inefficiency on his part---Petitioner having presented the document well before the enforcement of levy viz. 1-7-2006, which was signed by both the parties and it was so admitted by Registrar in the stamped recitals signed by him---Petitioner could not be held responsible for non-filling of the blanks or assignment of document number, book number, volume number and date of registration---Refusal on the part of Registrar to award such details to complete sale-deed was declared to be illegal and without lawful authority---High Court directed the authorities to award document number, book number, volume number and date of registration to the document in question as having been presented on 23-6-2006 and registration/authentication having completed in law on or before 30-6-2006---Petition was allowed in circumstances.

Amir Wakeel Butt for Petitioner.

Rafey Ahmed Khan, A.A.G. for Respondent.

Date of hearing: 28th March, 2007.

2007 P T D 1969

[Lahore High Court]

Before Nasim Sikandar, J

Messrs GOBAL TELECOM (PVT.) LTD. through Duly Authorized Chief Executive

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and others

Writ Petition No. 13050 of 2006, decided on 9th May, 2007.

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

----S.72---Constitution of Pakistan (1973), Art. 199---Constitutional jurisdiction of High Court---Scope---Orders, instructions and directions of Central Board of Revenue---Where order determining tax liability can be lifted to appellate forum of an extra departmental tribunal and then to High Court in referable jurisdiction, except in the cases of complete lack of jurisdiction or bar of limitation, an interference in Constitutional jurisdiction will not only militate against the system of collection of revenue but also will not be in the interest of taxpayer at the end of the line.

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

----Ss.46 (5) & 47---Reference---Jurisdiction of High Court---Scope---High Court enjoys referable jurisdiction under S.47 of Sales Tax Act, 1990, in respect of questions of law arising out of the orders of appellate Tribunal recorded under S.46 (5) of Sales Tax Act, 1990---Barring cases of lack of jurisdiction on the part of revenue authority both on executive as well as the adjudication side, High Court is very slow in interfering in the matters which are likely to come to it in referable jurisdiction.

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

----Ss.11, 36, 46 (5), 47, 66 & 72---Sales Tax Refund Rules, 2002, Rr.4 & 11---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Reference to High Court---Refund of sales, recovery of---Direction of Central Board of Revenue---Merits of the case---Petitioner was aggrieved of the direction issued by Central Board of Revenue for initiating proceedings against it for recovery of amount received as sales tax refund---Validity---Most of the contentions of petitioner concerning interpretation of S.66 of Sales Tax Act, 1990 or Rr.4 and 11 of Sales Tax Refund Rules, 2002, pertained to merits of the case and adjudicating authority was the only and proper forum, to rule thereupon---Prospectivity or otherwise of the view expressed by Central Board of Revenue in various letters referred by assessee and factum of their subsequent withdrawal could also very well be adjudicated upon by the authority issuing the show-cause notice---Adjudicating authority was under no stress, obligation or legal requirement to be influenced by a direction, circular or letter issued by Central Board of Revenue expressing an opinion or making advice on a particular legal issue or interpretation of a provision of law---No order, instruction or direction could be made by the Board so as to interfere with the discretion of the officers in the exercise of their quasi-judicial functions---Natural corollary of the proviso to S.72 of Sales Tax Act, 1990, being that a Sales Tax Officer in exercise of his quasi-judicial functions was not obliged to follow any such order, direction or instruction which was opposed to any express provision of law, rules or a precedent of the superior Court---Petition was dismissed in circumstances.

Edulji Duishaw Limited v. Income Tax Officer PLD 1990 SC 399; Pir Sabir Shah v. Shad Muhammad Khan, Member Provincial Assembly, N.W.F. P. and another PLD 1995 SC 66; Gatron (Industries) Limited v. Government of Pakistan and others 1999 SCMR 1072; Al Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29; Farzand Raza Naqvi and 5 others v. Muhammad Din through Legal Heirs and others 2004 SCMR 400; Messrs Flying Board and Paper Products, Lahore Cantt. v. Deputy Collector-II, Government of Pakistan, Directorate of Sales Tax, Custom House, Lahore and 3 others 2002 PTD 7; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250: Collector of Customs, Custom House, Lahore and 3 others v. Messrs S.M. Ahmad and Company (Pvt.) Limited, Islamabad 1999 SCMR 138; Khawaja and Company Fruit Products (Pvt.) Ltd. Through Director v. Secretary, C.B.R. (Sales Tax Wing), Revenue Division, Islamabad and 3 others (GST 2005 CL 478; Khan Trading Company,. Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore PTCL 2001 CL 615; Messrs D.G. Khan Cement Co. Ltd. v. Federation of Pakistan and others PTCL 2002 CL 332; Messrs Mishal Exports, Gujranwala and others v. Collectorate of Sales Tax and Central Excise, Gujranwala PTCL 2004 CL 18; 'Mst. Tasnim Akhtar, Lahore v. Government of Pakistan and others 2006 PTD 1261; Nihal Chand Agarwalla and others v. S. Venkatesan and another AIR 1960 Calcutta 413 and The Collector of Sales Tax and Central Excise (West), Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi 2005 PTD 53 ref.

Khalid Mehmood v. Collector of Customs, Custom House, Lahore, 1999 SCMR 1881 rel.

Mian Abdul Ghaffar, Imtiaz Rashid Siddiqui and Malik Muhammad Arshad for Petitioner.

A. Karim Malik and Izharul Haque for Revenue.

2007 P T D 2018

[Lahore High Court]

Before Maulvi Anwarul Haq, J

WAHAJ ENTERPRISES through Sole Proprietor

Versus

PAKISTAN through Secretary Revenue Division, Islamabad and 4 others

Writ Petitions Nos.496 to 501 of 2007, heard on 21st May, 2007.

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

----Ss.25 & 32---Constitution of Pakistan (1973), Art.199---Constitutional petition---Imported goods, valuation of---Demand of deficient duties raised without issuing show-cause notice in terms of S.32 of Customs Act, 1969---Validity---Such demand would be illegal and liable to be set aside on such ground alone---Authority, only after issuing such show-cause notice could make an assessment in accordance with S.25 of the Customs Act, 1969 without being influenced by Motiwala formula---High Court accepted constitutional petition in circumstances.

Writ Petition No. 14987 of 2005 fol.

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

----Ss.25 & 32---Constitution of Pakistan (1973), Art.199---Constitutional petition---Imported goods, valuation of---Show-cause notice, demanding deficient duties in terms of Motiwala formula---Validity---Such formula could not form a valid basis for valuation of goods---Authority would be bound to make assessment in accordance with S.25 of Customs Act, 1969 without being influenced by such formula---High Court disposed of constitutional petition, in such terms.

Writ Petition No. 14987 of 2005 fol.

Athar Minallah for Petitioner.

Farhat Zafar and Syed Anwar Ahmad Shah for Respondents Nos.1 to 4.

Farhat Nawaz Lodhi for Respondent No.5.

Raja Muhammad Bashir (under instructions from C.B.R.).

Date of hearing: 21st May, 2007.

2007 P T D 2035

[Lahore High Court]

Before Muhammad Sair Ali and Nasim Sikandar, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX; SIALKOT ZONE, SIALKOT

Versus

Messrs TASADIQ HUSSAIN, FANS SPARE PARTS MAKER, GUJRAT

I.T.A. No. 352 of 2000, decided on 18th April, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.55, 56, 108, 134 & 136---Return of total income---Failure to furnish return---Imposition of penalty---Reduction in amount of penalty---Appeal against judgment of Appellate Tribunal---Assessee who derived income from manufacturing and sale of spare parts, was burdened with a penalty of Rs.36,200 on account of his failure to have filed return under S.55 of Income Tax. Ordinance, 1979---Commissioner of Income Tax (Appeals) finding said amount of penalty to be excessive and on the higher side, directed its reduction to Rs.5,430---Said order was maintained by Income Tax Appellate Tribunal on the ground that assessee was a small businessman and that he had returned nil income for the year under consideration as he was under the impression that no taxable income was earned by him during that year---Assessee, on notice under S.56 of Income Tax Ordinance, 1979, did file a statement of sales and expenses on a plain paper on the ground of non-availability of prescribed income tax return---Such fact was sufficient to support the first appellate order of reduction in amount of penalty---Appellate Commissioner and Appellate Tribunal had jurisdiction to reduce the fixed amounts of penalties provided for in Income Tax Ordinance, 1979--Both forums were competent to grant relief of reducing the amount of penalty.

Commissioner of Income Tax, Special Zone, Lahore v. Musarat Textile Mills Ltd., Faisalabad 2005 PTD 2270 ref.

Khadim Hussain Zahid for Appellant.

2007 P T D 2063

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs NESPAK (PVT.) LIMITED

Versus

FEDERATION OF PAKISTAN through Secretary Law &Parliamentary Affairs and 2 others

Writ Petition No.17187 of 2005, decided on 19th April, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S.177---Constitution of Pakistan (1973), Art.199---Constitutional petition---Selection. of income tax return for audit---Notice for----Department informed assessee by issuing notice that income tax return of assessee had been selected for audit under S.177 of Income Tax Ordinance, 2001---Subsequently department issued notice to assessee requiring assessee to attend tax office with complete accounts---Validity---Essential requirement for exercise of power under S.177 of Income Tax Ordinance, 2001, was to disclose grounds/reasons for selection of income tax return for audit---Impugned notices issued to assessee contained detect of lack of disclosure of reasons for selection of its case for audit for the relevant year---Notices impugned, having failed to disclose any reason for conducting audit of assessee's return, same were declared to be illegal and void by High Court, in exercise of its constitutional jurisdiction.

Ch. Muhammad Hussain v. Commissioner of Income Tax, Sialkot (2004) 90 Tax 81 ref.

Waseem Chaudhry for Petitioner.

Sajjad Ali Jafri for Respondent.

Date of hearing: 19th April, 2006.

2007 P T D 2073

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

Messrs SHEIKH TRADERS

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE BENCH, LAHORE and others

I.T.A. No. 166 of 2000, decided on 27th March, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss.120, 122, 131 & 133---Addition to declared income---Appeal---Income Tax Officer added amount to assessee's declared .amount and Income Tax Appellate Tribunal-affirmed Income Tax Officer's order---Validity---Quantum of income added in declared amount was based on appreciation. of evidence on record, which tantamounted to finding of fact--Assessee, who derived its income from the business of a flour mill, did not produce any bock of accounts in support of its declared version---Assessing officer gave his findings on the basis of the report of an independent Chartered Accountant who was appointed to audit the record of assessee---Increase in the assessee's consumption of electricity units during relevant period was also treated as another relevant statistic by the Tribunal to make impugned addition to the assessee's income---'Contention of assessee that impugned addition was devoid of supporting evidence, was factually incorrect---Whether material relied upon by the Tribunal, sufficed to sustain the amount of addition made by the Tribunal by impugned finding, required appraisal of evidence and interference with a finding of fact., which exercise was outside the arena of inquiry undertaken by High Court in appeal---No legal question having arisen for determination, appeal was dismissed.

Latif Ali Qureshi for Appellant.

Khadim Hussain Zahid for Respondents.

2007 P T D 2092

[Lahore High Court]

Before Nasim Sikandar, J

Messrs SHAFIQ TRADERS through Proprietor

Versus

COLLECTOR OF CUSTOMS and another

Writ Petition No.6420 of 2006, decided on 24th May, 2007.

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

----S.81(2) [as amended by Finance Act (VII of 2005)]---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Provisional assessment---Limitation, extending of---Power of Collector---Scope---Grievance of importer was that as period of final assessment had been reduced from one year to nine months from the date of provisional assessment, therefore, provisional assessment had become final---Validity---Held, as a rule S.81(2) of Customs Act, 1969, was a machinery provision and therefore, it took effect from the date of enforcement of Finance Act, 2005 i.e. 1-7-2005, accordingly the reduced limitation from one year to dine months immediately became applicable to all pending provisional assessments---Power vested in Collector to extend period of limitation was not a carte-blache, as he could exercise such power only in exceptional circumstances and was also required to record such circumstances---Although the Collector was the sole arbiter of existence of exceptional circumstances, yet record must show as to what such circumstances were not how Collector considered them to be of exceptional nature---Mere agreement with a joint proposal made in respect of number of .cases initiated from a junior officer through intervening hierarchy of officers did not answer the legal requirement as contained in proviso to S.81(2) of Customs Act, 1969---Final assessment being not only out of time but also the extension given by Collector paving been made without answering the conditions prescribed for exercising such power, same was unlawful and without jurisdiction---Petition was allowed in circumstances.

(b) Jurisdiction.---

----Exercise of jurisdiction---Principles---Where exercise of jurisdiction by any authority, court or tribunal is made subject to existence of a specific condition, then such power cannot be exercised in absence of that condition---Where an executive authority exercises its jurisdiction after expiry of period provided if a statute, such .exercise of jurisdiction is illegal.

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

----S.81, proviso---Word "exceptional"---Object and scope---Word "exceptional" used in proviso by its very meaning indicates that law contemplates, exercise of that power by Collector rarely---Purpose of vesting the power in an individual officer to extend a limitation prescribed by law itself is an exceptional provision and had the only object that the State money is not lost even in cases of force-majeure---Exceptional circumstances are bundle of facts which render it impossible for the concerned officer to make final assessment within the prescribed limitation.

(d) Limitation---

----Fiscal statutes---Limitation---Applicability---Once time prescribed for doing an act by an executive authority expires, the taxpayer is clothed with a vested right of escapement of assessment.

Nagina Silk Mill, Lyallpur v. The Income Tax Officer, A-Ward Lyallpur and others PLD 1963 SC 322 and Commissioner of Income Tax, Meerut v. Hari Raj Swarup and Sons, 1982(138) ITR 462 ref.

(e) Words and phrases---

---"Exceptional circumstances"---Connotation.

Shahzada Mazhar for Petitioner.

Rana Muhammad Arshad fo Respondent.

Date of hearing: 26th April, 2007.

2007 P T D 2105

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs FOOD CONCEPT (PVT.) LTD, through Director

Versus

INCOME TAX APPELLATE TRIBUNAL OF PAKISTAN through Chairman

Writ Petition. No.13488 of 2006, decided on 17th January, 2007.

Income Tax Ordinance (XLIX of 2001)---

----S.132(2)---Income-Tax Appellate Tribunal Rules, 2005, R.20(2)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Appeal, dismissed for non-prosecution---Date of hearing---Scope---Failure to note next date---Effect---Appeal filed by petitioner was dismissed on the date which was not fixed by Income Tax Appellate Tribunal---Plea raised by petitioner was that the date on which the appeal was dismissed was not the date of hearing and his counsel railed to note that date---Validity---Income Tax Appellate Tribunal, according to the provision of S.132(2) of Income Tax Ordinance, 2001 read with R.20(2) of Income Tax Appellate Tribunal Rules, 2005, could proceed to dismiss the appeal in default, on the date fixed for hearing---Date on which the appeal was dismissed was not the date of hearing---Wrong date of hearing mistakenly entered in diary, was held to be sufficient cause for non-appearance of the party---Order passed by Income Tax Appellate Tribunal was without lawful authority, had no legal effect and was set aside---High Court remanded the appeal to Income Tax Appellate Tribunal for decision on merit---Petition was allowed accordingly.

Zahid Ahmad v. Deputy Director Adjudication and 2 others PLD 2006 Kar. 252; Municipal Committee, Rawalpindi through the Secretary, Municipal Committee, Rawalpindi v. Raja Muhammad Sarwar Khan 1968 SCMR 917; Jan Muhammad v. Bashir Ahmed and others .2002 MLD 1321; Abdul Basit Zahid and another v. Madoraba Al-Tijarah and another 2000 MLD 2067 'and Ghulam Qasim v. Ghulam Hussain PLD 1992 SC 577 rel.

Ch. Anwar-ul-Haq for Petitioner.

Jan Muhammad Chaudry for Respondent.

2007 P T D 2119

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs S. FAZAL ILAHI &. SONS through Registrar

Versus

DEPUTY COLLECTOR CUSTOMS and others

Writ Petition No.3726 of 2006, decided on 1st December, 2006.

Customs Act (IV of 1969)---

----Ss.25(4) & 81---Customs Rules, 2001, R.109---Constitution of Pakistan (1973), Art.199---Constitutional petition---Provisional assessment of duty---Petitioner's/importer's goods were released under provisional assessment of customs duty, whereby in addition to payment of liability based on the declared value of the imported goods, authorities, under section 81 of the Customs Act, 1969 obtained postdated cheque and indemnity bond from petitioner for the difference in liability on account of higher value of the imported goods claimed by the .authorities---Pursuant to the provisions of S.81(4) of the Customs Act, 1969 the provisional assessment was declared to become final after lapse of one year in absence of a recorded finding and that event had happened in present case---Section 25(4) of Customs Act, 1969 had cast a duty on the taxing officer to demand proof or documents From the importer in respect of which corroboration or clarification was required---Such duty was re-inforced by the provisions of Rule 109 of the Customs Rules, 2001---No such demand was raised by, the authorities, nor any material was confronted to petitioner to substantiate the higher value claimed---Petitioner/importer could not be penalized for default committed by the authorities---Under S.81(4) of Customs Act, 1969, version of price given by petitioner/importer stood accepted and finalized upon. the failure of the authorities to establish on record through 'a speaking order, the higher price claimed by them at the time of provisional assessment---Petitioner/importer ought not be saddled with an attributed value to sustain liability, if that were done., it would put a premium on imaginary claims, mechanical assessments and time wasting measures to exhaust the statutory period.

Messrs Farooq Woollen Mills v. Collector of Customs, Customs Dryport Sambrial and 2 others ' 2004 PTD .795; Messrs Trade International through Proprietor Habib ur Rehman v. Deputy Collector of Customs (Bank Guarantee Section) and 3 others 2005 PTD 1968; Collector of Customs (Appraisement), Karachi v. Messrs Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116 and Messrs Dewan Farooque Motors Ltd. Karachi. v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi and 2 others 2006 PTD 1276 rel.

Mian Abdul Ghaffar for Petitioner.

Izhar-ul-Haque Sheikh for. Respondents.

2007 P T D 2150

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME TAX, SIALKOT ZONE, SIALKOT

Versus

Messrs Sh. ZAFAR IQBAL and others

I.T. As. Nos.679, 602, 603 and 480 of 2000, decided on 18th April, 2007.

Wealth Tax Act (XV of 1963)---

----Ss.14, 18, 23, & 27---Imposition of penalty for filing return late---Appeal to High Court---Assessee was burdened with penalties under S.18(1)(a) of Wealth Tax Act, 1963 on account of having filed return late by a number of days---Commissioner (Appeals) refused to interfere finding the default of assessee wilful---Appellate Tribunal finding that Amount of penalties were higher than the tax demand created against assessee during each individual year, directed their reduction to the amount equal to the amount of wealth tax assessed---Validity---Appellate Commissioner and Appellate Tribunal had the jurisdiction to reduce the fixed amounts of penalties provided for under the law.

Commissioner of Income Tax, Special Zone, Lahore v. Musarat Textile Mills Ltd. Faisalabad 2005 PTD 2270 ref.

Khadim Hussain Zahid for Appellant.

2007 P T D 2162

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

Messrs LION STEEL INDUSTRIES (PVT.) LTD, through Chief Executive

Versus

CHAIRMAN CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE and others

Customs Appeal No.21-S of 2000, decided on 21st February, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 47 & 46---Civil Procedure Code (V of 1908), O.XX, R.3 & OXLI, R.31---Appeal to High Court---Judgment of the Court---Requirements---Under provisions of OXX, R.3, C.P.C. judgment would be dated and signed by the Judge in open Court at the time of pronouncing same---Order XLI, R.31, C.P.C, also envisaged that judgment of the Appellate Court would be signed and dated by the Judge at the time of pronouncing same---Judgment must be dated; in ordinary circumstances an omission by a Judge to date and sign the judgment at the time of its pronouncement, though was a mere irregularity, but such omission coupled with the other circumstances, would. lead to many implications, one of which, being the period of limitation for-tiling appeal, inasmuch as it could prejudice the case of the appellant---Impugned undated judgment was set aside and appeal under S.46 of Sales Tax Act, 1990 would be deemed to be pending before Appellate Tribunal.

Munawar Iqbal Duggal for Appellant.

Amna Warsi for Respondents.

