PTD 2008 Judgments

2008 P T D (Trib.) 1905

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member (Judicial) and Hafiz Muhammad Anees, Member (Technical)

S.T.A. No.1869/LB of 2002, decided on 27th November, 2007.

(a) Sales Tax---

---Show-cause notice---Non-mention of sections of the Act---Effect---Sections of law are not to be seen rather substance of the matter is to be examined wherefrom the allegations are oozed out.

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

---S.34---Default surcharge---Evasion of tax---Non-material whether the evasion of tax was deliberate act of a person or it was otherwise, the liability of additional tax under S.34 of the Sales Tax Act, 1990 could not be avoided.

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

----S.8---Tax credit not allowed---Inadmissible input adjustment---Appellant had claimed input adjustment on the item which did not fulfil the requirements of S.8 of the Sales Tax Act, 1990 as those goods did not involve in the furtherance of taxable activity---Goods like hotel bills and air tickets having nothing to do with the production of goods liable to sales tax nor the appellant was successful in proving the same before the lower forum or even at the appellate stage.

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

----S.8---Tax credit not allowed---Premature adjustment input tax of gas bills---Validity --Adjustment of input tax out of tax period was allowable---Finding of Adjudicating Officer on the issue were set aside by the Appellate Tribunal, the charge was dropped accordingly.

PLD 1998 SC 64 rel.

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

----Ss.2(41) & 2(46)(ii)(a)---Value of supply---Non-payment of sales tax on self-consumption of electricity in housing colony---Validity---Utility supplied to the housing colony of a manufacturing unit did not relate to taxable activity as defined by S.2(41) of the Sales Tax Act, 1990, as such the supply was taxable and liable to the sales tax.

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

----Ss.3(1)(a) & 36---Scope of tax---Furtherance of taxable activity---Sales of fixed assets and scrap---Sale of fixed assets as well as the scrap were liable to the sales tax as the same fell in the furtherance of taxable activity reducing cost of production or adding to the profit of the registered person---Charge alleged in the show-cause notice was maintained by the Appellate Tribunal.

Ms. Nyma Batool, D.R. and Pervaiz Alam, Auditor for Respondent.

Date of hearing: 20th November, 2007.

2008 P T D (Trib.) 1925

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Chairman/(Member) Judicial

C.A. No.201/LB of 2004, decided on 10th October, 2007.

Customs Act (IV of 1969)---

----S. 25---Value of imported and exported goods---Assessment of value---Origin of country---Department pleaded that goods imported were of Korean origin and not of China origin and the documents had been manoeuvred by way of prior understanding between supplier and the appellant and the order passed was unexceptional---Validity---Admittedly, goods imported were of Job Lot Quality which was accepted by the appellant before Collector---Under Import Trade Order 2003-2004, the goods of Job Lot Quality were not importable in the country---Goods were shipped from Korea and were of famous brand of Korea and apparently to avoid higher valuation the appellant misdeclared their country of origin---Appellant heavily relied on a certificate purportedly issued by the China Company which even did not bear the date of issue---Authenticity of this document had not been proved---Appellate Tribunal did not believe that the goods imported were of China origin particularly when those had been shipped from the Korean Port, however personal penalty of Rs. 5,00,000 was reduced to Rs.2,00,000.

Syed Iqtidar Alam, C.A. for Appellant.

Habib Bhatti, Appraiser for Respondent.

Date of hearing: 13th September, 2007.

2008 P T D (Trib.) 1966

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Chairman/Member (Judicial) and Saeed Akhtar, Member (Technical)

S.T.A. No.175/LB of 2007, decided on 22nd November, 2007.

Sales Tax Act (VII of 1990)---

----Ss.45-B, 2(9)(33)(41)(43)(46), 3(1A), 6, 7(1)(2)(i), 8(1)(a), 11(2), 23(1), 26, 33(2)(cc), 34(1), 36(1), 48 & 73---S.R.O. 578(I)/98 dated 12-6-1998---Appeal---Appropriate forum---Appeal was instituted before Collector (Appeals)---Appeal was disposed of with the observations and direction that appellant should approach the right forum namely the Appellate Tribunal and file appeal there as clearly mentioned in order-in-­original of Collector (Adjudication) and said forum could not interfere and will not take upon itself the rectification of mistake committed by the appellant---Validity---Section 45-B, Sales Tax Act, 1990 was effective from 1-7-2005---Appeal against order passed by any officer of Sales Tax was to be preferred before Collector (Appeals)---Appeal was very much competent before the Collector (Appeals) and the law in this context had not been properly appreciated by the Collector (Appeals)---Order in original passed by the Collector (Adjudication) was maintainable before Collector (Appeals).

Omer Arshad and Waseem Ahmad for Appellant.

Pervaiz Alam, Auditor for Respondent.

Date of hearing: 22nd November, 2007.

2008 P T D (Trib.) 1383

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

C.M. Application No. Misc. 48/ST/IB of 2006, decided on 26th March, 2008.

Sales Tax Act (VII of 1990)---

----S. 46---Customs, Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006, R.21(4)---General Clauses Act (X of 1897), S.21---Appeal to Appellate Tribunal---Miscellaneous application for recall of order---No one appeared on behalf of the appellant---Representative of Department was marked present, after noting attendance and without hearing either side, judgment was reserved---Subsequently, judgment was announced and appeal was dismissed on merits---Application for recalling the order by following the principles of natural justice and propriety and that appellant should be given an opportunity of being heard before deciding the appeal afresh---Validity---Appeal was simply adjourned and it was not clearly fixed for arguments---Adjourned date might be a date for further proceeding---Such date could not be styled as a "date of hearing"---Word "hearing" implies taking down of evidence or hearing arguments or where question relating to determination of case was considered---Unless Court was satisfied that it was date of hearing of the lis, it was not permissible to dismiss the same even for non-prosecution---Appeal was simply adjourned and on the later date nothing effective and germane to progress of appeal could be intended as productive functioning, constituting a step forward in matter rather than mere fixation of date for formal proceedings---Rules of procedure were not to be too technically applied but were construed to foster cause of justice---Courts had always preferred decision of cases on merits instead of knocking out a party on technical grounds---Appellate Tribunal had powers inherent in it to keep the proceedings in correct and legal parlance---Application was bound to succeed and was accepted by the Appellate Tribunal with the payment of Rs.5000 as cost---Original appeal was restored for regular hearing which was to be fixed for hearing for a date under intimation to both the sides by issuance of separate hearing notices under registered post as per rules.

AIR 1929 .Cal. 475; AIR 1961 Patna 299; AIR 1962 Punjab 82; PLD 1976 Kar. 268 and Allah Dita v. Aziz Din PLD 1981 Lah. 508 rel.

PLD 1972 Lah. 603; 1990 CLC 1473; 1996 SCMR 669; PTR No.1 of 1998; 2003 CLC 1064; 2001 CLC 1689, 1989 SCMR 883; 2002 PTD 549; PLD 2003 SC 724; 2007 PTD (Trib.) 795 and 2007 PTD (Trib.) 1919 ref.

C.M. No.28/ST/IB/2005 distinguished.

Sajid Ijaz Hotiana for Appellants.

Barrister Masroor Ahmed Shah for Respondents.

Date of hearing: 4th March, 2008.

2008 P T D (Trib.) 1667

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mumtaz Haider Rizvi, Member (Technical)

Appeal No.C.E.7(1326)/IB of 2001, decided on 19th December, 2007.

Central Excise Act (I of 1944)---

----S.3---Central Excise Rules, 1944, Rr. 9, 52-A, 53, 53-B, 226, 241 & 246---Central Excise duty, recovery of---Show-cause notice was issued to appellants on the ground that certain quantity of raw material was removed from Customs Bonded Warehouse without payment of Central Excise duty---Collector of Customs, Central Excise and Sales Tax being dissatisfied with the reply filed by appellant imposed penalty along with duty---Validity---Appellants had accounted for the raw material which was illegally removed from Customs Bonded Warehouse as having been consumed in appellants' declared production---Authorities failed to show any other source of goods in question without which appellants' declared production would not have been possible at all---Such situation ruled out the possibility of any additional production, which was the main cause of proceedings against appellants-Authorities had built the case on the presumption that as the appellants had removed raw material from Customs Bonded Warehouse clandestinely, so the goods produced out of the same must also have been removed without payment of Central Excise Duty and Sales Tax---Such presumption was not substantiated by the authorities---Appellant's act of illegal removal of goods from Customs Bonded Warehouse was cognizable under Customs Act, 1969, and the concerned authorities not only took due notice of the offence but had also punished the appellant in accordance with law---Case which had been made under Central Excise Act, 1944, ought to have been proved independently, which the authorities had failed to do in convincing manner-Order-in-Original passed by Collector of Customs, Central Excise and Sales Tax was set aside---Appeal was allowed in circumstances.

Isaac Ali Qazi for Appellants.

Jehanzeb Mehmood, D.R. Shafi-urRehman, D.S., Sharifullah, Sr. Auditor and Syed Yousaf Shah, S.I.O. for Respondents.

Date of hearing; 19th September, 2007.

2008 P T D (Trib.) 8

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No. 6/LB of 2005, decided on 26th June, 2007.

Sales Tax Act (VII of 1990)---

----Ss. 2(37), 3, 3-A, 6, 22, 23 & 46---Appeal to Appellate Tribunal---Allegation of maintaining double record and evasion of sales tax---Staff of Sales Tax Collectorate, audited sales tax record of the assessee had reported that assessee was maintaining double record i.e. one for sales tax purposes and one for private purpose; that assessee had suppressed sales through manipulation of record; and thus had evaded sales tax amounting to Rs.88,43,383. --Private record of assessee, was reportedly resumed by the staff and a contravention case was made out against assessee for committing tax fraud within the meaning of S.2(37) of Sales Tax Act, 1990, besides violation of provisions of Ss.3, 3-A, 6, 7, 22 & 23 of the Act---Case was decided by the Additional Collector (Adjudication), vide impugned order whereby show cause notice issued to assessee was vacated on the ground that the Department had failed to produce the private record statedly resumed by authorities from the assessee; and that authorities had failed to prove the charge of tax fraud against the assessee---Entire case of the Department was based on private record statedly resumed from assessee's premises during the course of audit, which the Department had failed to produce before the adjudicating officer despite several opportunities were given---Collectorate had failed to establish the charge of tax fraud, suppression of sales and alleged tax evasion against assessee by any cogent evidence---Impugned order was accordingly upheld and appeal of the department was rejected being without merit.

Khalid Mahmud, D.R. and Ali Ehsan, Auditor for-Appellant.

Waheed Shahzad for Respondent.

Date of hearing: 18th June, 2007.

2008 P T D (Trib.) 10

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Member (Judicial)/Chairman and Saeed Akhtar, Member (Technical)

C.A. No. 744/LB of 2003, decided on 20th June, 2007.

Sales Tax Act (VII of 1990)---

----Ss.13, 46 & 66-Appeal to Appellate Tribunal---Exemption---Refund of duty/taxes---Consignment of six units of old and used mini Dumpers imported by appellant was examined, assessed and cleared by Customs Authority and a sum of Rs.12,10,893 was levied as customs duty and sales tax, etc.---Company moved an application for refund of duty/taxes amounting 'to Rs.8,05,719 on the ground that imported items were duty free under Table III of S.18 of the Finance Act, 1999---Cheque for said amount of refund was issued to the company, holding that original importer was some body else and claim of appellant for refund was rejected by the Deputy Collector Customs---Validity---Show-cause notice specifically charged the appellant that he was not authorized to collect or claim the refund---Charge levelled against appellant about the unauthorized receipt of the refund had not been decided either way by the Authority---In absence of that impugned order was not sustainable under the law---Allowing appeal impugned order was set aside and case was remanded with the direction to decide the same afresh.

Malik Muhammad Arshad for Appellant.

Dr. Akhtar Hussain, D.R. and Muhammad Omer, Appraiser for Respondent.

Date of hearing: 20th June, 2007.

2008 P T D (Trib.) 17

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No. No.425/LB of 2006, decided on 26th June, 2007.

Sales Tax Act (VII of 1990)---

----Ss. 2(25), 7 & 46---Appeal to Appellate Tribunal---Input tax credit, claim for---Claim of appellant for input tax credit was held inadmissible by Additional Collector (Adjudication) on the ground that appellant was registered as wholesaler, whereas it was actually providing services of manufacturing/erecting machinery and input tax credit was claimed by appellant against purchases which were different from those shown in the output tax invoices---Said order of Additional Collector, having been upheld by Collector, appellant had filed appeal---Validity---Case of appellant/assessee was that it was an engineering concern engaged in fabrication of machinery and supply/installation thereof against contract which was duly registered with the Sales Tax Department in terms of S.2(25) of Sales Tax Act, 1990---Counsel for appellant, during the course of arguments, placed on record, copy of its application for registration wherein appellant's business activity was shown as wholesale dealer as well as manufacturer engaged in fabrication of goods whereby the registration certificate issued by the Department was for wholesaler only---Considerable merit existed in the contention of appellant that its business was duly registered with the Sales Tax Department in terms of S.2(25) of the Sales Tax Act, 1990 and that it was entitled to, input tax credit under S.7 of Sales Tax Act, 1990 regardless of the category of registration---Copy of registration application produced by the Counsel for appellant revealed that while applying for registration, appellant did indicate its principal business activities as manufacturer engaged in the business of fabrication, but the Department registered it as a wholesaler---Appellant, in circumstances could not be held responsible for said omission on the part of Department---Claim of appellant for input tax credit, which was supported by sales tax invoices, held, was in order.

M. M. Akram for Appellant.

Khalid Mehmood, D.R. with Ashiq Hussain Duggal, Superintendent for Respondent.

Date of hearing: 21st May, 2007.

2008 P T D (Trib.) 29

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Member (Judicial)/Chairman

C.A. No. 1605/LB of 2003, decided on 7th June, 2007.

Customs Act (IV of 1969)---

----Ss. 2(aaa), (bb), 32, 33, 194 & 194-A---Appeal to. Appellate Tribunal---Refund claim---Appellant/assessee lodged refund claim for Rs.1, 07, 111, which allegedly was got deposited in excess by department without adopting legal course---Case of department was that the scrutiny of documents had revealed that appellant imported PS Printing Plates and value declared by the appellant was found to lie on the lower side as compared to data of identical imported goods---Assistant Collector, who was seized of the matter, disposed of the application of appellant for refund of claimed amount, holding that amount of duties and the taxes were deposited by the claimants before the release of the goods in question without challenging the re-assessment and it was observed by him in the impugned order that in case appellant was aggrieved of the re-assessment he should have moved petition challenging the re-assessment and thus case of refund was dismissed---Validity---Relevant record of the Department showed that it was admitted by the D.R. that as' per record the additional duty was recovered after the goods had been made out of charge---In view of said factual position, a show cause notice as required under S.32 of the Customs Act, 1969, was necessary---Re-assessment could not be effected without the show cause notice---Once the goods had become out of charge no re-assessment under S.2(bb), of the Customs Act, 1969 could be effected---Impugned order was set aside---Appellant was entitled to refund of additional customs duty and taxes, which were levied without resorting to the relevant provisions of law contained in S.32 of the Customs Act, 1969.

1996 CLC 1365 rel.

Malik Muhammad Arshad for Appellant.

Dr. Akhtar Hussain, D.R. and Khurram Munir, Appraiser for Respondent.

Date of hearing: 7th June, 2007.

2008 P T D (Trib.) 36

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mrs. Ashraf Jehan, Member (Judicial)

Customs Appeals Nos. 619, 620, 698, 700, 730, 731, 964 to 966 of 2004, decided on 10th November, 2007.

Customs Act (IV of 1969)---

----Ss.81(1)(2)(3)(4), 25(4), 25-B, 32 & 163---Customs Rules, 2001, R.109(3)-Provisional assessment of duty---Show-cause notices for short recovery of duties and taxes on the ground that untrue import documents were submitted to the customs authorities with criminal intent to evade duties and taxes by committing such fraud---Appellants contended that notices were self-contradictory, having no relevance with the imports of appellants while the department conceded that show-cause notices were not in accordance with law---Validity---Show-cause notices had been issued on the pattern, which either did not contain any specific allegation against the appellants or were full of material contradictions---Notices issued were not only containing incorrect facts, but were also not in accordance with law---Notices revealed that the facts of the cases of different importers had been mixed up and in many cases facts recorded in the notices were incorrect, contradictory to the record and self-contradictory---Even in some of the cases the declared and assessed value had been shown more than the value at which the customs authorities had suggested to assess those goods in the notices---No loss to the exchequer could be attributed to the importers/appellants nor it could be held that any case of mis-declaration within the meaning of S.32 of the Customs Act, 1969 was made out---Any action against the appellants on such premises could not be sustained---One could not go beyond the allegations mentioned in the notices and since notices were either self-contradictory, vague without any specific allegation or containing incorrect facts, had no legal sanctity---Order was set aside by the Appellate Tribunal in circumstances.

Federation of Pakistan and others v. Ibrahim Textile Mills Limited and others 1992 SCMR 1898 and Messrs D.G. Khan Cement Company Ltd v. Collector of Customs, Sales Tax and Central Excise, Multan and 2 others 2003 PTD 1997 ref.

Muhammad Afzal Awan, Haji Muhammad Yousuf, Muhammad Saleem Thepdawalla and Ms. Danish Zuberi, A.Rs. for Petitioners.

Haider Iqbal, D.R. for Respondent.

2008 P T D (Trib.) 44

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal Ex. A. No. 1764/LB of 2001, decided on 23rd May, 2007.

Sales Tax Act (VII of 1990)---

----Ss.26, 33, 34 & 46---Central Excise Rules, 1944, Rr.3, 6, 22, 23, 26, 47, 52, 52-A, 210 & 226---Appeal to Appellate Tribunal---Demand of Central Excise Duty for shortage of goods---Staff of Collectorate of Central Excise visited appellant's factory premises and on scrutiny detected shortage of stock produced in the godown---Appellant was accordingly charged with contravention of Central Excise Rules, 1944 and vide impugned order amount of Central Excise Duty, sales tax and penalties were imposed on appellant/assessee who filed the appeal---Validity---Charge relating to shortage of stock stood established as appellant had admitted the same himself in his written statement recorded by the detecting staff---Demand of Central Excise Duty along with additional duty, on assessee was upheld---However no stock stayed un-cleared beyond prescribed period, because fresh stocks of production continued to replace the old stock under pledge with the Bank---Demand of Central Excise Duty and additional duty on that account, was dropped, in circumstances---Penalty imposed under R.210 of Central Excise Rules, 1944, was also remitted.

Mian Abdul Ghaffar for Appellant.

Khalid Mahmood, D.R. for Respondent.

Date of hearing: 23rd April, 2007.

2008 P T D (Trib.) 68

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

S.T.A. No. 97/LB of 2007, decided on 20th August, 2007.

Sales Tax Act (VII of 1990)---

----Ss.7, 8(1)(a) & 46---Appeal---Input tax---Claim for-Appellant being a manufacturer of cotton yarn, claimed input tax of certain goods for which he was not entitled due to the fact; that goods in question were not used for the manufacturing/production of taxable goods in terms of S.8(1)(a) of Sales Tax Act, 1990; or were prohibited claiming input tax vide Notification dated 12-6-1998---Said irregularity resulted in short payment of sales tax---Recovery of amount along with additional tax and penalty was ordered--Appeal had been filed by the appellant against said order---Collector (Appeals), after detailed discussion, had found that spare parts pertained to generators, but according to Notification only those generators, which had capacity of 250 KV or above were allowed for input tax---No clear cut distinction was shown by appellant that said spare parts were necessarily used in generators leaving capacity of 250 KV or above---No fault lay with the findings of the Collector (Appeals) in circumstances.

Malik M. Arshad for Appellant.

Nemo for Respondent.

Date of hearing: 2nd August, 2007.

2008 P T D (Trib.) 77

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Member (Judicial) Chairman

S.T.A. No.1133/LB of 2002, decided on 20th August, 2007.

Sales Tax Act (VII of 1990)---

----Ss.11(4), 32-A, 33, 34, 36 & 46---Central Excise Rules, 1944, R.10(2)(3)---Appeal to Appellate Tribunal---.Assessment of sales tax---Less payment of tax due to some miscalculation---Issuance of notice---Limitation---Final order in the case had been made after about 6 months of issuance of notice to appellant, whereas under provisions of Ss. 11(4) & 36(3) of Sales Tax Act, 1990 said order was to be made within 45 days of issuance of show-cause notice---No consequence for non-adherence of said provisions of law had been prescribed, which meant that said provisions were directory and not mandatory---Appellant had contended that specific provisions of law having not been incorporated in the show-cause notice, it could not be termed as valid and no action could be taken against appellant on the basis of said faulty show-cause notice---Contention of appellant was devoid of any legal force---Object of notice including notice contemplated under S.36 of Sales Tax Act, 1990 was to afford the opportunity of hearing and defence---Form of notice had neither been prescribed under statute nor in the rules farmed thereunder---Non-mention or wrong mention of the section, did not affect the nature of the documents which was determined on the basis of their contents---Merely for the reason that sub-rules (2)&(3) of R.10 of Central Excise Rules, 1944 had not been mentioned, it was not proper to declare the notice illegal---Instead of taking into consideration technicalities, the court should look into the matter with different angles namely as to whether substantial compliance had been made, or any of the sub-rules had been omitted---In the present case no prejudice was caused to the department because the substantial compliance of the relevant rules had been made---Deputy Collector had rightly held that amount in question was recoverable---Additional tax and penalty imposed, however, was waived off.

2006 SCMR 1519; 2001 SCMR 838; 2004 PTD 714 and PTCL 199(sic) CL 803 rel.

Syed Kazim Bukhari for Appellant.

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

Israr Khan S.A.

Date of hearing: 27th June, 2007.

2008 P T D (Trib.) 95

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Member (Judicial)/Chairman and Saeed Akhtar, Member (Technical)

S.T.A. No. 173/LB of 2007, decided on 17th July, 2007.

Sales Tax Act (VII of 1990)---

----Ss.2(44), 23, 34 & 46---Appeal to Appellate Tribunal---Late payment of sales tax---Collector, who was seized of the matter, vide impugned order found that appellant company had entered into an agreement with the buyers for the supply of goods and received part of the value of the supply in advance, but did not issue sales tax invoices at the time of receipt of those advances---Appellant did not deposit tax in the tax period In which those advances were received---Provisions of S.2(44) of Sales Tax Act, 1990 had provided that the time of supply was either the time of delivery of goods or receipt of payment whichever was earlier in respect of supply---Under provisions of S.23 of Sales Tax Act, 1990, the sales tax invoice was to be issued at the time of supply of goods---Contention of appellant was that late payment of sales tax was not wilful, but was the result of the controversy arising out of the decision of the superior courts giving different interpretations of the word `payment', the time of supply given in S.2(44) of Sales Tax Act, 1990, the imposition of additional tax and thus penalty imposed was not justified---Controversy was regarding the interpretation of the term supply, and time of supply, which ultimately was laid to rest by dictum laid down in 2004 PTD 1179---No dispute existed with regard to the payment of principal amount of sales tax---Only dispute was regarding the late payment---Since the late payment of sales tax by the appellant was not wilful, but was due to the controversy arising out of the decision of the superior courts giving different interpretations of the term "time of supply", imposition of additional tax and penalty on appellant, was not justified---Impugned orders were set aside, in circumstances.

1999 PTD 3907; D.G. Khan Cement v. Federation 2004 PTD 1179; Ghandhara Nissan Diesel Ltd. v. Sales Tax Department 2004 PTD 2771 and 2004 PTD (Trib.) 2539 rel.

Waseem Ahmad for Appellant.

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

Date of hearing: 16th July, 2007.

2008 P T D (Trib.) 101

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

S.T.A. No. 595/LB of 2006, decided on 19th June, 2007.