2007 P T D 2188

[Lahore High Court]

Before Sh. Hakim Ali, J

SADIQ HUSSAIN MAJID

Versus

SECRETARY, GOVERNMENT OF PAKISTAN and others

Writ Petition No.3011 of 2006, decided on 12th January, 2007.

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

----S.177 [as substituted by Finance Act (II of 2004)]---Central Board of Revenue's Circular No.7 of 2002, dated 15-6-2002, para.9(a)(ii)---Selection of return for audit without issuing to assessee prior show-cause notice under, C.B.R. Circular No.7 of 2002, dated 15-6-2002---Validity---Such circular would be relevant under old provision of S.177 of Income Tax .Ordinance, 2001, but not after same was substituted by Finance Act, 2004---Issuance of pre-selection notice not required by newly substituted provision of S.177 of Income Tax Ordinance, 2001, which required issuance of show-cause notice after selection of return by Commissioner for its re-opening and auditing---Principles.

Messrs Syed Bhais Ltd. v. C.B.R. and others W.P. No.S471 of 2006 and (2006) 94 Tax 317 ref.

Ch. Muhammad Hussain, Shakargarh and others v. Commissioner of Income Tax, Sialkot 2005 PTD 152 distinguished.

(b) Circulars etc. by Central Board of Revenue---

----Circulars/Notifications/Instructions issued by Central Board of Revenue under old law---Applicability of such Circulars/Notifications/ Instructions to substituted or re-enacted law with regard to same subject­-matter---Principles.

Circulars/Notifications/Instructions issued under old law are applicable even to new re-enacted law with regard to the same subject-matter, but cannot prevail upon or override the substituted or re-enacted statutory law, if they are contrary to the provisions of the parent Act, which is provided by any Act of the legislature. These provisions fire supporting subordinate legislations to fulfil the aim and the very purpose of the-provision of main law and cannot nullify the provision of parent Act itself.---[Interpretation of statutes---Fiscal statutes].

(c) Natural justice, principles of---

----Principle of audi alteram partem is applicable, when an adverse order or action is going. to be passed or taken against a person.

Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others (2006) 94 Tax 317 (S.C. Pak.)

C.As. Nos. 233-315 of 2004 rel.

Shamshir Iqbal Chughtai for Petitioner.

Masud Ashraf Sheikh for Respondents.

Date of hearing: 12th January, 2007.

2007 P T D 2202

[Lahore High Court]

Before Maulvi Anwarul Haq, J

SHAUKAT MASOOD, DIRECTOR FAZAL .INDUSTRIES (PVT.) LTD., ISLAMABAD

Versus

FEDERATION OF PAKISTAN through Chairman, Central Board of Revenue/Secretary, Revenue Division Government of Pakistan, Islamabad and 2 others

Writ Petitions Nos. 1.594 to 1596 of 2003, decided on 29th May, 2007.

Wealth Tax Act (XV of 1963)---

----Ss.2(16), 4(3), 27, 35 & Second Sched., Part-I, Item 8---Constitution of Pakistan (1973), Art.199---Constitutional petition---Maintainability---Shares purchased with loan obtained against foreign currency account---Refusal of authority to treat such shares as debts owed by assessee in terms of S.2(16) of Wealth Tax Act, 1963---Instead of filing. appeal against decision of Tribunal restoring order-in-original, assessee filed rectification application on the plea that such relief was available to him under S.4(3) of Wealth Tax Act, 1963---Dismissal of rectification application by Tribunal challenged through Constitutional petition---Validity---Provision. of S.4(3) of Wealth Tax Act, 1963 would not apply to such case, wherein assessee had neither claimed to have transferred some assets for consideration irrevocably nor sought some assets transferred by them to be included in their net wealth---No appeal was provided against order of rectification, thus, constitutional petition was maintainable---Tribunal had disallowed rectification for valid reasons---High Court dismissed Constitutional petition in circumstances.

Gatron (Industries) Ltd. v. Government of Pakistan and others 1999 SCMR 1072 rel.

Sikandar Hayat Khan for Petitioner.

Ms. Shahina Akbar for Respondent.

Date of hearing: 22nd May, 2007.

2007 P T D 2228

[Lahore High Court]

Before M. Bilal Khan and Sh. Azmat Saeed, JJ

IQBAL KHAN and another

versus

DEPUTY DIRECTOR INTELLIGENCE AND INVESTIGATION (CUSTOMS, EXCISE AND SALES TAX), GUJRANWALA and 2 others

Customs Reference No.79 of 2006, decided on 22nd September, 2006.

Customs Act (IV of 1969)---

----Ss.2(s), 168 & 196---S.R.O. No.566(I)/05 dated 6-6-2005---Reference to High Court--Confiscation of goods---Cloth of .foreign origin was seized by the officials of Customs Department---After issuing show-cause notice and hearing petitioners, Adjudicating Authority directed confiscation of cloth in question which. was 100288 yards---Appeal filed by petitioners against order of confiscation having been dismissed by Collector (Appeals), petitioners invoked jurisdiction of Appellate Tribunal by filing appeal, which also having been dismissed, petitioners had filed reference to High Court---Case of petitioners before Collector (Appeals) was that cloth, in question did not fall within the mischief of S.2(s) of Customs Act, 1969 and that foreign cloth had been excluded from :the definition of smuggled goods in the light of S.R.O. No.566(I)/05---Collector accepted contentions of petitioners, but upheld confiscation order in original on the ground that cloth seized was not of reasonable quantity---Tribunal also upheld order of confiscation on the sole ground that a large. quantity of cloth had been seized---Collector (Appeals), in another case, in similar circumstances, had not confiscated 2,80,000 sq. yards of foreign cloth, but was permitted to redeem against payment of duties, taxes and fine---Petitioners, in circumstances, were also entitled to the redemption and release of goods/cloth in question subject to payment of leviable duties and taxes in addition to a redemption fine to be determined by the department.

Mian Abdul Ghaffar for Petitioners.

Mrs. Tayyaba Zameer Qureshi for Respondents.

2007 P T D 2265

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs INAM PACKAGES, LAHORE

Versus

APPELLATE TRIBUNAL CUSTOMS, C.E., AND SALES CUSTOM HOUSE, LAHORE and 2 others

S.T.A. No.8 of 2004, decided on 9th July, 2007.

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

----Ss.36 & 47---Appeal---Maintainability---Recovery of tax---Show-­cause notice---Failure to specify reasons causing tax evasion---Assessee claimed input tax adjustment for raw materials shown in the returns for July 1997, September 1997, January, 1998 and March, 1998 to May, 1998---Authorities, after serving show-cause notice, directed the assessee to deposit evaded tax---Plea raised by assessee was that show-cause notice was time-barred and against the provisions of law---Validity---Show-cause notice .generally alleged contravention of .numerous provisions but. neither specific provision of contravened law nor manner of its contravention was specified by authorities---Motives or reasons causing/occasioning alleged evasion were also not stated under S.36 of Sales Tax Act, 1990 by the notifying authority---Show-cause notice was vague, unspecific and too general to enable a reader or notified person to make out or clearly identify particular clause/subsection or reason or period of limitation applicable in terms of 5.36 of Sales Tax Act, 1990---Validity---Show-cause notice alleged input tax adjustment but patently omitted to specify or allege reason causing purported evasion---Assumption of jurisdiction by Adjudicating Authority was an act contrary to the law---Show-cause notice served upon assessee by Notifying Authority was patently illegal, without lawful authority- and all orders based thereupon were liable to be set aside---Validity of show-cause notice was fundamental to assumption of jurisdiction by Revenue Authorities to pass orders---Show-cause notice issued and orders passed against assessee were devoid of jurisdiction and lawful authority---Assessee could legitimately agitate basic fundamental question even in further appeal under S.46 of Sales Tax Act, 1990---Orders passed against assessee by the Authorities were set aside---Appeal was allowed in circumstances.

Ibrahim Textile Mills Ltd. v. Federation of Pakistan and others PLD 1989 Lah. 47; Haji Abdullah Khan and others v. Nisar Muhammad Khan and .others PLD 1965 SC 690; Gatron (Industries) Limited v. Government of Pakistan and others 1999 SCMR 1072; "Commissioner of Income Tax v. Abdul Majeed 2000 PTD 359 and Province of Sindh through Secretary, Public Works. Department, Government of Sindh, Karachi and 6 others v. Messrs Royal Contractors 1996 CLC 1205 rel.

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

----S.36---Recovery of tax---Show-cause notice---Preconditions---Limitation---Determining factors.

Show-cause notice can only be served under section 36 of Sales Tax Act, 1990, if:---

(a) any tax or charge has not been levied or has been short-levied or has been erroneously refunded;

(b) such non-levy, short levy or erroneous refund has been caused by the reason of "some collusion or a deliberate act" under S.36(1) of Sales Tax Act, 1990, or owing to inadvertence or error of misconstruction per S.36(2) of Sales Tax Act, 1990; and

(c) within the period of five years under subsection (1) and three years under subsection (2) of section 36 of Sales Tax Act, 1990.

Mere non-levy, short levy or erroneous refund of tax or charge cannot be the basis for show-cause notice. Notice has to be founded upon non-levy, short levy or erroneous refund caused by any of the above reasons which being the dominant factor also determines the period of limitation thereto. In absence of any of the three conditions or jurisdictional facts, he taxing authorities have no power or jurisdiction to serve show-cause notice under S.36 of Sales Tax Act, 1990.

Assistant Collector Customs and others v. Messrs Khyber Electric Lamp and others 2001 SCMR 838 rel.

Habeeb Ullah Khan for Appellant.

Sh. Izhar-ul-Haq for Respondent.

Date of hearing: 11th April, 2007.

2007 P T D 2304

[Lahore High Court]

Before Umar Ata Bandial, J

NOON SUGAR MILLS LIMITED, LAHORE

Versus

PROVINCE OF PUNJAB through Secretary, Department of Finance Civil Secretariat; Lahore and another

Writ Petition No. 7768 of 1998 and C.M. No. 21, of 2007; decided on 1st February, 2007.

Punjab Finance Act (IX of 1997)---

----S.7---Constitution of Pakistan (1973), Art.199---Constitutional petition---Imposition of luxury tax on vehicle---Contentions of petitioner was that under S.7 of Punjab Finance Act, 1997 luxury tax was payable on foreign manufactured vehicles registered in the. Province after 30-6-1994; that vehicles subject to the tax were named brands of motorcars such as 4x4 vehicles that had engine capacity of 2500cc and above; and such other vehicles as were notified by the government; that his vehicle was not 4x4 vehicle, but a Sedan motor car, which was not notified by the government nor mentioned in paragraph (a) of S.7 of Punjab Finance Act, 1997 and as such, same was outside the ambit of, charging section of luxury tax---Held, tax liability in the case had been postponed since 1998 on account of fact that vehicle in question .was a Sedan car rather than a 4x4 Land Cruiser Jeep---High Court directed that the matter be determined by authorities on production of vehicle before the competent officer, who on inspection, shall assess and collect the leviable tax in accordance with, law within specified period.

Jawad Hassan for Petitioner.

Jawad Malik, A. A:-G. for Respondent??

2007 P T D 2380

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

Messrs ACCORD TEXTILE MILLS (PVT.) LTD.

Versus

DEPUTY COMMISSIONER OF INCOME TAX and 2 others

I.T.A. No.663 of 1999, decided on 12th February, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 12(18), 62 & 136---Assessment of income---Appeal to High Court---Books of accounts of the Appellant/Company had revealed that one Director of the Company had advanced a cash loan for the purchase of car---Notices under S.62 of the Income Tax Ordinance, 1979 were issued---Reply to said notices having been found unsatisfactory, said amount of cash loan was assessed as income of the company in terms of S.12(18) of Income Tax Ordinance, 1979---Case of appellant/assessee was that car was purchased by the Director for the Company---No reliable evidence having been produced in that behalf, said plea of assessee was rejected---Alternative plea was taken that Director of the Company owned an amount of Rs.22.00 million to the company and that said car was transferred as part payment of said loan---No evidence in support of the aforesaid contention having been produced, the plea was rejected---Appellant was attempting to rekindle factual controversy which was not possible in jurisdiction of High Court.

Ch. Anwar-ul-Haq for Appellant.

Shahid Jamil for Respondents

Date of hearing: 12th February, 2007.

2007 P T D 2389

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

Messrs GUJRANWALA COLLEGE EMPLOYEES COOPERATIVE HOUSING SOCIETY LTD., GUJRANWALA

Versus

DEPUTY COMMISSIONER OF INCOME TAX and 2 others

I.T.A. No.664 of 1999, decided on 12th February, 2007.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 85, 129, 132, 134 & 136---Appeal---Limitation---Aggrieved by assessment order, appellant/assessee filed appeal under S.132 of Income Tax Ordinance, 1979 before Appellate Additional Commissioner, which was dismissed being barred by time-Appeal filed by appellant before Income Tax Appellate Tribunal was also dismissed---Order of assessment was served upon Authorized Representative of appellant and period of computation of limitation was determined by Appellate Additional Commissioner from the date of the alleged service of assessment order upon the Authorized Representative---Validity---Limitation for filing appeal prescribed under S.130(2) of Income Tax Ordinance, 1979, was 30 days from date of service of assessment or penalty order in question--Section 85 of Income Tax Ordinance, 1979, had specifically provided that any assessment or order under the Ordinance, would be served upon assessee or any other person liable to pay tax on behalf of the assessee---Authorized Representation being neither the assessee nor liable to pay tax on behalf of assessee, service on him was not `service' in terms of S.85 of Income Tax Ordinance, 1979 and the period of time would nun commence from service of such assessment. order upon an Authorized Representative---Where assessment order had not been served upon appellant or any other person liable to pay -tax on his behalf, period of limitation would not commence---Appeal, in circumstances had erroneously been held to be barred by limitation.

Ch. Anwarul Haq for Appellant.

Shahid Jamil for Respondent.

Date of hearing: 12th February, 2007.

2007 P T D 2396

[Lahore High Court]

Before Mian Saqib Nisar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCGME TAX/WEALTH TAX, FAISALABAD

Versus

WASEEM ASHFAQ

I.T.A. No.427 of 1999, decided on 19th April, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 12 & 133---Allowances, liability to income-tax---Reference to High Court---Case of appellant/Department was that Director of assessee company being the Director of more than one companies, allowances, specified in order-in-original, drawn by him from different companies, were liable to income tax---Appeal filed by Director of the Company, was dismissed, but when matter came before Income Tax Appellate Tribunal, it was found "that Director at one time was serving only one company and the concept of part time employee was not applicable in the case"---Question that Tribunal had misread the record in reaching said conclusion would not arise out of the order and that .was not even the question formulated in the appeal---Factual conclusion drawn by the Tribunal, that assessee was the Director of only one company, could not be interfered with in appeal---High Court declined to answer question raised in the appeal.

Khadim Hussain Zahid for Appellant.

2007 P T D 2443

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs BLACK GOLD INDUSTRY through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division/Chairman (Central Board of Revenue), Islamabad and 4 others

Writ Petition No. 747 of 2007, decided on 5th March, 2007.

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

----S. 195---Suo motu power of Collector of Customs---Scope---Such power could be exercised where substantial grounds of impropriety or illegality of an order passed under Customs Act, 1969 were evident on record.

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

----S. 32---Constitution of Pakistan (1973), Art. 199---Constitutional Petition---Re-opening of assessment after seizure raid---Authority during raid having obtained from assessee Pay-Order for an amount to cover additional demand of duties---Order-in-Original declaring action. taken against assessee under S.32 of Customs Act, 1969 as illegal---Non­payment of amount of Pay-Order to assessee---Validity---Department must obey order-in-original and could not withhold from assessee such funds, which had been adjudicated by departmental forum to have been collected illegally---Verification of declared value of imported goods and possibility of additional assessment could not authorize authority to collect an arbitrary amount in advance -from assessee---High Court directed authority to refund amount of Pay-Order to assessee.

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

----S.193---Appeal by department against order-in-original passed in Favour of assessee---Maintainability---Customs Act, 1969 did not provide such right to department.

Mian Abdul Ghaffar for Petitioner.

Izhar ul Haque Sheikh for Respondents.

2007 P T D 2453

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs WESTERN COMPUTERS (PVT.) LTD. through Office Manager

Versus

DEPUTY COLLECTOR CUSTOMS (GROUP-IV), LAHORE and 2 others

Writ Petition No. 6235 of 2006, decided on 19th April, 2007.

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

----Ss. 81 & 193 [as amended by Finance Act (III of 2003)]---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Maintainability---Order of final assessment---Filial assessment was made before 1-7-2006, when remedy of appeal before Appellate Authority was not available to the petitioner---Constitutional petition was competent.

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

----S. 84(4)---Provisional assessment would attain finality, if final assessment was not made within period of limitation.

Mian Abdul Ghaffar for Petitioner.

Sh. Izhar ul Haq for Respondents.

2007 P T D 2480

[Lahore High Court]

Before M. Bilal Khan and Sh. Azmat Saeed, JJ

AMIR KHAN through Zia-ud-Din Chaman

Versus

SUPERINTENDENT CUSTOMS (IMPORT) CUSTOMS DRY PORT, FAISALABAD and another

Customs Reference No. 42 of 2007, decided on 11th May, 2007.

Customs Act (IV of 1969)---

----Ss. 194 & 196---Appeal before Appellate Tribunal---Objection of appellant that Member (Technical) of the Tribunal should refuse to hear appeal for he as Collector had passed order challenged in appeal after issuing show-cause notice to the appellant---Dismissal of appeal by Tribunal without deciding such objection---Validity---Appellant's such contention was mentioned in the order of Tribunal, but same was not adjudicated upon---Department had not opposed such objection of appellant---High Court set aside impugned order and remanded case to .Tribunal for its decision afresh after hearing both parties.

Mian Abdul Ghaffar for Petitioner.

M. Nawaz Cheema for Respondent.

2007 P T D 2485

[Lahore High Court]

Before Mian Hamid Farooq and Iqbal Hameed-ur-Rehman, JJ

Rana NADEEM AHMAD

Versus

ASSISTANT COLLECTOR CUSTOMS, DRY PORT MULTAN and 2 others

C.A. No. 3 of 2005, heard on 17th April, 2007.

Customs Act (IV of 1969)---

----Ss. 81, 194, & 196---Smuggled vehicle---Provisional assessment of duty @ 25 %---Report of Indus Motor Company confirming seating capacity of vehicle-in-question as six---Vehicle having more than 10 seats was chargeable to duty @ 25 %, while vehicle having less than 10 seats was chargeable to duty @ 225 %---Authority directed appellant to pay duty @ 225 %, which order was. upheld by Tribunal---Plea of appellant was that such report did not relate to vehicle-in-question and could not be made basis in his case; and that he was not provided opportunity to cross-examine its scribe---Validity---Tribunal had not taken into consideration facts of appellant's case, but had considered facts of another case---Appellant was correct in contending that facts stated in impugned judgment did not relate to his case---High Court set aside impugned judgment and remanded case to Tribunal to decide same afresh after hearing parties and taking into consideration the facts of appellant's case.

Quetta Textile Mills Ltd. v. Federation of Pakistan and 2 others 1997 CLC 755; Collector of Customs, Appraisement, Karachi v. Messrs H.M. Abdullah and another 2004 PTD 2993; Messrs Dewan Farooque Motors Ltd., Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi and 2 others 2006 PTD 1276; Collector of Customs (Appraisement), Karachi, v. Messrs Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116; Messrs Farooq Woollen Mills v. Collector of Customs, Customs Dryport, 5ambrial and 2 others 2004 PTD 795 and Messrs S. Fazal Elahi and Sons v. Deputy Collector Customs and others, Writ Petition No. 3726 of 2006, Messrs Faran Enterprises through Proprietor Muhammad Zaman v. The Appellate Tribunal, Customs, Excise and Sales Tax and another 1999 CLC 735 ref.

Mian Abdul Ghaffar for Appellant.

Ch. Saghir Ahmad Standing Counsel for Respondent.

Date of hearing: 17th April, 2007.

2007 P T D 2507

[Lahore High Court]

Before Nasim Sikandar, J

Messrs Al-Haj GHULAM MUHAMMAD & SONS

Versus

CENTRAL BOARD OF REVENUE through Chairman Government of Pakistan, Islamabad and 3 others

Writ Petitions Nos. 19120 563 and 566 of 2002 and 24354 of 2000, decided on 9th October, 2007.

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

----Ss. 59, 62, 80-D [as inserted by Finance Act (XII of 1991) & Second Sched., Part-IV, Cl. (32-D) [as inserted through C.B.R. Notification S.R.O. 773(I)/2000, dated 31-10-2000 and omitted by Finance Ordinance (XXV of 2001)]---(C.B.R. Circular No. 21 of 2000, dated 11-9-2000)---Self-Assessment Scheme 2000-2001---Constitution of Pakistan (1973), Arts. 25 & 199---Constitutional petition---Business of dealership of products---Commission on sale of products received by petitioners­ assessees engaged in such business as association of persons, individual and unregistered firm---Self-Assessment Scheme for assessment year, 2000-2001 issued through Circular No.21 of 2000, dated 11-9-2000---C.B.R.'s Clarification, dated 24-10-2000 that S.80'D of Income Tax Ordinance, 1979 would apply to all categories of cases for assessment year 2000-2001 whether or not covered by Self-Assessment Scheme---Denial of benefit of such Scheme to petitioners for not being eligible under Cl. (32-D) in Part-IV of Second Sched. of Ordinance, 1979---Petitioners alleged such. denial to be discriminatory---Validity---Irrespective of nature of source of income, such Cl. (32-D) excluded provisions of S. 80-D of the Income Tax Ordinance, 1979 to turn over of different kinds of assessees who qualified for such Scheme---Petitioners, instead of declaring higher income and paying more tax, declared loss, thus, they were required to file regular return---Scheme would not become discriminatory for petitioners' failure to fulfil conditions laid down therein---Clause (32-D) of Second Schedule Part-IV, Income Tax Ordinance, 1979 was a rider for every assessee, who had declared loss in relevant year---Different rates applicable to different slabs of income would not be discriminatory---Person earning more must contribute more to snare burden of development in country---Petitioners were not being discriminated against in any manner---High Court dismissed constitutional petition---Principles.

Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of East Pakistan and others PLD 1957 SC (Pak) 9; Zia Ullah Khan and others v. Government of Punjab and others PLD 1989 Lahore 554; Government of Baluchistan v. Azizullah Memon and 16 others PLD 1993 SC 341;-Khyerbari Tea Co. v. State of Assam AIR 1964 SC 925 (V) 51 C 122 and Elahi Cotton Mills Ltd. and, others v. Federation of Pakistan through Secretary, Ministry, of Finance Islamabad and others PLD 1997 SC 582 = 1997 PTD 1555 ref.

(b) Taxation---

----Person earning more must contribute' more to share burden of development in country.

As a general rule, a person who earns more must contribute more to share the burden of development in the country. This principle is based upon one of the reasons for framing the Constitution i.e. to create an egalitarian society.

Dr. Ilyas Zafar for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 16th April, 2007.

2007 P T D 2563

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs HUSSAIN GINNERS LTD.; COTTON GINNING AND PRESSING FACTORY through Chief Executive

Versus

CUSTOMS CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE and 2 others

S.T.A. No. 339 of 2001, decided on 21st May, 2007.

Sales Tax Act (VII of 1990)---

----Ss.2(9) & 47---filing of Monthly Return Rules, 1996, R.5(3)(4)---. S.R.O. No. 55(I)/96, dated 1-7-1996---S.R.O. 732(I)/98, dated 1-7-1998---Words "due date"---Applicability---Deposit of sales tax through bank demand draft---Assessee deposited sales tax through two bank demand drafts in prescribed bank before due date---Penalty was imposed upon assessee as bank demand drafts were encashed beyond due date---Plea raised by assessee was that though R.5 of Monthly Return Rules, 1996, had been amended after due date but its benefit could have been given to assessee---Validity---Instrument having been purchased in favour of Revenue, intervening time of its clearance by concerned bank did not matter at all---It was only the personal cheque of individual that required clearance by bank on which it had been drawn---Banking instruments like pay order. or a bank draft did not need any such clearance---Tendering bank drafts along with return before due date was not. disputed and clearance of drafts was only a matter between two banks---Assessee 'having tendered bank demand drafts to designated branch before due date was absolved of its legal liability towards Revenue---In case bank demand drafts were not cleared by the issuing banker, assessee as tax payer would have been liable to pay additional tax till the time of actual payment of tax---Amendment in the rule had stated correct legal and factual position---Orders of Authorities as well as of Appellate Tribunal were set aside and assessee, held, was not liable for additional tax, penalty or any other penal action---Appeal was allowed in circumstances.

Rana Muhammad Afzal for Appellant.

Izharul Haque and Mrs. Tayyba Zameer Qureshi for the Revenue.

2007 P T D 2598

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHORE

Versus

Messrs FAUJI SUGAR MILLS, SHEIKHUPURA

C.A. No. 344 of 2001, decided on 21st September, 2006. .

Sales Tax Act (VII of 1990)---

----Ss. 2(46) & 47---Reference/appeal to the High Court---Enforcement of notification---Retrospectivity of Notification---Plea of Revenue authorities, was that notwithstanding its express terms, Notification in question could not be given effect to from a period prior to the date of its enforcement, which could mean that said Notification was prospective in effect---Position taken by the counsel for the Department would be valid if said Notification expressly conferred beneficial rights on assessees for a past period---Nothing was available to prevent the Revenue for conferring an advantage or benefit retrospectively on its assessees---Beneficial Notification could lawfully have retrospective effect---Notification in question expressly conferred on assessees the retrospective benefit of fixed value of locally produced Sugar through lawful and valid exercise of delegated legislative power---Such retrospective conferment of a benefit, in circumstances, had created vested rights in the assesses, which were rightly acknowledged and affirmed.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 ref.

Ijaz Ahmad for Petitioner.

Sh. Izhar-ul-Haq for Respondent.

2007 P T D 2655

[Lahore High Court]

Before Syed Hamid Ali Shah, J

NATIONAL ELECTRIC COMPANY OF PAKISTAN LTD. through Chief Executive

Versus

COMMISSIONER OF INCOME TAX, GUJRANWALA ZONE, GUJRANWALA and 5 others

Writ Petition No.20755 of 1999, decided on 13th August, 2007.

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

----Ss.61, 62 & 65---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Maintainability---Alternate remedy---Non-filing of appeal---Effect---Factual controversy---Assessee, instead of assailing order of re-assessment in fourth round of litigation in appeal before authorities, assailed the same before High Court in Constitutional petition---Validity---Matter had attained .finality and order of assessment, in view of availability of alternate remedy of appeal in hierarchy of Income Tax Department, was not open to exception in Constitutional jurisdiction---In earlier rounds of litigation, assessee availed remedy of appeals and orders were set aside---Remedy of appeal was adequate and efficacious---Questions raised in petition, except question of limitation, were controversial questions of fact, determination whereof was outside the ambit of Constitutional jurisdiction---Without exhausting alternate remedy of appeals under Income Tax Ordinance, 1979, Constitutional petition was not maintainable---Petition was dismissed in circumstances.

Income Tax Officer and another v. Messrs Chappal Builder 1993 SCMR 1108; Messrs- H.M. Abdullah v. The Income Tax Officer, Circle-V, Karachi and 2 others 1993 SCMR 1195 and Ch. Samiullah v. Commissioner of Income Tax, Zone-A, Lahore and 2 others 2002 PTD 1212 ref.

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

----Ss. 61, 62, 65 & 66---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Re-assessment---Limitation---Order of assess­ment dated 30-6-1983, was declared illegal by High Court and income tax authorities were directed to decide the matter afresh---Notice under S.61 of Income Tax Ordinance, 1979, was issued on 13-6-1997, while notice under S.62 of the Ordinance was issued on 13-6-1997, i.e. within one year of the decision of High Court---Re-assessment under S.65 of Income Tax Ordinance, 1979, was once again challenged by assessee before appellate authority who vide order dated 27-4-1998, set aside the assessment and directed fresh assessment by providing opportunity to assessee to satisfy queries raised---Assessing Officer issued notice under S.61 of Income Tax Ordinance, 1979 before the end of financial year in which order in appeal under S.132 of Income Tax Ordinance, 1979, was received---Plea raised by assessee was that notice issued by authorities was time-barred---Validity---Notice was issued within the period of limitation as envisaged in S.66 of Income Tax Ordinance, 1979---Notice as well as additional assessment was made within the period of limitation as provided under S.66 of Income Tax Ordinance, 1979---Petition was dismissed in circumstances.

Dr. A. Basit for Petitioner.

Muhammad Ilyas Khan for Respondent.

Date of bearing: 7th May, 2007.

2007 P T D 526

[Peshawar High Court]

Before Shah Jehan Khan and Ejaz-ul-Hassan Khan, JJ

Messrs GUL COOKING OIL AND VEGETABLE GHEE (PVT.) LTD. through Chief Executive

Versus

PAKISTAN through Chairman Revenue Division, Central Board of Revenue, Islamabad and 6 others

Writ Petitions Nos.841, 869, 936, 1134, 1168, 1169, 1180, 1191, 1195, 1208, 1212, 1239, 1246, 1247, 1260, 1283 of 2004, 5, 6, 157, 158 of 2005, 222, 223, 50, 51, 844, 854 and 1845 of 2006, decided on 19th October, 2006.

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

----S.18---Constitution of Pakistan (1973), Arts. 247(3) & 199---Constitutional petition---Imposition of customs duty and regulatory duty--Grievance of petitioner was that department demanded from them customs duty and regulatory duty at the rate specified through subsequent amendments which were not applicable to the Tribal Areas as required, under Sub-clause (3) of Art.247 of the Constitution---Controversy agitated by parties was to the effect; that whether petitioners were legally required to pay customs duty and regulatory duty calculated on the basis of amendment of Acts of the Parliament in the principal statute i.e. Customs Act, 1969, despite the fact that amending Acts of the Parliament or Provincial Assembly, were not extended to the Tribal Areas in terms of Art.247(3) of the Constitution---Validity---Amendment made by the Parliament or Provincial Assembly, would not apply to the Tribal Areas automatically, but with the process as envisaged in Art.247 of the Constitution, whereunder, it was the President and not the Parliament to decide which Act was to be applied in the Tribal Areas---Contention that amending Act merged into original or principal Act and if the principal Act was duly applied to Tribal Areas after the amendment, it would be in force in amended form, was repelled---Act of Parliament amending or repealing the principal statute, could not be extended to Tribal Area without approval of the President and in accordance with prescribed procedure under clause (3) of Art.247 of the Constitution---Department could not demand excessive customs duty and excessive regulatory duty imposed through Amending Acts which were not enforced in Tribal Areas---Demand of department for excessive customs and regulatory duty specified through unextended amending Acts, in the Tribal Area was unconstitutional, arbitrary, mala fide and unjust---Department was directed to refrain from such illegal demand, accordingly.

AIR 1986 SC 513; Sharbat Khan and others v. Haji Lal Gul and others 1984 PCr.LJ 4.11; Hazrat Muhammad v. The State PLD 1988 Pesh. 11 and Sadbar Khan v. Amir Hussain and others PLD 1995 Pesh. 14 ref

(b) Interpretation of statutes---

----Court was empowered to look at the intent and purpose behind the Legislative device---Thing which could not be done directly, could not be allowed to be done indirectly---While extending a law, it was required to specifically refer to the amendments already made or at least some language to that effect was to be used.

PLD 1975 SC 397-433; 1993 SCMR 1905-1923 and 1993 SCMR 1342 ref.

(c) Constitution of Pakistan (1973)---

----Arts. 247, 89 & 128---Powers of the President and Governor to make applicable the law enacted by the Parliament---President or Governor of the Province had been empowered to make applicable the law enacted by Parliament for the settled areas of the country and for extending an Act of Parliament or Ordinance promulgated under Art.89 or 128 of the Constitution to the Tribal Areas---Constitution had imposed certain duties upon the President and the Governor; he would satisfy himself about the interest of the people and necessity of extension of the Act to the Tribunal Areas and he would also consider as to whether the Act of Parliament or Provincial Assembly or Ordinance, which was to be extended to Federally Administered Tribal Areas or Provincially Administered Tribal Areas would be in the same form or with modifications therein or exceptions thereto---Powers of the President under S.247 of the Constitution was not to be exercised as prerogative powers which was not supported by the Constitution---Said powers were co-relative duties and obligations conferred upon the President---Being special status of Tribal Areas, Parliament or Provincial Assembly could not directly legislate for the Tribal Areas and Legislation enacted by the Parliament or Provincial Assembly, would be extended to those areas after examining the same by President or Governor---If an Act of Parliament or Provincial Assembly could not legislate directly for the Tribal Areas then it could not be done even indirectly---When a law was amended, it would be presumed to be altered---If principal Act was amended by amending Act of the Parliament, it would be presumed that the former had been changed/altered---Amendment made by the Parliament or Provincial Assembly, in circumstances, would not apply to the Tribal Area automatically, but with due process as envisaged in Art.247 of the Constitution---Act of Parliament amending or repealing the principal statute could not be extended to Tribal Areas without approval of the President and in accordance with the prescribed procedure under Cl. (3) of Art. 247 of the Constitution.

Controller of Patents and Designs, 'Karachi v. Muhammad Quadir Hussain 1995 SCMR 529 ref.

(d) Constitution of Pakistan (a<973)---

----Arts. 89, 246 & 247---Powers of President to promulgate ordinance---Legislative powers of the State always vested in the Parliament, but in view of Arts.89, 246 & 247 of the Constitution, Parliament was not exclusively empowered---Under Art.89 of the Constitution, President could pass an ordinance which would have the same force and effect as an Act of Parliament---President also enjoyed limited legislative powers to promulgate an ordinance obviously for a specified period and when Parliament was not in the session and circumstances so demanded---President had also got powers either to enforce the Act passed by the Parliament wholly or partly with or without modification or exceptions in the Tribal Areas---President could also make law in the shape of regulation for peace and good governance in the Tribal Areas---Those provisions made the Parliament not exclusively empowered to legislate as those provisions of Constitution also empowered the President in certain circumstances and enforcement of laws of the country to Tribal Areas---Since that was legislative powers of the President to extend an existing law in the Tribal Areas, there was co-relative constitutional duty of President to apply his mind and then to decide the form and shape of legislation, either to extend an existing law and it was or without modifications and exceptions---Once the President after applying his mind and keeping in view the best interest of the people and the State decide to extend an Act of Parliament to the Tribal Areas, it could not be withdrawn/repealed through a subsequent Act of Parliament named as Amendment in the principal statute already extended to Tribunal Areas.

(e) Constitution of Pakistan (1973)---

----Art. 247---Powers of the President in Tribal Area---Delegation of legislative powers of' the President to Parliament or Provincial Assembly---Legislative powers of the President under Art.247 of the Constitution could not be delegated to the Parliament or Provincial Assembly---President possessed two-fold powers in the Tribal Areas i.e. power to apply .Act of Parliament or an Ordinance and the power to make regulation for peace and good governance of the Tribal Areas---Said powers could not be delegated to the Parliament or Provincial Assembly---Contention that amending Act of the Parliament or Provincial Assembly would stand automatically extended to the Tribal Areas, if the principal Act had already applied to that area, would amount to delegation of legislative powers of the President under Art.247 of the Constitution---Powers to frame rules under the statute could be delegated, but it would not be derogatory to or in conflict with the principal Statute and if rules were found violative of any provision of the statute those were always struck down by the Courts under its constitutional obligations---Holding automatic extension of amending Acts of the Parliament to Tribal Areas, was certainly in conflict with the basic statute which was extended to Tribunal Areas---Under Art.247 of the Constitution, constitutional duty was cast on the President to determine whether concerned Act of Parliament (whether original or amending) was to be applied as it was or with certain modifications and exceptions, which he deemed appropriate.

M. Sardar Khan for Petitioner.

Salahuddin Khan D.A.-G. and Abdul Latif Yousafzai for Respondents.

Date of hearing: 19th October, 2006.

2007 P T D 749

[Peshawar High Court]

Before Ejaz Afzal Khan and Dost Muhammad Khan, JJ

Messrs SYNTRONICS LIMITED, INDUSTRIAL ESTATE, HATTAR

Versus

ADDITIONAL COLLECTOR (ADJ) CUSTOMS, CE & SALES TAX PESHAWAR

S.A.O. No.7 of 2002, decided on 30th November, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8 & 47---Input tax adjustment on wires and cables---Claim for---"Stock in trade", meaning of---Appeal to High Court---Assessee had contended that when the words "stock in trade" would mean goods kept available for sale at a store or shop including tools, materials etc., used in carrying on a trade or a business or any resources, practices or devices characteristically employed by a given person or group, cables and wires used to facilitate the electric supply to the machinery operated by the electric power, would be "stock in trade" to all intents and purposes and that Appellate Tribunal by not appreciating that important aspect of the case failed to appreciate the law---Validity---Wires and cables could not be used in the manufacture or production of taxable supplies as assessee being supplier of woven fibres staple bags, had nothing to do with any of them---Case of assessee was not that any of said items was used in the manufacture or production of taxable supplies rather case of assessee was that said goods being covered by words "stock in trade" would entitle it to reclaim or deduct input tax, but words used otherwise than as stock in trade' in S.7, Sales Tax Act, 1990 when read in the light of S.8 of said Act, had left no doubt that those items would meanused in the manufacture and production of taxable supplies'---Wires and cables, by no stretch of imagination, could be brought within the mischief of the words "stock in trade", when those could not be said to have been employed characteristically by the assessee---No input tax adjustment could be claimed on wires and cables---Impugned order being based on proper appreciation of law, was unassailable---Appeal being without merit, was dismissed.

Isacc Ali Qazi for Appellant.

Behlol Khattak for Respondent.

Date of hearing: 30th November, 2006.

2007 P T D 789

[Peshawar High Court]

Before Shah Jehan Khan and Ejaz Afzal Khan, JJ

Messrs IMTIAZ AHMED

Versus

COLLECTOR CUSTOMS, PESHAWAR

S.A.O. No. 157 of 2004, decided on 30th November, 2006.

Customs Act (IV of 1969)---

----Ss. 2(s), 9, 10, 15, 181 & 196---S.R.O. 374(I)/2002, dated 15-6-2002---Confiscation of seized goods---Option to pay redemption fine in lieu of confiscation of goods---Appeal to High Court---Appellant claimed that his confiscated goods could be released on payment, of redemption fine as Adjudicating Authority, in exercise of its discretionary powers had released goods on payment of redemption fine in many other similar cases and that case of appellant could not have been treated with a different yardstick---Validity---No option was given under Notification No.S.R.O. No.374(I)/2002 dated 15-6-2002 to pay fine in lieu of confiscation or smuggled goods falling under clause (s) of S.2 of Customs Act, 1969 or goods imported in violation of S.15 of Customs Act, 1969---Goods seized did not fall within the purview of S.2(s)(i)(ii) of Customs Act, 1969, but fell within the ambit of S.2(s)(iii) of the Act as no evidence whatever was available to prove that goods were brought through the route declared under Ss.9 & 10 of Customs Act, 1969---Mere fact that goods subsequently found and seized from one of the trucks would not prove that goods were brought through declared route---Had goods been so, those would have tallied with the Bill of Entry, but they did not tally---Said goods would be deemed to have been smuggled from a route other than the one declared under Ss.9 & 10 of Customs Act, 1969--- Question of release of goods of appellant in exercise of discretionary powers on payment of redemption fine in terms of S.181 of Customs Act, 1969, would not arise, as such powers in view of S.R.O. 374(I)/2002, dated 15-6-2002 had been taken away---Finding given by Appellate Tribunal being in conformity with the law, was not open to any interference by High Court in appeal.

Chairman, Regional Transport Authority, Rawalpindi v. Pakistan Mutual Insurance Company Limited, Rawalpindi PLD 1991 SC 14; Messrs Kaghan Impex and another v. Central Board of Revenue and another PLD 1982 Lah. 608; Messrs Bijhama Traders v. The Collector of Customs (Appraisement) and others 1989 MLD 4592 and Abu Bakar Siddique and others v. Collector of Customs, Lahore and others 2006 SCMR 705 rel.

Isacc Ali Qazi for Appellant.

Moeen ud din Hamayun for Respondent.

Date of hearing: 30th November, 2006.