Sales Tax Act (VII of 1990)---

----Ss.13 & 46---Appeal---Claim for exemption from levy of sales tax---Appeal had been directed against order whereby Collector had upheld the Order-in-Original calling for recovery of sales tax leviable on cotton seed oil and on oil dirt along with additional tax and penalty---Contention of appellant was that total sales of cotton seed oil worked out by the Department were Rs.20,48,800, which were less than Rs.5 million---Appellant had submitted that its unit was exempt from levy of sales tax in terms of Entry No.42 of the 6th Schedule of Sales Tax Act, 1990 which entry clearly mentioned that supplies made in Pakistan by the manufacturer, whose annual turnover from taxable supplies made in any tax period during the last 12 months ending any tax period, did not exceed Rs.5 million; was exempt as per provisions contained in S.13(1) of Sales Tax Act, 1990---Department had made out a case on the basis of electricity units consumed---Validity---Admittedly the value of supplies was less than Rs. 5 million---Appellant, in circumstances was entitled to exemption---Impugned order was set aside, in circumstances.

Rana Rashid for Appellant.

Nemo for Respondent.

Date of hearing: 19th June, 2007.

2008 P T D (Trib.) 139

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.1309/LB of 2005, decided on 3rd April, 2007.

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

----Ss.33(1) & 46---C.B.R. Letter C. No. 3(9) ST-L & P/2001 dated 16-7-2001---Appeal to Appellate Tribunal---Late filing of sales tax return---Imposition of penalty---Penalty of Rs.5,000 was imposed an appellant/assessee on account of late filing of sales tax return for the month of June, 2001---Assessee had filed sales tax return for the said month of June, 2001 on 19-7-2001 which was well within the time extended by C.B.R. vide its letter C.No.3(9) ST-L&P/2001, dated 16-7-2001 up to 20-7-2001---Penalty imposed on assessee, was, remitted, in circumstances.

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

----Ss.33(7) & 46---Appeal---Wrong filing of monthly sales tax return---Imposition of penalty---Penalty of 3% of the amount of tax involved was imposed on appellant/assessee on account of wrong filing of monthly sales tax returns---Assessee did not record exempt purchases and export of molasses valtiingRs.34,54,50,234 in sales tax return---Contention of assessee that growers, as per practice were not providing invoices against sales of sugarcane, therefore, it was not possible to maintain its record and reflect it in the monthly sales tax retinas, carried weight---Similarly, the omission to record figure of export of molasses in the monthly sales tax returns had no revenue implications-- Said lapses were condoned and the penalty imposed on assessee under 5.33(7) of Sales Tax Act, 1990 on that account was remitted.

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

----Ss.33(7) & 46---Appeal to Appellate Tribunal---Demand of sales tax along with additional tax and penalty for claiming inadmissible input tax adjustment---Department demanded sales tax amounting to Rs.26,291 along with additional tax and penalty for claiming inadmissible input tax adjustment against purchase of cash sales and split air-conditioners---Said demand was not contested by the assessee---Demand of sales tax and penalty imposed an assessee, were upheld and assessee was directed to pay the same.

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

----Ss.33(2)(cc) & 46---Appeal of Appellate Tribunal---Applying lower value for supply of sugar to unregistered buyers as compared to the value of supplies made to registered persons---Imposition of penalty---Sales tax along with additional tax and penalty was demanded on account of the charge that assessee had applied lower value for supply of sugar to unregistered buyers as compared to the value of supplies made to registered persons---Supply of sugar was admittedly made to unregistered persons at a lower value, while supplies to registered persons were made at a higher value on the same dates---Counsel for assessee, however pleaded that low value supplies were made in case of contracts involving large quantities---Section 2(46)(b) of Sales Tax Act, 1990 did allow discount in the value of supply, provided discounted price and related tax was indicated in the invoices and the discount allowed was in conformity with the normal business practices---Plea of assessee that value of supply could only be determined by the valuation committee constituted under S.2(46)(e) of Sales Tax Act, 1990, had no force---Assessee having himself supplied sugar at a higher value on the same dates, no justification existed for assessee to make supplies to certain purchasers at lower value---Short payment of sales tax, having been established, demand of amount raised vide impugned order along with additional tax and penalty was upheld.

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

----Ss.2(35), 33(2)(cc) & 46---Appeal to Appellate Tribunal---Sale of plant/machinery and machinery parts without payment of sales tax---Imposition of penalty-Appellant/assessee having sold plant/machinery and machinery parts without payment of sales tax, amount of sales tax, additional tax and penalty equal to 3% was demanded from the assessee---Appellant/assessee who admitted sale of old and used plant, machinery etc., had contended that said sale or disposal did not constitute taxable supply as it did not conform to the definition of taxable activity provided in S.2(35) of Sales Tax Act,1990---Validity---Contention that said disposal being not in fine with the declared business of the taxpayer, did not constitute a taxable supply, was not well-founded and not in line with the scheme of value added tax---Supply in question, held, was chargeable to tax---Demand of sales tax, was upheld which appellant/assessee was directed to pay; however, as there had been a controversy going on about chargeability of tax on such transactions, non-payment of tax was not considered wilful---Additional tax and penalty imposed vide impugned order under S.33(2)(cc) of Sales Tax, 1990, were remitted.

Ijaz Ahmed Awan for Appellant.

Khalid Mehmood, D.R and Faisal S.A. for Respondent.

Date of hearing: 8th March, 2007.

2008 P T D (Trib.) 145

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, (Member Judicial/Chairman) and Saeed Akhtar, Member (Technical)

S.T.A. No.450/LB of 2006, decided on 20th July, 2007.

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

----Ss. 2(26), 33, 34, 36 & 46---Appeal to Appellate Tribunal---Under valuation of supply (of sugar) to associates and under-valuation of stock---During course of audit of sales tax record of appellant company, the auditors initially raised four audit observations and during the course of adjudication two audit observations were settled/dropped; whereas liability against remaining two observations, namely under-valuation of supply to associates; and under-valuation of stock was confirmed by the Adjudicating Officer---Appellant was directed to deposit sales tax along with additional tax and penalty in respect of first charge---Appeal filed by appellant/registered persons against said two audit observations having been dismissed by the Collector, appellant had filed present appeal---Counsel for appellant produced a list pertaining to the supplies of commercial grade sugar and ultra refined sugar during relevant period containing the value of sugar of both the grades supplied on different dates---Scrutiny of the list revealed that in most of the cases, value of the ultra refined sugar was slightly higher than the value of the commercial grade sugar---In some of the cases, however, value of the ultra refined sugar was less than the value of the commercial grade sugar---Department had contended that supply of ultra refined sugar was made to associates in violation of S.2(46) of Sales Tax Act, 1990 and that appellant was required to make supplies at the open market price excluding the amount of tax---Was necessary in circumstances, to determine the open market price for the determination of correct amount of sales tax---Impugned order was set aside and case was remanded to Adjudicating Officer for de novo consideration on merit after determination of open market price and affording opportunity of hearing to both the parties.

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

----Ss.11, 22, 23 & 46---Appeal to Appellate Tribunal---Under-valuation of stock and supply---Maintaining of sales tax record---Audit of sales tax record of appellant company---Auditors observed discrepancy with regard to under valuation---Value addition could not be fixed under the provisions of We Sales Tax Act, 1990---Registered person was duty bound to pay full amount of sales tax on the supplies made by him during a tax period as there was no justification for evasion of sales tax through suppression of value---Value addition against declared value was not justified---No need was for re-determination of sales tax liability, if any, against the charge after examining of sales tax. records maintained by the appellant/registered person under Ss.22 & 23 of Sales Tax Act, 1990---Impugned order against charge of under-valuation was set aside and case was remanded .to Adjudicating Officer for de novo consideration on merit after affording opportunity of hearing to both the parties.

M. Raza Qureshi for Appellant.

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

Irfan Ahmed, Auditor.

Date of hearing; 20th June, 2007.

2008 P T D (Trib.) 152

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

S.T.A. No. 190/LB of 2007, decided on 20th August, 2007.

Sales Tax Act (VII of 1990)---

----Ss.14 & 46---Appeal---Registration of retailer---:Under provisions of S.14 of Sales Tax Act, 1990 a retailer whose value of supply in any period during the last 12 months exceeded rupees five million, was liable to be registered---Department in case of appellant had taken income year 2003 as basis for registration of appellant unit, whereas law had provided that preceding 12 months period was to be taken into consideration---Sales for the preceding 12 months i.e. during the year 2005 in appellant's case were below rupees five million---Appellant, in circumstances was not liable to be compulsorily registered as it could be registered only in view of the sales made by it during preceding 12 months---Impugned orders were set aside, in circumstances.

Nizam ud Din A.R. for Appellant.

Ghulam Shabir Auditor for Respondent.

Date of hearing: 9th August, 2007.

2008 P T D (Trib.) 167

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

S.T.A. No. 273/LB of 2007, decided on 20th August, 2007.

Sales Tax Act (VII of 1990)---

---Ss.7, 11 & 46---Appeal---Appellate Tribunal---Assessment of Sales Tax---Record of appellant was audited for the year 2005-2006 and Auditor Sales Tax had observed firstly that appellant had suppressed the supplies of cotton seed oil by showing production of oil with 7% recovery ratio, whereas recovery ratio should have been 8%, secondly the discrepancy was with respect to supply of cotton seed oil to unregistered persons and in regard to said two objections, show-cause notice was issued to appellant and when matter came up for adjudication before Adjudicating Officer, it was found that charges against appellant had been established due to non-appearance of appellant---Appeal filed against order of Adjudicating Officer having been dismissed---Validity---Recovery ratio as per minutes of the meeting with Association was 8% for the oil mills for the year 2004-2005---Appellant could not produce any evidence as to how ratio had decreased to 7%-Department had rightly found the recovery ratio of 8%-Appeal on that account failed---Regarding second objection, appellant had failed to produce sales tax invoices showing supplies to have been made to registered persons---In the absence of such sales tax invoices, no relief could be granted to appellant.

Mian M. Arif Amin for Appellant.

Safdar Bashir for Respondent.

Date of hearing: 13th August, 2007.

2008 P T D (Trib.) 194

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

C.A. No. 458/LB of 2005, decided on 28th March, 2007.

Customs Act (IV of 1969)---

----Ss.156(1)(8), 157(2), 158, 159, 171, 180 & 194-A---Appeal to Appellate Tribunal---Confiscation of goods-Provisions of S.159 of Customs Act, 1969 had not been adhered to in the present case as appellants/accused were not produced before the Gazetted Officer of the Customs or the Magistrate---Such aspect of the ease had even been admitted by the Adjudicating Officer in the impugned order---Observation of the Adjudicating Officer that same being a procedural lapse, was not fatal, was not correct---When the law had provided procedure, same must be observed as provided under the law-Non­observance of procedure was always deemed fatal---Non-observance of the provisions contained in S.159 of the Customs Act, 1969, would render the search and. seizure illegal and further proceedings in that behalf would not be validated---Impugned order of confiscation was set aside, in circumstances.

1983 PCr.LJ 1351 and PLD 1988 Lah. 146 rel.

Miss Kausar Akhtar for Appellant.

Nemo for Respondent.

Date of hearing: 28th March, 2007.

2008 P T D (Trib.) 196

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Member (Judicial)/Chairman and Saeed Akhtar, Member (Technical)

C.A. No.1356/LB of 2000, decided on 11th June, 2007.

Sales Tax Act (VII of 1990)---

----Ss.13 & 34---Customs Act (IV of 1969), S.194-A---S.R.O. 424(I)/97, dated 13-6-1997---Appeal to the Appellate Tribunal---Exemption of tax---Claim for---Appeal had been directed against order passed by Collector of Customs, Sales Tax and Central Excise, whereunder appellant was directed to deposit customs duty and income tax .along with sales tax under 5.34 of Sales Tax Act, 1990---Appellant had imported consignment of Ring Spinning Frames and had got the clearance, availing benefit of S.R.O. 424(I)/97, dated 13-6-1997---During post clearance scrutiny of record it was observed that according to said S.R.O. exemption of customs duty and sales tax was conditionally admissible and it was admissible to the machinery/goods not manufactured locally---Goods imported by appellant (Ring Spinning Frames) at the time of import were included in the list of locally manufactured articles issued vide Customs General Order---Exemption of customs duty and sales tax allowed to the importer under the S.R.O. was considered irregular---Adjudicating officer decided case ex parte against appellant on the basis of material available on record---Exemption/concession of duties and tax under said S.R.O. was available to goods not manufactured locally---Goods/ machinery etc. manufactured locally was notified by C.B.R. through a Customs General Order and in said Customs General Order, Ring Spinning Frames were mentioned as goods which were manufactured locally---Engineering Development Board had opined that Ring Spinning Frames imported by appellant would be treated as not included in Customs General Order; goods imported by appellant, were not manufactured locally and said evidence was not taken into consideration while passing impugned order---Impugned order was an ex parte decision and was passed without taking into consideration the viewpoint of the importer---Tribunal, in circumstances considered appropriate to remand the case to Adjudicating Officer to enable the appellant to produce clarification of C.B.R.---Impugned order was set aside and case was remanded accordingly.

Tariq Najib Ch. for Appellant.

Dr. Akhtar Hussain, D.R. and Farrukh Ghulam Abbas, Inspector for Respondent.

Date of hearing: 5th June, 2007.

2008 P T D (Trib.) 210

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.A. No. 1433/LB of 2005, decided on 23rd May, 2007.

Sales Tax Act (VII of 1990)---

----Ss. 7(1), 33(2), 46 & 73---Appeal---Appellate Tribunal---Determination of tax liability---Imposition of penalty---Entitlement of a registered person to deduct input tax from output tax, was subject to the provisions of S.73 of Sales Tax Act, 1990, which had made it binding on the registered person that payment of the amount of transaction exceeding value of Rs.50,000 would be made by a crossed bank draft; or crossed pay order or any other crossed banking instrument in favour of the supplies from the business account of the buyer-Payments in the present case were made through travellers cheques, which were bearer in nature and did not qualify for Banking instruments referred to in S.73 of Sales Tax Act, 1990---Provisions of Ss.7 and 73 being mandatory in nature must be followed by a registered person---Mere non-mention of S.36 of the Sales Tax Act, 1990 in the show-cause notice, would not vitiate entire proceedings---Assessee having not actually made input tax adjustment, its sales tax liability was reduced---Additional tax and penalty of 3% imposed under S.33(2) of Sales Tax Act, 1990 was remitted.

Farooq Sh. for Applicant.

Khalid Mehmood, D.R. with Abdul Qadoos Auditor for Respondent.

Date of hearing: 23rd May, 2007.

2008 P T D (Trib.) 213

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No. 695/LB of 1999, decided on 3rd April, 2007.

Sales Tax Act (VII of 1990)---

----Ss.8, 33(7) & 46---Appeal to Appellate Tribunal---Input tax adjustment-Claim for---Authorities found assessee/appellant's claim of input tax adjustment inadmissible on the basis of S.8(1) of Sales Tax Act, 1990---Contention of Authorities was that since cement and tiles could not be considered as having been used for the purpose of taxable goods, tax paid thereon could not be adjusted---Validity---If input tax adjustment was otherwise not admissible against items of building materials, same should not have been included in S.R.O.1111(I)/90, dated 1-11-1990---Said items later on were excluded from the negative list of S.8(1)(b) of Sales Tax Act, 1990 as same did not appear in S.R.O. 556(I)/96, dated 1-7-1996 which was applicable during the relevant period; though prohibition was re-imposed with effect from 12-6-.1998---Input tax credit against building material having been allowed in similar cases as a practice, there was no reason to deny that facility to assessee---Assessee, in circumstances was entitled to claim adjustment of input tax against cement and tiles during the period in question.

Ch. Tariq Najib for Appellant.

Khalid Mehmood, D.R. with Faisal, S.A. for Respondents.

Date of hearing: 19th March, 2007.

2008 P T D (Trib.) 221

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.49/LB of 2006, decided on 23rd May, 2007.

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

----Ss.13, 33, 34 & 46---Appeal to Appellate Tribunal---Under-valuation in respect of supplies-Exemption, claim for---Assessee was served with a show cause notice and after observing process of law, demand of sales tax, additional tax and penalty equal to 3% of sales tax was adjudicated against assessee on account of under-valuation in respect of two supplies of oil cakes---Assessee had contended that supply of oil cakes having been exempted from sales tax with effect from 19-6-2000 through Finance Ordinance, 2000, supply of oil cake made by assessee on 18-7-2000 involving sales tax demand was exempt---Admittedly, supply of oil cake made on 18-7-2000 was exempt from tax as contended by assessee---Demand of sales tax, was reduced along with additional tax---Penalty of 3% imposed under S.33(2) of the Sales Tax Act, 1990, was remitted in view of small amount of tax involved.

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

----Ss.13, 33, 34 & 46---Appeal to Appellate Tribunal---Non-payment of sales tax on supply of oil cake---Exemption---Claim for---Appellant was served with a show cause notice and after observing due process of law, demand of sales tax along with additional tax and penalty equal to 3% of sales tax involved on account of non-payment of sales tax on supplies of oil cake was made during the period prior to 19-6-2000 the date on which exemption from sales tax was granted on supply of said item---Charge against assessee was vague in that the department had not produced any evidence to prove that supplies in question were made before 19-6-2000 when the goods in question were chargeable to tax; and that the entire case of the department was based on presumption---Counsel for department had conceded that the sales tax record maintained by the assessee and relevant invoices produced by it pertained to the period after 19-6-2000 when the supplies of goods/oil cakes were exempt---Demand of sales tax along with additional tax and penalty from assessee was not maintainable, which was dropped accordingly along with additional tax and penalty.

Tariq Najib for Appellant.

Khalid Mahmood, D.R. with Pervaiz Alam, Auditor for Respondent.

Date of hearing: 8th May, 2007.

2008 P T D (Trib.) 224

[Customs Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.A. No. 839/LB of 2006, decided on 4th May, 2007.

Sales Tax Act (VII of 1990)---

----Ss.3-AA, 11(4), 14, 36(3), 38(3) -& 46---Appeal to Appellate Tribunal---Registration of assessee---Assessment of tax---Appellant/ assessee's annual turnover having exceeded Rs.5 millions according to the declaration made by it in the income tax returns, assessee was liable to registration and pay tax on its sales either as retailer or wholesaler-.--Various assessment orders passed by the Income Tax Department submitted by assessee, had indicated that it was engaged in wholesale business---While wholesale business too being chargeable to sales tax, determination of assessee's sales tax liability as retailer was not correct, which needed to be re-determined---Case was remanded to the Adjudicating Officer for a fresh decision on merits and in accordance with law.

M. Ghulam Rasool, A.R. for Appellant.

Ahmad Din Auditor for Respondent.

Date of hearing: 2nd May, 2007.

2008 P T D (Trib.) 242

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

S.T.A. No. 192/LB of 2006, decided on 20th August, 2007.

Sales Tax Act (VII of 1990)---

----Ss.23 & 46---Appeal to Appellate Tribunal---Discrepancies found in the record of appellant during audit of record---During audit for the relevant year, three discrepancies were observed in the record of the appellant; (i) shortage of stock; (ii) suspicious invoices and (iii) violation of S.23 of Sales Tax Act, 1990---Regarding first discrepancy, appellant had failed to point out any material irregularity in physical verification of the stock, even otherwise appellant could not satisfy any of the forums below that no shortage of stock was found---Findings against shortage of stocks by the lower forums were upheld and the appeal to that extent stood rejected---Details of alleged suspicious invoices had been duly proved by the Department in order-in-original---Counsel for appellant, however had placed on file photocopies of the various sales tax invoices, which had been marked against which the amount of refund had been withheld and it was alleged in the circumstances that same could not be recovered from the appellant as the amount had already been withheld---Validity---Said annexures had not at all been considered by the lower forums; it would be proper and just to reconcile the record by the Department and after reconciling, the exact inference should be drawn---Findings of the lower forums on that account were set aside and, matter was remanded to Adjudicating Officer with direction to reconcile the record---Regarding third discrepancy, findings in that respect had been challenged by the appellant in the light of order earlier passed by the Collector in which it was found that appellants were not required to pay tax on the goods, which were never received back nor sold or disposed of as per record---Collector, in circumstances could not deviate from the previous decision/finding---Equity demanded that same principle should have been applied in the present case as well---Findings in respect of alleged third discrepancy given by the lower forums, were set aside and the charge framed to that extent was dropped.

M. Akram Nizami for Appellant.

Ghulam Shabbir for Respondent.

Date of hearing: 8th August, 2007.

2008 P T D (Trib.) 261

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zia-ud-Din Khattak, Member (Judicial)

Appeal No.7(2150)ST/IB of 2001, decided on 19th July, 2007.

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

----Ss. 7(1) & 8(1)(b)---S.R.O. 1307(I)/1997, dated 20-12-1997--Determination of tax liability---Adjustment of input tax---Reclaim of input tax credit paid on import of machinery spares---Demand of short realization of sales tax and additional tax on the grounds that S.R.O. 1307(I)/1997, dated 20-12-1997 had excluded spares, machinery and lubricants being items which were not direct constituent or integral part of the goods produced, manufacture or supplied in taxable activity---Registered person contended that it was. indicative of the fact that S.R.O. 1307(I)/1997, dated 20-12-1997 was not in conformity with the mandate conferred on Federal Government by the Legislature and was in conflict with the substantive statutory provisions of S.8(1)(b) of the Sales Tax Act, 1990---Validity----Federal Government had disentitled registered person from reclaiming or deducting the input tax paid on goods which were not the direct constituent and integral part of the taxable goods produced, manufactured or supplied during the course or in furtherance of any taxable activity---Apparent conflict existed between S.R.O. 1307(I)/1997, dated 20-12-1997 and the provision contained in S.7(1) of the Sales Tax Act, 1990 which entitled the registered person to deduct input tax paid for the purpose of taxable supplies made or to be made---Substantive provisions in S.7 of the Sales Tax Act, 1990 did not provide that only such input tax shall be reclaimed or deducted which was paid on the goods which, were direct constituent and integral part of the taxable goods produced, manufactured or supplied---S.R.O. 1307(I)/1997, dated 20-12-1997 was in conflict with the provision contained in S.7 and S.8(1)(b) of the Stales Tax Act, 1990---Provisions contained in such sections shall prevail over the S.R.O. 1307(I)/1997, dated 20-12-1997---Machinery parts on which input tax was paid were used for the purpose of taxable supplies and the appellant being registered person was entitled to take input tax paid from the output tax paid while determining its tax liability, as these goods were not specified in any notification issued under S.8(1)(b) of the Sales Tax Act, 1990 including S.R.O. 1307(I)/1997, dated 20-12-1997 and thus were not excluded from the entitlement to deduction of input tax---Order of First Appellate Authority was set aside and that of Order-in-Original was vacated by the Appellate Tribunal.

1999 SCMR 1442 rel.

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

----Ss. 30 & 25---S.R.O. 1195(I)/90, dated 17-12-1990---Appointment of officer---Access to record, documents, etc.---Audit of registered person by the staff of Directorate General of Revenue Receipts Audit (DRRA)---Validity---Audit was conducted by audit party of Directorate General of Revenue Receipts Audit which was a branch of Auditor General of Pakistan and its officers were neither sales tax officers under S.30 of the Sales Tax Act, 1990 nor they were authorized under the Sales Tax Rules, 2005 to have access to premises and accounts of any registered unit---Said officers even did not fall in the category of officers mentioned in S.25 of the Sale Tax Act, 1990 in the execution of the Sales Tax Act, 1990---Staff of Directorate General of Revenue Receipts Audit was non-existent authority so far as private registered units were concerned and they could not have access to their books of accounts and other record under the Sales Tax Laws---President of Pakistan had required the Auditor General of Pakistan to audit the receipt of Federal Government and not the record of the private enterprises/industrial units licensed/registered under the Sales Tax Laws---Whole exercise conducted by the staff of Directorate General of Revenue Receipts Audit was coram non judice.

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

----Ss. 8(1)(b), 7 & 10---Tax credit not allowed---Nature of provisions---Provision contained in S.8(1)(b) of the Sales Tax Act, 1990 was in the nature of exception to the general rule contained in S.7 of the Sales Tax Act, 1990 read with S.8(1)(b) and S.10 of the Sales Tax Act, 1990.

(d) Interpretation of Statutes---

----Provisions of law which were in the nature of exception shall not override the substantive provision but shall merely operate to the extent of making exception to the general rule.