2007 P T D 1596

[Peshawar High Court]

Before Ijaz-ul-Hassan Khan and Fazl-ur-Rehman Khan, JJ

Messrs KABIR MEDICAL COLLEGE, PESHAWAR

Versus

COMMISSIONER OF INCOME TAX, PESHAWAR

Tax References Nos. 1 to 4 of 2005, decided on 22nd December, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Second Schedule, Cl. (86-A)---Exemption---Expression `set up' occurring in Cl. (86-A) of Second Schedule of the Income Tax Ordinance, 1979---Connotation---Assessee, an Association of Persons deriving income from running Medical and Dental Colleges---Question involved in the reference was as to when the institutions were 'set up'---Assessee contended that the Institutions were set up before the target date i.e. 30th June, 1995 as such, it was entitled to claim exemption but such contention was rejected by the department---Appellate Tribunal on appeal, found that building was acquired on rent by the assessee before 30-6-1995 but the same was not a conclusive proof that the institutions were 'set up' by the said date; that the assets purchased at Rs.9,86,000 did not indicate that even a kindergarten school could be set up with the same and that the salary and wages claimed at Rs.26,500 was even not sufficient for one month salary of the staff---Validity---Held, Income Tax Appellate Tribunal, in circumstances, had rightly found that the investment was not sufficient to bring into existence the two institutions and that as regards the recognition of the two institutions by the Pakistan Medical and Dental Council, though correspondence started with it before the target date, it was not a condition precedent---Principles.

Word and phrases by John B. Saunders, London Butterworths 1970; 1979 PTD 612 (Lail.); 1999 PTD 1004 and 1999 PTD 1126 Pesh. ref.

Malik Jarar Hussain for Appellant.

Atif Ali for Respondent.

Date of hearing: 8th November, 2006.

2007 P T D 1738

[Peshawar High Court]

Before Mian Shakir Ullah Jan and Dost Muhammad Khan, JJ

COMMISSIONER OF INCOME TAX

Versus

Haji MASUD-UR-REHMAN and others

S.A.O. No.16 of 2002 with S.R.O. Nos.29, 17 to 24 of 2002, decided on 23rd December, 2003.

Wealth Tax Act (XV of 1963)---

----S. 27---Wealth Tax Rules, 1963, R.8(2)(c)(i) & (3)---Determination of market value of properties for valuation of wealth-tax---Appeal to High Court---Returns filed by assessees were not accepted by Assessing Officer who assessed properties of assessees at their net value which caused grievance to assessees who filed appeals before the Commissioner wherein order was passed in favour of assessees and appeal filed by the Department against said order was dismissed by Appellate Tribunal---Appeal to High Court---Question of law involved in the appeal was whether Appellate Tribunal was justified to hold that at first, market value of the properties was to be determined and then their GALVs and lowest of the two was to be adopted for valuation of wealth tax purposes, whereas no such condition had been laid down in R.8(3) of Wealth Tax Rules, 1963---Held, R.8(3) of Wealth Tax Rules, 1963 had provided a methodology/Scheme as to how values of buildings or of vacant sites were to be assessed for the purpose of wealth tax---Said Rule along with its first Proviso had left nothing in doubt to be debated upon and the view taken by Appellate Tribunal was perfectly in accord with law and Rules---Appellate Tribunal had followed the Rule in its true letter and spirit and had rightly perceived the true intent and object, of law--No provision of law having been violated by the Tribunal, no exception could be taken to its view---Impugned judgment was maintained.

(1998) 78 Tax 319 and (1994) 78 Tax 217 rel.

Eid Muhammad Khattak for Appellant.

M. Asif Khan for Respondents.

Dates of hearing: 7th October and 23rd December, 2003.

2007 P T D 1800

[Peshawar High Court]

Before Ijaz ul Hassan Khan and Dost Muhammad Khan, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

AKHTAR MUNIR and others

T. Rs. 27 to 29, 31 to 45, 48 to 53 of 2006, decided on 9th May, 2007.

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

----Second Sched., Part IV, cl. (6F) [as inserted by Finance Act (III of 1998) with effect from 1-7-1998] & S.13---Income Tax Ordinance (XLIX of 2001), S.111---Exemption---Addition---Exemption having become effective from 1-7-1998 amount invested in purchase of any asset through public auction upto 16-12-1999 was immune from probe---No addition under S.13, Income Tax Ordinance, 1979 read with S.111, Income Tax Ordinance 2001 for assessment years 1998-1999 to 2000-2001 thus could be made as the entire investment by the assessees was made prior to the target date of 16-12-1999---Additions made on such score were liable to be deleted---Principles.

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

----Second Schedule, Part IV, cl. (6F) [as inserted by Finance Act, (III of 1998)]---Terms inverted', "commencing date",investment contract', investment indebtedness' andinvestment property'---Connotation.

Black's Law Dictionary Eighth Edition ref.

(c) Interpretation of statutes---

----Taxing statute---Principle---Imposition, levy or recovery of tax a kinds of penalty, therefore, in case of any ambiguity in a taxing provision which is open to two constructions, one favouring the Revenue Department and the other favouring the tax payers the one which favour the latter shall be acted upon.

Shahid Raza for Petitioner.

2007 P T D 2422

[Peshawar High Court]

Before Ijaz-ul-Hassan Khan and Muhammad Raza Khan, JJ

Messrs SALEEM CIGARETTE INDUSTRIES (PVT.) LIMITED through Chief Executive---Petitioner

Versus

ASSISTANT COLLECTOR (CUSTOMS) and 4 others---Respondents

Writ Petition No.883 of 2007, decided on 24th July, 2007.

(a) Companies Ordinance (XLVII of 1984)--

----S.3---Customs Act (IV of 1969), S.202--- Recovery of government dues---Liability of subsidiary company' and indirect responsibility onassociated company' or associated undertaking---Scope.

The teen "sister concern" finds no mention either in the Company Law or in the Customs Act. There is a concept of "subsidiary company" and the "holding company" and there can also be a connection of an "associated company" or "associated undertakings" between two corporate bodies or firms. In the former case, the "holding company", as per section 3 of the Companies Ordinance, 1984, directly or indirectly controls more than 50% of the voting power of a "subsidiary company", may be held liable for the liabilities against the "subsidiary company". Such an indirect responsibility cannot be fixed on an "associated company" or "associated undertakings" for the outstanding liability of one of them.

(b) Companies Ordinance (XLVII of 1984)---

----S.3---Customs Act (IV of 1969), Ss.202 & 193---Constitution of Pakistan (1973), Arts.23 & 199---Constitutional petition---Recovery of government dues---Petitioner-Company was directed by Customs Authorities, not to remove any goods from his business premises till such time the amount of taxes recoverable from another company was paid in full and simultaneously a direction was issued to the petitioner-Company "not to sell, mortgage, lease or otherwise deal with all movable and immovable property belonging to it directly or indirectly except with the prior permission of the Assistant Collector (Customs)"---Contentions of the petitioner-company were that it was a corporate body and had got no concern with the defaulter-company; that there was no outstanding liability of the Customs Department against it and petitioner-Company being neither a holding company' of the defaulter-company nor the petitioner being a Director or guarantor of the defaulter-Company, neither the notice could be served nor an embargo could be imposed on the business transactions of the petitioner-company---Validity---Both the Corporate bodies did not fit in even as "associate companies" or "associate undertakings", merely to justify the termsister concerns' as alleged by the department---Demand of the liability of another corporate body from the petitioner-company, in circumstances was prima facie illegal and without jurisdiction---Issuance of impugned demand notice in the name of the petitioner-company was gross misuse of authority and a demonstration of an authority not vested in the department which was strongly deprecated by the High Court---Impugned notice could not be held to have been issued under the' Customs Act, 1969, and therefore, same could not have been challenged in appeal under S.193 Customs Act, 1969 and the only remedy available to the aggrieved person was to challenge the said notice in a constitutional petition---Constitutional petition was allowed, the impugned notice was set aside and any action taken thereunder stood reversed---High Court directed that the copy of the present judgment be forwarded to the Central Board of Revenue for taking appropriate action against the person responsible for such illegal, unjust, arbitrary and illogical demand notice along with a restraint order---Principles.

Under the Constitution, every person, or for that matter every juristic person, was entitled to own the property and business (subject to the legal restrictions) and such an owner can use, sell, transfer or otherwise transact in such property and business. Before placing a particular person under restraint, -the .functionaries of the State are required to establish not only the scope of responsibility of such person vis-a-vis the defaulter but they are also duty bound to ensure that such a person or juristic person cannot be put under an unconditional complete restraint. Issuing a notice on the personal beliefs, without such verification, shall amount to the misuse of authority which shall be amenable to the constitutional jurisdiction of this Court.

A bare perusal of section 202, Customs Act', 1969 would show that the demand notice has to be served on the person who was liable to pay such amount either as a principal or as an agent or who may be liable under a .guarantee or any other instrument. By thorough scanning of the entire record, one could not trace the responsibility of the petitioner with regard to the outstanding amount payable by defaulter-Company Admittedly, there was no amount directly outstanding against the petitioner in this regard. Defaulter-company was exclusively liable for the said amount, subject to the adjudication by the appropriate forum for the said amount, subject to the adjudication by the appropriate forum. The petitioner-company was neither an agent of the defaulter-company nor a guarantor for the payment of such liability. There was no instrument whatsoever to hold the petitioner-company liable in this behalf. Therefore, the demand of the liability of another corporate body from the petitioner-company was prima facie illegal and. without jurisdiction.

The petitioner-company being a corporate body, could be directly a shareholder of defaulter-Company or it could regulate the affairs of said company through a nominated/representative Director but there was no proof that any shares of the defaulter-Company were ever purchased by the petitioner-Company or that petitioner-Company had ever been on the panel of Directors of said company. Had it been so, the department could be, remotely justified in issuing the impugned demand notice. However, the department had not been able to prove that it had made any effort to verify the said status of the petitioner-company with regard to defaulter-company.

The extract from Form No.29 and the other documents of both the petitioner and the defaulter-company show that the petitioner-company, was being managed by the Directors and the Chief Executive who had no nexus with the Directors of the defaulter-company, At the most, two of the share-holders of the petitioner-company were the share-holders in the company of defaulter-company. Even these facts were provided by the petitioner, which could not be rebutted by the department. The voting power of each of such .share-holders is less than 10% of the defaulter-company. Therefore, both the corporate bodies do not fit in even as "Associate Companies" or "Associate Under-takings" merely to justify the term "sister concern".

The responsibility of a shareholder, in a company limited by shares, is restricted to the extent of the unpaid amount of the share capital purchased by him. He can be called upon to pay the unpaid amount of the share capital. However; if the entire share capital is paid up by a shareholder, he is entitled to the benefits attached .with the number of shares purchased by him and his liability shall be limited to the extent of his investment in the share capital.

If the company i.e. defaulter-company suffered a loss, it would be proportionately shared by each of the shareholders, including the said two shareholders. Thus, the maximum loss of the said individual shareholder shall be to the extent of the amount invested by him in the share capital by purchasing a particular number of shares. But he could not be held liable for a single penny beyond the amount of the said shares. Although the point of responsibility of such shareholder was not a point in issue in the present case but the position was being high-lighted to stress that the maximum liability which could be imposed on the said two persons, being individual shareholders of the defaulting company, could not exceed the value of their shares. In such a situation, the demand of the entire outstanding liability from the petitioner company was not only illegal but issuance of he impugned demand notice in the name of the petitioner-company was the gross misuse of authority and a demonstration of an authority not vested in the department.

There is no doubt that the officials of the Customs department were the earning hands of the Government and, therefore, extraordinary latitude was extended to them by the Government to facilitate the revenue generation but in pursuit of such an endeavour, the exercise of authority to the extent of illegality shall be counter-productive to the very concept of civilized society. The placement of embargo and restraint, as depicted through the impugned order, unfortunately displayed the unbridled exercise of authority over the citizens by those who were on the other side of the table. Such a barbarious action could not be conceived even in the most uncivilized societies. Corporate bodies are regulated by well recognized principles throughout the world. The Corporate bodies .have independent juristic personalities governed by their Directors, who are trustees of the capital of the share-holders. They cannot be held liable for the liabilities of the share-holders and vice versa. In such a situation, it will be illogical to presume that the corporate body, being the independent juristic person, may be held responsible for the liabilities of another corporate body without establishing a connection between the two. The petitioner did not control the defaulter-company nor was guarantor thereof. There was no undertaking or instrument to make the petitioner responsible for liabilities of the defaulter-Company.

Under section 193 of the Customs Act, an aggrieved person could file an appeal to the Collector (Appeals) within thirty days of such decision or order. This section has been referred to in the written statement of the Customs department without realizing that such remedy has been expressly barred with regard to the notice raider section 202. Since the impugned notice purported to have been issued under the said section, therefore, such a notice could not be challenged under the said provision in appeal. However, the stress- of section 193 of the Customs Act relates to "any decision or order passed under this Act". The impugned notice could not be issued either under the Customs Act or under any other legal instrument of a civilized society, therefore, the impugned notice could not be held to be an order under "the Act". Since the impugned notice was entirely illogical and unreasonable, therefore, it remedy available to the aggrieved person was to challenge the absurd notice in a constitutional petition. Similarly, the concept of appeals and internal redressal mechanism through an Appellate Tribunal or through the Board etc. shall only relate to the grievances of an action legally taken by an authority of the Federal Government under the statutory in provisions. The objections with regard to the assessment, legality of the demand, propriety of an assessment etc. could be challenged by a person through the fora created within the Department itself but if a third person having no relationship or responsibility with the defaulter was required to pay the liability of the defaulter, such an action could not be challenged in the internal redressal system. Such an illegal and arbitrary order had to be taken to the Court where the fundamental rights of a citizen were watched and the citizens were protected, from the atrocities of irresponsible administrative agency.

Constitutional petition was allowed, the impugned notice was set aside and any action taken thereunder stood reversed. Copy of this judgment was directed to be forwarded to the Federal/Central Board of Revenue for taking appropriate action against the person responsible for such illegal, unjust, arbitrary and illogical demand notice coupled with a restraint order.

1997 SCMR 169; 2001 YLR 2696 and 1999 SCMR 1881 ref.

Yahya Khan Afridi for Petitioner.

Hashim Raza for Respondents.

Date of hearing: 26th June, 2007.

2007 P T D 361

[Quetta High Court]

Before Amanullah Khan and Akhtar Zaman Malghani, JJ

ABDUL SATTAR & CO. through Proprietor and another

Versus

COLLECTOR OF CUSTOMS, COLLECTORATE OF CUSTOMS SALES TAX AND CENTRAL EXCISE, QUETTA

C. Ps. Nos. 86 and 126 of 2006, decided on 4th October, 2006.

Customs Act (IV of 1969)---

----Ss. 9, 44, 45 & 121---Customs Rules, 2001, Ch. XIV---Constitution of Pakistan (1973), Art.199---Constitutional petition---Import of goods---Deposit of Bank guarantee pertaining to taxes on examination of goods on customs station---Earlier, vide public notice, in order to streamline customs clearance work, a procedure was laid down whereby vehicles loaded with imported goods on their arrival at entry post were allowed to proceed to Dry Port after delivering import manifest and on reaching imported goods at NLC/Railway Dry Port, those were allowed to be cleared after payment of assessed tax/duties---Later on vide impugned office order issued in supersession of previous orders/instructions, new procedure was notified by completely changing procedure; wherein Bank guarantee pertaining to the taxes was to be deposited on examination of goods at customs station---Further, earlier escort was being provided free of cost, but after impugned order it had been ordered that same would be provided on payment of charges, whereby importers were over-burdened in violation of lair and Rules---Impugned office order was based on mala fide and discrimination because no such procedure was prevalent in other border towns or border areas---Impugned office order was violative of Chapter 12 of Customs Act, 1969 and Chapter XIV of Customs Rules, 2001 because said Act and Rules did not contemplate 'obtaining Bank guarantee from the importers---Impugned office order made by Collector, being discriminatory and in excess of authority, was declared to have been passed without lawful authority and of no legal effect.

1989 MLD 2322 and 2005 SCMR 37 ref.

H. Shakil Ahmed for Petitioners (in C.P. No.86 of 2006).

Ch. Mumtaz Yousaf, Standing Counsel and Muhammad Azam, Law Officer, Customs (in C.P. 1W.86 of 2006).

Sycd Ayaz Zahoor for Petitioner (in C.P. 126 of 2006).

Ch. Mumtaz Yousaf, Standing Counsel and Muhammad Azam Law Officer, Customs for Respondents (in C.P. 126 of 2006).

Date of hearing: 22nd August, 2006.

2007 P T D 67

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C. J., Faqir Muhammad Khokhar and Mian Shakirullah Jan, JJ

Civil Appeals Nos. 2296 to 2412 of 2001

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others

Versus

Haji MUHAMMAD SADIQ and others

(On appeal from the judgment and order of High Court of Sindh, Karachi dated 22-12-2000 passed in C.Ps. Nos. 1216, 1452, 2287, 1454, 1471, 1969, 1795, 774, 1064, 693, 1517, 463, 1521/1993, 1545/92, 1092, 1514, 1841, 204, 3430, 932, 762, 3163, 1038, 3146, 775, 1541, 1290, 3186, 1160, 1735, 1468, 140, 2616, 1470, 805, 2818, 1456, 2136, 3514, 3147, 1063, 748, 1036, 506, 3167, 1518/93, 3164/92, 1513, 694, 2872, 224, 691/93, 225/94, 1379, 2471, 704, 1031/93, 186, 1342, 1371, 2873, 692, 1736, 3389, 1453, 1472, 2874, 1159/93, 3185/92, 804-D/93, 3165/92, 275-D/93, 2617/93, 3166-D/92, 1457/93, 1794-D/93, 690/93, 1116-D/93, 1281/93, 1694, 1333/93, D-226/93, D-1098/94, D-1405/98, D-1372/94, D-1449/93, D-1494/93, D-1519/93, D-1532/94, D-1951/93, D-1971/93, D-1796/93, D-3137/92, D-151/93, D-255/93, D-734/93, D-735/93, D-769/93, 934/93, 1099/94, 1143/93, 1189/95, 1217/93, 1372/94, 1386/93, 1794/93, 1970/93, 2193/93, 2194/93, 3098/93 and 3146/92).

Civil Appeals Nos.2707-2717 of 2001

INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others

(On appeal from the judgment and order of High Court of Sindh, Karachi dated 22-12-2000 passed in C.Ps. Nos.D-148, 152, 727, 729, 736, 775, 1064, 1099, 1468, 1521 and 1541/1993).

Civil Appeal No.516 of 2002

INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others

(On appeal from the judgment and order of High Court of Sindh at Karachi dated 30-10-2001 in C.P. No.D-2342/93).

Civil Appeal No.934 of 2002

ICC TEXTILE MILLS, LTD.

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others

(On appeal from the judgment and order of Lahore High Court Lahore dated 4-4-2002 passed in W.P. No. 9705).

Civil Appeals Nos.1087-1091 of 2004

Messrs PAK ELECTRON LTD. and others

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others

(On appeal from the judgment and order of the Lahore High Court, Lahore dated 4-4-2002 passed in W.Ps. Nos. 23072/96, 316-317/97 and dated 27-5-2004 in W.Ps. Nos. 21760 and 20642/1996).

Civil Appeals Nos.2254-2403 of 2005

Messrs FAISAL ASAD TEXTILE MILLS LTD. and others

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others

(On appeal from the judgment and order of Lahore High Court, Lahore dated 4-4-2002 in W.Ps. Nos. 151/94, 1082/93, 3895/92, 12059/97, 743/93, 744/93, 795/93, 742/93, 918/96, 2512/97, 10691/95, 5686/96, 4915/95, 4919/95, 4917/95, 4918/95, 776/93, 4916/95, 121010/92, 12011/92, 685/93, 22007/92, 12139/92, 101/93, 11060/92, 102/93, 12091/92, 12014/92, 12092/92, 11059/92, 12013/92, 11061/92, 12008/92, 12012-92, 3730/96, 2063/96, 12143/92, 12141/02, 12142/02, 4599/94, 16565/96, 2293/97, 16567/96, 7601/97, 704/97, 703/97, 1851/93, 12445/92, 12450/92, 1770/98, 1357/93, 1580/93, 16520/95, 216522/95, 2918/93, 1046/93, 12665/96, 12768196, 11238/97, 1267/96, 1263/96, 12674/96, 12676/96, 12695/96, 12696/96, 19120/01, 20059/96, 20060/96, 2901/93, 3309/93, 3513/97, 4073/97, 7039 to 7041/93, 2454/93, 2523/93, 2526-2530/93, 3995/93, 14284/93, 14285/93, 243/93, 436/93, 492/93, 2525/93, 2531/93, 5317/93, 11294/95, 1407/92, 13775/96, 3543/93, 509/93, 1083/93, 2524/93, 322/94, 989/93, 3000/94, 3001/94, 3004-3005/94, 13894/94, 8113/95, 8115/95, 8116/95, 8117/95, 987/93, 17214/96, 17215/96, 17218/96, 10057/97, 10045/97, 10061/97, 10063/97, 13179/96, 613/96, 12333/92, 10054/97, 2593/96, 611/96, 2594/96, 2592/96, 609/96, 2595/96, 606/96, 610/96, 605/96, 607/96, 4099/93, 10055/97, 12334/92, 10056/97, 612/97, 608/96, dated 20-8-2002 in W.P. No.3896/1992, dated 4-4-2002 in W. P. No. 2596/96, 1408/93, 5412/93, dated 24-9-2002 in W.P. No. 18702/2001, dated 4-4-2002 in W.Ps. Nos.1884/96, 20753/96, dated 18-6-2002 in W.P. No.319/93 and dated 4-4-2002 in W.P.No.7078/1993).