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

----Ss. 8(1)(b) & 7---S.R.O. 556(I)/96, dated 1-7-1996---S.R.O. 1307(I)/1997, dated 20-12-1997---S.R.O. 578(I)/98, dated 12-6-1998---Tax credit not allowed---Determination of tax liability---Re-claim/ deducting input tax---Disallowance of such claim explained.

Tariq Najeeb Chaudhry for Appellant.

Naveed Alam for Respondent.

2008 P T D (Trib.) 293

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member (Judicial)

Customs Appeal No.627/LB of 2004, decided on 25th September, 2007.

Customs Act (IV of 1969)---

----Ss.2(s), 156(1)(89) & 194-A---Smuggling---Outright confiscation of vehicle on the ground that full panel chassis sheet of van was welded and refitted and thus same was a smuggled vehicle---Validity---Chassis number was not grinded and welding/soldering appears on the body could be due to repairs conducted during the life of the vehicle i.e. 21 years old and according to report the body was in very poor shape and in rusty condition---Inference drawn that it was a smuggled vehicle was incorrect---Report forcefully supported the contention of appellant that vehicle was not a smuggled vehicle and the partial welding point noted in the report could be the result of the repair as the vehicle was imported in 1984 and during 20, 21 years it needed repairs off and on---Law required that adjudicating authority should be consistent in deciding the identical matters but the authority did not remain consistent while deciding the case---Order passed by the Additional Collector (Adjudication) was not sustainable in the eyes of law and the same was set aside by the Appellate Tribunal and the vehicle was ordered to be released un-conditionally to the lawful owner after due verification of his ownership.

F.A.O. No.170 of 1999 ref.

Syed Muhammad Mohsin Hamdani for Appellant.

Muhammad Farooq for Respondent.

2008 P T D (Trib.) 315

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar-ul-Majeed, Member (Technical)

Appeal C.A. No.22/LB of 2007, decided on 8th November, 2007.

Customs Act (IV of 1969)---

----S. 156---Punishment for offences---Confiscation of vehicle on the ground that chassis number was self-punched/grinded without testing from Forensic Science Laboratory---Validity---Entire case of the department was based on the premise that chassis number carried by the vehicle was self punched/grinded and auction voucher produced by the vehicle owners in support of their contention that the same had been purchased in auction was not relevant while according to certificate of manufacturing company chassis numbers of the vehicle were punched manually in their plant and for some time in the past even without or with incomplete model numbers---Department, in such a situation, should have got the vehicle tested by Forensic Science Laboratory to ascertain whether the chassis number found on vehicle was original or not---Department failed to establish that the chassis number was not genuine---Contention that auction vehicle as shown in the auction voucher was the truck, whereas, the vehicle in question was "Prime Mover Machine" did not carry much weight as both these terms were generally used for such vehicles and in the absence of solid evidence/proof that the chassis number of the vehicle was not genuine, the argument was not tenable---Order of First Appellate Authority in respect of release of vehicle was upheld and the appeal of the depart­ment was rejected by the Appellate Tribunal being without merit.

Tariq Mahmood, I.O. for Appellants.

Syed M. Mohsin Hamdani for Respondents.

2008 P T D (Trib.) 541

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Judicial Member

Sales Tax Appeal No.295/LB of 2007, decided on 20th February, 2008.

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

----S.3---Scope of tax---Issuance of show-cause notice for levy of tax on suppressed sales detected on the basis of difference between the income tax returns and sales tax returns---Validity---Income tax record could not be made basis for adjudging the liability under Sales Tax Act, 1990---Order passed by both the lower forums were the result of non-appreciation of law---Appeal was accepted by setting aside the orders as a result of which the show-cause notice was set aside by the Appellate Tribunal.

1992 SCMR 1898; PLD 2005 SC 842; 2006 PTD 271; 2007 PTD (Trib.) 127 and 2004 PTD 868 ref.

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

----S.36(1)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---If any irregularity -was found during the audit that should be confronted to the registered person by serving a notice within a period of five years---Date recorded on the show-cause notice was 30-6-2006 i.e. the last day of completion of five years but the postal envelope showed the date of dispatch as 7-7-2006 meaning thereby that the notice was received by the appellant after lapse of 8 days of the completion of five years, against wording of S.36 (1) of the Sales Tax Act, 1990 that the notice should be served on the registered person within five years---Notice having not been served within period of five years, the department was not entitled to recover the amount as mentioned in the show-cause notice.

Ch. Mumtaz-ul-Hassan for Appellant.

Hafiz Abdul Waris, Auditor for Respondent.

Date of hearing: 20th February ;2008.

2008 P T D (Trib.) 659

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member Technical

Appeals C.A. Nos. 459/LB and 460/LB of 2007, decided on 11th February, 2008.

Customs Act (IV of 1969)---

----S.157(2)---Extension of confiscation---Confiscation of trucks without framing charge in the show-cause notice---Release of seized truck against payment of redemption fine---Validity---Smuggled/non-duty paid seized goods were released considering the same not liable to confiscation---No charge regarding involvement of trucks in the smuggling of goods was framed against the appellants in the show-cause notice---Orders of confiscation of the trucks though not physically seized, and their release against redemption fine of 30% of their customs value by the adjudicating officer being beyond the scope of the show-cause notice, simply on the ground that the action of the detecting agency to release the trucks was mala fide and not in accordance with the provisions of S.157(2) of the Customs Act, 1969, was not lawful and not maintainable in the law---Appeal was accepted and orders were set aside by the Appellate Tribunal.

M. Mohsin Hamadani for Appellants.

Munir Ahmad, I.O. for Respondents.

Date of hearing: 29th January, 2008.

2008 P T D (Trib.) 672

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member Technical

Appeal C. A. No.22/LB of 2007, decided on 8th November, 2007.

Customs Act (IV of 1969)---

----S.156---Punishment for offences---Confiscation of vehicle without obtaining expert opinion of Forensic Science Laboratory to confirm its allegation that the chassis number of the vehicle was not original/genuine---Release of vehicle---Validity---Department should have got the vehicle tested by Forensic Science Laboratory to ascertain whether the chassis number found on the vehicle was original or not---Department failed to establish that the chassis number was not genuine---Order was passed by the First Appellate Authority after verification/confirmation of auction of vehicle carrying chassis number by the government department---Department's contention that auctioned vehicle as shown in the auction voucher was Hino truck, whereas the vehicle in question was "Prime Mover Machine" did not carry much weight as both these terms were generally used for such vehicles and in the absence of solid evidence/proof that the chassis number of the vehicle was not genuine, such argument was not tenable---No illegality or infirmity in the order was found which was upheld by the Appellate Tribunal and Departmental appeal was rejected being without merit.

Tariq Mahmood, I.O. for Appellants.

Syed M. Mohsin Hamdani for Respondents.

Date of hearing: 6th November, 2007.

2008 P T D (Trib.) 1528

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Chairman/Member (Judicial) and Saeed Akhtar, Member (Technical)

S.T.A. No.16/LB of 2007, decided on 22nd October, 2007.

Sales Tax Act (VII of 1990)---

----Ss. 33(2)(ee), 33(4)(e)(f), 34, 2(9), 3, 3(2) & 3(A)---S.R.O. 1271(I)/96, dated 10-11-1996, R. 6---S.R.O. No. 463(I)/2007, dated 9-6-2007--S.R.O. 999(I)/2007, dated 29-9-2007---C.B.R. Letter C. No.4/2-ST/2007, dated 30-6-2007---Offences and Penalties---Amnesty---Payment of principal amount of sales tax prior to 9-6-2007---Levy of additional tax/default surcharge and penalties---Validity---Federal Government vide S.R.O. 463(I)/08, dated 9-6-2007 allowed exemption of additional tax/default surcharge and penalties payable by a person subject to the condition that the outstanding principal amount of sales tax was paid by the 30th of June, 2007---Federal Government further extended the scope of exemption notification through amendment in S.R.O. 463(I)/2007, dated 9-6-2007 vide S.R.O. 999(I)/2007, dated 29-9-2007 allowing exemption of additional tax, penalties to cases where principal amount of sales tax was paid even prior to 9-6-2007---Appeal was accepted subject to production of evidence of payment of principal amount of sales tax prior to 30-6-2007 before sales tax authorities.

Rana Muhammad Afzal for Appellant.

Irfan Ahmad for Respondent.

Date of hearing: 18th September, 2007.

2008 P T D (Trib.) 1535

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial)

C.A. No.323/LB of 2007, decided on 21st May, 2008.

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

----S. 156---Punishment for offences---C.B.R's. Letter C. No. 3(13) TAR-I/-4, dated 17-2-2007---Confiscation of imported goods was allowed to be re-exported by making a minimum 10% value addition to the import value---Department contended that packing list provided by the importer showed the marks and numbers as Rani, Ferozi, Mehandi, Jambli, Rama, Devdas etc. all such nomenclatures not only depict but amply substantiate the goods to be of Indian origin and import was in contravention of Import policy---If importers were allowed to re-export the goods, it would encourage them to perpetrate such like contravention, unless there was any deterrence, the irresponsible importers will not be deterred---Validity---Department had given much importance to the labels as Ferozi, Rani, Jambli, Devdas and Rama and concluded that the Polyester must be of Indian Origin; there were some other labels named as Red, Lemon, Fanta, Green, Gold, Maroon, Pink, Tomato and Cofee---If, the labels were to be believed it did not mean that the fibre was of English origin by virtue of labels---Similar consignment had been allowed to be re-exported and there should be no discrimination---Reasons given by the Department were mere conjectures and surmises---Importer could not be blamed on hypothetical reasons---Consignment should have been released---Re-export was allowed as ordered by the First Appellate Authority and the departmental appeal was dismissed by the Appellate Tribunal.

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

----S.156---Import---Certificate of manufacturer---Invoice of intermediate exporter---Intermediate exporter (Dubai) had issued invoice that the Polyester was of China origin---It was certified that the company China was exporting the Polyester to him---Fax number of such China Company was very much mentioned in the certificate---Customs authorities could have got verified the certificate from the exporting company of the China by Fax which they had not---It could not be said authoritatively that the Polyester of this weight was only and only manufactured in India and nowhere else.

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

----S.156---Public notice---Legality of---Public notice issued by the Collector had hardly any legal sanctity behind it as the public notice had been published that some importers were importing Polyester Fabrics against Import Policy Order, so in, future they will have to produce certificate issued by the manufacturer and it was not proved that Public Notice had been brought to the notice of the importer.

Shaukat, Inspector for Appellant.

Mian Abdul Ghaffar for Respondent.

Date of hearing: 30th April, 2008.

2008 P T D (Trib.) 1542

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial)

C.A. No.10/LB of 2008, decided on 21st April, 2008.

Customs Act (IV of 1969)---

----Ss. 181 & 156(1)(14)---S.R.O.487(I)/2007, dated 9-6-2007---Option to pay fine in lieu of confiscated goods---Goods were examined and reported that the same were classifiable under PCT' Heading other than what was declared by the importer---Value of such goods was enhanced and show-cause notice was issued on the charges of misdeclaration of description of the goods---Appellate contended that different type of goods were erroneously shipped by the foreign exporter and he had accepted that the goods shipped may be sent back---Permission was sought to re-export the goods---Permission was refused on the ground that Ministry of Commerce granting permission of re-export the goods had withdrawn its permission---Such order was upheld by the First Appellate Authority---Validity---Such was hardly a case of wilful mis­description---Ministry of Commerce, after applying its mind, had granted permission and had hastily withdrawn the same---Appellant had placed on record copies of number of GDs wherein the customs authorities had charged the taxes and duties upon rectified classification---Approach of the Government functionaries should be beneficent to its citizens and not harsh and oppressive---Customs authorities should not always insist on getting their pound of flesh---Appeal was accepted and orders were set side and the appellants were allowed to re-export the goods in terms of the letter of Ministry of Commerce, Government of Pakistan.

2002 YLR 2651 rel.

Mian Abdul Ghaffar for Appellant.

Ahtesham for Respondent.

Date of hearing: 27th March, 2008.

2008 P T D (Trib.) 1601

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

Appeal No.S.T.A. No.11/LB of 2007, decided on 31st May, 2007.

Sales Tax Act (VII of 1990)---

----S.66---Claim for refund of sales tax regarding purchases made in year, 2004---Rejection of claim on basis of a report showing non-existent status of supplier in year, 2006---Validity---Refund claim pertained to purchases made in year, 2004 and not in year, 2006---Department had rejected claim without making necessary inquiries regarding status of supplier at the time when assessee made purchases thereform---Tribunal set aside impugned order and remanded case to Adjudicating Officer for its fresh decision.

Adnan-ul Haq and Miss Samreen Tabassum for Appellants.

Khalid Mehmood, D.R. and Mansoor Sadiq for Respondent.

Date of hearing: 21st May, 2007.

2008 P T D (Trib.) 1607

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member Judicial and Hafiz Muhammad Anees, Member Technical

Sales Tax Appeal No.1131/LB of 2005, decided 17th January, 2008.

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

----S. 36(1)-Ex parte adjudication of assessee's liability under S.36(1) of Sales Tax Act, 1990 for non-availability of reply to show-cause notice on file---Validity---Impugned order did not disclose any reason for non-availability of such reply on file---Record showed that Adjudicating officer had considered only documents produced by department---If matter was being delayed by assessee, then Adjudicating Officer was duty bound to provide him last and final opportunity for placing on record his point of view---Availing of certain adjournments by a party on one pretext or the other would not lead to conclusion that he had nothing to say in his defence---Impugned order did not show that ample opportunity had been provided to assessee for presenting his case---Tribunal set aside impugned order and remanded case to Adjudicating Officer for its decision afresh within specified time after taking reply to show-cause notice and other documentary evidence produced by parties and conducting detailed, inquiry into veracity of charges levelled against assessee.

(b) Adjournment---

----Availing of---Effect---Availing of certain adjournments by a party on one pretext or the other would not lead to conclusion that he had nothing to say in his defence.

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

----S. 30---Adjudication Officer---Qualities stated.

It is expected from an Adjudicating Officer to be unbiased and impartial while deciding a matter, because he is performing judicial functions, which are based upon the principles that no one should be condemned unheard and should not fall prey to bureaucratic inertia.

Adjudicating Officer should not be amused by a huge amount detected by Audit Team and he should himself examine the matter fairy, justly and honestly with open judicial mind.

Adnan Ahmad for Appellant.

Atif Qureshi, S.A. for Respondent.

Date of hearing: 15th January, 2008.

2008 P T D (Trib.) 1621

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

Appeal C.A. No.475/LB of 2007, decided on 16th January, 2008.

Customs Act (IV of 1969)---

----Ss. 19 & 19-A---S.R.O. 575(I)/06, dated 5-6;2006---Customs General Order No.12 of 2002, dated 15-6-2002---Customs General Order No.11 of 2007, dated 28-8-2007---Hydraulic jacks, import of---Denial of benefit of S.R.O. 575(I)/96 to importer on basis of Customs General Order 12 of 2002---Validity---Hydraulic jacks falling under P.C.T. Heading No. 84.25 had been excluded from list of locally manufactured goods vide Customs General Order No.11 of 2007, thus, importer was entitled to benefit of such S.R.O.---Tribunal set aside impugned order for being illegal.

Ch. Ishtiaq Ahmad for Appellant.

Saud Imran Ahmad, D.R. and M. Akhtar Zaidi A/O for Respondent.

Date of hearing: 15th January, 2008.

2008 P T D (Trib.) 1644

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

Appeal No. S.T.A. No. 349/LB of 2007, decided on 26th February, 2008.

Sales Tax Act (VII of 1990)---

----S.66---Refund of sales tax, claim for---Rejection of claim on basis of objection raised by STARR without verifying as to whether supplier units were operating during relevant period, and whether disputed supplies were actually tax paid---Validity---Abnormal tax profile of a supplier would not be taken as a ground to reject such claim without confirming that tax against disputed supplies was actually not paid---Tribunal set aside impugned order and remanded case to Adjudicating Officer for its fresh decision.

Adnan Ahmad Ch. for Appellant.

Saud Imran Ahmad, D.R. assisted by Mr. Muhammad Naeem Auditor for Respondent.

Date of hearing: 4th February, 2008.

2008 P T D (Trib.) 1689

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member Judicial

C.A. No.27/LB of 2007, decided on 19th May, 2008.

Customs Act (IV of 1969)---

----Ss. 156 & 2(s)---S.R.O. 487(I)/07, dated 9-6-2007---S.R.O. 574(I)/05, dated 6-6-2005-Punishment for offences---Smuggling---Confiscation of truck alleging that the smuggled goods were being transported through the truck and the " bilties" were fictitious as the truck driver had made a statement that he was owner of the truck and the petrol and as per report it was not a petrol of Pakistani origin---Validity---Truck could not automatically be connected with the carrying of smuggled' goods unless a proper link was proved---Department had tried to set up a case that driver was the owner and had transported the goods intentionally---It had all along been one M.R., who had been claiming himself as the attorney of the owner of the truck and it was not proved that the proprietor of the truck was intentionally engaged in smuggling of the petrol---By a composite order one H.A.K., the owner of the truck was substituted as the appellant and the appeal would be read as H.A.K. through M.R., the attorney and the appeal was accepted and the order-in-original and order in appeal were set aside to the extent of confiscation of the truck---Customs authorities were directed to release the truck in favour of H.A.K. subject to his furnishing surety bond to the tune of Rs.10,00,000 that he would hand over the truck to any other lawful owner, if declared by a competent civil court.

Reference No. 144/06 in the Lahore High Court and PLD 1974 SC5rel.

PLD 1974 SC 5; C.A. No.107/LB/07; C.A. No. 23/LB/07 and C.A. No.17/LB/07 ref.

Mohsin Hamdani for Appellant.

Muhammad Arshad, I.O. for Respondent.

Date of hearing: 6th May, 2008.

2008 PTD 1787

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Member Judicial/Chairman

C.No.73/CU/IB of 2008, decided on 23rd May, 2008.

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

----Ss.32, 156(1)(14)(77), 157 & 178--Imports and Exports (Control) Act, (XXXIX of 1950), S.3(1)---Customs Agents Licensing Rules, 2001, R.102(iv)(v); 103 & 104(2)---Untrue statement, error, etc.---Change of amount of import authorization---Filing of tampered/forged import authorization from Rs.5,00,000 to Rs.50,00,000 for clearance of consignment---Show-cause notice was issued---Case was adjudicated and seized goods were confiscated---Penalty equal to three times of the value of the seized goods was also imposed-License of Custom House Agent was revoked forthwith and the amount of Rs.30,000 deposited as security was ordered to be forfeited---Validity---During examination the import authorization provided along with import documents were found suspected---Original copy of import authorization was obtained from the official record which showed import ceiling worth Rs.5,00,000 and when it was tallied with the import authorization presented by the clearing agent, it was found tampered/forged showing the amount of import authorization of Rs.5 Millions---Import authorization having been tampered/forged subsequently, the same was got verified from Ministry of Commerce which confirmed that no such authorization of. Rs.5 Million was ever issued by the Ministry of Commerce---Department was obliged to take action against the appellants in the circumstances and the provisions of Imports and Exports (Control) Act; 1950 were fully attracted---Ministry of Commerce had cancelled the import authorization and in consequence of such cancellation letter the appellants were not authorized or competent to import the goods in issue.

Messrs Al-Hamd Edible Oil (P.) Ltd. and others v. Collector of Customs and others 2003 PTD 552; Federation of Pakistan and others v. Saman Diplomatic Bonded Warehouse 2004 PTD 1189; Messrs A. R. Hosiery Works Karachi v. Collector of Customs (Export) another 2004 PTD 2977; 2007 PTD 2215 and PLD 1986 Kar. 373 ref.

West Pakistan Tank Terminal (Pvt.) Ltd., v. Collector Appraisement C.P.L.A. 1098 of 2006 rel.

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

----Ss.32, 156(1)(14)(77), 157 & 178---Untrue statement, error, etc.---Change of amount of import, authorization---Application of the provisions---Misstatement or the alleged submission of false declaration was not with a view to cause loss to the Government exchequer or to defraud the public revenue thus S.32 of the Customs Act, 1969 and the penal clauses referred to Ss. 156(1)(14)(77), 157 and 178 of the Customs Act, 1969 were not applicable.

Messrs Al-Hamd Edible Oil (P.) Ltd. and others v. Collector of Customs and others 2003 PTD 552 and 2004 PTD 2977 rel.

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

----Ss.156(1)(14)(77), 157, 178 & 32---S.R.O.487(I) of 2007, dated 9-6-2007---Punishment for offences---Filing of tampered/forged import authorization---Outright confiscation of goods---Appellant advanced plea that in place of outright confiscation, the appellant should have been allowed to get the goods cleared after payment of fine and other dues vide S.R.O. 487(I) of 2007, dated 9-6-2007---Validity---Such facility was not available as there was no authorization from the competent Ministry---Outright confiscation of good§ imported by the appellant was justified under the law.

(d) Customs Agents Licencing Rules, 2001---

----Rr.102(iv)(v), 103, & 104(2)---Filing of tampered/forged import authorization---Revocation of licence---Validity---Authorization of the importer being fake/forged and was cancelled---Being agent of the importer, the Customs Clearing Agent was fully liable for the acts and the omissions of the principal---Customs Clearing Agent had violated Rr.102 (4 & 5) of the Customs Agent Licensing Rules, 2001---Action taken against the Customs Clearing Agent under Rr.103 and 104 of the Customs Agent Licensing Rules, 2001 was justified.

Mian Abdul Ghaffar for Appellant.

Imran Chaudhry, Deputy Collector/D.R. for Respondent.

Date of hearing: 29th April, 2008.

2008 P T D 1827

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ramzan, Member (Technical)

Appeal No.44/CU/IB of 2008, decided on 24th June, 2008.

Customs Act (IV of 1969)---

----Ss.25-A, 25 & 32(1)(2)---Sales Tax Act (VII of 1990), Ss.3, 2(46)(d) & 6(1)---Custom Rules, 2001, Rr.113 & 107-A---S.R.O. 732(I) of 2006, dated 13-7-2007---Valuation Ruling No.606, dated, 14-6-2006---Action where declared value is less than the value determined---Customs authorities did not accept the invoice/transaction value declared by the appellants and assessed the goods on the basis of evidence as per provision of S.25(5) of the Customs Act, 1969---Valuation Ruling No.606, dated 14-6-2006 was not replied for the reason that the goods declaration has been filed on 13-11-2006 and the valuation ruling being old by more than 90 days was not applicable because of the provisions of R.107-A of the Customs Rules, 2001-Valuation ruling was patently wrong and illegal because the same had been fixed without any reference from any concerned quarter and without applying the provisions S.25 of the Customs Act, 1969 , in the sequential order---Values through Valuation Ruling No.606, dated 14-6-2006 could also not be fixed under the provisions of S.25-A of the Customs Act, 1969 because the same was inserted and made applicable on a subsequent date i.e. 1-7-2006---Validity---Vires of Valuation Ruling No.606, dated 14-6-2006 was challenged and the High Court had remanded a large number of petitions with the direction to reappraise the value after adoption of the sequential order provided in S.25 of the Customs Act, 1969 and for issuance of fresh valuation advices, if need be, for the relevant period---Department had failed to advance any convincing arguments as to why this judgment of High Court be, not followed in the present appeal except that it had been claimed that the appellants in the present appeal had not filed any writ petition before the High Court and the judgment in an identical case was not applicable to the present appeal as it was not a subject matter of any petition---Order to the extent of fixation of value through Valuation Ruling No.606, dated 14-6-2006 was not in consonance with the judgment of High Court and was set aside as far as the fixation of values for the purposes of assessment of customs duties was concerned and the case was remanded to the Director General of Customs Valuation for de novo consideration and decision by strictly following the judgment of High Court---Appeal was accepted by the Appellate Tribunal only to the extent of levy of customs duties by following the Valuation Ruling No.606, dated 14-6-2006 and the case was remanded to Director General Customs Valuation, for de novo fixation of value or issuance of a fresh valuation advice in the light of judgment of High Court and rest of the order was upheld.

Writ Petition No.2415 of 2007 rel.

Mian Abdul Ghaffar for Appellants.

Imran Chaudhry, Deputy Collector/(D.R.) for Respondent.

Date, of hearing: 16th June, 2008.