Civil Appeals Nos.2410-2423 of 2005

FEDERATION OF PAKISTAN and others

Versus

GUL AHMAD TEXTILE MILLS LTD. and others

(On appeal from the judgment and order of High Court of Sindh, Karachi passed in C.Ps. Nos. 462, 780, 2289/93, 2136/94, 841/93, 3139/92, 147/03, D-54/94, D-2190/93, D-254/93, D-2202/93, D-933/93, D-1331/93 and 1606-D/1993).

Civil Appeals Nos.2433-2436 of 2005

THE PAK PUNJAB MANUFACTURING COMPANY (PVT.) LTD. and others

Versus

FEDERATION OF PAKISTAN and others

(On appeal from the judgment and order of Lahore High Court, Lahore dated 4-4-2002 in W.Ps. Nos.17307, 17309, 17310 and 17314 of 1993).

Civil Appeals Nos. 2296 to 2412, 2707-2717 of 2001, 516, 934 of 2002, 1087-1091 of 2004, 2254-2403, 2410-2423, 2433--2436 of 2005, decided on 22nd February, 2006.

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

----Ss. 2(20), 3 & First Sched. Part-II, Item 14.14---Excisable Services---History stated.?

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

---Ss. 2(20), 3, 3-C(1)(b), 4(3), 7(1) & First Sched. Part-II, Item 14.14 [as inserted by S.5 of Finance Act (XII of 1991) and then replaced with Item No.9813.0000 by Finance Act (XII of 1994)]---Constitution of Pakistan (1973), Arts, 144, 163 & Fourth Sched.---Levy of excise duty on services provided or rendered to its customers by Institutions named in Item 14.14 of Part-II of First Sched. of Central Excise Act, 1944---Validity---Legislature was competent to levy excise duty on excisable services by inserting Item 14.14 in First Sched. of Central Excise Act, 1944---Such Item was part of the Central Excise Act, 1944 for purposes of charging duty on services in respect of advances made to any person---First Sched. was appended with Central Excise Act, 1944 to cater requirement of S.3 thereof being a charging section---Constitutionality of such Item, thus, could not be testified on touchstone of S.3 of Central Excise Act, 1944 for being constitutional---In case of irreconcilable inconsistency between such Item and S.3 of Central Excise Act, 1944, such Item would yield to section 3 thereof---Legal nexus between such Item and S.3 of the Act, existed for both being part of a statute---Word "services" used in plural sense in Column II of such Item would cover all services provided to its customers by Institutions named therein---Criteria or measure to calculate duty provided in Column II of such Item was neither vague nor ambiguous---Excise duty would be calculated on the volume of loan/advance at the rate specified in Column III of such Item---Such Institutions would have a recurring cause of action for purpose of effecting recovery of excise duty on services being provided on monthly basis on volume of advance/loan, which would be calculated on last working day of each calendar month---Expressions/ words used in S. 2(20) of Central Excise Act, 1944 and such item would be interpreted keeping in view their popular meanings---Words "facilities", "loans", "utilities" and "advances" would be considered in popular sense---Such Item did not speak in respect of Modaraba or Musharka etc., but after its replacement with Item No.9813.0000 by Finance Act, 1994, excise duty became chargeable on services provided or rendered by Banking Companies, Insurance Companies, Cooperative Financing Society, Modaraba, Musharka, Licensing Companies, Non-Banking Companies and other person dealing in such services---Levy of excise duty would depend upon services being provided in respect of advances to a person, but no sooner when there was no advance outstanding, Bank would not be deemed to be providing or rendering any service as transaction between Bank and customer came to an end---Financing Company would enjoy recurring cause of action till adjustment of loan---Day on which excisable service was rendered/provided would be the date for determination of excise duty---Rate of excise duty mentioned in Item 14.4 of First Schedule, Part II of the Central Excise Act, 1944 was just, proper and not arbitrary---Levy of excise duty at such rate being an indirect tax would not burden such Institutions, but would be passed on to its customers---Principles.?

South Behar Sugar Mills Ltd. v. Union of India AIR 1968 SC 922; Hirjina & Co. v. Islamic Republic of Pakistan 1993 SCMR 1342; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Pakistan Industrial Development Corporation v. Pakistan 1992 SCMR 891; United Provinces v. Atiqa Begum AIR 1941 FC 16; Navinchaandra Mafatlal v. Commissioner of Income Tax [1954] (XVI) ITR 758; Bisvil Spinners v. Superintendent Central Excise PLD 1988 SC 370; Ghulam Hyder Shah v. Chief Land Commissioner 1983 CLC 1585; Sabir Shah v. Shad Muhammad Khan PLD 1995 SC 66; A&B Food Industries Ltd. v. Commissioner of Income/Sales Tax Karachi 1992 SCMR 663; Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdul Rehman PLD 1973 SC 445; Excise and Taxation Officer Karachi v. Burma Shell Storage and Distribution Company of Pakistan 1993 SCMR 338; Mondi's Refreshment Room & Bar, Karachi v. Islamic Republic of Pakistan PLD 1983 Kar. 214; Sohail Jute Mills Ltd. and others v. Federation of Pakistan PLD 1991 SC 329; ICC Textiles Ltd. v. Federation of Pakistan 2003 PTD 1017; P. Kunhammad Kutty Haji v. Union of India [1989] 176 ITR 481; Ocean Industries Ltd. v. Industrial Development Bank PLD 1966 SC 738; Jamat-i-Islami Pakistan v. Federation of Pakistan PLD 2000 SC 111; Buxa Dooars Tea Company Ltd. v. State of West Bengal AIR 1989 SC 2015; Govind Saran Ganga Saran v. Commissioner of the Sales Tax (1985) 155 ITR 144; Commissioner of Sales Tax v. Hunza Central Asian Textile and Woolen Mills Ltd. 1999 PTD 1135; Reference No.2 of 2005 PLD 2005 SC 873; 2002 CLC 1714; Messrs Central Insurance Co. v. The Central Board of Revenue 1993 SCMR 1232; Al-Jehad Trust v. Federation of Pakistan PLD 1996 SC 324; Pakistan v. Public at large PLD 1987 SC 304 and Mrs. Zehra Begum v. Pakistan Burmah-shell Ltd. PLD 1984 SC 38 ref.

Abdul Rahim v. UBL PLD 1997 Kar. 62; Excise and Taxation Officer Karachi v. Burma Shell Storage and Distribution Company of Pakistan 1993 SCMR 338; Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Chambers Concise Dictionary (pg. 53); Habib Bank Limited v. Messrs Farooq Compost Fertilizer Corporation Ltd. 1993 MLD 1571; Habib Bank Limited v. Messrs Qayyum Spinning Ltd. 2001 MLD 1351; Muhammad Shafi v. Wealth Tax Officer 1992 PTD 726 and Messrs ICC Textile Ltd. and others v. Federation of Pakistan and others 2001 SCMR 1208 rel.

(c) Islamic Banking---

----Islamic modes of financing, adoption of---Expressions "loan", "interest" etc., would be alien to Islamic Banking system.?

(d) Words and phrases---

----"Service"---Meaning.?

Advanced Law Lexicon 3rd Edition Volume 4 (2005) ref.

(e) Interpretation of statutes---

----Fiscal statute---Language used in fiscal statute would be interpreted in its literal and ordinary meanings in favour of taxpayer.

?

Government of Pakistan v. Messrs Haswani Hotel Ltd. PLD 1990 SC 68; Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise and Land Customs PLD 1988 SC 370 and Abdul Rahim v. United Bank Ltd. PLD 1997 Kar. 62 fol.

(f) Interpretation of statutes---

----Not safe to compare language in one statute with that employed in another, even though subject covered by the two may involve similarities.?

Abdul Rahim v. UBL PLD 1997 Kar. 62 ref.

(g) Words and phrases---

----"Advances"---Meaning.?

Words and Phrases Vo. 2-A (pg. 117) and Corpus Juris Secundum Vol. 2 page 496-97 ref.

(h) Interpretation of statutes---

----Law should be interpreted in such a manner, that same should be saved rather than destroyed.?

Elahi Cotton Mills PLD 1997 SC 582 and Corpus Juris Secundum Vol. 2 pg. 496-97 rel.

(i) Interpretation of statutes---

----Schedule appended with statute---Legal status---Schedule placed/appended with an enactment is an extension of the section for the purpose of which same has been inserted.?

(j) Interpretation of statutes---

----Act and Schedule, conflict between---Schedule being an enjoinder equal status of an enacment; in case of such conflict, Act would prevail and Schedule would yield to the Act---Principles.?

Excise and Taxation Officer Karachi v. Burma Shell Storage and Distribution Company of Pakistan 1993 SCMR 338; Craies on Statute Law Seventh Edition 1971 p. 225; N.S. Bindra's The Interpretation of Statutes Seventh Edition at pg. 92 and Understanding Statutes S.M. Zafar rel.

?

(k) Interpretation of statutes---

----Fiscal statute, constitutional validity of---Determination---Principles stated.

The Court is bound while examining whether particular matter falls within a fiscal statute is required to examine the letter of the law, and if it comes to the conclusion that all the expressions used by the legislature are to be taken into consideration its popular meaning, then there should not be hesitation in maintaining the constitutionality of particular law.?

Corpus Juris Secundum Vol. 84 page 246; Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdul Rehman 1973 SCMR 445; Tenant v. Smith 1892 AC 150; Interpretation of Statutes Fourth Edition at page 977; Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329 and Mian Ejaz Shafi v. Federation of Pakistan and others PLD 1997 Kar. 604 ref.

(l) Interpretation of statutes---

----Laws relating to economical activities, interpretation of---Principles stated.

The Court while interpreting laws relating to economical activities view the same with greater latitude than the law relating to civil rights such as freedom of speech, religion etc., keeping in view the complexity of economic problems, which do not admit of solution through any doctrinaire or strait jacket formula.?

Elahi Cotton Mills PLD 1997 SC 582 fol.

(m) Interpretation of statutes---

----Fiscal statute---Taxing measure---Ultra vires to the Constitution---Determination---Reasonableness or otherwise of such measure would be a matter of legislative policy and not for the Courts for adjudication.?

Anoud Power Generation Ltd. v. Federation of Pakistan PLD 2001 SC 340 rel.

(n) Constitution of Pakistan (1973)----

----Arts. 25, 184, 185(3) & 199---Pakistan Citizenship Act (II of 1951), S.2---Constitutional petition by a Company challenging constitutionality of a statute on touchstone of Art. 25 of the Constitution---Not maintainable without joining its shareholder/director---Principles.

Undoubtedly, the companies have got fundamental rights to carry on business through its representatives, who are the citizens of Pakistan, but for the purpose of challenging the constitutionality of a statute, it would be a condition precedent to satisfy that challenge is by a citizen at the touchstone of Article 25 of the Constitution, which provides that all citizens are equal before the law and are entitled to protection of law. Expression "citizen" means a citizen of Pakistan as defined by law under Article 260 of the Constitution.

A company incorporated under the Companies Act, 1913 or the Companies Ordinance, 1984, does not fall within the definition of a citizen. However, the constitutionality of a legislation, which has impaired the rights of a company, can be challenged through a shareholder.

An incorporated company does not fall within the definition of citizen. However, constitutionality of a statute can be examined for violation of Article 25 of the Constitution, if the vires of the statute have been questioned by a shareholder, director along with the company itself and the company independently cannot question the constitutionality of legislation at the touchstone of Article 25 of the Constitution. The Courts are not debarred to examine the case of the company on the point other than the alleged violation of Article 25 of the Constitution.

The incorporated bodies/companies do not fall within the definition of a citizen for the purpose of Article 25 of the Constitution; therefore, without joining the share/account holders, the impugned legislation cannot be examined within the parameters of Article 25 of the Constitution.

It would be incorrect to contend that while examining the availability of the question of discrimination under Article 25 to an incorporated body, but so far as the petition under Article 199 of the Constitution is concerned, it would be maintainable on behalf of the companies/banking institutions, if they fall within the definition of a person as it has been used in Article 199 of the Constitution. It would not be out of context to lay down a distinction between the expression of a person and a citizen. As far as the expression "person" is concerned, it also includes a juristic person i.e. incorporated bodies, and so far as expression "citizen" is concerned as it has been employed in Article 25 of the Constitution, which means as defined under the law. Essentially the law on the subject is Pakistan Citizenship Act, 1951, which by its implication excludes a juristic person from the definition of citizen.

Divisional Forest Officer v. Bishwanath Tea Co. Ltd. AIR 1981 SC 1368; Excell Wear v. Union of India AIR 1979 SC 25; U.P.S.E. Board v. Hari Shanker AIR 1979 SC 65; I.A. Sherwani v. Government of Pakistan 1991 SCMR 1041 and Inaam ur Rehman v. Federation of Pakistan 1992 SCMR 563 ref.

The Progress of Pakistan Co. Ltd. v. Registrar Joint Stock Companies Karachi PLD 1958 Lah. 887; Shelat v. Bhargava, G.K. Mitter AIR 1970 SC 564; Godhra Electric Company v. State of Gujarat AIR 1975 SC 32 and DC & GM Company v. Union of India AIR 1983 SC 937 rel.

(o) Administration of justice---

----Power of Court to maintain judgment other than on the grounds on which same was founded---Scope stated.

Courts can maintain the judgments other than on the grounds on which the same were founded. But if the plea is not available under the law to defend the judgment, then argument raised by him would not help him at all.?

(p) Central Excise Act (1 of 1944)---

----S. 2(20), 3 & First Sched. Part-II, Item, 14.14 [as inserted by S. 5 of Finance Act (XII of 1991) and then replaced with Item No.9813.0000 by Finance Act (XII of 1994)]---Excise duty on excisable services---Status---Such tax being an indirect tax recoverable from a person to whom excisable services were provided or rendered---Duty of Financial Institution, Insurance Company, Cooperative Financial Society, other Lending Bank or Institution and other person dealing in advancing of loans to realize excise duty at prescribed rate from amount of advances outstanding against each borrower.?

Messrs Central Insurance Co. v. The Central Board of Revenue 1993 SCMR 1232 ref.

(q) Interpretation of statutes---

---Retrospective effect---Scope---In absence of clear intention of legislature to apply provision of a statute with retrospective effect, same would be deemed applicable prospectively.?

(r) Taxation---

---Rate of tax, fixation of---Acceptable consensus of taxpayers ordinarily preferred by Lawmakers--Principles.

The Lawgivers before imposing the tax ordinarily undertake an exercise during the process whereof the taxpayers are also examined and keeping in view their acceptable consensus the rate of tax is fixed. Besides at the same time, it becomes very difficult to quantify the excise tax, therefore, a reasonable/moderate rate of tax is fixed keeping in view the suggestion of the taxpayers and other persons who matter in this behalf.?

Elahi Cotton Mills PLD 1997 SC 582 rel.

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

----Ss. 2(20), 3, 3-C(1)(b), 4(3), 7(1) & First Sched. Part-II Item 14.14 [as inserted by S. 5 of Finance Act (XII of 1991)]---Excise duty on excisable services, imposition of---Estoppel against legislature---Scope---Legislature could not be estopped from promulgating a law to impose tax with a view to generate revenue---Principles.

Neither Banking Companies nor C.B.R. has imposed excise levy on excisable services, as it is evident from the contents of Finance Act, 1991. Similarly the Federation of Pakistan, who had legislated Item 14.14 of First Schedule Part-II is not a party to the agreement between the persons dealing in advances of loans and the Bank. Therefore, the legislature cannot be estopped from promulgating a law for the purpose of imposing of the tax with a view to generate revenue keeping in view its growing requirement to generate funds to address burning problems of the day and the complex issues facing the people, which the legislature in its wisdom through legislation seeks to solve, therefore, there is no estoppel against the Federation to levy excise on the excisable services notwithstanding the contents of the agreement. The powers of the legislature to promulgate the law imposing excise duty or other duties cannot be curtailed.?

Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan 1993 SCMR 1905 and Government of Pakistan v. Muhammad Ashraf PLD 1993 SC 176 rel.

Waseem Sajjad, Senior Advocate Supreme Court, and Mumtaz Sheikh, Member (Legal) C.B.R. for Appellants (in Civil Appeals Nos.2296 to 2412 of 2001).

Khalid Anwar, Senior Advocate Supreme Court with M.A. Zaidi and M.S. Khattak, Advocates-on-Record for Respondents (in C. As. Nos.2312, 2317, 2321, 2355, 2356, 2359, 2373, 2375, 2376, 2383, 2402 and 2406 of 2001).

Syed Ali Zafar, Advocate Supreme Court for Respondents (in C.A. No.2318 of 2001).

Fazal-e-Ghani, Advocate Supreme Court and Ejaz Muhammad Khan, Advocate-on-Record for Respondents (in C.As. Nos. 2325, 2331, 2376, 2402 and 2410 of 2001).

Muhammad Afzal Sandhu, Advocate Supreme Court for Respondents (in C.As. Nos. 2330 and 2366 of 2001).

Raja Haq Nawaz, Advocate Supreme Court with Ch. Akhtar Ali, Advocate-on-Record for Respondents (in C.As. Nos. 2345, 2357, 2363, 2386 and 2405 of 2001).

Muhammad Farid, Advocate Supreme Court for Respondents (in C.A. No.2401 of 2001).

A.I. Chundrigarh, Advocate Supreme Court with A.S.K. Ghori, Advocate Supreme Court for Appellant (in C.As. Nos. 2707-2717 of 2001).

Waseem Sajjad, Senior Advocate Supreme Court with Raja Abdul Ghafoor, Advocate-on-Record (in Civil Appeals Nos. 2707 to 2717 of 2001) and Farogh Naseem, Advocate Supreme Court with M.A. Zaidi, Advocate-on-Record for Respondents (in C.A.2717 of 2001).

A.I. Chundrigarh, Advocate Supreme Court with A.S.K. Ghori, Advocate-on-Record for Appellant (in C.A. No. 516 of 2002).

Nemo for Respondents (in C.As. Nos. 516 of 2002).

Imtiaz Rasheed Siddiqui, Advocate Supreme Court with Sh. Salahuddin, Advocate-on-Record for Appellant (in C.A. No.934 of 2002).

A. Karim Malik, Senior Advocate Supreme Corut and Ahmer Bilal Sufi, Advocate Supreme Court for Respondents (in C.A. No.934 of 2002).

Nemo for Appellant (in C.As. Nos. 1087-1091 of 2004)

Raja Muhammad Irshad, D.A.-G. with Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.As. Nos. 1087 to 1091 of 2004).

Izhar-ul-Haq Advocate-Supreme-Court (in C. A No. 1091 of 2004).

Imtiaz Rasheed Siddiqui, Advocate Supreme Court with Sh. Salahuddin, Advocate-on-Record for Appellants (in C.As. Nos.2254-2256, 2260-2261, 2262, 227, 2287, 2290-2292,2297-2300, 2301, 2303, 2318-2322, 2327-2329, 2349, 2350 and 2395 of 2005).

Syed Ali Zafar, Advocate Supreme Court with Ch. Arshad Ali, Advocate-on-Record for Appellants (in C.As. Nos. 2257, 2288, 2289 and 2304-2308 of 2005).

Syed Najmul Hassan Kazmi, Advocate Supreme Court for Appellants (in C.As. Nos. 2258 and 2259 of 2005).

Ashtar Ausaf Ali, Advocate Supreme Court with Sh. Salahuddin, Advocate-on-Record for Appellants (in C.As. Nos. 2262, 2290-2292 and 2327-2329 of 2005).

Shahid Hamid, Senior Advocate Supreme Court for Appellants (in C.As. Nos. 2263-2265 of 2005).

Khawaja Muhammad Akram, Advocate Supreme Court for Appellants (in C.As. Nos. 2293-2296 and 2323 of 2005).

Muhammad Akram Sheikh, Senior Advocate Supreme Court for Appellants (in C.As. Nos.2310-2317 and 2325-2326 of 2005).

Raja Muhammad Akram, Senior Advocate Supreme Court for Appellants (in C.As.Nos.2259, 2311, 2330-2338, 2340-2347, 2349, 2352, 2353, 2365, 2367-2369, 2375, 2376 and 2385-2388 of 2005).

Sh. Shahid Waheed, Advocate Supreme Court for Appellants (in C.As. Nos.2337-2339 of 2005).

Mian Abdul Rauf, Advocate Supreme Court for Appellants (in C.As. Nos. 2344 and 2352 of 2005).

Ch. Muhammad Anwar, Advocate Supreme Court for Appellants (in C.As. Nos. 2348, 2354 and 2364 of 2005).

Tariq Mehmood Khokhar, Advocate Supreme Court with Ejaz Muhammad Khan, Advocate-on-Record for Respondents (in C.A. No.2332 of 2005).

Waseem Sajjad, Senior Advocate Supreme Court and Mumtaz Sheikh, Member (Legal) C.B.R. for Appellants (C.As. Nos.2410-2423 of 2005).

Khalid Anwar, Senior Advocate Supreme Court with M.S. Khattak, Advocate-on-Record for Respondents (in C.As. Nos.2410 and 2412 of 2005).

Muhammad Azeem Malik, Advocate Supreme Court for Appellants (in C.As. Nos.2433 and 2434 of 2005).

Ch. Muhammad Anwar Khan, Advocate-on-Record for Appellants (in C.As. Nos. 2435-2436 of 2005).

M.S. Khattak, Advocate-on-Record for Respondents (in C.A. No.2433 of 2005).

Dates of hearing: 20th, 21st and 22nd February, 2006.

2007 P T D 157

[Supreme Court of Pakistan]

Present: Javed Iqbal and Raja Fayyaz Ahmed, JJ

Haji REHMATULLAH and another

Versus

COLLECTOR CENTRAL EXCISE AND LAND CUSTOMS, QUETTA and others

Civil Petition No.17-Q of 2006, decided on 14th September, 2006.

(On appeal from the judgment, dated 12-12-2005 of the High Court of Balochistan, Quetta, passed in C.P. No.331 of 2005).

Customs Act (IV of 1969)---

----Ss. 201 & 181---Customs General Order No.5 dated 19-4-1992---Customs Auction Rules, 1996---Constitution of Pakistan (1973), Arts. 185(3) & 199---Confiscated goods---Auction by Customs Authority---Tentative assessment of goods by Customs Authority---Goods sold below market value---Remedy for aggrieved person qua sold goods---Constitutional jurisdiction of High Court---Scope---Mobile squad of Customs Authority recovered wrist watches from especially designed cavities of bus travelling on highway---Authority's official issued show-cause notice whereupon petitioners claimed ownership of the watches---Authority, under S.181 of Customs Act, 1969, directed to release watches subject to payment of redemption fine---Petitioners after depositing fine amount, submitted application for release of said watches whereupon they came to know that said watches had already been released to CSD shop for sale---Authority informed petitioners to take amount as received by it---Petitioners being aggrieved by action of Authority filed constitutional petition before High Court which was dismissed---Petitioners contended that High Court did not appreciate legal and factual aspects of controversy in its true perspective and provisions contained in S.201 of Customs Act, 1969 had been misconstrued and misinterpreted; that mandatory formalities as contemplated under S.201 of Customs Act, 1969, read with Customs General Order No.5 dated 19-4-1992 escaped notice of High Court which resulted in miscarriage of justice; that Customs Auction Rules, 1996, had been violated while disposing of confiscated goods by Authority and that confiscated goods were sold far below the market value of goods---Validity---During pendency of constitutional petition, the goods in question had been auctioned by Customs Authorities and proceeds thereafter deposited in Government treasury, therefore it was not possible for High Court to restore original goods to the petitioners---Authority though had completed necessary formalities as envisaged under S.201 of Customs Act, 1969, but, had the adjudicating authority passed order under S.181 of the Customs Act, 1969, for release of goods, on payment of fine earlier, the question of disposal of seized goods was not to have arisen---Price of goods initially determined tentatively by seizing official of Authority was not to be considered as final---Question of fixation of price being a question of fact was not to be determined by High Court in exercise of constitutional jurisdiction---Customs Authority was vested with powers to assess actual value of goods for purpose of customs duty and in absence of any evidence contrary to determination of such value, the assessment of Authority was to be accepted---Customs Authority was required to adopt measures for obtaining better results qua auction of seized goods so that consequential legal rights or benefits accruing from such auction proceedings to either party were not jeopardized---Petitioners were at liberty to approach civil court for redressal of their grievance subject to all legal exceptions---Petition for leave to appeal was decided accordingly.

Obedullah v. Inspector-General, Frontier Corps 1997 SCMR 1833 and Raza Muhammad v. Inspector-General, Frontier Corps 1999 MLD 3414 distinguished.

Sheikh Ghulam Muhammad, Advocate Supreme Court and Gohar Yakub Yousufzai, Advocate-on-Record for Petitioners.

Ch. Mumtaz Yousaf, Standing Counsel, Muhammad Yahya, Collector Customs, Mamtaz Ali Khosa, Deputy Collector Customs and Haji M. Azam, Law Officer for Respondents.

Date of hearing: 14th September, 2006.

2007 P T D 967

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Abdul Hameed Dogar and Saiyed Saeed Ashhad, JJ

COMMISSIONER OF INCOME TAX, KARACHI

Versus

ABDUL GHANI

Civil Appeals Nos. 991 and 992 of 2002, decided on 23rd May, 2006.

(On appeal from the judgment/order dated 24-10-2001 passed by High Court of Sindh in I.T.As. Nos.226 and 227 of 1999).

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

----Ss. 56 & 65---Re-opening of assessment of previous years---Applying wrong provision of law---Effect---Assessing Officer had power to re-open assessment for previous assessment years, under S.65 of Income Tax Ordinance, 1979---Fact that Assessing Officer, instead of issuing notice under S.65, issued notice under S.56 of Income Tax Ordinance, 1979, would neither invalidate the notice issued under S.56 of Income Tax Ordinance, 1979, nor would render assessments framed in pursuance of such notice as illegal and without jurisdiction.

(1998) 77 Tax 91 and Pakistan Fishries Ltd. v. United Bank Ltd. PLD 1993 SC 109 rel.

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

----Ss. 156---Rectification---Principles---Rectification under S.156 of Income Tax Ordinance, 1979, is permissible if error is apparent, obvious and floating on the surface of judgment and can be rectified without long drawn arguments and proceedings for appreciating facts and interpretation or application of any provision of law.

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

----Ss. 56, 65 & 156---Re-opening of assessment---Applying wrong provision of law--Rectification of judgment---Assessing Officer re-opened assessment of previous assessment years and matter was finally decided by Income Tax Appellate Tribunal---After the judgment was announced by Tribunal, assessees sought rectification of the judgment on the ground that Assessing officer issued notice under S.56 of Income Tax Ordinance, 1979, instead of S.65 thereof---Income Tax Appellate Tribunal, in exercise of powers under S.156 of Income Tax Ordinance, 1979, annulled the assessment and order of rectification was maintained by High Court---Validity---No error on the face of judgment was identified in initial order of Tribunal, therefore, in absence of any error apparent on the record with regard to the judgment, Tribunal ought to have refused to exercise jurisdiction under S.156 of Income Tax Ordinance, 1979---In exercise of such jurisdiction only a mistake apparent on record could be rectified by Income Tax Appellate Tribunal but in fact Tribunal acted as appellate forum against its own order, which was not sustainable in law---High Court failed to apply correct law and dismissed the appeal without providing any legal justification---High Court also failed to appreciate that assessee by filing application under S.156 of Income Tax Ordinance, 1979, tried to circumvent law by avoiding to file appeal/reference before High Court against earlier order/judgment---High Court also lost sight of the fact that Tribunal under the law could not sit on its own judgment/order unless error apparent or floating on the surface of record could be pointed out---High Court while holding that no prejudice would be caused and in view of earlier judgments of Courts/Tribunals, assessees were entitled to benefit, had committed grave and serious error/mistake, which could not be sustained---Income Tax Appellate Tribunal exceeded its jurisdiction by rectifying its judgment being free from any error in terms of S.156 of Income Tax Ordinance, 1979---If at all assessees were aggrieved, they could have approached relevant forum, in accordance with law--Judgments passed by High Court and Income Tax Appellate Tribunal were set aside--Appeal was allowed.?

Commissioner of Income Tax v. National Food Lab.1992 SCMR 687 and Islamuddin v. Income Tax Officer 2000 PTD 306 and Baqar v. Muhammad Rafique 2003 SCMR 1401 fol.

Akhtar Ali Mehmood, Advocate Supreme Court and A.R. Akhtar, Advocate-on-Record for Appellant.

Nasrullah Awan, Advocate Supreme Court for Respondents.

Date of hearing: 23rd May, 2006.

2007 P T D 1195

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, Javed Iqbal, Abdul Hameed Dogar, Mian Shakirullah Jan and Saiyed Saeed Ashhad, JJ

PROVINCE OF BALOCHISTAN through Secretary Excise & Taxation Department, Quetta and 2 others

Versus

MURREE BREWERY COMPANY LTD. through Secretary

Civil Appeal No.210 of 2004 out of Civil Petition No. 94-Q of 2003, decided on 15th December, 2006.

(On appeal from the judgment, dated 7-4-2003 passed by the High Court of Balochistan at Quetta in Civil Petition No.471 of 2000).

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

----Art. 199(1)---Constitutional jurisdiction of High Court, invoking of---Principles---Held, it is sine qua non for invoking jurisdiction of High Court through Constitutional petition that petitioner must be an aggrieved person and he must have a locus standi for availing such jurisdiction.

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

----Art. 199 (1)(a)---"Aggrieved party"---Defined.

Messrs Associated Cement Companies Ltd. v. Pakistan through the Commissioner of Income Tax, Lahore Range, Lahore and 7 others PLD 1978 SC 151; Nisar Ahmed and 2 others v. Additional Secretary, Food and Agriculture, Government of Pakistan and 3 others 1979 SCMR 299; Anjuman Araian Bhera v. Abdul Rashid and others 1982 PSC 888; Mst. Noor Jehan Begum v. Dr. Abdus Samad and others 1987 SCMR 1577; Mian Muhammad Nawaz Sharif v. Federation of Pakistan through Secretary, Ministry of Defence, Government of Pakistan, Islamabad and 8 others 1994 CLC 2318 and Dalmia Cement Ltd v. District Local Board, Karachi and 2 others PLD 1958 (W.P.) Karachi 211 rel.

(c) Balochistan Excise Regulations (I of 1915)---

---S.62---British Balochistan Foreign Liquor and Country Spirit Rules, 1947, R.4 (4) [as amended by Notification No. SO (E&T) 234-Tax/99/769-78, dated 20-8-1999]---Supreme Court Rules, 1980, O.XXVIII, R.3---Constitution of Pakistan (1973), Art. 199 (1)---Constitutional petition before High Court---Maintainability---Locus standi---Imposing special costs---Provincial Government imposed import fee on all supplies of liquor to Balochistan from other Provinces---Respondent-company based in an other Province was aggrieved of the notification on the ground that Notification No. SO (E&T) 234-Tax/99/769-78, dated 20-8-1999, issued by Balochistan Government had placed the respondent at disadvantageous position as compared to companies situated in Balochistan---High Court, in exercise of Constitutional jurisdiction allowed the petition filed by respondent and declared the notification as without lawful authority---Plea raised by authorities was that respondent was not an aggrieved person under Art. 199 (1) of the Constitution hence had no locus standi to file the petition---Validity---Respondent failed to show that it was an aggrieved party as no fee had been imposed on it and it had never paid the same---Respondent-company's case was not that any of the licensees had ever complained of depreciation of sale of its products in market because of imposition and consequential increase in prices or any of them had ever refused to take supply of its products---Respondent could not be allowed to plead case of third party (the licensee) which was liable to pay duty/fee and which party was not before the Court--Only contention of respondent that its products would not be competitive with local products was a far-fetched idea to consider it as an aggrieved party, on such a speculative and imaginary consideration---Respondent-company dragged the authorities unneces­sarily into frivolous and vexatious litigation and such stand was still asserted on behalf of respondent even before Supreme Court---By defending such baseless proceedings, respondent-company had wasted precious time of courts meant for grant of relief to genuine litigants and public---Respondent was liable to pay special costs for such frivolous litigation as either had been awarded by Supreme Court under its inherent powers while exercising Constitutional jurisdiction and also under O. XXVIII, R. 3 of Supreme Court Rules, 1980, or had approved it (special costs) awarded by High Court under similar inherent powers, while exercising Constitutional jurisdiction---Supreme Court set aside the judgment passed by High Court with special costs in a sum of Rs. 500,000 awarded to respondent---Appeal was allowed.

Muhammad Rafiq v. Ataullah and others 1985 SCMR 1226; Inayatullah v. Sh. Muhammad Yousaf and 19 others 1997 SCMR 1020; The Postmaster General, Northern Punjab and (AJ &K), Rawalpindi v. Muhammad Bashir and 2 others 1998 SCMR 2386; Muhammad Naseer v. Mir Azhar Ali Talpur 2001 SCMR 4; Khurshid Ahmad Naz Faridi v. Bashir Ahmed 1993 SCMR 639; Arwinder Singh Bagga v. State of U.P. and others AIR 1995 SC 117; Rudul Shah v. State of Bihar AIR 1983 SC 1086; Bhim Singh Mila v. State of Jammu and Kashmir AIR 1986 SC 494; M.C. Mehta v. Union of India AIR 1987 SC 1086 and Akhtar Iqbal v. Muhammad Ali Bilal and others 2006 SCMR 1834 rel.

Salahuddin Mengal A.G. and Mehmood Raza, Addl. A.G. for Appellants.

Shahid Hamid, Sr. Advocate Supreme Court for Respondent.

Date of hearing: 15th December, 2006.

2007 P T D 1213

[Supreme Court of Pakistan]

Present: Rana Bhagwandas and Saiyed Saeed Ashhad, JJ

COLLECTOR OF CUSTOMS and another

Versus

SHAHNAWAZ ENTERPRISES, KARACHI

C.P.As. Nos.305-K and 306-K of 2005.

Customs Act (IV of 1969)---

----S. 25---Import of teak-wood roughly squared, Teak-wood posts and Teak-wood squares---Value of such wood, determination of---Such wood would fall within Pakistan Customs Tariff (P.C.T.) Heading 4403.1010, and thus, would not be liable to customs duty under P.C.T. Heading 4407.2110.

Abdul Saeed Khan Ghori, Advocate-on-Record for Petitioners.

Navin Merchant, Advocate Supreme Court and A. Aziz Khan Advocate-on-Record for Respondent.

2007 P T D 1279

[Supreme Court of Pakistan]

Present: Falak Sher and Ch. Ijaz Ahmed, JJ

Mst. NASIR BIBI and others

Versus

MUHAMMAD SHAFIQUE AHMAD and another

C.P.L.A. No.2584-L of 2002, decided on 27th February, 2007.

(On appeal from the judgment/order, dated 15-5-2002 passed by the Lahore High Court, Lahore in R.F.A. No.184 of 1994).

Income Tax Ordinance (XXXI of 1979)---

----S. 136---Constitution of Pakistan (1973), Art.185(3)---Appeal to High Court---Issue not raised before Income Tax' Appellate Tribunal---High Court not giving any finding on such issue---Grievance of assessee was that out of three referred questions High Court had replied two, while. no finding was given on third question---Validity---At no stage of proceedings -any question had arisen whether assessee being a limited company was a person incapable of incurring expenses on travelling, telephone and the like, which was liable to be deleted and disallowed for the purpose of computing taxable income of the assessee---Other two questions were answered by High Court in affirmative as the amount of gratuities payable to employees was a proper charge on the income of the assessee and was, therefore, admissible as an expense---High Court was justified in taking the view that the third question was never raised before the Tribunal for the purpose of S.136 of Income Tax Ordinance, 1979---Judgment of High Court was correct to which no exception could be taken---Leave to appeal was refused.

Nazar Muhammad's case PLD 1974 SC 22; Ashfaq-ur-Rehman's case PLD 1971 SC 766; Thakurdas and another v. Topandas and others AIR 1929 Sindh 217 and Ghansham Singh Tirathsingh and another v. Mohamed Yaqoob AIR 1933 Sindh 257 rel.

Pir Saeed Kaleem Khurshid, Advocate Supreme Court for Petitioners.

Mahmood Khan, Advocate Supreme Court and Mahmood-ul-Islam, Advocate-on-Record for Respondents.

2007 P T D 1347

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Tassaduq Hussain Jillani and Karamat Nazir Bhandari, JJ

DEPUTY COMMISSIONER OF INCOME TAX/WEALTH TAX, FAISALABAD and others

Versus

Messrs PUNJAB BEVERAGE COMPANY (PVT.) LTD.

Civil Petitions Nos.956-L and 957-L of 2003, 12th July, 2006.

(On appeal from the Order dated 24-2-2003 passed by the Lahore High Court, Lahore in W.Ps. Nos.4408 and 4360 of 2002).

Income Tax Ordinance (XXXI of 1979)---

----S.66A---Constitution of Pakistan (1973), Art.199---Show-cause notice under S.66A of Income Tax Ordinance, 1979 asking petitioner as to why proposed action be not taken against him---Constitutional petition by petitioner challenging same accepted by High Court---Validity---Tendency of by-passing remedy .provided under law and resort to constitutional jurisdiction of High Court was deprecated---Petitioner had wrongly availed remedy of High Court instead of availing appropriate remedy under Income Tax Ordinance, 1979---Merely for purpose of convenience, availing remedy under Art.199 of Constitution could not be appreciated---Supreme Court accepted appeal and set aside impugned judgment.

Al-Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29 fol.

Muhammad Ilyas Khan, Advocate Supreme Court and Ch. Muhammad Aslam Chatha, Advocate-on-Record for Petitioner.

Siraj-ud-Din Khalid, Advocate Supreme Court and Faiz-ur-Rehman, Advocate-on-Record for Respondent.

2007 P T D 1351

[Supreme Court of Pakistan]

Present: Rana Bhagwandas, Nasir-ul-Mulk and Syed Jamshed Ali, JJ

C.P.L.A. NO.535 OF 2006

CAHIRMAN, CENTRAL BOARD OF REVENUE and others

Versus

Messrs HAQ COTTON MILLS (PVT.) LTD., BUREWALA

(On appeal from judgment of Lahore High Court, Multan Bench, Multan, dated 8-5-2006 passed in Writ Petition No.6711 of 2004).

C.P.L.A. NO.536 OF 2006

CAHIRMAN, CENTRAL BOARD OF REVENUE and others

Versus

Messrs AL-FAZAL COTTON INDUSTRIES, BUREWALA

C.P.L.As. Nos.535 and 536 of 2006, decided on 12th February, 2007.

(On appeal from judgment of Lahore High Court, Multan Bench, Multan, dated 8-5-2006 passed in Writ Petition No.6712 of 2004).

Sales Tax Act (VII of 1990)---

---Ss. 38, 38-A, 40 & 40-A----Constitution of Pakistan (1973), Art.185(3)---Search of premises---Non-obtaining of search warrants---Effect---Authorities conducted raid on the premises of assessee without search warrants and seized various documents and records---High Court in exercise of constitutional jurisdiction set aside raid proceedings---Plea raised by authorities was that there was no occasion for issuance of any notice to assessee, who would have otherwise removed the goods and required record from the premises---Validity---In absence of any strong belief to such effect,. S.40-A of Sales Tax Act, 1990, did not confer unlimited and unbridled powers on authorized officer to conduct search or impound any kind of documents, in absence of any reasonable cause and without obtaining any search warrant from Magistrate---Authorities being fully aware and conscious of the settled law, were not in a position to distinguish and differentiate the dictum laid down by Supreme Court in earlier case, which fully covered the controversy and supported the view taken by High Court---Supreme Court declined to interfere with the judgment passed by High Court---Leave to appeal was refused.