2008 PTD 1835

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Hafiz Muhammad Anees, Member (Technical)

S.T.A. No.497/LB of 2006, decided on 24th July, 2007.

Sales Tax Act (VII of 1990)---

----Ss.3 & 33(2)---Scope of tax---Additional tax---Levy of tax on account of supply of empty P.P. bags and paper cones without charging sales tax; commission of fraud by claiming double refund; claim of excess refund on exported goods weight of which was found less than the weight declared in export documents and claim of inadmissible refund against invoices issued by fake units---Report of the committee, constituted on the direction of Collector, was submitted by the appellant, according to which the liability against the appellant worked out to Rs.18586 which was to be recovered---Appellant agreed for payment of the said amount but at the same time requested that additional tax and penalty may be remitted as the same was not wilful or deliberate---Validity---As per report submitted by the Collectorate duly signed by the representatives of both the sides, the charges levelled against the appellant were not based on facts---Only liability of Rs.18585 stood out against the appellant---Appellate Tribunal directed that the amount as agreed by the appellant should be recovered---Order of lower forum of adjudication was modified to that extent and appeal was disposed of accordingly.

2005 PTD 1920 and 2006 SCMR 626=2006 PTD 1132 ref.

Masood Ishaq for Appellant.

Israr Khan, Senior Auditor for Respondent.

Date of hearing: 25th April, 2007.

2008 P T D 1841

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Chairman/Member (Judicial) and Saeed Akhtar, Member (Technical)

S.T.A. No.1264/LB of 2005, decided on 10th October, 2007.

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

----S. 33---S.R.O. 463(I)/2007, dated 9-6-2007---S.R.O. 999(I)/2007, dated 29-9-2007---Offences and penalties---Advances---Levy of additional tax for late payment of due amount of sales tax and penalty for non-filing of sales tax return---Appellant contended that event of supply was not completed at the time of receipt of advances as the property in goods had not passed on to the buyer---Federal Government vide S.R.O. 463(I)/2007 dated 9-6-2007 had allowed exemption of additional tax/default surcharge and penalties payable by a person subject to the condition that the outstanding principal amount of sales tax was paid by 30th of June, 2007---Validity---Federal Government extended the scope of S.R.O. 463(I)/2007 dated 9-6-2007 vide S.R.O. 999(I)/2007 dated 29-9-2007 allowing exemption of additional tax and penalties to the cases where principal amount of sales tax was paid even prior to 9-7-2007---Since principal amount had already been paid, there was no justification for demand' for payment of additional tax after the issuance of Notification S.R.O. 463(I)/2007 dated 9-6-2007 as amended vide S.R.O. 999(I)/2007 dated 29-9-2007---Order against the charge was set aside and appeal was accepted by the Appellate Tribunal.

PTCL 2000 CL 95 rel.

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

----S.33---Offences and penalties---Levy of penalty for non-filing of sales tax return---Appellant contended that there was taxable activity carried out for sixteen months and no sales tax was payable meaning thereby no evasion of tax had taken place---Filing' of returns was a mechanical action and non-filing of return had not resulted into any loss to the national exchequer---Such was an innocent and inadvertent mistake--Where there was no wilful evasion of duty/tax, imposition of penalty was illegal even if there appeared to be violation of rules---Appellate Tribunal after considering the contentions of parties, found force in the arguments of the appellant and order against the charge was set aside and appeal was accepted.

Khalid Ishaq for Appellant.

Irfan Ahmad, Senior Auditor for Respondent.

2008 P T D (Trib.) 1858

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Chairman/Member (Judicial)

S.T.A. No.1011/LB of 2004, decided on 22nd November, 2007.

Sales Tax Act (VII of 1990)---

----S.10---C.B.R. Letter C. No.2(7) STP/99, dated 22-5-2001---Excise amount to be refunded---Variance in blend and description of account declared/claimed and test report---Rejection of refund being illegal and inadmissible---Validity---Sales Tax Department not being satisfied with the blend and description of count approached the customs for test report which showed variation---Description declared was 35x35 PC 80x20 PC whereas after the test the ascertained value was 40x36 and 62x38---Description declared in another shipping bill was 30x30 PC 80x20% PC whereas the ascertained value was 35x34 PC 63x67 PC---Central Board of Revenue clarified vide letter C.No.2(7)STP/99, dated 22-5-2001 variation up to 3% - + count variation was admissible, whereas count variation in this case was beyond the permissible limit---Rejection of refund to the extent of two shipping bills was justified but with respect to third shipping bill, the ascertained value was within the permissible range---Rejection of refund to that extent was unjustified and the appellant was entitled to the refund claimed pertaining to such shipping bill.

Muhammad Yousaf, Accounts Manager for Appellant.

Syed Azhar Abbas, Auditor for Respondent.

Date of hearing: 22nd November, 2007.

2008 P T D (Trib.) 1864

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member (Judicial)

S.T.A. No.328/LB of 2006, decided on 6th December, 2007.

Sales Tax Act (VII of 1990)---

----Ss.34 & 33---Additional tax and penalties---Supplies to blacklisted units---Late payment of tax by the blacklisted units---Levy of additional tax and penalty upon the appellant/registered person---Validity---Admittedly blacklisted unit had made the payment although it was deposited late---Levy of penalty upon the buyer i.e., appellant was totally unjustified particularly when the Central Board of Revenue itself had condoned the late payment of sales tax---Finding that appellant had deliberately and knowingly supplied the goods to blacklisted unit was not supported by any type of evidence and thus was not sustainable---Orders passed by both the forums below suffering from legal infirmity were set aside and appeal was accepted by the Appellate Tribunal holding that appellant was not liable to make payment of additional tax and penalty.

Muhammad Irfan for Appellant.

Hassan Muhammad, D.S. for Respondent.

Date of hearing: 4th December, 2007.

2008 P T D (Trib.) 1869

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.A. No.04/LB of 2007, decided on 27th November, 2007.

Sales Tax Act (VII of 1990)---

----S.10---S.R.O. 27(I)/98, dated 17-1-1998--S.R.O. 455(I)/2004, dated 12-6-2004---S.R.O. 501(I)/06, dated 31-5-2006---C.B.R. Order C.No.2(1) ST/L&P/2000(Pt), dated 28-8-2006---Excess amount to be refunded---Suppression of production and sales of wastage---Refund claim was disallowed on the ground that amount in question pertained to tax on suppressed production and sale of wastage---No break-up/detail had been given in the refund payment order or order-in-appeal---Appellant contended that shortage in production was due to shrinkage duly supported by physical verification report produced by a team of officers of sales tax department, which confirmed shrinkage of fabrics up to 26%-Department had neither controverted the findings of this report in the written comments nor produced any evidence to prove the charges about suppression of production or supply of wastage/scrap---Major part of the amount had already been adjudged of the same order and refunded and there was no justification to withhold a small part of the claim on such ground---Appeal was accepted and the department was directed to refund the balance amount of appellant's claim.

Tariq Waseem, Manager for Appellant.

Nemo for Respondent.

Date of hearing: 26th November, 2007.

2008 P T D (Trib.) 1872

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member (Judicial) and Hafiz Muhammad Anees, Member (Technical)

S.T.A. No.23/LB of 2003, decided on 4th December, 2007.

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

----S.7---Determination of tax liability---Input tax adjustment---Consumption of electricity in administrative office---Consumption of electricity in the administrative office located within the four walls of the factory premises was admissible to input tax adjustment---Central Board of Revenue had also clarified and declared to the field formations that input tax adjustment may not be objected to---Objection was dropped by the Appellate Court.

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

----S.33(3)---Offences and penalties---Non-maintenance of record---Penalty prescribed under S.33(3) of the Sales Tax Act, 1990 was Rs.10,000 and not Rs.50,000 for non-maintenance of record; being so, the penalty was reduced to Rs.10,000---Order-in-original was modified accordingly by the Appellate Tribunal.

Mudassar Shuja for Appellant.

Ms. Nyma Batool, D.R. for Respondent.

Date of hearing: 3rd December, 2007.

2008 P T D (Trib.) 1879

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member (Judicial) and Hafiz Muhammad Anees, Member (Technical)

S.T.A. No.876/LB of 2005, decided on 13th November, 2007.

Sales Tax Act (VII of 1990)---

----Ss.3(1A), 3(1), 2(46), 23, 33(2)(cc), 34 & 36(1)---S.R.O. 207(I)/98, dated 31-3-1998---Further tax---Supply of sugar---Recovery of further tax along with additional tax and penalty not paid on the value of supplies of sugar in excess of Rs.14 per Kg being in violation of provision of Ss.2(46), 3(1) and 3(1A) of the Sales Tax Act, 1990---Validity---Further tax was not exempted under the S.R.O. 207(I)/98, dated 31-3-1998---Fixation of value was for levy of sales tax only and over and above the value fixed by the Federal Government, the sales tax was exempted whereas further tax in 'terms of S.3(1A) of the Sales Tax Act, 1990 was to be collected as per value envisaged under S.2(46) of the Sales Tax Act, 1990---Contention that further tax was not leviable as supplies were made to persons who were liable to be registered was misconceived and ill-founded---Section 23 of the Sales Tax Act, 1990 stipulates that full particulars of the registered person viz. registration number, full address and other relevant particulars had to be indicated in the sales tax invoices before making taxable supplies which were missing---In absence of all such particulars, such issue had been raised without any substance just to create confusion---Appeal was dismissed by the Appellate Tribunal being devoid of any merit and legal force.

Collector of Sales Tax v. Phalia Sugar Mills and others Civil Appeal No.629 of 2002 ref.

Sales Tax Appeal No.185 of 2001 and S.T.A. No.1485 of 2000 rel.

Ijaz Ahmed Awan for Appellant.

Ms. Nyma Batool, D.R. and Tauqir Zaman, Investigating Officer for Respondent.

Date of hearing: 23rd October, 2007.

2008 P T D (Trib.) 1893

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member (Judicial) and Hafiz Muhammad Anees, Member (Technical)

S.T.A. No.132/LB of 2007, decided on 31st October, 2007.

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

---Ss.7(2), 8(1)(a), 6, 23, 26, 33(5), 34 & 36(1)-S.R.O. 578(I)/98, dated 12-6-1998---Determination of tax liability---Registered person was not entitled to claim input tax paid on the goods like vehicle, building material, office equipment, electric and gas appliance, telephone equipment--Unauthorized/irregular claim of input tax claimed on prohibited items resulted into short payment of sales tax---Recovery---Validity---Section 7 of the Sales Tax Act, 1990 allowed input tax adjustment provided that the registered person was in possession of valid sales tax invoices---Section 8(1)(a) of the Sales Tax Act, 1990 disentitled a registered person to claim input tax adjustment on those items/input goods which were used for any purpose other than for the purpose of manufacture/production of taxable goods or supplies---Similarly S.8(1)(b) of the Sales Tax Act, 1990 provided that certain items could be disallowed for input tax adjustment if they had multiple uses and were liable to be misused and otherwise being taxable were entitled to input tax adjustment---Central Board of Revenue had issued notification vide S.R.O. 578(I)/98, dated 12-6-1998 stating that items which fell in the notification had been disallowed---No legal justification for allowing input tax adjustment existed on those goods which were hit by S.R.O. 578(I)/98, dated 12-6-1998---Collector (Appeals), in the present case, had already allowed adjustment to the extent which were not hit by S.8(1)(b) of the Sales Tax Act, 1990---Order passed by the Collector (Appeals) was correct and was upheld by the Appellate Tribunal---Appeal filed by the assessee being devoid of any merit was turned down by the Appellate Tribunal.

(b) Sales Tax---

----Audit---Order F. No.2(I)/2001-Pub., dated 17-5-2001---Jurisdiction of DRRA staff to carry out audit---Contention that DRRA was not competent to carry out audit was not valid---DRRA, was competent to carry out the audit under its charter of function---Appellate Tribunal had already held that auditors of DRRA were authorized under the law to conduct audit of the sales tax records pertaining to receipts of Federation in accordance with the provisions of Order F.No.2(I)/2001-Pub., dated 17-5-2001---By conducting audit by the DRRA no prejudice was caused to the appellant---Show-cause notice had been issued by the competent authority and had been adjudicated upon by the competent authority---Objection was not tenable in the eyes of law and was turned down accordingly by the Appellate Tribunal.

GST 2006 CL 18 ref.

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

----S.36(1)--Recovery of tax not levied or short-levied or erroneously refunded---Issuance of show-cause notice---Limitation---Contention of the appellant that show-cause notice fell under S.36(2) of the Sales Tax Act, 1990 and not under S.36(1) of the Sales Tax Act, 1990 was misconceived---Under self-assessment scheme, it was exclusive responsibility of taxpayer to ensure that due tax was paid on time and in case of failure to do so the registered person could not avoid responsibility---Appellant did not substantiate that it was due to inadvertence, error or misconstruction---Show-cause notice S.36(1) of the Sales Tax Act, 1990 was not time-barred and was issued well within time.

Ijaz Ahmad Awan for Appellant.

Dr. Kamal Azhar Minhas, D.R. for Respondent.

Date of hearing: 12th September, 2007.

2008 P T D 13

[Federal Tax Ombudsman]

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

Messrs LION BOX FACTORY, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-533-K of 2007, decided on 4th August, 2007.

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

----S. 2(3)-Sales Tax Act (VII of 1990), Ss.14 & 26(5)---Deregistration---Complaint against---Factory which was registered as manufacturer with the Sales Tax Department about two decades ago lodged a complaint that Department vide its letter deregistered the factory with retrospective effect on the grounds that factory's turn-over during 2003-2004, was below Rs.5 million---Department, in accordance with the C.B.R's. directive in the budget measures of 2004-2005, correctly, but unilaterally deregistered complainant's unit as no intimation to that effect was given to it---Complainant's unit which continued to be a registered unit and kept on filing monthly sales tax returns regularly and submitted summaries of invoices under S.26(5) of Sales Tax Act, 1990, remained under impression that it continued to be a registered unit---Present was clearly a case of maladministration on the part of the department because the complainant all the time presumed that it was a registered unit and was keen to remain so, but the Department did not take appropriate action even when the turnover exceeded the ceiling---Such was also an act of maladministration that under C.B.R's. Order the unit was deregistered, but complainant was not informed, though it might have published news in one particular newspaper as told---Ombudsman recommended that C.B.R. should restore registration of complainant factory and concerned Departments would ensure that representatives of the Department attended hearing punctually and regularly---Compliance of order be reported within forty five days.

Abbas Bhojani for the Complainant.

Dr. Ahsan Khan, Asstt. Collector of Sales Tax.

Dr. Ali Raza, Asstt. Collector of Sales Tax.

2008 P T D 89

[Federal Tax Ombudsman]

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

Messrs GLAXO SMITH KLINE PAKISTAN LIMITED through Messrs Muhammad Naseem & Company

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-675-K of 2007, decided on 1st August, 2007.

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

----S.9(2)(b)---Sales Tax Act (VII of 1990) Ss. 7 & 9---Sales Tax Rules, 2006, Rr. 19 & 23---Complaint---Jurisdiction of Federal Ombudsman---Scope---Collector of Sales Tax in her written report had raised objection regarding jurisdiction of office of Ombudsman on the ground that since the issue involved interpretation of law, rules and regulations, Ombudsman office had no jurisdiction to investigate the complaint in view of provisions of S.9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Validity---Said objection was invalid because whenever maladministration was alleged independent of the controversy in the matter, there would be no bar to jurisdiction of the Federal Tax Ombudsman to look into the allegation of mal­administration---Wherever maladministration was alleged and proved, then Federal Tax Ombudsman could give recommendations and findings which could even affect the merits of case---Question involved in the present complaint did not require any interpretation of law and rules, but it was alleged that the Department was refusing to follow the legal principle settled by the High Court---Such conduct being contrary to law, tantamount maladministration which office of Ombudsman was competent to investigate or inquire into.

Mayfair Spinning Mills v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore PTCL 2002 CL 115 ref.

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

----Art.189---Decision of Supreme Court, binding force of---Only that decision of the Supreme Court would be binding which would decide a question of law or was based upon a principle of law or enunciated a principle of law---Decision should be final and after that nothing should remain pending before Supreme Court regarding that point---None of the conditions enumerated in Art.189 of the Constitution being applicable to the order of the Supreme Court, order suspending the operation of the judgment of the High Court which was not covered by Art.189 of the Constitution, was not binding on the courts of Pakistan, except on the parties in that case.

Dr. Farogh Naseem, Messrs Asif Haroon and Samiullah for Petitioners.

Chartered Accountants for the Complainant.

Badaruddin Ahmed Qureshi, Deputy Collector, Sales Tax for Respondent.

2008 P T D 163

[Federal Tax Ombudsman]

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

Messrs FAUZIA INDUSTRIES (PVT.) LIMITED through Messrs Awan Law Associates, Karachi

Versus

SECRETARY, REVENUE DIVISION, GOVERNMENT OF PAKISTAN, ISLAMABAD

Complaint No. C. 1069-K of 2007, decided on 3rd December, 2007.

Sales Tax Act (VII of 1990)---

----S. 10---Sales Tax Rules, 2005, R. 29---Sales Tax Rules, 2606, R.39(4)---C.B.R. Letter C. No. 2(1)ST-ST-L&P/2000(Pt) dated 25-11-2006---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund of input tax-- Tax period dune, 2005---Refund claim was not processed on the ground that refund claim had not been filed on Refund Claim Preparation Software (ACT'S) as required by Refund Rules---Validity---Under the Sales Tax. Rules, 2005, there was neither any requirement of RCPS (though the data was required to be submitted in electronic format) nor any time limit had been prescribed for filing of the supportive documents---Board's letter intended to allow a period of six months from the date of promulgation of Sales Tax Rules, 2006 for filing of the relevant documents but the letter was issued on 25-11-2006 and required the filing of all documents by 31-12-2006---Virtually only one month's time had been given to the taxpayers for compliance which was not reasonable and tantamounted to maladministration---No evidence had been brought on record to prove that it was widely circulated---Most of the taxpayers failed to :sail such amnesty since the matter slid not come to their knowledge- Federal Tax Ombudsman recommended that Federal Board of revenue withdraw the-id letter dated 14-7-2007 addressed to the complainant and direct the concerned Collector to obtain the relevant supportive documents from the complainant and thereafter process and settle the claim within 60 days of the receipt of this order in accordance with law and farts of the case after providing a reasonable opportunity of hearing to the complainant.

Asad Arif, Advisor, Dealing Officer.

Messrs Afzal Awan, Imran Javed and Imran Iqbal for the Complainant.

S.A. Sajjad Rizvi, Deputy Collector, Sales Tax for Respondent.

2008 P T D 283

[Federal Tax Ombudsman]

Present: Justice (R) Munir A. Shaikh, Federal Tax Ombudsman

ASKARI ENTERPRISES, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 853 of 2006, decided on 14th October, 2006.

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

----Ss. 7(2)(i) & 23(1)(8)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Determination of tax liability---Tax invoices---Disallowance of input tax on the grounds that original invoices were not submitted and invoices did not bear the serial number---Validity---Provisions of Ss. 7 and 23 of the Sales Tax Act, 1990 confirm that the submission of original invoices was not necessary condition---Provisions of S.7(2)(i) of the Sales Tax Act, 1990 required that "a tax invoice in his name and bearing his registration number in respect of such supply is required to be furnished"---Invoice submitted by the complainant contained registration number---In respect of serial number, department ignored the observation of its own auditor that the "supplier issued only one sales tax invoice to the distributor in each month against all the supplies made at different dates of that month"---Presumed procedural lapse should not be pressed into service for disallowing a credit of tax paid, the payment of which was not doubted by the Department---Alleged procedural lapse was committed by the supplier and not by the complainant---Supplier was also a registered person and was a reputed company and had confirmed the payment of tax---No justification was found by the Federal Tax Ombudsman to disallow the input tax claimed by the complainant---Federal Tax ombudsman recommended that the competent authority may cancel the impugned order-in-appeal in exercise of the powers under S.45A of the Sales Tax Act, 1990 which would result in annulment of the order-in-­original and input tax claimed by the complainant be allowed and that Collector (Appeals), the author of the Order-in-Appeal, be issued a warning letter by the Central Board of Revenue to refrain from making impertinent comments.

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

----S. 2(3)-Sales Tax Act (VII of 1990), S.7---Maladministration---Definition of maladministration was wide and inclusive in nature and included decisions, processes, recommendations, acts of omission or commission, which were contrary to law, rules and regulations and or perverse, arbitrary, unreasonable, unjust, biased, oppressed or discriminatory---Disallowance of input tax without any justification squarely fell in the definition of maladministration.

(c) Sales Tax---

----Judicial authority---Definition---Power and authority appertaining to the office of a Judge---Collector (Appeals) was not a judicial authority.

Black's Law Dictionary, 6th Edition ref.

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

----S.14---Power of the Federal Tax Ombudsman---Scope---Under the provision of S.14 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, Federal Tax Ombudsman could summon and enforce attendance of any person and examine him on oath, compel production of documents, receive evidence on affidavits, issue commission for examination of witnesses.

(e) 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 investigate any allegation of maladministration against any officer of the Revenue Division within the meaning of S.9(1) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000.

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

----S.16---Power to punish for contempt---Scope---Impertinent remarks---Provisions of S.16 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 were not invoked by the Federal Tax Ombudsman as such impertinent remarks were based on ignorance.

Shamim Ahmad, Adviser, Dealing Officer.

Syed Arshad Hussain, Advocate/A.R. for the Complainant.

Tahir Abbas, A.C.S.T./D.R. for Respondent.

2008 P T D 351

[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

Complaint No. C-884-K of 2006, decided on 17th October, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170(4), 113A, 114, 115(4) & 233---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 9(2)(b)---Refund---Limitation---Commission receipts---Discount income--Statement under S.115 (4) of the Income Tax Ordinance, 2001 was filed declaring commission receipt and tax payable thereon and claimed the excess of tax deducted as refundable---No return was filed in response to notice under S.114 of the Income Tax Ordinance, 2001 in respect of discount income subject to normal taxation---Refund was claimed on the ground that since no order had been passed within 45 days as directed by the First Appellate Authority, the refund had automatically became due---Validity---Provision of S.170 of the Income Tax ordinance, 2001 did not come in operation because it was yet to be decided as to whether the amount paid was in excess of the amount with which the complainant was properly chargeable to tax---Since the discount income earned was not offered for taxation, Assessing Officer required the claimant to file the return under S.114 of the Income Tax Ordinance, 2001 in regard to this income so that his tax liability and the resultant refund, if any, could be determined---Instead of filing return, complainant chose to approach the Federal Tax Ombudsman with the result that Taxation Officer had kept the proceedings in abeyance---Question as to whether any refund was due or not was to be determined by the Taxation Officer---Return having not been filed, Taxation Officer had not yet worked out the tax liability and the amount refundable also remained undetermined---Question of issuance of refund would not arise in circumstances---No case of mala-administration had thus been made out.

2006 PTD 1580; Complaint Nos. C-1088 of 2005, 905L of 2004, 945 of 2005 and also 1102/2005 and (1994) 70 Tax 11 distinguished.

Asad Arif Advisor Dealing Officer.

Abdul Tahir Ansari for the Complainant.

Saeed Ahmed Siddiqui Addl. Commissioner and Khuda Bux Abbasi, Special Officer, Income Tax for Respondent.

2008 P T D 411

[Federal Tax Ombudsman]

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

Messrs ZAVERIA ENTERPRISES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-1249-K of 2003, decided on 20th October, 2003.

Customs Act (IV of 1969)---

----Ss.35, 36 & 37---Custom General Order 12 of 2002, para.52---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Drawback---Non-settlement of supplementary claims pending since 1992 to 1994---Validity---Since the Complainant had already filed duplicate documents of the 75 supplementary claims and the Deputy Collector had promised to process and decide the same as early as possible---Federal Tax Ombudsman recommended that Central Board of Revenue direct the Collector of Customs to decide the supplementary claims within thirty days and depute staff to prepare a list of all pending supplementary claims and furnish the same to this office within two months.

M. Mubeen Ahsan, Dealing Officer.

Aleem Khan, Advocate.

Ms. Zeba Ahmed, Deputy Collector of Customs (Exports).