Federation of Pakistan v. Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; N.P. Water Proof Textile Mills (Pvt.) Ltd. v. Federation of Pakistan 2004 PTD 2952 and Collector of Customs v. Universal Gateway Trading Corporation 2005 SCMR 37 ref.

Collector of Sales Tax and Central Excise v. Mega Tech 2005 SCMR 1166 fol.

Chaudhry Saghir Ahmed, Advocate Supreme Court and Syed Zafar Abbas Naqvi, Advocate on Record for Petitioners.

Nemo for Respondents.

Date of hearing: 12th February, 2007.

2007 P T D 1377

[Supreme Court of Pakistan]

Present Iftikhar Muhammad Chaudhry, C.J., Abdul Hameed Dogar and Saiyed Saeed Ashhad, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX

Versus

Messrs USMAN GHEE, IDUSTRIES (PVT.) LTD. and others

Civil Appeals Nos. 1344 of 2003 and 1367-1370 of 2003, decided on 27th April, 2006.

(On appeal from the judgment, dated 26-7-2001 passed by Peshawar High Court, Peshawar in TR No. 33/1997 and F.A.O. Nos.24, 26 and 27 of 1997.and F.A.O. 192 of 1999).

Income Tax Ordinance (XXXI of 1979)---

----S. 12(18)---Central Board of Revenue's Circular Nos. 3, 11, 12 of 1992 and Circular No.1 of 1993---`Loan'---Scope---Word "cash" not expressly used in substantive law---Not cash transactions, but only amounts received through crossed cheques or any other banking channel would be-considered a loan for purpose of S. 12(18) of Income Tax Ordinance, 1979.

Malik Muhammad Nawaz, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record and Mumaz Ahmed Member (Legal) C.B.R. for Appellants.

M.S. Khattak, Advocate-on-Record for Respondents.

2007 P T D 1387

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Tassaduq Hussain Jillani and Karamat Nazir Bhandari, JJ

Messrs NIDA-E-MILLAT, LAHORE

Versus

COMMISSIONER OF INCOME TAX, ZONE-I, LAHORE

Constitutional Petitions Nos.440-L of 2001, decided on 10th July, 2006.

(On appeal from the judgment of the Lahore High Court, dated 2-10-2000 passed in C.T.R. No.23 of 1989).

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

----S.130(2)(3)---Constitution of Pakistan (1973), Art.185(3)---Appeal to Appellate Authority---Delay of one day---Dismissal of ' appeal---Application for condoning such delay not made to authority, but made for the first time before Supreme Court---Validity---Limitation would create a right in favour of opposite party---Making of such application before Supreme Court would show that appeal before authority was time-barred, thus, petitioner had an obligation to make application or submit explanation therefore before the authority---Supreme Court, in exercise of jurisdiction under Art.185(3) of the Constitution, could not condone delay occurring in filing of appeal before Authority---Petitioner had rightly been declined relief---Supreme Court refused leave to appeal in circumstances.

(b) Limitation---

--Delay, condonation of---Limitation would create a right in favour of opposite party---When an appeal or proceedings were time-barred, then duty of person approaching court would be at least to submit application or make explanation in that regard.

Shahbaz Butt, Advocate Supreme Court and C.M. Latif, Advocate-on-Record for Petitioner.

M. Ilyas Khan, Senior Advocate Supreme Court and Ch. M. Aslam Chattha, Advocate-on-Record for Respondents.

2007 P T D 1454

[Supreme Court of Pakistan]

Present: Rana Bhagwandas, Nasir-ul-Mulk and Syed Jamshed Ali, JJ

PAKISTAN TOBACCO COMPANY LIMITED, ISLAMABAD

Versus

ADDITIONAL COLLECTOR, CENTRAL EXCISE, GUJRANWALA

Civil Petition No.2614 of 2005, decided on 9th February, 2007.

(On appeal from the judgment of the Lahore High Court, Rawalpindi Bench, Rawalpindi, dated 21-7-2005, passed in Civil Appeal No.17 of 1995).

Central Excise Act (I of 1944)---

----S. 3---Central Excise Rules, 1944, Rr.9 & 200---Payment of excise duty after removing cigarettes from factory---Validity---Liability of manufacturer to pay excise duty would be created at the time of removal of excisable goods from factory---Such liability would be determined on the basis of record of goods so removed---Board of Revenue could extend time for payment of excise duty, the liability' of which had already been created---Such payment would not exonerate manufacturer from charge of evasion of duty, which took place when goods were removed from factory in violation of Central Excise Rules, 1944---Principles.

Farrukh Jawad Panni, Advocate Supreme Court for Petitioner.

Nemo for Respondent.

Date of hearing: 9th February, 2007.

2007 P T D 1473

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Muhammad Nawaz Abbasi and Saiyed Saeed Ashhad, JJ

HASHWANI HOTELS LIMITED

Versus

GOVERNMENT OF PAKISTAN through Secretary Ministry of Finance and others

Civil Appeal No.323 of 2004, decided on 9th February, 2007.

(On appeal from the judgment, dated 12-12-2003 passed by High Court of Sindh, Karachi in Constitutional Petition No.615 of 1996).

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

----Ss. 31-A, 79 & 104---Sales Tax Act (VII of 1990), Ss.5 & 6(1)---Rate of customs duty and sales tax, determination of---Date of filing of Bill of Entry (goods declaration), relevancy of---Provisions of S.31-A of Customs Act, 1969 and S.6(1) of Sales Tax Act, 1990 would govern only rate of duty and tax payable on a particular goods on the date of filing of Bill of Entry (goods declaration)---Provision of Customs Act, 1969 relating to calculation, payment and enforcement of sales tax would not apply in presence of similar provisions contained in S.5 of Sales Tax Act, 1990---Requirement of second proviso to S.5 of Sales Tax Act, 1990 would be attracted only when goods imported were liable to be charged to sales tax at the time of filing of Bill of Entry (goods declaration)---Principles.

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

----S. 5---S.R.O.212(I)/91, dated 14-3-1991---Customs Act (IV of 1969), S.18---Motorboat, import of---Exemption notification, subsequent withdrawal of---Pre-condition for claiming exemption from payment of sales tax and customs .duty was obtaining of certificate from concerned authority prior to import of motorboat that same could not be manufactured locally---Failure of importer to provide such certificate before withdrawal of exemption notification---Validity---Duty of importer was to have complied with all conditions enumerated in such notification for availing its benefit---Importer for such failure had deprived itself of benefit of exemption notification, thus, could not claim exemption from payment of sales tax and concessional customs duty on motorboat---Principles.

(c) Taxation---

----Exemption---Grants or concessions in the nature of exemption from payment of duties/tax would be given a rigid interpretation against tax-payer and in favour of taxing power.

Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise and Land Customs Circle Sheikhupura and another PLD 1988 SC 370 and .Pakistan Machine Toll Factory (Pvt.) Ltd. v. Commissioner of Sales, Central Zone "B", Karachi 2006 SCMR 1577 rel.

(d) Constitution of Pakistan (1973)---

----Arts. 185(3) & 199---Impugned judgment silent regarding ground raised before Supreme Court and in constitutional petition before High Court---Presumption---Nothing on record to show that such ground was agitated before High Court---Held: presumption would be that such ground was not raised and agitated before High Court at the time of arguments---Supreme Court refused to allow to argue such ground.

Fakhruddin G. Ebrahim, Advocate Supreme Court and K.A. Wahab, Advocate-on-Record (absent) for Appellant.

Ms. Naheeda Mehboob Ellahi, D.A.-G., Malik Ittaat Hussain, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record, M.S. Khattak, Advocate-on-Record and Mumtaz Ahmed, Member Legal, C.B.R. for Respondents.

Date of hearing: 8th November, 2006.

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2007 P T D 1605

[Supreme Court of Pakistan]

Present: Rana Bhagwandas, Nasir-ul-Mulk and Syed Jamshed Ali, JJ

COLLECTOR, CENTRAL EXCISE AND SALES TAX and another

Versus

DEWAN TEXTILE MILLS LIMITED and others

Civil Appeal No.13 of 2004, decided on 9th February, 2007.

(On appeal from the judgment, dated 13-2-2002 passed by the Sindh High Court, Karachi Bench Karachi in Constitutional Petition No.D-1686 of 1994).

Sales Tax Act (VII of 1990)---

----Ss. 6 [as modified by Finance Act (IX of 1996) and Finance Act (XIII of 1998), 6-1A [as added by Sales Tax (Amendment) Ordinance (XXV of 2002) & 7---S.R.O. 500(I)/88, dated 26-6-1988---Special steel drums, import of---Exemption of such drums from sales tax---Withdrawal of exemption notification after opening of Letter of Credit and before landing of goods at port of destination---Effect---Sales tax would be chargeable in the same manner and at the same time as same were a duty of customs payable under Customs Act, 1969---Insertion of S.6(1A) in Sales Tax Act, 1990 made S.31-A of the Customs Act, 1969 applicable with retrospective effect---Liability of sales tax would be determined on the date of submission of Bill of Entry.

Pakistan through Ministry of Finance Economic Affairs and another v. Fecto Balarus Tractors Limited PLD 2002 SC 208; Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917 and Federation of Pakistan and others v. Amjad Hussain Dilawari and 2 others 1992 SCMR 1270 ref.

Civil Appeal No.1210 of 1977 rel.

Raja M. Irshad, D.A.-G. and Mumtaz Ahmad Sheikh, Member (Legal) C.B.R. for Appellants.

Nemo for Respondents.

Dates of hearing: 7th and 9th February, 2007.

2007 P T D 1933

[Supreme Court of Pakistan]

Present; Rana Bhagwandas and Javed Iqbal, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-IV, KARACHI and others

Versus

Messrs PAKISTAN ELECTRIC FITTINGS MANUFACTURING CO. LTD, through Directors

C.P.LA, No. 113-K of 2000, decided on 7th July, 2000.

(On appeal from the judgment, dated 23-12-1993/3-1-2000 of the High Court Sindh, Karachi, passed in Income Tax Appeal No. 158 of 1998).

Income Tax Ordinance (XXXI of 1979)---

----Ss. 136 & 156---Income Tax Appellate Rules, 1981, R. 20---Constitution of Pakistan (1973), Art. 185(3)---Order of Tribunal, dated 5-5-1996 dismissing appeal not challenged by way of reference---Tribunal dismissed application filed under R.20 of Income Tax Appellate Rules, 1981 against its such order---Tribunal dismissed application for rectification of its said order---Appeal to High Court on 16-6-1996 against said order---Acceptance of appeal by High Court despite objections as to maintainability of appeal and bar of limitation were raised---Validity---Supreme Court granted leave to appeal to consider questions, whether appeal to High Court filed on 16-6-1998 against original order, dated 5-5-1996 was time-barred and could be lawfully maintained; whether High Court failed to take into consideration various provisions of the statute and judgments rendered by Supreme Court on question of law involved; and whether impugned judgment could be sustained in law in view of peculiar facts and circumstances of the case.

Shaikh Haider, Advocate Supreme Court and S.M. Abbas Advocate-on-Record for Petitioners.

Nemo for Respondents.

2007 P T D 1981

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Abdul Hameed Dogar and Saiyed Saeed Ashhad, JJ

COMMISSIONER OF INCOME TAX, ZONE "A" KARACHI

Versus

Messrs COMBINED INVESTMENT (PVT.) LTD. and 5 others

Civil Appeals Nos. 1443-1447 of 1996 and 1009 of 2000, decided on 25th April, 2006.

(On appeal from the judgment of High Court of Sindh, dated 25-10-1994 in ITR Nos. 9/86, 29/87, 124/84, 45/88, 59/89, 290/88 and 4/89).

Income Tax Act (XI of 1922)---

----S. 4(1)---Deeming interest---Department would charge income tax prospectively on interest of loan---Supreme Court disposed of appeal in such terms.

M. Bilal, Senior Advocate 5uprerne Court with Mumtaz Ahmed, Member (Legal) C.B.R. for Appellants.

Iqbal Salman Pasha, Advocate Supreme Court for Respondent (in C.A. Nos. 1443 and 1446 of 1996).

Respondents not represented in remaining cases.

2007 P T D 1999

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Abdul Hameed Dogar and Saiyed Saeed Ashhad, JJ

FEDERATION OF PAKISTAN through Secretary Finance, Finance Division, Islamabad and others

Versus

Messrs ZAMAN COTTON MILLS LTD.

Civil Appeals Nos. 1819 of 2000, 678 to 683 of 2003, decided on 26th April, 2006.

(On appeal from the judgment, dated 29-4-1999 and 1-11-2000 of the Peshawar High Court, Peshawar passed in Writ Petition No.1404 of 1999, 58, F.A.Os. Nos. 60, 63, 59, 62 and 64 of 2000).

Income Tax Ordinance (XXXI of 1979)---

----Ss. 80-CC & 80-D---Protection of Economic Reforms Act (XII of 1992), Ss. 2(1)(b) & 6---Exemption from minimum tax under S.80-C of Income Tax Ordinance, 1979---Entitlement---Establishment of industries in tax exempted area in pursuance of S.R.O. 60(I)/87, dated 20-1-1987---Incentive for investment granted to assessee in pursuance of S.R.O. 1283(I)/90, dated 13-12-1990 as provided in Second Sched. to S.6 of Protection of Economic Reforms Act, 1992---Whether assessee fulfilled conditions of S.R.O. 1283(I)/90 being a question of fact, would be decided by authority concerned while keeping in view provisions of S.2(b) read with Second Sched. to S.6 of Protection of Economic Reforms Act, 1992 read with Ss. 80-CC & 80-D of Income Tax Ordinance, 1979 and observations made by Supreme Court in PLD 1997 SC 582, para. 54.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/.O Finance, Islamabad and 6 others PLD 1997 SC 582 rel.

Muhammad Ilyas Khan, Senior Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Appellants (in C.A. No. 1819 of 2000).

Malik Muhammad Nawaz, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellants (in C.A. Nos. 678 to 683 of 2003) with Mumtaz Ahmed, Member (Legal (C.B.R).

Raja Muhammad Akram, Senior Advocate Supreme Court for Respondents (in C.A. No. 1819 of 2000).

M. Sardar Khan Senior Advocate Supreme Court for Respondents (in C.A. No. 678 to 683 of 2003).

2007 P T D 2012

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J. Abdul Hameed Dogar and Saiyed Saeed Ashhad, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

SARHAD DEVELOPMENT AUTHORITY, PESHAWAR

Civil Appeals Nos. 1498 to 1500 of 2005, decided on 22nd May, 2006.

(On appeal against the judgment, dated 9-9-2001 passed by the Peshawar High Court, Peshawar in F.A.O. Nos. 175-177 of 000).

Income 'Car Ordinance (XXX1 of 1979)---

----S. 19---Income from property---Liability of tax---Decision of appeal by High Court while relying upon judgment of Indian Supreme Court reported as 1991 PTD 286---Validity---Question discussed in said judgment was different from issue involved in appeal before High Court i.e. whether tax would be charged on total lease money of each plot received in advance in a year or same would be charged proportionately on each plot per year in respect of plot leased out by assesses---Supreme Court set aside impugned judgment and remanded case to High Court for its decision afresh in accordance with law.

K.S. Krishna Rao v. Commissioner of Income Tax Andhra Pradesh 1991 PTD 286 distinguished.

Malik Muhammad Nawaz, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Petitioner.

Abdul Latif Yousafzai, Advocate Supreme Court and Imtiaz Ali, Advocate Supreme Court for Respondents.

2007 P T D 2087

[Supreme Court of Pakistan]

Before Iftikhar Muhammad Chaudhry, C J, Faqir Muhammad Khokhar and M. Javed Buttar, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, ISLAMABAD

Versus

Miss NAHEED KHAN

Civil Petition No.1300 of 2003, decided on 22nd December, 2005.

(On appeal Prom judgment dated 28-3-2003, passed by the Lahore High Court, Rawalpindi Bench, Rawalpindi in Tax Appeal No.139 of 2001).

Income Tax Ordinance (XXXI of 1979)---

----S.136---Limitation Act (IX of 1908), S.5---Constitution of Pakistan (1973), Art.185(3)---Appeal to High Court---Application for condonation of delay---Dismissal of application by High Court holding that reasons advanced for extending period of limitation were trot sufficient---Supreme Court refused to grant/leave to appeal against impugned judgment.

M. Bilal, Senior Advocate Supreme Court for Petitioner.

Dr. Babar Awan, Advocate Supreme Court for Respondent.

2007 P T D 2215

[Supreme Court of Pakistan]

Present: Rana Bhagwandas and Saiyed Saeed Ashhad, JJ

COLLECTOR OF CUSTOMS (EXPORTS) and another

Versus

Messrs R.A. HOSIERY WORKS

Civil Petition No.330-K of 2004, decided on 14th October, 2005.

(On appeal from the order dated 15-12-2003 passed by High Court of Sindh at Karachi in Special Customs Appeal No. 3 of 2002).

Customs Act (IV of 1969)---

----S.32---Constitution of Pakistan (1973), Art.185(3)---Making untrue statement---Imposition of penalty---Order of Collector of Customs was assailed before High Court, which appeal was allowed and order imposing penalty under S.32 of Customs Act, 1969 was set aside---Validity---Provision of S.32(1) of Customs Act, 1969, would be attracted only when- a mis-declaration or mis-statement was made with a view to obtain. illegal gain by evasion of payment of customs duty and. other taxes or by causing loss to Government revenue---Mis-declaration alleged to have been made in the case, was neither for evasion of payment of customs duty or other taxes/charges nor same had caused any financial loss to the Government---Petition far leave to appeal by the Authorities being without merit, was dismissed.

Kamran Industries v. The Collector of Customs (Exports), Karachi and 4 others PLD 1996 Kar. 68; Messrs Al-Hamd Edible Oil Limited and others v. Collector of Customs and others 2003 PTD 552; Pakistan v. Hardcastle PLD 1967 SC 101; Sikandar and Brothers v. Government of Pakistan PLD 1986 Kar. 3783 and Finest Corporation v. Collector of Customs PLD 1990 Kar. 338 rel.

Akhlaq Ahmed Siddiqui, Advocate-on-Record for Petitioner.

Respondents not represented.

2007 P T D 2275

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry C.J., Faqir Muhammad Khokhar and Mian Shakirullah Jan, JJ

COLLECTOR OF CUSTOMS through Additional Collector, Hub

Versus

CUSTOMS EXCISE AND SALES TAX APPELLATE TRIBUNAL, KARACHI BENCH and others

Civil Appeal No.344 of 2002, decided on 24th February, 2006.

(On appeal from the judgment,. dated 6-12-2001 passed by High Court of Balochistan, Quetta in Sales Tax Appeal No.1 of 2000).

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

----Ss. 3(1), 7, 13 & Sixth Sched. Item No.41---Acquisition/production of limestone and clay etc. by assessee from its quarries and their consumption in manufacture of cement as raw material---Liability of assessee to pay sales tax on such raw material, when end product (cement) was exempt from levy of sales tax---Scope---Such raw material for not being exempt under S.13 of Sales Tax Act, 1990 would come within ambit of taxable supply---Taxable supply was not confined or limited to end product or goods manufactured, but would include such goods involved in some way with progress, promotion, advancement of business or any other taxable activity---Such raw material was supplied and used in the course of or in furtherance of taxable activity of assessee i.e. manufacture and supply of cement (end product) to other persons in the market---Levy of sales tax would start from point of supply and would have no relevance with any activity prior to supply irrespective of the source, which might be manufacturing one or a mineral one---Input tax. would be adjusted Pram output tax, provided end product was subject to levy of sales tax---Had cement not been exempted, assessee would have been entitled to adjustment of input tax as provided under S.7 of Sales Tax Act, 1990---Such, raw material and its supply was a taxable supply made in the course or in furtherance of manufacturing cement, thus, was chargeable to sales tax---Principles.

Advanced Law Lexicon, Third Edition 2005 P.1953 and Oxford English Dictionary, Vol. IV, P.619 ref.

(b) Words and phrases---

----"Furtherance"---Definition.

Advanced Law Lexicon, Third Edition 2005 P.1953 and Oxford English Dictionary, Vol. IV, P.619 ref.

Raja Abdul Ghafoor, Advocate-on-Record for Appellant.

Barrister Ch. Muhammad Jameel, Senior Advocate.

Supreme Court and Raja Sher Muhammad Khan, Advocate-on-Record for Respondents.

Date of hearing: 24th February, 2006.

2007 P T D 2297

[Supreme Court of Pakistan]

Before Iftikhar Muhammad Chaudhry, C.J, Faqir Muhammad Khokhar and Mian Shakirullah Jan, JJ

COMMISSIONER OF INCOME TAX, KARACHI

Versus

Messrs OCCIDENTAL PETROLEUM PAKISTAN LTD.

Civil Appeals Nos. 1089-1095 of 2002, decided on 23rd February, 2006.

(On appeal against the judgment dated 7-2-2002 passed by the High Court of Sindh, Karachi ire I.T.As. Nos.633, 337 of 1991)

Income Tax Ordinance (XXXI of 1979)---

----S.163(2)---Constitution of Pakistan (1973), Art. 185---Appeal to Supreme Court---Avoidance of doubt taxation and prevention of fiscal evasion---Counsel for department/appellant had contended that the High Court had pronounced the judgment on the basis of an earlier judgment of the same court, without taking into consideration the effect of subsection (2) of S.163 of Income Tax Ordinance, 1979, whereas points involved ire both the cases were distinct from each other---Prima facie, distinction existed in both the cases and the High Court could have disposed of those cases independently taking into consideration the effect of S.163(2) of the Income Tax Ordinance, 1979 as will as other provisions of law---Appeals were allowed, impugned judgment was set aside and cases were remanded to the High Court for disposal of appeals afresh, expeditiously.

Muhammad Ilyas Khan, Advocate Supreme Court for Appellants.

Nemo for Respondent.

Raja Muhammad Irshad, Dy Attorney-General on Court notice.

2007 P T D 2303

[Supreme Court of Pakistan]

Before Iftikhar Muhammad Chaudhry, C.J., Faqir Muhammad Khokhar and Mian Shakirullah Jan, JJ

Messrs ASHRAF SUGAR MILLS LTD., and another

Versus

GOVERNMENT OF PAKISTAN and others

Civil Appeals Nos.822 to 825 of 2003, heard on 22nd February, 2006.

(On appeal from the judgment and order dated 31-1-2002 passed by the Lahore High Court, Lahore in Writ Petitions 8542 of 1991, 6774 of 1992, 8541 of 1991, 7908 of 1992).

Central Excise Act (I of 1944)---

----S.12-A---Constitution of Pakistan (1973), Art. 185--- Appear to Supreme Court---Fixation of period of crushing of sugarcane---Government had specified period of crushing of 160 days by notification---Contention of the appellant was that Provincial Government had discriminated the appellants because in the other Provinces, no such limitation for crushing period had been imposed---Validity---Government being competent to fix the crushing period, High Court under the circumstances had rightly dismissed petition holding staid notification to be valid---Order being unexceptionable, admitted no interference by the Supreme Court.

Ch. Muhammad Anwar, Advocate Supreme Court for Appellants.

Ejaz Muhammad Khan, Advocate-on-Record for Respondents.

2007 P T D 2306

[Supreme Court of Pakistan]

Before Hamid Ali Mirza and Karamat Nazir Bhandari, JJ

ICI PAKISTAN LIMITED

Versus

FEDEKATION OF PAKISTAN through Secretary, Ministry of Finance and others

Civil Petition No.42 of 2006; decided on 24th January, 2006.

(On appeal from the judgment dated 13-1-2006 in C. P. No.D-658 of 2005 passed by the High Court of Sindh, Karachi).

Income Tax Ordinance (XXXI of 1979)---

----S.62---Constitution of Pakistan (1973), Arts. 199 & 185(3)---Prima facie case for grant of leave to appeal was made out, inter alia to consider; that whether the High Court- erred in law in holding that petition was not maintainable under Art. 199 of the Constitution; that whether the Income Tax Authorities had jurisdiction to ascertain the effective date of demerger which the High Court in its special Company Jurisdiction had already decided in an other case; that whether the Income Tax Authorities could override the order of the High Court in not accepting the effective date as sanctioned by the High Court in special Company Jurisdiction; and that whether High Court erred in law in tailing to appreciate that notice issued under section 62 of Income Tax Ordinance, 1979 was without lawful authority and of no legal effect---Ad interim injunction as prayed for, was granted.

Abdul Hafeez Firzada, Senior Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Petitioners.

Nemo for Respondent.

2007 P T D 2310

[Supreme Court of Pakistan]

Before Iftikhar Muhammad Chaudhry, Tassaduq Hussain Jillani and Karamat Nazir Bhandari, JJ

Messrs SHIFA MEDICO

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petition No. 2114-L of 2002, decidedon 10th July, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss.129, 134 & 136---Constitution of Pakistan (1973), Art. 185(3)---Assessment Order---Appealability of---Petitioner .had sought leave to appeal against judgment of High Court vide which his constitutional petition was dismissed---Leave was sought on the ground that High Court fell in error to hold that order passed by Special Officer Income Tax, which was challehged in the constitutional petition was appealable---Contention of petitioner was that order passed in constitutional petition having been violated, assessment made pursuant to said order was amenably to constitutional jurisdiction of the High Court and it Was for that reason that petitioner filed the second constitutional petition which culminated in passage of judgment impugned in petition for special leave to appeal---Validity---Assessment order passed, was amenable to appellate jurisdiction under Income Tax Ordinance, 1979, where petitioner could agitate all the points raised before Supreme Court---No illegality existed in the impugned judgment---No question of law warranting grant of leave to appeal, having been raised, petition was dismissed and leave was refused.

Sh. Zia Ullah, Advocate. Supreme Court for Petitioner.

Muhammad Ilyas Khan, Senior Advocate Supreme Court and Ch. M. Aslam Chattha, Advocate-on-Record for Respondents.

Date of hearing: 10th July, 2006.

2007 P T D 2316

[Supreme Court of Pakistan]

Before Iftikhar Muhammad Chaudhry, C.J., and Mian Shakirullah Jan, J

AGRO TRACTORS (PRIVATE) LIMITED

Versus

FECTO BELARUS TRACTORS LIMITED and others

C.P.L.A. No.374 of 2006, heard on 20th December, 2006.

(On appeal from the judgment dated 4-5-2006 of Sindh, High Court at Karachi passed in C.P. No.D-304 of 2006).

Customs Act (IV of 1969)---

----S.69---Constitution of Pakistan (1973), Art.185(3)---Question raised was as to whether on the basis of the doctrine of "promissory estoppel" importer was entitled to exemption from. customs duty and that in the meanwhile the Bank guarantee, equal to the duty to the extent goods imported, which would be worked out by Central Board of Revenue, be kept intact out of Bank guarantee, which was pending before the Secretary Ministry of Industries in view of the new scheme introduced, which had been abandoned, could be released along with additional guarantee which was furnished in pursuance of said order---Leave to appeal was granted by Supreme Court to examine the question.

Chaudhry Mushtaq Ahmad Khan, Senior Advocate Supreme Court, Mahmood A. Sheikh, Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Petitioners.

Ms. Naheeda Mehboob Ellahi, D.A-G. and Mumtaz Ahmad, (Legal) C.B.R. for Respondents.

2007 P T D 2345

[Supreme Court of Pakistan]

Present: Rana Bhagwandas and Saiyed Saeed Ashhad, JJ

PROVINCE OF SINDH and others

Versus

Messrs CRESCENT BOARD LIMITED, KARACHI

C.P. L. A. No. 693-K of 2004, decided on 20th October, 2005.

(On appeal from order of the Sindh High Court, Karachi, dated 25-8-2004 passed in C.P. No.D-1197 of 1991).

Central Excise Act (I of 1944)---

----S. 3 & Sched.---Constitution of Pakistan (1973), Art.185(3)---Levy of excise duty on "Methanol"---Rule of consistency---Question involved in the petition related to the levy of excise duty on "Methatol" which had been declared to be liquor within the meaning of the term used in Abkari Act, 1878---Additional Advocate General had pointed out that question involved in the petition was almost the same as involved in other identical petitions in which leave to appeal had been granted by the Supreme Court---Said submission, was controverted by the other side with slight distinction in the nature of duty---Leave to appeal was granted on rule of consistency.

Dr. Qazi Khalid Ali Additional Advocate General, Sindh and Akhlaq Ahmad Siddiqui, Advocate-on-Record for Petitioners.

Nemo for Respondent.

2007 P T D 2354

[Supreme Court of Pakistan]

Before Saiyed Saeed Ashhad and Ghulam Rabbani, JJ

INDUS TRADING AND CONTACTING CO., KARACHI

Versus

COLLECTOR OF CUSTOMS (PREVENTIVE), KARACHI and 2 others

Civil Petition No. 239-K of 2006, decided on 6th October, 2006.

(On appeal from the judgment, dated 8-3-2006 passed by Sindh High Court Karachi in Constitution Petition No. D-226 of 2003.).

Customs Act (IV of 1969)---

----S.19---Constitution of Pakistan (1973), Art. 185(3)---Exemption from charge of customs duty---Counsel for petitioner had stated that High Court was not justified in holding that no difference or distinction could be made between the goods subjected to zero duty' andfree duty' and referred to Notification No. S.R.O. 1050(I)/95 dated 29-10-1995 whereby Government levied further regulatory duty at the rate of 5 % and 10% ad valorem on import of certain goods---Wording of said Notification was very clear that a person could not be subjected to levy of regulatory duty, unless the goods imported by petitioner fell in the category of goods which were liable to be charged to customs duty, either at zero per cent or sixty per cent; and such goods would not include those goods which had been totally exempted from charge to duty or were to be imported duty free---Contentions advanced by the counsel for petitioner requiring deeper examination, it was deemed proper to grant leave, to examine said contentions---Leave to appeal was granted.

Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs Circle Sheikhupura and another PLD 1988 SC 370 ref.

Aziz A. Sheikh Advocate Supreme Court and K.A. Wahab, Advocate-on-Record for Petitioners.

Rana M. Shamim, Advocate Supreme Court and A.A. Sididiqui, Advocate-on-Record for Respondent No.1.

Nemo for Respondent Nos. 2 and 3.

2007 P T D 2356

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Tassaduq Hussain Jillani and Karamat Nazir Bhandari, JJ

COLLECTOR OF SALES TAX and others

Versus

Messrs FOOD CONSULTS (PVT.) LTD. and another

C.Ps. Nos.1674-L and 1675-L of 2004, heard on 19th July, 2006.

(On appeal from the judgment of the Lahore High Court dated 25-3-2004 passed in Writ Petitions Nos.7035 and 10311 of 2000).

Sales Tax Act (VII of 1990)---

----Ss.38, 40 & 40-A---Criminal Procedure Code (V of 1898), Ss.96 to 105---Search of premises and .seizure of records by Sales Tax Officer---Scope---Search authorized under. Sales Tax Act, 1990 must be carried strictly in accordance with provisions of Ss.96 to 105, Cr.P.C.---Such search and seizure would be illegal, if made or caused to be made without disclosing reason to believe that there was urgency for entering into premises without taking permission from Magistrate---Principles.

Collector of Sales Tax and Central Excise (Enforcement) v. Messrs Mega Tech (Pvt., Ltd. 2005 PTD 1933 ref.

Izhar-ul-Haque, Advocate Supreme Court and Tanvir Ahmad, Advocate-on-Record for Petitioners.

Nemo for Respondents.

2007 P T D 2410

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J. and Mian Shakirullah Jan, J

COLLECTOR OF SALES TAX AND CENTRAL EXCISE; LAHORE

Versus

WATER & POWER DEVELOPMENT AUTHORITY and others

Civil Appeal No. 512 of 2003, decided on 15th March, 2007.

(On appeal from the judgment dated 4-2-2002 passed by Lahore High Court, Lahore in R.P. No.6147 of 1994).

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

----Ss.3(1) & 13---Pakistan Water and Power Development Authority Act (XXXI of 1958), S.8---Constitution of Pakistan (1973), Art.185(3) & Fourth Sched., Part-II, Item No.3---Printing material and stationery prepared by WAPDA for its own consumption---Supreme Court granted leave to appeal to consider, whether sales tax was leviable on such material and stationery and law laid down in the case reported as 2001 SCMR 1376 had been properly applied.

Shaikhoo Sugar Mills Ltd. and another v. Government of Pakistan and others 2001 SCMR 1376 ref.

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

----S.3(1)(a)---Expression "in the course of" as used in S.3(1)(a) of Sales Tax Act, 1990---Meaning.

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

----S.3(1)(a)---Expression "in furtherance of" as used in S.3(1)(a) of Sales Tax Act, 1990---Connotation.

Oxford English Dictionary, Volume-IV, P.619 ref.

(d) Words and phrases---

----"Furtherance"---Definition.

Advanced Law Lexicon, Third Edition, 2005, P.1953 and Oxford English Dictionary, Volume-IV, P.619 ref.

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

----Ss.3(1), 7 & 13---West Pakistan Water and Power Development Authority Act (XXXI of 1958), Ss.8, 13 & 25---Constitution of Pakistan (1973), Arts.165 & 165-A & Fourth Sched., Part-II, Item No.3---Printing material and stationery prepared by WAPDA for its own consumption---Liability of WAPDA to pay sales tax on such material and stationery---Scope---Taxable supply was not confined or limited to end product or goods manufactured, but would include such goods involved in some way with progress, promotion, advancement of business/activity taxable activity---WAPDA was carrying on business as envisaged under S.3(1)(a) of Sales Tax Act, 1990---Supply of stationery was not exempt from sales tax- under S.13 of Sales Tax Act, 1990---Supply of such stationery for private business or non-business use without intervening another person would be a taxable supply made in the course of or in furtherance of business i.e. activity of generation and selling/supplying electricity being carried on by WAPDA in the form of business---Exemption available under Art.165 of the Constitution would not be available to a statutory Corporation from payment of taxes in view of incorporation of Art.165-A in the Constitution, which legal proposition would apply in the case of WAPDA also---Such stationery was, thus, chargeable to sales tax---WAPDA would be entitled to adjustment of input tax from output tax, provided its case came within ambit of S.7 of Act, 1990---Principles.

Shaikhoo Sugar Mills Ltd. and another v. Government of Pakistan and others 2001 SCMR 1376; Karachi Development Authority (KDA) v. C.B.R. 2000 Appeal Cases 53; Commissioner of Sales Tax and others v. Hunza Central Asian Textile and Woollen Mills Ltd. and others 1999 SCMR 526 and Central Board of Revenue and another v. Sindh Industrial Trading Estate Limited PLD 1985 SC 97 ref.

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

----S.3(1)(a)---Expression "business" as used in Sales Tax Act, 1990---Connotation slated.

The expression `business' though has not been defined in the Sales Tax Act, 1990, yet in the ordinary parlance it is used with varying connotations and has been defined by the Courts including those from foreign jurisdiction from time to time as it means any trading activity accompanied by regularity of transactions intended for the purpose of making profit; it is an activity carried on continuously in an organized manner with a set purpose and with a view to earn profits; it is used in the sense of an occupation or profession, which occupies the time, attention and labour of a person, normally with the object of making profit not for sport and pleasure.

The State of Andhra Pradesh v. Messrs H. Abdul Bakhi and Bros AIR 1965 SC 531 and Messrs Hindustan Steel Ltd. v. The State of Orissa AIR 1970 SC 253 rel.

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

----S.3(1)---Sales tax, levy of---Essential conditions stated.

The charging section 3 of Sales Tax Act, 1990 has prescribed certain conditions for levying of the sales tax, which are that (i) a taxable supply made (ii) in the course or furtherance of business. The taxable supply and business are two different expressions with different concepts and operate in their respective fields. The quantum of tax liability is determined on the basis of value of taxable supply, while the liability to pay tax under section 3(1)(a) of the Sales Tax Act, 1990 arises only when the supply is made in the course or in furtherance of business.

A. Karim Malik, Senior Advocate Supreme Court for Appellant.

Mian Ashiq Hussain, Advocate Supreme Court for Respondents.

Date of hearing: 15th March, 2006.

2007 P T D 2466

[Supreme Court of Pakistan]

Present: Rana Bhagwandas and Hamid Ali Mirza, JJ

COLLECTOR OF CUSTOMS (EXPORT), KARACHI

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE .TRIBUNAL, KARACHI and another

Civil Petition No.436-K of 2003, decided on 17th October, 2006.

(On appeal from the order, dated 11-4-2003 in Special Custom Appeal No.4 of 2002 passed by the High Court of Sindh, Karachi).

Customs Act (IV of 1969)---

----S. 32---Constitution of Pakistan (1973), Art.185(3)---Misdeclaration by exporter---Short question involved in the petition for leave to appeal was, whether the respondent-Exporter, by declaring weight of Dana Printed Fabric less by 14 % was guilty of misdeclaration within the meaning of S.32 of Customs Act, 1969---Impugned orders tended to show that in fact no concrete and definite evidence was available about short of weight by 14 % as alleged---Even if that be so it had been fairly conceded before the forums below, including the High Court that by declaring the weight of the consigmnent less by 14%, exporter neither derived any gain nor caused arty loss to the Customs hierarchy---No fault or legal flaw was found with the approach of the forums below, which was not open to any exception---No question of law of public importance and no ground for grant of leave, having been made out, petition was dismissed and leave to appeal was refused.

Akhlaq Ahmad Siddiqui, Advocate-on-Record for Petitioner.

Nemo for Respondents.

Date of hearing: 17th October, 2006.

2007 P T D 2623

[Supreme Court of Pakistan]

Present: Rana Bhagwandas and Saiyed Saeed Ashhad, JJ

COLLECTOR OF CUSTOMS PORT MUHAMMAD DIN QASIM

Versus

Messrs ZYMOTIC DIAGNOSTIC INTERNATIONAL, FAISALABAD

Civil Petition No. 434-K of 2005, decided on 14th October, 2005.

(On appeal from the order, dated 25-2-2004 passed by High Court of Sindh at Karachi in Special Customs Appeal No. 5 of 2004).

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

----S. 25---Assessment of imported goods---Assessing Officer, authority of---Scope---Officer of customs department is authorized under S.25 of Customs Act, 1969, to reject declared value of consignment imported in Pakistan and to asses the same.

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

----S. 25---Declared value of imported goods, rejection of---Principles---For rejecting or refusing to accept value declared by consignee in respect of imported goods, concerned officer is required to give cogent, plausible and satisfactory reasons for non-acceptance of declared value and rejection .thereof, cannot' proceed on whims or desire of officer of Customs department---Assessing Officer is required to point out some flaw or defect or such circumstances which create doubt with regard to veracity and correctness of declared value or that same had been under invoiced---In determining or assessing fair value or normal price of such imported consignment, concerned officer is under obligation to take into consideration all necessary factors and circumstances enumerated in S.25 of Customs Act, 1969, for such determination and assessment.

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

----Ss.16, 25 & 31(1)(2)---Constitution of Pakistan (1973), Art.185(3)---Assessment of imported goods---Declared value, rejection of---Collector of Customs, on allegation of misdeclaration, ordered confiscation of goods allowing importer to redeem the same on payment of 50% fine equal to amount of duty and taxes---Customs, Excise and Sales Tax Appellate Tribunal allowed appeal. filed by importer and set aside the order passed by Collector Customs, which order was maintained by High Court---Validity---Nothing was available on record to indicate that Customs Department had secured or had attempted to secure invoices from other importers who had imported identical or similar consignment in Pakistan with a view to show that price declared by such other importers greatly varied from price declared by importer---In absence of such an exercise, action in rejecting declared value of consignment would amount to an arbitrary and capricious exercise---Resort to S.25(7) of Customs Act, 1969, was to be made only when Customs Officer, who had to make assessment or determination of fair or normal value of consignment, was of the view that the same could not be determined in view of impossibility of procuring evidence---Order of Collector Customs was silent in such regard which was an important factor for drawing an inference that no such attempt was made before passing. the. order---Customs officer dealing with the case proceeded in a perfunctory, whimsical and arbitrary manner and Customs, Excise Sales Tax Appellate Tribunal was justified in setting aside the same---High Court also did not commit any illegality or infirmity in accepting order of the Tribunal and dismissing Constitutional petition filed by authorities---Supreme Court declined to interfere with judgment passed by High Court---Leave to appeal was refused.

Akhlaq Ahmed Siddiqui, Advocate-On-Record for Petitioner.

Nemo for Respondent.