2008 P T D 413

[Federal Tax Ombudsman]

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

Messrs F. HUSSAIN & SONS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1324-K of 2003, decided on 3rd November, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 92, 50 & 59(1)---C.B.R. Circular No. 18 of 1999 dated 11-9-1999---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Assessment was finalized under Self-Assessment Scheme giving tax credit to the extent of tax liability only and tax paid in excess of tax liability was not refunded---Instructions were issued to the Commissioner to issue the refund voucher for relevant assessment year---Explanations had also been called from the concerned officer for showing carelessness in responding to the complainant's application---In compliance to instructions, Commissioner concerned had approved the issuance of refund---Federal Tax Ombudsman appreciated the prompt and just action taken by the Regional Commissioner of Income Tax in redressal of the genuine grievance of the taxpayers---Such vision and progressive attitude reflected service oriented trend which was a great improvement in the tax culture---Any reform in the tax administration will succeed if the reformers and administrators changed their minds---Federal Tax Ombudsman recommended that claim or refund for the assessment year 1999-2000 be issued within 15 days of the receipt of this order together with compensation for delayed payment of refund under S.102 of the Income Tax Ordinance, 1979 and that disciplinary proceedings initiated against the concerned officer be finalized and completed within 30 days of the receipt of this order and a copy of the same be wilt to this Secretariat.

S. A. Nasser, Dealing Officer.

Haider Naqi for the Complainant.

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

2008 P T D 416

[Federal Tax Ombudsman]

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

Messrs ABDUL JALIL AND BROTHERS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 914-L of 2005, decided on 30th September, 2005.

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

----Ss. 21(4), 25(3) & 38---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---De-registration, blacklisting and suspension of registration---Complainant was registered person with the sales tax department as a commercial exporter and wholesaler and paying sales tax on imports and on more than 10% value­ addition---Name of the complainant was included in the list of suspect units without issuing a show-cause notice or the blacklisting order debarring the complainant to claim input tax on invoices issued by it---Validity---Registered person was blacklisted on the basis of non-existence of declared address/premises and involvement in issuance of fake/flying invoices, which were later reported in audit observations---Complainant's name in the list of suspect units at a time when there was no provision in the Sales Tax Act, 1990 to blacklist the registered person---Proviso to S.21(4) of the Sales Tax Act, 1990 under which the Collector was authorized to blacklist the units or suspend their registration, subject to adherence to the procedure as laid down for the purpose, was added to the Sales Tax Act, 1990 w.e.f. 1-7-2003---Department's action to include complainant's name in the list of suspect units prior to that amendment was without jurisdiction---Collector's letter addressed to Central Board of Revenue for inclusion of complainant's name in the suspect list did not disclose any reason for which inclusion was to be made nor did the department disclose whether any formal order blacklisting the complainant was communicated to it to enable it to react and explain its position---Inclusion of complainant's name in the list of suspect units was without jurisdiction and not sustainable---Complainant's name should be excluded from the list of suspicious units---Federal Tax Ombudsman recommended that Revenue Division direct the competent authority to exclude complainant's name from the list of suspect units as the same was included in the list at a time when there did not exist any provision in the statute empowering the revenue to place complainant's name in the suspect list, the department will, however, be at liberty to include the name of the complainant in the list of suspect units, provided it has sufficient and demonstrable evidence to do so subject also to the condition that the law, provides for such blacklisting and the department follows the procedure Paid down for the purpose; that Central Board of Revenue to decide complainant's pending application, dated 4-6-2005 complaining that it was subjected to audit despite suspension of audit by the Central Board of Revenue so as to rule whether or not respondents' action to conduct audit was legitimate or whether it militated against Central Board of Revenue's own instructions to suspend audit and communicate its considered decision to the complainant with reference to its pending application as well as to the Collectorate.

Complaint No.295-K of 2004 ref.

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

----S. 21(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---De-registration, blacklisting and suspension of registration---Compensation for loss of business due to blacklisting and suspension of registration---Validity---Not possible for Federal Tax Ombudsman to award compensation on account of loss of business---Sales Tax Act, 1990 did not provide for payment of any such compensation---Department will be at liberty to blacklist the complainant, provided it had sufficient and demonstrable evidence to do so subject to the condition that the law provides such blacklisting and the department follows the procedure laid down for the purpose, giving the complainant the opportunity to clarify its position.

Muhammad Akbar, Advisor, Dealing Officer.

Saleem Iqbal Rathore, for the Complainant.

Muhammad Saeed Wattoo, D.C. Sales Tax, Lahore for Respondents.

2008 P T D 430

[Federal Tax Ombudsman]

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

Messrs FIVE STAR TEXTILE INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 560 of 2003, decided on 3rd November, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59(1) & 80-CC---C.B.R. Circular No. 7 of 2002, dated 15-6-2002 [Self-Assessment Scheme], para. 9(a)(ii)---C.B.R. Letter C. No.7(7)/S.Asstt/2002 dated 17-12-2002---C.B.R. Circular No.20 of 1992 dated 1-7-1992---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment--Setting apart---Case was set apart by the Regional Commissioner of Income Tax for total audit on the ground that expenses claimed under various heads of accounts had not been properly prorated in accordance with the ratio of local processing and exports to find out the right figure of total taxable income and that sale of scrap/empties under the head of other income had been added to export income, whereas the same should have been included in local income---Validity---Separate accounts had been maintained for export business and for local processing---Relevant expenses under different heads relating to each segment were charged to relevant account i.e. exports or local sales---Accounts were certified by the practising chartered accountants and the financial statement reflected both the segments [export or local] separately---Since there was no overlapping or mixing up of expenses of export and local business and expenses pertaining to each account were being charged separately the principle of prorating the expenses towards export and local business would not apply---Local sales of goods as well as waste material, not constituting mere than 20% of such production, may also be treated as export sales if the assessee opts to pay tax one such sales at the rate applicable to export sales under S.80CC of the Income Tax Ordinance, 1979---Local sales formed 3.8% of total production for export sales---Sale of scrap/waste was rightly shown in the export sales---Workers a Welfare Fund was also rightly charged to normal business income which was offered for taxation---Law did not envisage charging of Workers Welfare Fund on presumptive income---Selection of case for total audit was arbitrary, baseless, contrary to law and based on irrelevant grounds---Federal Tax Ombudsman recommended that the Complainant's case be excluded from the list total audit cases and return for the assessment year 2002-2003 be accepted under Self-Assessment Scheme.

C.I.T. v. Messrs Kamran Model Factory 2002 PTD 14 ref.

Muhammad Anwar, Consultant, Dealing Officer.

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

Javed Ahmad, DCIT for Respondent.

2008 P T D 434

[Federal Tax Ombudsman]

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

Messrs CROWN LIGHTING (PVT.) LTD., PESHAWAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1448 of 2002, decided on 30th January, 2004.

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

----Ss.156, 92, 80-D & Second Sched., Cl.(126C)--C.B.R. Circular No.10 of 1960 dated 19-7-1960---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Rectification of mistake---Refund---Minimum tax on turnover was charged---Application for rectification on the ground that complainant being exempt from tax under Cl.(126C) of the Second Schedule of the Income Tax Ordinance, 1979 was not liable for payment of minimum tax under S.30-D of the Income Tax Ordinance, 1979 and demanded refund of tax paid under S.80-D of the Income Tax Ordinance, 1979---Department contended that Complainant/assessee had not filed appeal against the order and application for rectification was rejected as there was no mistake apparent from record---Validity---Complainant/assessee being exempt from tax under Cl.(126-C) of the Second Schedule of the Income Tax Ordinance, 1979 was exempt from levy of minimum tax under S.80-D of the Income Tax Ordinance, 1979---Tax levied was illegal and non-filing of appeal could not make it legal and such being a glaring and obvious mistake of law should have been rectified deleting the tax demand instead of rejecting the application under S.156 of the Income Tax Ordinance, 1979 simply for the reason that there was no mistake apparent from record---Stand taken by the department was arbitrary and contrary to law which constituted maladministration---Federal Tax Ombudsman recommended that the assessment order for the year 1997-98 be amended/rectified by the Commissioner by resorting to the provision of sections 122A and 221 of the Income Tax Ordinance, 2001 so that the Complainant was not charged to tax under section 80D and the tax collected was refunded to him.

Elahi Cotton Mills's case PLD 1997 SC 582 = 1997 PTD 1555 ref.

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

----S.156---Income Tax Act (XI of 1922), S.35---C.B.R. Circular No. 10 of 1960 dated 19-7-1960---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Rectification of mistake---Scope---Mistake of fact--Mistake of law---If a mistake of fact apparent from the record of assessment order could be rectified why a mistake of law which was glaring and obvious could not be similarly rectified.

(1958) 34 ITR 143 rel.

Muhammad Anwar, Consultant, Dealing Officer.

Zafar Iqbal for the Complainant.

Khalid Khan, DC IT for Respondent.

2008 P T D 437

[Federal Tax Ombudsman]

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

Messrs AL-ABBAS TRADERS through Proprietor

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-875-L of 2005, decided on 15th September, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 221, 122-A & 122(5A)---income Tax Ordinance (XXXI of 1979), Ss. 156, 80C & 50(4)-- C.B.R. Circular No.11 of 1991, dated 30-6-1991---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10(8)---Rectification of mistake--Income from commission; service charges and janitorial services by providing manpower---Assessment were framed under Ss.62/132 of the Income Tax Ordinance, 1979 after conducting direct enquiries---"Nil" demand notices were issued---Application for rectification for grant of full credit and issue of refund was filed---Application for rectification was rejected for the reason that proceedings under S.122(5A) of the Income Tax Ordinance, 2001 were proposed to be taken as the complainant/assessee was a contractor and fell within the Presumptive Tax Regime---Although, Assessing Officer admitted that the mistake was apparent from record but refused to rectify on the ground that the case had been proposed for action under S.122(5A) of the Income Tax Ordinance, 2001---Validity---Decision rejecting the rectification application for creation of refund was contrary to 'the decision of the President of Pakistan which amounted to `maladministration' and was not maintainable in the eyes of law---Federal Tax Ombudsman recommended that the order passed under S.221 of the Income Tax Ordinance, 2001 by the Taxation Officer, rejecting the complainant's application under S.156 of the (repealed) Income Tax Ordinance, 1979 should be set aside by invoking provision of S.122A of the Income Tax Ordinance, 2001 and complainant's refund in consequence of assessment order for assessment years 1998-99, 1999-2000, 2001-02 and 2002-03 be properly determined and issued along with additional payment, if any, as per law.

C.No.36 of 2003, Vol.7 No.9 Tax Forum 42 and I.T.A. No.2668/LB to 2672/LB of 2002 rel.

Muhammad Sirjees Nagi, Advisor, Dealing Officer.

Salim Iqbal Rathore for the Complainant.

Muzammil Hussain, D.C.I.T. for Respondent.

2008 P T D 447

[Federal Tax Ombudsman]

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

ABDUL RASHEED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1513-K of 2003, decided on 28th February, 2004.

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

----Ss.13. 62, 111 & 116---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Re-framing of assessment by making additions---Imposition of penalty during pendency of appeal against assessment order---Assessing Officer during penalty proceedings undertook to have elaborate discussion on specified points after decision of appeal---Assessing Officer later on deviated from his undertaking and imposed penalty without hearing complainant---Validity---Such deviation without any bona fide reason had rendered penalty order arbitrary, vindictive and illegal resulting in maladministration---Federal Tax Ombudsman recommended to Commissioner to cancel penalty order under S.122-A of Income Tax Ordinance, 2001 and reconsider matter after decision of such appeal.

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

----Ss.2(3) & 9---Tax matters---Action/order contrary to law, arbitrary, baseless or biased---Validity---Assessment of income and wealth must necessarily be according to law---Such action/order not protected under S.9(2) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Duty of department in order to justify such action/ order to prove bona fide as envisaged by S.2(3)(i)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 stated.

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

----Ss. 2(3) & 9---Jurisdiction of Federal Tax Ombudsman---Scope---Ombudsman, as a general rule, would not interfere with merits of a decision, though unmeritorious, but free of maladministration---Order/ decision/process tainted with maladministration could justifiably be questioned by Ombudsman, even if law provided appeal.

A. A. Zuberi, Advisor, Dealing Officer.

Muhammad Younas Bhatti, (ITP) for the Complainant.

Muhammad Hajjan Bughio, (D-CIT) for Respondent.

2008 P T D 451

[Federal Tax Ombudsman]

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

Messrs KARIM ENTERPRISES, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1583-L of 2003, decided on 19th March, 2004.

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

----Ss.2(16), 3, 16, 17 & 25---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss, 9 & 11---Assessment in respect of property not belonging to assessee, but holding same as "sub­lessee"---Plea of authority was that such property belonged to assessee at least for period of tenancy---Validity---Lease deed did not contain any reference to establish that complainant was owner of land or superstructure---Unless ownership was established, property or superstructure could not be said to belong to complainant---Impugned order was contrary to law, rules and regulations---Authority had not proved such action to be bona fide and for valid reason---Federal Tax Ombudsman recommended to Commissioner to set aside impugned assessment, conduct enquiry to ascertain, whether complainant after obtaining lease had made addition/modification or, raised fresh construction, which could be said to belong to him and then frame assessment on basis of findings of enquiry.

W.T.As. Nos.199 to 203/LB of 1996 and W.T.As. Nos. 852 to 858/LB of 2000 ref.

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

---Ss.2(3) & 9---Procedure adopted or decision taken by revenue - contrary to law/rules/regulations or a departure from established practice/procedure---Validity---Onus would lie on revenue to establish that such action was bona fide and for valid reasons---Failure to discharge such onus would result in maladministration vesting jurisdiction with Ombudsman.

A.A. Zuberi, Advisor, Dealing Officer.

Zahid Parvez for the Complainant.

Abdur Rehman Warriach (D-CIT) for Respondent.

2008 P T D 454

[Federal Tax Ombudsman]

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

Mrs. UZMA KHURRAM ALI ABIDI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 483-L and 484-L of 2004, decided on 15th December, 2004.

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

---Ss. 14C, 35 & Second Sched., Part-I, Cl.(12)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Tax on owners of certain immovable assets---Rectification of mistake---Limitation---Non-payment of created refund on the ground that payment was final discharge of tax liability in respect of property---Assessing Officer's rectification orders declaring the amounts as refundable were not in accordance with the provisions of law---Validity---Assessing Officer rectified the original assessment under mistaken belief that the tax deposited was in excess of the demand and result was that the demand though due under S.14C of the Wealth Tax Act, 1963, had not at all been created---Such demand could legally be created by rectifying/revising the assessments---Subtle point was that the certificatory order had not created any demand but had simply allowed credit for tax paid---Department woke up to the reality too late in the day when action both under S.35 and S.17B of the Wealth Tax Act, 1963 had become time-barred by operation of the provision of S.17A(4) and 17B(3) of the Wealth Tax Act, 1963---Issuance of notices under S.35 of the Wealth Tax Act, 1963 were `contrary to law' being devoid of lawful authority and fell in the definition of "maladministration"---Federal Tax Ombudsman recommended that Central Board of Revenue to direct the concerned tax functionaries to drop the proceedings initiated by issuing notices under S.35 on 27-7-2004; that initiate enquiry as to how the lapses committed by the Assessing Officer remained unattended despite the expected frequent inspection by the Inspecting Additional Commissioner and that tax functionaries found responsible for improper inspection be identified and warned for dereliction of responsibility placing the warning on the Performance Evaluation Report.

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

----Second Sched., Cl. (12)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Exemption---One residential house was exempted from tax on 9th July, 1996 vide S.R.O. 575(I)/96, dated 9th July, 1996 by amending Cl. (12) of the Second Schedule of the Wealth Tax Act, 1963.

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

----S. 14C---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Tax on owners of certain immovable assets---Application and explanation---Section 14C of the Wealth Tax Act, 1963 was for the first time introduced in the Wealth Tax Act, 1963 on 16-4-1997 through Finance Supplementary (Amendment) Act, 1997 which was to `come into force at once'---For assessment year 1997-98 the provisions of S.14C and Cl.(12) of the Second Schedule of the Wealth Tax Act, 1963 were applicable.

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

---Ss. 14C, 17B, 35 & Second Sched., Cl.(12)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Tax on owners of certain immovable assets---Assessing Officer when framing assessment rightly allowed exemption, as claimed, for the self-occupied property, and subject to the rest of the declared assets without regard to the basic exemption limit---Assessing Officer however, committed a mistake by not levying the minimum tax liability' as per S.14C of the Wealth Tax Act, 1963 which hadcome into force on 16-4-1997---Such mistake was apparent from record and attracted action by the Inspecting Additional Commissioner under S.17B of the Wealth Tax Act, 1963.

Muhammad Akbar, Advisor, Dealing Officer.

Ahmad Shujah Khan for the Complainant.

Abdul Rehman Warriach for Respondents.

2008 P T D 462

[Federal Tax Ombudsman]

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

Messrs OWAISCO, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1580-K of 2003, decided on 29th March, 2004.

Customs Act (IV of 1969)---

----Ss. 81 & 202---S.R.O. 1108(I)/94 (Pre-Shipment Inspection Scheme)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9, 10(3) & 11---Release of goods after provisional assessment of duty---Non-finalization of assessment within period under S.81 of Customs Act, 1969 for being inapplicable to decision taken under Pre-Shipment Inspection Scheme---Issuance of recovery notice under S.202 of the Customs Act, 1969 after decision of Working Committee under S.R.O. 1108(I)/94---Validity---Instructions contained in Standing Order 9/95 and Public Notice 44/95 had to be followed within mandatory time-frame as provided under S.81 of 'the Customs Act, 1969, from which no escape was provided in Pre-Shipment Inspection Scheme---Finalization of assessment by Working Committee after such mandatory period had no legal validity---Encashment of pay-order and issuance of recovery notice were without lawful authority---Complaint against recovery notice was within time---Maladministration was established---Federal Tax Ombudsman recommended to C.B.R. to direct Collector to cancel recovery notice and refund ''amount to complainant within specified time.

2002 MLD 1098 ref.

M. Mubeen Ahsan, Dealing Officer.

Muhammad Junaid Ghaffar, Advocate.

Dr. Akhtar Hussain, Deputy Collector of Customs (Appraisement).

Naseem Ahmed Nisar, Examining Officer.

2008 P T D 468

[Federal Tax Ombudsman]

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

IMRAN MUKHTAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 180-L of 2004, decided on 18th May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S.50(7E)---Income Tax Ordinance (XLIX of 2001), S.170(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Tax collected by WAPDA through electricity bills---Maladministration---Discriminatory action---Reluctance to allow refund to the complainant of the amount of tai collected by WAPDA on electricity bills was arbitrary and unjust amounting to mal­administration---Federal Tax Ombudsman recommended that C.B.R. to direct the competent authority to allow refund of the subject amount collected by WAPDA through electricity bills as the complainant had discharged his tax liability by way of deduction of tax at source by company.

Muhammad Akbar, Advisor, Dealing Officer.

Rana Mushtaq Ahmad Toor, ITP for the Complainant.

Karamat Ullah, DCIT for Respondents.

2008 P T D 472

[Federal Tax Ombudsman]

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

MUNIR HUSSAIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1096-L of 2005, decided on 11th October, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 80C & 50(4)---Income Tax Ordinance (XLIX of 2001), Ss.122A & 153(9)---C.B.R. Circular No.6 of 2003, dated 9-7-2003---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Tax on income of certain contractors and importers---Services rendered as washerman/dhobi---Assessing Officer passed order cancelling the assessment under S.122A of the Income Tax Ordinance, 2001 holding that tax deducted under S.50(4) of the Income Tax Ordinance, 1979 was final liability---Assessee contended that services rendered as washerman/dhobi were covered by the word "services" and assessments under S.80C of the Income Tax Ordinance, 1979 were not justified; case fell under S.50(4) of the Income Tax Ordinance, 1979 and outside the purview of Presumptive Tax Regime and tax deducted could not be final discharge of tax liability---Validity---Issue had been dealt with at length by the Appellate Tribunal and it had been held by the Appellate Tribunal that the services rendered, whether through contract or otherwise were not covered by the `Presumptive Tax Regime' of the Income Tax Ordinance, 1979---Restricted meaning could not be given to the expression "services"---Federal Tax Ombudsman recommended that the impugned order of Commissioner of Income Tax should be set aside and that the Taxation Officer should assess the complainant's returns under normal law after issuing notices under S.61 of the Income Tax Ordinance, 1979.

2005 PTD (Trib.) 668 rel.

Muhammad Sirjees Nagi, Advisor, Dealing Officer.

Rana Mushtaq Ahmad Toor, I.T.P. for the Complainant.

Muhammad Naeem Afzal Khan, Taxation Officer for Respondent.

2008 P T D 479

[Federal Tax Ombudsman]

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

Mst. SHAHEENA ASGHAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 260-L of 2004, decided on 15th June, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 65, 170R-71, 176, 122 & 102---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(b)---Refund---Self-assessment---Additional assessment---Additional payment for delayed refunds---Prosecution for unauthorized disclosure of information by a public servant---Maladministration---Income Tax assessment was made under self-assessment scheme---Refund was determined---No additional assessment was made---No prosecution for wrong information was started---No order for withholding the refund was passed---Withholding of refund illegally constituted maladministration within the meaning of section 2(3)(i),(b) and 2(3)(v) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 on account of inefficiency, inattention, negligence and inaptitude in performance of duties---Revenue authorities had failed to prove that non-issuance of the refund was bona fide and for valid reasons---Federal Tax Ombudsman therefore recommended that Refund due to the complainant be issued immediately by the Taxation Authorities and compliance report submitted within 30 days.

Muhammad Mushtaq, Advisor, Dealing Officer.

Iftikhar Shabbir, ITP for the Complainant.

Abdul Rehman Warriach, DCIT, for the Revenue.

2008 P T D 481

[Federal Tax Ombudsman]

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

Dr. MAHMUD ASGHAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 310 of 2004, decided on 7th August, 2004.

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

----Ss.12(18),25(c) & 63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Addition---Amounts subsequently recovered in respect of deductions, etc.---Assessment was finalized ex parte--Loss was ignored and addition was made under S.25(c) of the Income Tax Ordinance, 1979 on the ground 'that complainant/assessee did not undertake any business during the year and failed to produce the documents and books to support his claim for loss--Validity---Examination of assessment order and related document revealed that the Assessing Officer did not give any reason whatsoever for ignoring the declared loss---Addition was not discussed at all---Best judgment assessment places a heavy responsibility on the officer passing it---No arbitrary addition could be made under such an assessment---Both the actions of Assessing Officer in ignoring the declared loss and making addition were found to be arbitrary.

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

----Ss.25(c), 12(18), 63 & 156---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amounts subsequently recovered in respect of deductions, etc.---Addition was made on the ground that complainant/assessee did not raise any objection to the proposed treatment and notice issued under S.61 of the Income Tax Ordinance, 1979 remained uncompiled---Complainant/assessee claimed that liabilities were not trading liabilities, but loans---If at all, they could be considered under the provisions of S.12(18) of the Income Tax Ordinance, 1979---Most of the loans were carried over from the preceding years---Validity---Documents transpired that the claim of the complainant/assessee was correct and addition made under S.25(c) of the Income Tax Ordinance, 1979 was illegal and. arbitrary---Action of Assessing Officer in ignoring the loss without assigning any reason making addition under S.25(c) of the Income Tax Ordinance, 1979 of the sums which factually represented loans and the refusal to rectify the original orders were all arbitrary and contrary to law, rules and regulation---Maladministration was established---Federal Tax Ombudsman recommended that the Commissioner of Income Tax, exercising his powers under S.122A of the Income Tax Ordinance, 2001, to revise both the assessment orders for assessment year 1998-99 and 2001-2002 taking into consideration the facts of the case.

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

----S.2(3)---Maladministration---Definition of maladministration is wide and inclusive in its nature and includes decisions, processes, act of omission or commission which are contrary to law, rules or regulations and are arbitrary.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Once a complaint is filed alleging maladministration it becomes cognizable by the Federal Tax Ombudsman and he is competent to investigate into the matter---Allegations by the complainant/assessee and denial by the Department are not sufficient to determine maladministration---Full investigation had to be made into the allegations of maladministration and parties are to be heard before determining, whether maladministration had occurred or not.

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

----S.129---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Appeal to the Appellate Additional Commissioner---Withdrawal of appeal---Merger of order---First Appellate Authority merely allowed the complainant/assessee to withdraw his appeals but did not discuss the facts of the case at all---Had the First Appellate Authority considered them and given his findings, his order could be construed to hold the field, and the order of the Assessing Officer merged with it---Order which still holds the field is that of the Assessing Officer.

Glaxo Laboratories Limited v. IAC of Income Tax and others PLD 1992 SC 549 = 1992 PTD 932 rel.

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

----Ss.156 & 25(c)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Rectification of mistakes---Addition made under S.25(c) of the Income Tax Ordinance, 1979 represented loans and were wrongly considered as trading liabilities---Most of the loans were carried over from preceding years and could not be considered in the years under consideration---Mistake was apparent from record---Decision of the Assessing Officer in rejecting the application for rectification was not legally correct.

Shamim Ahmad, Adviser, Dealing Officer.

Dr. Muhammad Asghar for the Complainant.

Mrs. Nafeesa Satti, DCIT, for Respondent.

2008 P T D 487

[Federal Tax Ombudsman]

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

Mst. SOFIA ABIDA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 721-L of 2004, decided on 15th December, 2004.

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

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.3 of 1994, dated 20-5-1984---Refund---Department failed to accord appeal effect to appellate order---After a lapse of nearly one and a half year the department had neither issued any revised demand notice nor IT-30s for the matter---Application was filed for payment or refund along with compensation but to no avail---Assessee contended that department be directed to issue refund vouchers and also pay compensation on account of delay in issuance of refunds---Validity---Refunds had been unduly and unjustly delayed on two accounts namely failure to give appeal effect to the appellate orders and to pass re-assessment order after the First Appellate Authority has set aside the original assessment order which became time-barred as a result of which the demand became unenforceable---Department did not care to process the cases at the appropriate time---All such factors led to the conclusion that complainant/assessee's refunds were withheld illegally, unjustly and arbitrarily---Even if some challans were missing the department could have asked for the same much earlier which they failed to do---Complainant/assessee was not only entitled to payment of original refund amounts but also to payment of compensation on account of delay in payment of refunds---Federal Tax Ombudsman recommended that Central Board of Revenue to direct the competent authority to 'pay promptly the refunds in question after due reconciliation of the amounts involved for which purpose the complainant had agreed to produce the relevant challans; to pay compensation to the complainant under the provisions of S.102 of the Income Tax Ordinance, 1979 at the prescribed rate from the due dates on account of delay in payment of refunds; to counsel (in writing) the officials responsible for not giving appeal effect to the appellate orders within a reasonable time and not passing the re-assessment order for assessment year 1998-99, letting the case become time-barred to give in future appeal-effect to appellate orders within a reasonable time and finalize assessment within the prescribed limit so as to avoid hardship to the complainants.

Complaint No.253 of 2004 rel.

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

----Ss. 62 & 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment on production of accounts, evidence etc.---Demand without formal assessment order---Validity---Although it was claimed by the department that re-assessment was finalized resulting in demand but it was admitted that no formal re-assessment orders were issued nor was any demand issued or served---Re-assessment had to be made by specified date and was not formally made nor any demand was issued or served on the complainant as a result of which re-assessment become time-barred and outstanding demand against the complainant was baseless.

Mohammad Akbar Nagi, Advisor. Dealing Officer.

A.D. Randhawa for the Complainant.

Ahmad Shujah Khan, D.C.I.T. for Respondent.

2008 P T D 500

[Federal Tax Ombudsman]

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

Messrs TOP END PRODUCTIONS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 149-L of 2004, decided on 17th April, 2004.

(a) Income Tax Ordinance (XLIX of 2000----

----S.122(5A)---Income Tax Ordinance (XXXI of 1979) Ss.96, 59(1), 50(4) & 80C---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Self-assessment---Assessee was engaged in production and exhibition of TV drama by obtaining "Air Time" from PTV---Return filed was set apart for Total Audit---Federal Tax Ombudsman recommended that order of set apart be withdrawn---Return was accepted under Self-Assessment Scheme resulting refund---In another complaint Federal Tax Ombudsman had recommended issuance of refund after verification---Notice under S.122 of the Income Tax Ordinance, 2001 was issued on the ground that income derived by telecasting dramas on PTV "through purchase of air time under contract" were chargeable to tax under S.80C of the Income Tax Ordinance, 1979 which fell within the presumptive tax regime---Assessment finalized was erroneous in so far as it was prejudicial to the interest of revenue---Validity---Case was set apart on . the recommendation of Commissioner and the same Commissioner now contended that filing of return under Self-Assessment Scheme was not proper and statement under S.143B of the Income Tax Ordinance, 1979 should have been filed, was self contradictory; which amounted to a 'change of opinion' and could not be made a basis for considering the assessment erroneous---Return was initially examined by the Commissioner who identified certain points for recommending its setting apart to the Regional Commissioner of Income Tax whose order was subsequently set at naught by the Federal Tax Ombudsman which left no room to suspect erroneousness in the proceedings as may have caused prejudice to the revenue---Change of opinion could not be a valid basis for resort to S.122A of the Income Tax Ordinance, 2001 to amend the assessment on an evidence which had been duly considered and accepted---Bona fides of action evidently stands eroded thus revealing "maladministration" essential for action under S.122(5A) of the Income Tax Ordinance, 2001 that assessment should be erroneous and prejudicial to the interest of revenue at the same time---Since there was no erroneousness in the acceptance of Return, which had been done on the recommendation of Federal Tax Ombudsman, prejudice to the revenue alone could not be the only ground for the proposed amendment---Such notice had been issued to by the same Taxation Officer who made the assessment which was contrary to established practice without any valid reason, against the norm of justice and thus perverse arbitrary and unjust falling in the realm of "maladministration"---Federal Tax Ombudsman recommended that the impugned notice issued under S.122 of the Income Tax Ordinance, 2001 by the Taxation Officer be withdrawn/cancelled; the assessment as framed under S.59(1) of the Income Tax Ordinance, 1979 accepting the returns be allowed to stand good and refund as determined for the two years be issued under S.170 along with additional payment for delayed refund, as per provisions of S.171 of the Income Tax Ordinance, 2001---Central Board of Revenue may issue instructions to the Regional Commissioners of Income Tax/Commissioners of Income Tax to delegate powers so as to retain the hierarchy of the Income Tax Department on the same lines as in the Income Tax Ordinance, 1979.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Re-opening of case---Section 9(2) of the Establishment of the. Office of Federal Tax Ombudsman Ordinance, 2000 protects acts of omission or commission which are bona fide and for valid reasons---Where bona fide is prima facie missing an investigation alone can determine the validity of the complaint---Process adopted to re-open a case did not amount to assessment against which no appeal was provided---Proceedings initiated was independent of assessment---Objection to jurisdiction was overruled by the Federal Tax Ombudsman.

A.A. Zuberi, Adviser (Dealing Officer).

Kh. Riaz Hussain for the Complainant.

Muzammil Hussain, (D-CIT) for Respondent.

2008 P T D 505

[Federal Tax Ombudsman]

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

Messrs HAJI AMIN SONS &CO., SIALKOT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 636-L of 2005, decided on 19th July, 2005.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 96, 85, 80C, 50(4), 143B & 156---C.B.R's. Letter No.1(17) WHT/91.Pt.IV, dated 28-4-1992---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Tax was deducted on the gross amount of payment while the payments were made after deduction of cost of material supplied---Complainant/assessee contended that in this manner an excess amount of tax was withheld which was refundable but the same was not determined by the Department while framing assessments under S.143B of the Income Tax Ordinance, 1979---Rectification order was passed resulting in creating of refunds---Complainant/assessee was deprived from the due refund by passing another rectification order and charged the tax on gross amount of receipts for want of verification of documents---Validity---Complainant/assessee was in possession of relevant contract document which could be furnished to the department for verification of the claim---Neither due opportunity of hearing had been afforded nor due attention was, given to Central Board of Revenue's letter, dated 28-4-1992---Claim of refund was hit by limitation which was not admissible---Being a hard case and to meet the ends of justice, Federal Tax Ombudsman remanded the case with the recommendation that Commissioner of Income Tax should personally look into the matter and afford due opportunity of hearing to the complainant for producing relevant agreement of contract with the Military Authorities (if any) as alleged by the complainant/assessee for the verification of his claim of refund.

Imtiaz Ali Khan, Advisor, Dealing Officer.

Mian Muhammad Asif for the Complainant.

Manzoor Hussain shad, (IAC) for Respondent.

2008 P T D 512

[Federal Tax Ombudsman]

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

Messrs PASBAN SECURITY SERVICES (PVT.), FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1129 to 1132 of 2003, decided on 16th September, 2004.

Income Tax Ordinance (XLIX of 2001)---

----S. 122---Income Tax Ordinance (XXXI of 1979), Ss.80C, 59(1) & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular' No. 11 of 1991 dated 30-6-1991---C.B.R. Circular No. 1(48)/11-1-1979 dated 17-2-1981---Amendment of assessment---Security services---Assessments were completed prior to 1st July 2002---Notices under S.122 of the Income Tax Ordinance, 2001 were issued on the ground that receipts were covered under S.80C of the Income Tax Ordinance, 1979 and assessments framed under normal law were invalid---Assessing Officer proceeded to pass the orders under S.122 of the Income Tax Ordinance, 2001 and assessed the complainant/assessee on its presumptive income under S.80C of the Income Tax Ordinance, 1979---Validity---Assessment orders had been passed prior to 1st July 2002, the date when the Income Tax Ordinance, 2001 came into force, the provisions of S.122 of the Income Tax Ordinance, 2001 were inapplicable, in view of principles settled by the binding decision of High Court---Mal-administration, on account of initiating a process which was contrary to principles of law enunciated by the High Court, was proved---Department had no jurisdiction under S.122 of the Income Tax Ordinance, 2001 on 13-3-2004 to issue a notice under S.122(1) to amend the assessment orders that had been passed prior to 30-6-2002---Process fell under the inclusive definition of maladministration for being contrary to settled law and for ignorance of the principle of law enunciated in the decision of High Court as well as in the beneficial Circular of Central Board of Revenue---Taxation Officer had acted without jurisdiction disregarding the principles laid down in the binding judgment of High Court which amounted to malice in law and. thus mala fide---Even otherwise no mala fide was required to be proved for finding of maladministration---Federal Tax Ombudsman recommended that the 'Member Income Tax, Central Board of Revenue issues a circular clarifying that assessments made prior to 1st July 2002 cannot be amended under S.122 of the Income Tax Ordinance, 2001 because it came into force after 30th June, 2002 and that the Commissioner Companies Zone 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 have been passed by the Taxation Officer working under him and proceed under subsection S.(2) of S.122A of the Income Tax Ordinance, 2001 as he deemed fit.

Messrs Monnoo Industries Limited v. The Commissioner of Income Tax, Central Zone, Lahore 2001 PTD 1525 rel.

Complaints Bearing Nos. 1472-L of 2003, 368 of 2004 and 329-K of 2004 ref.

Mirza Muhammad Wasim, Adviser (Dealing Officer).

Mr. Aquib Hussain, ITP, AR for the Complainant.

Mrs. Irum Sarwar, DCIT for Respondent.

2008 P T D 515

[Federal Tax Ombudsman]

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

Messrs SLECTO FABRICS TRADING CO., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-194-K of 2004, decided on 30th July, 2004.

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

----S.21(4), first proviso---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2 (3)---De-registration--Registration was suspended in terms of S.21 (4) of the Sales Tax Act, 1990 by the Assistant Collector on account of tax fraud/evasion---Complainant contended that Assistant Collector did not have the power to suspend the registration---Department contended that order of suspension of registration was passed by the Collector on the relevant file and the Assistant Collector had issued the order on behalf of the Collector---Validity---Power under first proviso of subsection (4) of S.21 of the Sales Tax Act, 1990 had been exclusively given to the Collector who could pass suspension order after satisfying himself that registered person was found to have issued fake invoice, evaded tax or had committed tax fraud---Such exercise had to be carried out by the Collector personally and not through any other authority, subordinate or agent---Satisfaction of the Collector could be made basis for passing such order---Collector had not made any inquiry for reaching the satisfaction that the complainant was found to have issued fake invoices, evaded tax or had committed tax fraud---Nothing was on record to show that the Collector had made any investigation or applied his mind independently to the facts of the case---Collector only endorsed the opinion of the Assistant Collector and approved the same---Mechanical process was adopted by the Collector without applying his mind and satisfying himself as required by law---Order of suspension was not passed as required by law and suffered from illegality and was of no legal effect---Contention that Assistant Collector had merely communicated the order of suspension was not correct---In fact order was passed by the Assistant Collector which was merely approved and no order was passed by the Collector as required by law---Order of suspension was arbitrary, contrary to law and against established practice without any valid reason and bona fides---Process of decision making adopted by the Collector was in violation of mandatory provisions of law- s Maladministration was established---Federal Tax Ombudsman recommended that Central Board of Revenue may set aside the order dated 28-7-2003 passed by the Assistant Collector (Registration) within fifteen days, direct the Collector to carry out a thorough inquiry in the working of the complainants and pass speaking order after affording the complainant opportunity of being heard and issue instructions to the Collectors of Sales Tax to pass order under first proviso to subsection (4) of S.21 of the Sales Tax Act, 1990 after affording an opportunity of being heard to the party.

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

----S.21(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---De-registration---Where registered person fails to file return under S.26 of the Sales Tax Act, 1990 for six consecutive months officers of not below the rank of Assistant Collector may, after issuing a notice and giving an opportunity of being heard to such person, cancel the registration after satisfying himself that no tax liability was outstanding against such person--Assistant Collector is empowered to cancel the registration if a registered person fails to file sales tax return under S.26 of the Sales Tax Act, 1990 for six consecutive months but before passing this order he has to issue notice to the party and after giving an opportunity of being heard pass the order.

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

----S.21(4), first proviso---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---De-registration---Opportunity of being heard---First proviso to subsection (4) of S.21 of the. Sales Tax Act, 1990 required the Collector to satisfy himself about the illegalities calling for suspension of registration but no provisions had been made to afford an opportunity of being heard to the complainant before passing the order---Any adverse order passed against a party without affording it an opportunity to defend itself is against the principles of natural justice---Although subsection (4) of S.21 of the Sales Tax Act, 1990 did not provide for hearing of a party, the principles of natural justice are so embedded in jurisprudence that the superior courts taking into consideration the fundamental rights conferred by the Constitution have consistently held that even if no provision is made for affording an opportunity of being heard before any order is passed it is incumbent on every authority and court to issue notice and opportunity of hearing be afforded to him before passing any order against him.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Tahir Razzaq Khan, F.C.A., Authorized Representative Zahid Habib.

Farrukh Sajjad, Deputy Collector (Adjudication).

2008 P T D 523

[Federal Tax Ombudsman]

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

GHULAM MUHAMMAD, BAWARCHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and others

Complaint No. C-744-L of 2005, decided on 19th July, 2005.

Federal Tax Ombudsman's Investigation and Disposal of Complaints Regulation, 2001---

----Regln. 23(vi)---Income Tax Ordinance (XXXI of 1979), Ss.63 & 132---Income Tax Ordinance (XLIX of 2001), S.122A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Close of complaint---Ex parte assessment was set aside under S.122A of the Income Tax Ordinance, 2001---Parties confirmed that the impugned order had been set aside redressing the grievance of the complainant/assessee---Complaint was closed by the Federal Tax Ombudsman under Regulation 23(iv) of the Federal Tax Ombudsman' Investigation and Disposal of Complaints Regulation, 2001.

Muhammad Sirjees Nagi, Advisor, Dealing Officer.

Muhammad Ajmal Khan for the Complainant.

Muzammil Hussain, (IAC) for Respondents.

2008 P T D 527

[Federal Tax Ombudsman]

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

M. A. FAROOQI, REGISTRAR, SUPREME COURT OF PAKISTAN, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 368 of 2004, decided on 4th August, 2004.

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

----Ss.59(3), 56, 61, 13(1)(aa) & Second Sched., Cls. (39) & (77A)---Supreme Court Rules, Part-II, R.24---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-­assessment---Income from salary and rent---Filing of salary certificate---Exemption was claimed on account of honorarium/reward---Issuance of notices under Ss.61 and 13(1)(aa) of the Income Tax Ordinance, 1979---Validity---Admittedly, complainant/assessee filed only salary Certificate (LT.-11E) whereas he was required to file return of income (I.T.-11B) under R. 190(3) of the Income Tax Rules, 1982, because besides salary, complainant/assessee had income from house properly therefore no valid return was filed---Honorarium /reward and special allowance was claimed to be exempt---Taxation Officer instead of issuing notice under S.56 of the Income Tax Ordinance, 1979, issued notices under Ss.61 and 13(1)(aa) of the Income Tax Ordinance, 1979 and demand notice was served on the basis of IT-30 produced by PRAL under S.59(3) of the Income Tax Ordinance, 1979 which proved maladministration on account of incompetence in discharge of responsibility; that if there was no valid return, a notice under S.56 of the Income Tax Ordinance, 1979 was required to be served calling for a valid return that notice under S.61 could be issued only when there was a valid return; hence proceedings under S.61 of the Income Tax Ordinance, 1979 were contrary to law; that there was no basis on the foregoing facts, to issue a notice under S.13(1)(aa) of the Income Tax Ordinance, 1979; hence contrary to law; complainant/assessee had claimed certain exemptions, which after obtaining a valid return could be considered on merits ; that order was not passed under S.62 of the Income Tax Ordinance, 1979 despite proceedings under S.61 of the Income Tax Ordinance, 1979 and that order was passed under S.59(3) of the Income Tax Ordinance, 1979 after making adjustments on account of alleged legally inadmissible claims, although it required a proper consideration and finding through an order under S.62 of the Income Tax Ordinance, 1979---Federal Tax Ombudsman recommended that the Commissioner undertakes written counselling of the concerned Taxation Officer to pay more attention to correct application of relevant provisions of law so that assessees are saved from undue harassment 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 have been passed by the Taxation Officer working under him and proceed under S.122A(2) of the Income Tax Ordinance, 2001 as he deems fit.

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

----S.9(2)(b)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Invalid return---Where an assessment is based on an invalid return, it is contrary to settled law and ab initio void and invalid ; it is a defect that is jurisdictional in nature and does not refer to the judgment of the Assessing Officer in assessment of complainant/ assessee's income.

Shamim Ahmad and S.M. Sibtain, Advisers (Dealing Officers).

Muhammad Siddiq Mughal, Advocate for the Complainant.

Mazhar Iqbal, ACIT, for Respondent.

2008 P T D 533

[Federal Tax Ombudsman]

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

POR DIL KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 400 of 2004, decided on 11th August, 2004.

Custom Rules, 2001---

----Rr.69 & 73---Custom Act (IV of 1969), S.195---Auction Rules, 2001, R.73---Auction---Forfeiture of earnest money for failure to deposit the balance amount without deciding application filed under R.73 of the Auction Rules, 2001-Validity-Forfeiture order passed without recording decision. on application filed under R.73 renders the forfeiture order perverse which would tantamount to maladministration---Neglect of and inattention to the application was also maladministration---Complainant had no onus to allege or prove mala fide for alleging maladministration---It was only in case of maladministration alleged on account of departure from established practice or procedure that the Department was allowed to plead and prove in his defence that it was bona fide and for valid reasons---Federal Tax Ombudsman recommended that (i) Collector of Customs, ensures appropriate counselling of tax employees involved in maladministration of neglecting the application filed by the complainant under R.73 of Auction Rules 2001 and passing the order for forfeiture of earnest money without deciding Application under R.73, (ii) the Collector takes cognizance of the perversity in forfeiture order under S.195 of the Customs Act, 1969 to fulfil his statutory obligation.

Complaint No. 1472-L of 2003 and Complaint No. 329 of 2004 rel.

S. M. Sibtain, Adviser (Dealing Officer).

Irshad Ahmad Durrani, Advocate for the Complainant.

Muhammad Arshad Khan, D.C. and Ms. Husna Jamil, A.C. Auction, Collectorate of Customs, Peshawar for Respondent.

2008 P T D 536

[Federal Tax Ombudsman]

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

Rana MANZOOR HUSSAIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1008 of 2004, decided on 28th February, 2005.

Sales Tax Act (VII of 1990)---

----Ss.57, 7(1) & 2(14)---Sales Tax Act (III of 1951), Ss.27(1) & 2(12)--Customs Act (IV of 1969), S.194B(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R's. Order C.No.7(7)C & I/84, dated 25-11-1984---Correction of clerical errors, etc.---Reward---Complainant moved an application to Central Board of Revenue that the case against assessee decided by Appellate Tribunal be rectified under the provisions of S.57 of the Sales Tax Act, 1990 as the Appellate Tribunal had the power to correct errors; that the case be reopened after rectification of the Appellate Tribunal's order to make recovery of the amount already paid; that his reward may be paid in terms of the Reward Order; that department had committed maladministration' by not appealing against the Appellate Tribunal's judgment---And payment of reward to complainant as claimed in his application submitted to the department---Validity---Federal Tax Ombudsman's jurisdiction did not extend to Appellate Tribunal's order---Federal Tax Ombudsman's forum was unable to analyze or comment on the Appellate Tribunal's order as to whether or not the Appellate Tribunal had passed its order under the provisions of Sales Tax Act, 1990 and not under provisions of Sales Tax Act, 1951---No ground was available for filing appeal in High Court nor were any errors apparent from the record needing rectification by the Appellate Tribunal---No reward was admissible to the complainant in view of the failure of the case prepared by him against the assessee---Central Board of Revenue may sanction special reward to the officers who rendered meritorious services---Meritorious services included displaying exceptional overall results in detection of evasion of central excise/sales tax and it was for the Central Board of Revenue to decide whether or not the complainant had rendered any meritorious service---Complainant's letter addressed to the Secretary, Sales Tax, did not appear to have been responded by the Central Board of Revenue---Not possible for Federal Tax Ombudsman to attributemaladministration' in the case---Central Board of Revenue may give a suitable reply to complainant's letter, which also raised the question of admissibility or otherwise of monetary reward claimed by the complainant-Complaint was disposed of accordingly.

Muhammad Akbar, Advisor, Dealing Officer.

Rana Manzoor Hussain for the Complainant.

Zulfiqar Hussain Khan, D.C. Sales Tax, Rawalpindi for Respondents.

2008 P T D 544

[Federal Tax Ombudsman]

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

SULTAN ALI ISMAILI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 432 of 2004, decided on 12th August, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.63, 61 & 71---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Return was. available on record indicating that business had been abandoned due to illness---Ex parte assessments were framed without service of notice under S.61 of the Income Tax Ordinance, 1979 on the basis of inspector's report that assessee had left the business for the past 9/10 months and that the assessments be framed on the basis of history of the case---Validity---Held, there was no mention in the Inspector's report of any attempt at service by affixture; since the date of the Inspector's report was the same as the compliance date there could not have been any timely service---No record of any other service of a notice during the time between the Inspector's report and the date of the assessment order was available---Ex paste order for three years without the service of notice was void and illegal and the matter fell within the definition of "mal­administration"---Federal Tax Ombudsman recommended that the combined assessment order for the assessment years 1998-99 to 2000-2001 be cancelled under S.122A of the Income Tax Ordinance, 2001.

Mirza Muhammad Wasim, Adviser (Dealing Officer).

Abdul Malik Khan, ITP, AR for the Complainant.

Akhtar Munir, DCIT for Respondent.

2008 P T D 548

[Federal Tax Ombudsman]

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

Messrs TOP END PRODUCTIONS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 139-L of 2004, decided on 16th April, 2004.

Income Tax Ordinance (XLIX of 2001)---

----Ss.170 & 171---Income Tax Ordinance (XXXI of 1979) Ss.96, 102, 50(4) & 52A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.5/2003 dated 30-6-2003---Refund was not issued on the ground that the party who deducted the tax had deposited it late in the Government account not adhering to the legal requirements to deposit within 7 days of deduction and that challan in respect of the other indicates payment under S.52A and not S. 50(4) of the Income Tax Ordinance, 1979---Validity---Payment of withholding tax pertained to complainant/assessee was visible from the "details of payment" on challan---Word "52-A" had been written which was being made an excuse to insist that payment was under S.52A and not under S.50(4) of the Income Tax Ordinance, 1979--No column on the prescribed challan form existed for the section in which payment was made and it was illogical to presume that the payments were by the withholding agent on their own account and not for the parties whose names were clearly mentioned in the column meant for "details of payment" which could be verified from the withholding agent---Section 52A of the Income Tax Ordinance, 1979 related to recoveries from the person from whom tax was deducted and had no relevance in the present context because neither the complainant/assessee nor the withholding agent was required to make payment under S.52A of the Income Tax Ordinance, 1979---Responsibility for delay in depositing the withheld amount of tax fell on the withholding agent and cognizance should have been taken under S.86 of the Income Tax Ordinance, 1979---Refund vouchers should preferably be issued along with the refund order and where verification is required "within three months from the date the refund order is made" .and the refund voucher be delivered to the taxpayer by registered post or courier service---Department was responsible for deliberate withholding of refund thus committing "maladministration"---Federal Tax Ombudsman recommended that refund of the aggregating Rs.3,83,329 for the assessment years 1999-2000 to 2001-2002 be issued under S.170 of the Income Tax Ordinance, 2001 and that Additional payment under S.17I of the Income Tax Ordinance 2001 or the period from which the refund originally became due to the date of payment, be also issued, as per law.

A. A. Zuberi, Adviser (Dealing Officer).

Kh. Riaz Hussain for the Complainant.

Muzammil Hussain, D-CIT) for Respondent.

2008 P T D 553

[Federal Tax Ombudsman]

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

Messrs S.S. OIL MILLS LIMITED, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 958-L of 2005, decided on 26th September, 2005.

Sales Tax Act (VII of 1990)---

----S. 36(3)-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---Complainant contended that Order-in-Original passed by the Deputy Collector (Adjudication) was without lawful jurisdiction on account of limitation provided under S.36(3) of the Sales Tax Act, 1990 as show-cause notice, dated 4-11-2003 was contested vide reply, dated 17-12-2003 but the case was decided vide Order-in-Original, dated 11-5-2005---Mandatory proviso to S.36(3) of the Sales Tax Act, 1990 provided that Order-in-Original was to . be passed within 135 days of the issuance of show cause---Limitation period expired on 20-3-2004---Adjudication authority failed to observe the time limitation so prescribed and passed the Order­-in-Original on 11-6-2005 creating sales tax liability along with additional tax and penalty long after the expiry of the prescribed time limitation---Order was void because it was passed after the time-limit prescribed in S.36(3) of the Sales Tax. Act, 1990---Validity---Show-cause notice was issued on 4-11-2003 and the Order-in-Original creating liabilities was passed on 11-6-2005 (dispatched on 30-6-2005) after a period of one year, seven months and 26 days (computed from the date of dispatch) in violation of the provisions of S.36(3) of the Sales Tax Act, 1990---Order being violative of the provisions of S.36(3) of the Sales Tax Act, 1990 was clearly hit by limitation as provided in law and maladministration was established---Federal Tax Ombudsman recommended that the Revenue Division should direct the competent authority to cancel the Order-in-Original.

Complaint No.805 of 2003 (Messrs Pace International Rawalpindi v. Secretary Revenue Division, Islamabad) and S.R.O. 723(I)/05 rel.

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

Muhammad Akbar, Advisor, Dealing Officer.

Shahid Pervaiz Jami for the Complainant.

Muhammad Akram Ch. D.C. Central Excise, Sales Tax and Customs, Multan for Respondents.

2008 P T D 560

[Federal Tax Ombudsman]

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

SHAMI FOOD INDUSTRIES (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 405/L of 2004, decided on 10th July, 2004.

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

----Ss.5(5), 59(1), 61 & 62---Income Tax Ordinance (XLIX of 2001), S.209 (7)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.2(1) S.Asstt/2002(1) dated 27-5-2003---Jurisdiction of income tax authorities---Self assessment---Returns were filed at Lahore under Self Assessment Scheme---On receipts of notices under S.61 of the Income Tax Ordinance, 1979, assessee requested for transfer of case to Multan taking shelter under the Central Board of Revenue notification dated 27-5-2003 whereby jurisdiction in case of certain categories of Private Limited Companies was to be assigned considering their manufacturing process, and location of factory and also insisted that returns should be accepted under Self Assessment Scheme---Objection of jurisdiction was rejected by the Income Tax Officer on the ground that the return were filed in her circle and provisions of S.5(5) of the Income Tax Ordinance, 1979 stood in the way of challenging the jurisdiction which had been retained as S.209(7) of the Income Tax Ordinance, 2001 and assessment was completed---Validity---Assessing Officer did not unduly retain the case nor did she arbitrarily reject the request of the complainant/assessee but waited for the higher authorities to carry out the directions to them, as per circular---When directed by the Commissioner of Income Tax, she promptly and faithfully complied with the same---Complainant/assessee by passing Zonal Commissioner of Income Tax for delay in identifying the cases as per direction in paragraph 3 of C.B.R. Circular No.2(1) S.Asstt/2002(1) dated 27-5-2003 and the Regional Commissioner of Income Tax's failure to monitor the case for transfer had caused the Assessing Officer for "maladministration" by way of violation of Central Board of Revenue's circular and for completion of assessment under S.62 of the Income Tax Ordinance, 1979---Complaint was not well founded and the stand was hit by the provisions of S.5(5) of the Income Tax Ordinance, 1979 and S.209(7) of the Income Tax Ordinance, 2001 which specifically debared objection to the jurisdiction after filing return in a circle---Complaint was held to be devoid of merit and the same was closed, at the same time Federal Tax Ombudsman recommended that the Central Board of Revenue issue instructions for Regional Commissioners of Income Tax and Commissioners of income Tax not to neglect or side' line the specific duties assigned to them in Central Board of Revenue circular/directions; that the Central Board of. Revenue may identify as to which of the Regional Commissioners income Tax or Commissioners of Income Tax failed to carry out the task assigned to them which retarded the full enforcement of Central Board of Revenue circular of 27-5-2003 by the prescribed date (i.e. 15-7-2003) and the Central Board of Revenue to devise a mechanism to monitor compliance of instructions and tasks assigned by it to the field functionaries.

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

.---S.5(5)---Income Tax Ordinance (XLIX of 2001), S.209(7)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---C.B.R. Circular No.2(1)S. Asstt/2002 (1) dated 27-5-2003---Jurisdiction of income tax authorities---Careful reading of Central Board of Revenue C.B.R. Circular No.2 (1) S.Asstt/2002 (1) dated 27-5-2003 disclosed that for harmonization of jurisdiction in one Circle certain criteria were prescribed which were location of the factory in the case of manufacturers/processing, and principal place of business in the case of those engaged in business other than manufacturing/ processing---On this criterion as per paragraph 3 of the Circular, the Zonal Commissioners of Income Tax were "advised to identify such companies whose location of assessment would be affected"---To ensure a smooth transfer of cases, the Regional Commissioners of Income Tax were advised to "closely monitor the whole exercise and ensure that all such cases were transferred by 15-7-2003" which clearly implied that Assessing Officers at their own initiative were neither to suspend work nor to transfer cases, unless the Commissioners of Income 'Tax identified cases for transfer to a specific Circle looking to the nature of business and location of the factory.

A. A. Zuberi, Adviser (Dealing Officer).

M. Iqbal Hashmi for the Complainant..

Ms. Amina Faiz Bhatti, (D-CIT) and M. Abid (D-CIT) for Respondent.

2008 P T D 565

[Federal Tax Ombudsman]

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

Messrs QUALITY WEAVING MILLS LTD., MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 506/L of 2004, decided on 16th August, 2004.

Customs Act (IV of 1969)---

----Ss.195C & 19---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---S. R. O. 962(I)/90 dated 12-9-1990---S.R.O. 722(I)/89---Alternate Dispute Resolution---General power to exempt from customs duties---Import of textile weaving machinery---Exemption from customs duty, Iqra surcharge and other taxes---Levy of taxes and penalties on the ground of violation of provisions of S.R.O. 722(I)/89 which was interlinked with S.R.O.962(I)/90 dated 12-9-1990---Textile unit was placed under attachment order---Appeal against order-in-original was rejected---Revision Petition moved before Secretary, Finance Division remained pending compelling complainant to file writ petition---High Court directed to dispose of the same within a period of four months---Revision petition was not decided on the ground that revisional powers of the Federal Government having been withdrawn consequent on creation of Customs, Central Excise and Sales Tax Appellate Tribunal, jurisdiction no longer vested with the Federal Government to adjudicate on Revision Petitions under S.196 of the Customs Act, 1969---High Court, on approach, informed that Writ petition stood finally disposed of and observations by Secretary, Finance Division in his administrative capacity did not warrant action by the High Court which may be invoked by the party or parities through fresh petition---Complainant moved the complaint pleading that he had no financial resources to pursue the case before the High Court---Validity---Complainant had shuttled vertically and horizontally from one authority to another although evident discrimination and legally strong favourable grounds supported this case---Complainant was still being denied justice and was suffering in consequence---Revision Petition remained unattended despite directions by High Court---Secretary, Finance Division felt that he could not adjudicate the matter as his jurisdiction for revision had ceased to exist on creation of Appellate Tribunal but at the same time it was hard to ignore that issues raised in pending petition warrant judicious resolution---Long drawn proceedings had adversely affected the complainant in asmuchas during the hearing of case he feinted and emergency medical aid had to be provided---Case was a hardship case which had caused undue suffering to the complainant financially, mentally and 'health-wise---Complainant was prepared for Alternate Dispute Resolution as provided under S.195C of the Customs Act, 1969---Provisions of S.195C of the Customs Act, 1969 were beneficial in nature and any person in connection with any matter of Customs specified in S.195C of the Customs Act, 1969 may apply to the Central Board of Revenue for appointing a Committee for the resolution of any hardship or dispute mentioned in detail in the application for Alternate Dispute Resolution---Complaint was admittedly a hardship case and fulfilled all the conditions for referring the matter to Secretary, Finance Division---Federal Tax Ombudsman recommended Central . Board of Revenue to treat and accept the complaint filed by the complainant before the Federal Tax Ombudsman bearing No. 506/2004 as an application under S.195C of the Customs Act, 1969 and the Board to take necessary action as provided under S.195C of the Customs Act, 1969 and pass such orders as provided by law.

A. A. Zuberi, Advisor (Dealing Officer).

Sh. Abdul Hakeem (Chief Executive) the Complainant.

Habib Ahmad (Deputy Collector, Customs, Multan) for Respondent.

2008 P T D 571

[Federal Tax Ombudsman]

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

SHAMS-UZ-ZAMAN BUTT through Attorney

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 454-L of 2005, decided on 18th July, 2005.

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

----Ss. 169(4), 168 & 201---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Things seized how to be dealt with---Under S.169(4) of the Customs Act, 1969 when anything liable to confiscation under the Customs Act, 1969 is seized under S.168 of the Customs Act, 1969 it could be sold in accordance with the provisions of 5.201 of the Customs Act, 1969 pending appeal or proceedings before any court of law---Proceeds are required to be kept in deposit pending adjudication of the case or disposal of the appeal or final judgment by the Court.

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

----Ss. 201 & 169(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Procedure for sale of goods and application of sale proceeds---Although department had issued a notice to complainant under S.169(4) of the Customs Act, 1969 the record of the case did not show that the vehicle in question was formally confiscated---Had the vehicle been confiscated there was no need for the department to issue notice to the complainant under S.201 of the Customs Act, 1969 because according to said section goods other than confiscated goods could be sold after due notice to the owner by auction---Department, therefore, issued notice to the complainant under S.169(4) of the Customs Act, 1969 without finally confiscating the goods---If the goods were not confiscated auction notices were required to be issued as per S.201 of the Customs Act, 1969---Department committed lapses which amounted to maladministration.

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

----S. 2(3)---Customs Act (IV of 1969), S.25---Maladministration---Delay to some extent in finalizing the assessment, which was not explainable by the department amounted to maladministration.

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

----S. 201---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Procedure for sale of goods and application of sale proceeds---Non-payment of sale proceeds on the ground that after deduction of duty and taxes there was no amount left in balance from the sale proceeds---Validity---Department informed that after deduction of duty and taxes there was no amount left in balance from the sale proceeds, which could be paid to the owner---Department had committed `maladministration'---Federal Tax Ombudsman could not allow any relief to the complainant because the rates of duty and taxes leviable on the vehicle being very high the auction price did not leave any balance to be paid to the complainant---While it was not to provide any relief to the complainant as after adjustment of duty and taxes no balance was left in the sale proceeds for payment to the complainant---Federal Tax Ombudsman however, observed that the Collector Incharge should look into the lapses committed by Customs Authorities by not adhering to some of the provisions of the Customs Act, 1969 for taking remedial measures so as to avoid occurrence of such lapses in future.

Muhammad Akbar, Advisor, Dealing Officer.

Mian Abdul Ghaffar for the Complainant.

Abbas Ali Babar, A.C. Customs, Dryport for Respondents.

2008 P T D 581

[Federal Tax Ombudsman]

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

Messrs BANO ROLLER & FLOUR MILLS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-525-K of 2004, decided on 3rd January, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S.170(4)---Income Tax Ordinance (XXXI of 1979) Ss.94 & 129(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Mandatory payment of 15% of demand was made along with additional tax---Appeal was allowed by the First Appellate Authority and second assessment was annulled---Appeal effect was given and refund was determined but credit of additional tax paid was not allowed---Determined refund was also not issued---Reason for delay in deciding the claimed refund was attributed to the confusion created by the complainant/assessee by filing returns at Hyderabad and at Karachi---Refund order was approved by the Commissioner of Income Tax but verification could not be made from the record regarding issuance of refund voucher and concerned Commissioner of Income Tax was directed to issue the refund immediately after verification---Validity---Department provided copy of refund order under S.170(4) of the Income Tax. Ordinance, 2001 whereby refundable amount was determined---Refund voucher was issued after a lapse of about 10 months---Department was not able to offer any plausible explanation for the inordinate delay in issuance of refund voucher---Rectification application had not been disposed of despite repeated reminders---Department failed to justify non-payment of compensation for delayed refund to the complainant/assessee---Maladministration was established---Federal Tax Ombudsman recommended that the Central Board of Revenue to direct the Taxation Officer concerned to dispose of the rectification application of the complainant dated 27-8-2003 and resultant refund if any be issued and that the compensation for delayed refund be worked out and paid to the complainant strictly in accordance with the provisions of S.171 of the Income Tax Ordinance, 2001.

S. Asghar Abbas, Adviser (Dealing Officer).

Ali Sajjad, Advocate for the Complainant.

Dr. Pir Khalid Ahmed, DCIT for Respondent.

2008 P T D 585

[Federal Tax Ombudsman]

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

Messrs CRYSTAL MOVING SYSTEM through Mian Abdul Ghaffar

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-112-K of 2005, decided on 22nd August, 2005.

Customs Act (IV of 1969)---

----Ss. 82 & 25---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(b)(c)---Customs Rules, 2001, R.48---S.R.O. 45(I)/2001, dated 18-6-2001---Procedure in case of goods not cleared or warehoused or transshipped within one month after unloading---Auction of imported consignments in defiance of High Court's order i.e. without reassessment---Claim of compensation for losses---Validity---Serious doubts arose about the conduct of both the importers and the customs officials---Department's contention that complainant did not comply with the High Court's order was not acceptable---Department should have summoned the import documents from the importer/Group concerned and issued an assessment order within forty-five days---No action was taken for full one year and the goods were auctioned at one third of the reserve price---Importer did not vigorously pursue reassessment and clearance of goods while the customs authorities were more keen to auction the goods---If customs authorities were adamant not to assess the goods, the importer should have protested before the appropriate administrative, quasi judicial or judicial forums---Importer could have paid duty and taxes on 14% enhanced value and represented for refund of difference of duty and tax instead of abandoning the goods to auction---Auction of goods at a very low price and the claim for compensation by the importer were matters of concern and the possibility of collusive foul play by the customs staff, could not be ruled out---Federal Tax Ombudsman recommended that Central Board of Revenue depute the Director General Inquiries to carry out a thorough probe into the matter to ascertain the reasons as to why reassessment was not done for one year as directed by the High Court; that why the goods were disposed of in the third auction at ridiculously low prices instead of release on full payment of duty and taxes at the declared/enhanced value and to ascertain the (collusive) involvement of the importer and/or the customs staff in the auction of goods.

M. Mubeen Ahsan, Advisor, Dealing Officer.

Mian Abdul Ghaffar for the Complainant.

Salamat Ali, Assistant Collector of Customs (Appraisement).

2008 P T D 591

[Federal Tax Ombudsman]

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

Messrs WORLD OF ISLAM TRUST, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 622 of 2004, decided on 13th September, 2004.

Income Tax Ordinance (XLIX of 2001)---

----S.2(36)---Income Tax Ordinance (XXXI of 1979), S.47(1)(d)---Income Tax Rules, 2001, R.214---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Non profit organization---Allowance for donations for charitable purposes---Delay---Inordinate delay of almost 13 months in processing application for renewal/approval filed under S.2(36) of the Income Tax Ordinance, 2001---Validity---Department reported that application was not attended to in time because the office was under constraint to meet the budgetary targets and all efforts were focused on the point---Lapse was regretted and it had been informed that approval had now been renewed---Regret expressed on the admitted lapse was acknowledged by the Federal Tax Ombudsman and his prayer for closing the investigation was granted with the observation that positive appreciation of lapse caused by inattention to the matter and expression of regret over it was made to be realized down the line---Federal Tax Ombudsman recommended that it will be appreciated if a reasonable time frame was laid down by the Regional Commissioner of Income' Tax for processing of such matters---Investigation proceedings were closed by the Federal Tax Ombudsman.

None for the Complainant.

Irfan Raza, Special Assistant to CIT Companies Zone, Islamabad for Respondent.

2008 P T D 593

[Federal Tax Ombudsman]

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

TAYMUR COTTON MILLS (PVT.) LTD., LAHORE CANTT.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 837-L of 2004, decided on 2nd February, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 221, 170(4) & 171---Income Tax Ordinance (XXXI of 1979), Ss.62, 64(1), 34, 35, 73 & 102---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Rectification of mistake---Refund---Losses declared by the predecessor---Brought forward and set off---Rectification application was moved requesting that losses declared by the predecessor in the assessment years 1999-2000 and 2000-2001 be brought forward and set off against the Income determined in the assessment year 2001-2002 under S.62 of the Income Tax Ordinance, 1979---Application was rejected on the ground that the matter "did not fall within the scope of S. 221 of the Income Tax Ordinance, 2001" because as per record "no assessed losses for the assessment years 1999-2000 and 2000-2001 were. available for adjustment" and as complainant was not correct in claiming that returns for earlier years were filed and came to be accepted by operation of law as per S.64(1) of the Income Tax Ordinance, 1979---Validity---Conclusion was inescapable that returns for 1999-2000 and 2000-2001 were filed in the case of predecessor and have attained finality due to the operation of law per S.64 of the Income Tax Ordinance, 1979---Complainant was entitled to set off the brought forward loss in terms of Ss.34 & 35 of the Income Tax Ordinance, 1979, subject to the satisfaction of the requirement of S.73 of the Income Tax Ordinance, 1979---Federal Tax Ombudsman recommended that the complainant be allowed refund arising due to set-off of brought forwarded loss, if allowable, within 45 days after the date of application as per S.170(4) of the Income Tax Ordinance, 2001; that additional payment for delayed refund also accrued and be allowed as per S.102 of the Income Tax Ordinance, 1979 read with S.171 of the Income Tax Ordinance, 2001; that Officers who committed the lapses as respects maintenance of files, and recording of proceedings on "Order Sheet", be identified and addi­tion to written warning, to be made part of their Performance Evaluation Reports (old A.C.Rs.) and be made to undergo a course in Office Procedure at the Tax Management Academy.

A.A. Zuberi, Advisor, Dealing Officer.

M. Ashraf Ch. for the Complainant.

Qamar Haider, (D.-C.I.T.) for Respondent.

2008 P T D 604

[Federal Tax Ombudsman]

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

Messrs AKRO PROTECTION SERVICES (PVT.) LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. No.238 of 2004, decided on 14th September, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.80C, 61 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.11 of 1991 dated 30-6-1991---Tax on income of certain contractors and importers---Security services---Assessee, a company providing security services---Receipts of such assessee were intended to be assessed under Presumptive Tax Regime---Assessee contended that receipts were not covered by provision of S.80C of the Income Tax Ordinance, 1979 and should be assessed under S.62 of the Income Tax Ordinance, 1979 and issuance of notice under S.61 of the Income Tax Ordinance, 1979 be termed as maladministration---Validity---In a remanded case, Assessing Officer found that the receipts of the Security Agency were far services rendered---Decision of the Appellate Tribunal holding that the receipts of the Security Agency were for services rendered, which the Department had accepted, were binding and not those in which the contrary view had been upheld by the Appellate Tribunal per incurium and had been challenged in the High Court---Investigation proved that the process initiated was contrary to settled law and fell under the definition of maladministration which was under the jurisdiction of Federal Tax Ombudsman---Federal Tax Ombudsman recommended that the Department should drop the proceeding3 initiated in contravention of settled law.

2001 PTD 2969 rel.

I.T.A. No. 578/IB of 2000-01 per incurium.

I.T.A. No.578/IB of 2001-01; I.T.A. No.529/IB of 2000; I.T.A. No. 131/IB of 2002; I.T.A. No.815/1B of 2000-01; I.T.A. No.691 (KB) of 1999-00; I.T.As. Nos.5314, 5315/(LB) of 1999 and R.A. No.67/IB of 2003 ref.

Faisal Lateef, ACA, for the Complainant.

Nasir Iqbal, DCIT for the Respondent.

2008 P T D 609

[Federal Tax Ombudsman]

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

Messrs DANDOT CEMENT COMPANY LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 940-L of 2005, decided on 26th September, 2005.

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

----S. 36(3)---Central Excise Act (I of 1944), S.33(3)---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---Combined show-cause notice, dated 26-10-2002 pertaining to sales tax and excise duty was issued---Department was required to pass the order within 135 days and 45 days respectively, of the issuance of show-cause notice while the order-in-original showed the date of judgment as 11-1-2005 which was dispatched on 14-7-2005---Order creating sales tax and central excise liability along with additional tax and penalty was defective in that the mandatory provisions of Sales Tax Act, 1990 and Central Excise Act, 1944 were not observed; that Additional Collector lacked jurisdiction to decide the case because the show-cause notice was issued by Collector (Adjudication) and that Order-in-Original showed the date of judgment as 11-1-2005 and. the order was dispatched on 14-7-2005 more than six months after the date of judgment---Validity---Case was decided on 11-1-2005 much beyond the prescribed time limits --Presidential order sustaining the order of the Federal Tax Ombudsman, laid down the principle that "where a public functionary is empowered to create liability against a citizen only within the prescribed time it is mandatory"---Department had created liabilities both of sales tax, along with additional tax and central excise duty and penalties but failed to pass the order within the prescribed time limits---Ruling contained in Presidential order will apply not only to sales tax but also to central excise---Order, as a whole, was hit by time limitation as provided in law---Department violated the provisions of law and mal­administration stood established--'-Order-in-Original was not sustainable because it was clearly hit by time limitations as provided in law---Federal Tax Ombudsman recommended that Revenue Division direct the competent authority to cancel the Order-in-Original.

Complaint No.805 of 2003 and decision No.85 of 2004-F.T.O.-Law, dated 7-5-2005 rel.

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

----S. 36(3)-Central Excise Act (I of 1944), S.33(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Recovery of tax not levied or short-levied erroneously refunded--Limitation---Extension of time---Reason advanced for seeking extension of time limits was reconciliation of evaded figures-Reason recorded was "case transferred by the Collector (Adjudication), Rawalpindi which needs further hearing and reconciliation"---Show-cause notice had been issued as far back as on 26-10-2002 reconciliation should have been completed well within the prescribed time limits---Failure to do so did not constitute special circumstance'---Transfer of a case by one officer to another did not constituteexceptional circumstances', especially when the department was aware of the operative time limits within which the cases had to be decided.

Complaint No.653 of 2005, dated 9-9-2005 rel.

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

----S. 36(3)---Central Excise Act (I of 1944), S.33(3)-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---Communication of order---Order passed on the file but not communicated to the affected party within the prescribed time limits or within the extended period of time, could not be treated as having been passed within the prescribed time limits.

Shahid Pervaiz Jami for the Complainant.

Moin-ud-Din Ahmad Wani, DC Sales Tax, Rawalpindi for Respondents.

2008 P T D 617

[Federal Tax Ombudsman]

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

SAFDRULLAH and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 504 of 2004, decided on 17th September, 2004.

Customs Act (IV of 1969)---

----Ss.201(1), 168 & 169---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Criminal Procedure Code (V of 1898) S.550---Procedure for sale of goods and application . of sale proceeds---Vehicle seized being smuggled was outrightly confiscated---Vehicle was auctioned after fulfilling all legal formalities---Later, with the intention of selling it further took the vehicle to Forensic Science Laboratory, for chemical examination for satisfaction of the intended buyer---Chassis number was proved to tampered with---Police seized the vehicle under S.550 of the Criminal Procedure Code, 1898, being snatched at gun point---Complainant contended that they were deprived of the ownership of vehicle for which they had paid good money without knowing the background of the vehicle that it was stolen one and prayed that either the ownership of the vehicle be restored to the complainants or auction amount and compensation for the expenses borne by them be refunded---Customs Authorities pleaded that complainant should have the chemical examination done on his own prior to taking the possession of the vehicle after the successful bid---Validity---Customs authorities auctioned the vehicle bearing tampered chassis number; it was their duty to have the particulars of the vehicle ascertained soon after its seizure as the facilities of forensic chemical test and services of C.P.L.C. were available to them which were not utilized---Such acts of omission were contrary to law, rules and regulations and were a departure from the established practice and procedure for which no valid reasons could be offered by the Department---Such act of omission squarely fell in the definition of maladministration---No reason was given as to why the successful bidder should suffer because of the acts of omission by the customs authorities---Expenses incurred on the repair of the vehicle were not verifiable---Payment of Capital Value Tax and Registration Fee and other registration expenses were not paid to, the customs authorities---Only amount which the complainant could claim from the customs authorities was the auction price---Federal Tax Ombudsman recommended that the auction price paid by the Complainant amounting to Rs,850,000 be refunded to him and that Central Board of Revenue to issue instructions that in cases of seizure of vehicles in use, Customs Authorities shall ascertain through forensic chemical test and the services of C.P.L.C. or any other Police Service available in the area for this purpose, before passing confiscation order, that it is not a stolen vehicle.

Safdarullah and Muhammad Bakhtiar for the Complainants.

Muhammad Arshad Khan, DC, Customs, Abdul Razzaq, Inspector, Anti Car Lifting Cell and Asrar Hussain Rizvi for the Respondent.

2008 P T D 622

[Federal Tax Ombudsman]

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

MUHAMMAD SIDDIQUE

Versus

COMMISSIONER OF INCOME TAX AND WEALTH TAX and 2 others

Complaints Nos. C-472-L and 473-L of 2005, decided on 1st June, 2005.

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

----S. 122(5A)-Income Tax Ordinance (XXXI of 1979), S.59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Finance Act (I of 2003), Preamble---C.B.R's letter C.No.3(12) IT-Jud/04, dated 24-4-2004---Amendment of assessments for the assessment years 2000-2001 and 2001-2002 finalized under Self-Assessment Scheme prior to enactment of Finance Act, 2003---Validity---Admittedly, notices, dated 28-6-2004 and 15-3-2005 under S.122(5A) of the Income Tax Ordinance, 2001 pertained to assessment years 2000-2001 and 2001-2002---Assessment of these years would be deemed to have been made in respect of income referred to in S.80(1) of the Income Tax Ordinance, 1979---Assessments orders were framed on 1-6-2002 and 27-5-2002---Substituted subsection (5A) in S.122 of the Income Tax Ordinance, 2001 was effective from 1-7-2003 and was not applicable to the matter decided and closed prior to enactment of Finance Act, 2003---Proceedings initiated against the complainant/assessee under S.122 of the Income Tax Ordinance, 2001 were without jurisdiction, illegal and void ab inito---Federal Tax Ombudsman recommended that the proceedings initiated against the complainant under S.122 of the Income Tax Ordinance, 2001 by issue of notices, dated 28-6-2004 and 15-3-2005 be dropped/withdrawn and cancelled.

Zikaria H.A. Sattar Bilwani and another v. Inspecting Additional Commissioner of Wealth Tax, Range II, Kar. 2003 PTD 52 (SC Pak.); 2007 PTD 2051; Monnoo Industries Ltd. v. C.I.T., Lab. 2001 PTD 1525 and Honda Shahrah-e-Faisal Association of Persons v. Regional Commissioner of Income Tax, Karachi and others 2005 PTD 1316 rel.

Muhammad Sirjees Nagi, Advisor, Dealing Officer.

Ahmad Naseer Sheikh for the Complainant.

Manzoor Hussain Shad, I.A.C. for Respondents.

2008 P T D 626

[Federal Tax Ombudsman]

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

ABDUL GHAFOOR through Muhammad Aleem Khan, Advocate

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-267-K of 2004, decided on 17th July, 2004.

Customs Act (IV of 1969)---

----S.18---Imports and Exports Control Act, (XXXIX of 1950)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Goods dutiable---Non-issuance of 'no objection certificate' (NOC) by the customs authorities to Excise and Taxation Department for the purpose of transfer of vehicle in the name of purchaser/complainant in spite of payment of duties by the seller on the ground that vehicles were imported under the scheme of temporary importation even after lapse of seven years---Department contended that importer approached the Central Board of Revenue for permission to retain goods, Central Board of Revenue allowed retention of vehicles on payment of duty and taxes---Permission was granted without prejudice to any action under Import and Export Control Act, 1950---Central Board of Revenue had not allowed subsequent sale of goods in the market---Otherwise, instead of approaching the customs authorities, the complainant should have asked the seller to obtain No Objection Certificate under Import and Export Control Act, 1950---Even after payment of duty and takes the permission of Ministry of Commerce was necessary for transfer of vehicles in the name of importers and the importer or the complainant should have approached the Ministry of Commerce---Validity---If it was necessary to obtain No Objection Certificate from the Ministry of Commerce, the complainant should have been advised of this requirement in 1997 when he first applied to the Collector---Matter was a simple one but due to neglect, inattention, inordinate delay due to incompetence and inefficiency, no decision had been taken for more than seven years which constitute mal­administration---Duty and taxes were paid with the approval of Central Board of Revenue on temporarily imported trucks on 25-5-1996 but the transfer of vehicles in the name of the complainant/assessee applied in 1997 had not been allowed by the Excise & Taxation Department for want of No Objection Certificate from the customs---Federal Tax Ombudsman recommended that Central Board of Revenue should direct the Collector of Customs to issue No Objection Certificate to the complainant within thirty days.

Muhammad Aleem Khan for the Complainant.

Abid Hakro, Assistant Collector and Saleem Akhtar, Examiner for Respondent.

2008 P T D 629

[Federal Tax Ombudsman]

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

SALIM S. SALAMAT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 736 of 2004, decided on 13th December, 2004.

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

----S. 132---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Disposal of appeal by the Appellate Tribunal---Non-following of directions of Appellate Tribunal---Department conceded that the directions as contained in Appellate Tribunal's order were not even remotely referred to by the Assessing Officer in the assessment order nor the estimate of receipts and the extent of expenses was made on the same lines as specified by the Appellate Tribunal---Validity---Department admitted that directions by the Appellate Tribunal in the second round of litigation had not been followed; it was a pity that assessments were now over a decade old history yet the matter was still not finally settled despite present assessment being the third attempt after setting aside of two earlier assessment efforts---Scenario was highly unsatisfactory and a genuine cause of grievance besides being a pathetic example of "mal­administration'---Matter had to be decided once and for all as quickly as possible after suitable reprimand to all concerned `tax functionaries' who participated in the three rounds of assessments---Federal Tax Ombudsman recommended that the Commissioner by resort to S.122(5A) of the Income Tax Ordinance, 2001 revised the assessment at his level so as to bring it in line with the directions of Appellate Tribunal; that the Assessing Officer (the person not the office) who framed the second and third assessments be suitably warned and a copy thereof, placed on the Performance Evaluation Report to be considered at the time of promotion and that the Assessing Officer who made a change in Income year in total disregard of provisions of S.32(3) read with S.2(26) of the Income Tax Ordinance, 1979 in the year 1990-91 be reprimanded wherever he is presently posted.

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

----S. 32(3)---Income Tax Ordinance (XXXI of 1979), S.2(26) Explanation (b)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Method of accounting---Income year---Assessing Officer, without any rhyme or reason, switched over to financial year' while determining income---No reason for switch over had been recorded as was necessary keeping in mind the provisions of S.32(3) of the Income Tax Ordinance, 2001 read with Explanation (b) to S.2(26) of the Income Tax Ordinance, 1979---Income for the assessment year 1989-90 had been determined for the period 1-1-1988 to 31-12-1988---Income for the immediately following year of 1990-91 was for the period of 1-7-1989 to 30-6-1990, in consequence either income for the period 1-1-1989 to 30-6-1989 had been totally omitted from assessment, or the assessment for the year 1991-92 was for a period of 18 months but the assessment order was silent about the same---Such vital infirmity in the assessment had not been noticed during inspection by the Inspecting Additional Commissioner in any of the last ten years nor by the Regional Commissioner of Income Tax when preparing parawise comments which was glaring example of "neglect, inattention, incompetence, and inefficiency in the discharge of duties and responsibilities", falling in the category ofmaladministration'.

A.A. Zuberi, Advisor, Dealing Officer.

S. S. Salamat for the Complainant.

M. Majid, D.-C.I.T. for Respondent.

2008 P T D 638

[Federal Tax Ombudsman]

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

Messrs RAZA TRADING COMPANY, PESHAWAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1532 of 2003, decided on 10th April, 2004.

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

----S.59---Input Tax---Verifiable unsold stock---Registration---Adjustment---Complainant claimed adjustment of input tax paid in 1996 in his return for June, 2000---Complainant was registered under the Sales Tax Act on 31-12-1998---At the time of registration section 59 of the Sales Tax Act was not in the statute book---Condition of claiming input tax for goods acquired 90 days before registration provided in the said section inserted vide Finance Act 1999, did not apply in the case---Adjustment of input tax paid at the time of ex-bonding the goods against the sales tax payable was correctly made.

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

----S.36(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(b)---Recovery of tax short-levied--Notice---Maladministration---Adjustment was claimed on 5-7-2000 and show-cause notice was to be issued before 5-7-2003, whereas it was issued on 13-9-2003---Which was beyond limitation time of 3 years as prescribed under section 36(2) of the Sales Tax Act, 1990---Stipulated time for recovery had lapsed and mere issuance of a show-cause notice did not make the matter valid---Notice being time-barred all the proceedings in pursuance thereof by any authority were illegal and void--Issuance of illegal notice was arbitrary, perverse, unjust and oppressive--Competent authority was ordered to withdraw the show-cause notice and drop the proceedings initiated in its consequence.

Muhammad Anwar, Consultant, Dealing Officer.

Syed Mohsin Raza Naqvi, the Complainant along with Isaac Ali Qazi for Petitioner.

Imtiaz Ahmad Sheikh, DC (Sales Tax) for the Respondent.

2008 P T D 642

[Federal Tax Ombudsman]

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

MUHAMMAD SADEEQ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 60 of 2004, decided on 14th April, 2004.

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

----Ss.50(5), 80(c) & 96---Constitution of Pakistan (1973), Art.247---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(ii)---Advance tax---Deduction at source---Payment of tax before Assessment---Exemption---Maladministration---Complainant, a resident of Tribal Area, imported goods---Customs authorities charged income tax under section 50(5) of the Income Tax Ordinance 1979---Complainant filed nil income return and claimed refund on the plea of exemption under Article 247 of the Constitution of Pakistan---Assessing Officer accepted the return of the complainant and assessed him to tax under section 80 C treating the tax deducted under section 50(5) as the final discharge of liability and no refund was created---Validity---Complainant was carrying on business in the Tribal Area where repealed Income Tax Ordinance 1979, and Income Tax Ordinance 2001 had not been made applicable---Assessing Officer had no jurisdiction to issue notice or frame assessment---Claim was verified---Department had no option but to refund the tax deducted or received in advance---Tax Ombudsman ordered the refund of the amount already verified to be paid to the complainant.

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

----S.122---Constitution of Pakistan (1973), Art.247---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(ii)---Tax paid in advance---Concealment of information---Exemption---Maladministration---Complainant, a resident of Tribal Area had paid advance Income Tax to the customs authorities at the time of import of goods---Assessee claimed refund due to exemption---Show-­cause notice was issued to the assessee by the department alleging that he was residing in settled area and owned property in the name of his company/firm and was liable to prosecution for such concealment of facts---Validity---Complainant was proved to be a resident of Tribal Areas and the other person was his brother; he was neither resident of nor carried on business in Pakistan---Ground on which the department had issued notice under section 122 of the Income Tax Ordinance 1979 and framed assessment was contrary to law without jurisdiction and without any evidence---Tax Ombudsman cancelled such notice and the proceedings drawn in pursuance thereof and assessment order in circumstances.

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

----Ss.9(b) & 2(3)(i)(a)---Jurisdiction---Remedy of appeal---Bona fides---Matter related to assessment of income for which legal remedy of appeal was available to the complainant and the case fell outside the jurisdiction of the Tax Ombudsman---Validity---Proceedings drawn without any proper evidence and merely on presumption were not bona fide---Process adopted in decision making was illegal---Law under which the proceedings were drawn and assessment made was not applicable---Objection of jurisdiction was overruled by the Tax Ombudsman.

Muhammad Sadeeq, Complainant in person along with his brother Muhammad Sadiq and Abdul Malik Khan, ITP for the Complainant.

Ashfaq Masood, ALIT, Circle-06, Peshawar for Respondent.

2008 P T D 649

[Federal Tax Ombudsman]

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

Messrs M.A. IMPEX, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1569 of 2003, decided on 14th April, 2004.

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

----Ss. 25, 32(1a), 156(1) & 14---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(b)(c)---Categorization---Literature/specification---Misdeclaration---Show-cause notice---Valuation---Laboratory report---Jurisdiction---Complaint against the order of confiscation of goods and issuance of show-cause notice under section 32(1a) of the Customs Act, 1969---Contention by the department was that consignment did not contain the substance as declared by the complainant and on the basis of test reports from the customers laboratory it was found to be different and was of more value as declared by the complainant---Validity---Correspondence made by the department with supplier was detailed about the value of the material supplied and details of invoice and the nature of the material supplied by them, which confirmed the declared version of the complainant---Identical goods imported by the complainant were cleared earlier---Test reports obtained by the department were prepared without consulting the literature of the manufacture-Constituents/components and the chemical qualities of the substance were not indicated in the report---Earlier test reports and test report of PCSIR's pertaining to the present consignment indicated that the basic component of the substance was ethylic in nature---Decision of the department was not based on cogent, reliable and relevant evidence---Customs value of imported goods was the transaction value or the price actually paid---Department had failed to prove that invoice was not genuine---Veracity of the certificates of manufacturer and exporting country's Chamber of Commerce was not questioned by the department---Show-cause notice alleging misdeclaration and under invoicing was found illegal and against the terms of section 32(1)(a) as ingredient of knowledge and belief was missing in the notice---Same being vague and not in conformity with law was thus illegal and contrary to law---Show-cause notice and of the process employed by department for rejecting the declared version of the complainant and subsequent decision taken was perverse, arbitrary, biased, oppressive, not founded on cogent and valid evidence and based on irrelevant grounds which fell within the definition of mal­administration in terms of section 2(3)(i)(b)(c) of the Ordinance 2000---Tax Ombudsman had jurisdiction to investigate such cases.

Assistant Collector of Customs v. Khyber Electric Lamps and others 2001 SCMR 838 quoted.

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

----Ss. 25, 32(1a), 156(1) & 14---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(b)(c) & 9(b)---Maladministration---Valuation of goods---Classification---Rejection of declared version---Legal remedies of appeal, review or revision---Test reports were arranged and the constituents/components and the chemical qualities of the substance were not indicated in the test reports---Veracity of the certificates issued by manufacturer and the Chamber of Commerce were not even questioned---Show-cause notice and, process employed by the respondent for rejecting the declared version was perverse, arbitrary, biased, oppressive and not founded on cogent and valid evidence---Such treatment fell, within the definition of maladministration and the Ombudsman had jurisdiction in this matter---Withdrawal of show-cause notice and release of goods was ordered in circumstances.

Muhammad Anwar, Consultant, Dealing Officer.

Muhammad Ashraf Hashmi for the Complainant.

Muhammad Asif, Assistant Collector (Imports), Faisalabad for Respondent.

2008 P T D 656

[Federal Tax Ombudsman]

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

Messrs GADOON TEXTILE MILLS LTD., INDUSTRIAL ESTATE GADOON AMAZAI, TEHSIL AND DISTRICT SWABI

Versus

SECRETARY, REVENUE, DIVISION, ISLAMABAD

Complaint No. 73 of 2004 decided on 12th April, 2004.

Central Excise Act (I of 1944)---

----Ss.1(3) & 3-D(3)---S.R.O.(I)/99 dated 1-7-1999 & S.R.O. 805(I)/99 dated 15-7-1999--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a)---Imposition of excise duty---Withdrawal of excise duty---Contrary to law---Refund---Excise duty was imposed by S.R.O.(I)99, dated 1-7-1999 on manufacturers at Gadoon Amazi and it was withdrawn by S.R.O. 805(I)/99, dated 15-7-1999 with effect from 1-7-1999---Complainants had deposited Rs.1,00,000 in advance and their request for refund was accepted to the extent of Rs.19,780 and the claim of Rs.80,219 was rejected---Validity---Incidence of tax had not passed to the consumers---Complainants had produced documentary evidence, which was official document---Excise duty paid was not included in the value for purposes of calculating sales tax---Invoice was in the name of customers mentioned in the official document---Process adopted in rejecting the claim without hearing the complainants and without properly examining the evidence on record was contrary to law---Decision was made arbitrarily only on presumptions and not on evidence on record---Tax Ombudsman ordered the refund of Rs.80,219 be paid within 30 days.

Usman Gul for the Complainant.

Imtiaz Shaikh, DC-Sales Tax, Peshawar for the Complainant.

Amer Rashid, AC-Sales Tax, Mardan for Respondent.

2008 P T D 661

[Federal Tax Ombudsman]

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

Messrs CHERAT CEMENT CO. LTD., NOWSHERA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.76 of 2004, decided on 18th May, 2004.

(a) Central Excise Rules, 1944---

----R. 13---S.R.O. No.514(I)/2001, dated 12-7-2001---Zero rated---Duty drawback---Show-cause notice---General bond---Insurance guarantee---Complainant challenged the encashment of Insurance Guarantee by the Assistant Collector being perverse, unreasonable unjust, biased and oppressive amounting to maladministration---Validity---Complainant was a regular exporter of cement to Afghanistan---Delay in production of the certificate from Consulate was not wilful and customs authorities had checked the goods at the time of export and allowed export without charging duty---Consulate had confirmed the export of woods---Assistant Collector had proceeded to pass encashment order without serving show-cause notice on the complainant---Such action was arbitrary, unjust, oppressive and contrary to law---Federal Tax Ombudsman cancelled the order of Assistant Collector and allowed benefits envisaged in S.R.O. No.514(I)/2001 dated 12-7-2001.

(b) Central Excise Rules, 1944---

----R. 13---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a)(b)---Show-cause notice---"Audi Alteram Partem"---Dictum---Assistant Collector has passed the order of encashment without serving any show-cause notice on the complainant and thus violated the dictum and principle enshrined in the maxim Audi Alteram Partem.

2002 SCMR 1034 = 2002 PLC (C.S.) 1083 cited.

Muhammad Anwar, Consultant, Dealing Officer.

Qazi Waheed-ud-Din for the Complainant.

Imtiaz Sheikh, DCIT for Respondent.

2008 P T D 668

[Federal Tax Ombudsman]

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

FAKHR-E-ALAM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1396-P of 2003, decided on 25th May, 2004.

Wealth Tax Act (XV of 1963)---

----Ss.14(2), 16(2) &. 17---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Ex parte Assessment--Notices---Maladministration---Service of any statutory notices issued by the Assessing Officer was not proved---Entire process of issue and service of various notices was found bogus and fictitious exercise---Assessment order framed without service of statutory notices was arbitrary, capricious, baseless, against facts of the case and contrary to law---Maladministration was proved---Objection as to the jurisdiction of Federal Tax Ombudsman to entertain a complaint was based on misreading of section 9(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Order passed without service of show-cause notice was void, contrary to law and without jurisdiction---Federal Tax Ombudsman had jurisdiction to investigate such cases---Federal Tax Ombudsman recommended to revise the assessment order and to assess the complainant to the extent of his interest the property and other taxable assets.

Muhammad Anwar, Consultant, Dealing Officer.

Abdul Malik Khan for the Complainant.

Ashfaq Masood, Taxation Officer for Respondent.

2008 P T D 675

[Federal Tax Ombudsman]

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

ZIA ULLAH

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1669 of 2003, decided on 28th May, 2004.

Sales Tax Act (III of 1951)---

----Ss.18 & 19---Sales Tax Registration Rules, 1996, Rr.5 & 6---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Registration under section 18 of the Sales Tax Act---Rules, Regulations and instructions---Circular letter issued by Secretary Sales Tax (L & P) showed that it sought to materially modify the Sales Tax Registration Rules, 1996---Containing new requirements for registration and showed that it was issued to overcome perceived deficiencies in the rules---Substantive changes in law or rules could not be brought through circular instructions---Central Board of Revenue had no power to add conditions which were not contained in rules---Letter dated 16-8-2003 issued by the Central Board of Revenue amounted to act of maladministration defined in section 2(3)(i)(a) & (b) of the Ordinance No. XXXV of 2000---Federal Tax Ombudsman ordered for withdrawal of circular instructions issued vide C.No.3(2)STP/99 (Pt-I) dated 16-8-2003.

Muhammad Anwar, Consultant, Dealing Officer.

Muhammad Saleem Malik for the Complainant.

Kamal Afzal, A.C., Sales Tax, for the Complainant.

2008 P T D 689

[Federal Tax Ombudsman]

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

Messrs GOJRA WEAVING FACTORY, TOBA TEK SINGH

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 212 of 2004, decided on 15th April, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(4) & 71---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a)---Refund---Compensation---Maladministration---Complainant had filed return under Self-Assessment Scheme---Complainant claimed refund and compensation---Validity---Rectification order bore no date---Order-sheet was not maintained---Such order was passed after receiving notices of complaint---Entire proceedings were mala fide and made up for denying the claim for compensation---Plea of rectification was not pleaded in the reply and was made with ulterior motive which showed that refund amount claimed by the complainant was accepted and the refund vouchers had already been issued---Such was done for denying the claim for compensation---Short document notice was complied within the prescribed period---Assessment would have been made on 30th June---Compensation should therefore be calculated from Ist October in the manner prescribed by section 171 of the Income Tax Ordinance, 2001---Maladministration was established---Tax Ombudsman 'recommended compensation and disciplinary action against concerned Taxation Officer for irregularities and non main­tenance of proper record.

Mian Zafar Iqbal for the Complainant.

Masood Aslam, AC-IT, Sargodha Zone, Sargodha for the Respondent.

2008 P T D 694

[Federal Tax Ombudsman]

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

Messrs TANVEER AND BROTHERS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1517-K of 2003, decided on 6th February, 2004.

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

----Art. 129(e)---Actions performed in normal course of duties would be presumed to be bona fide.

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

----S. 126(1)---Evidence of assessment---Assessment order being an original document was cognizable evidence, thus, all particulars contained therein would be treated as correct.

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

----S.66-A---Income Tax Ordinance (XLIX of 2001), S.122(5-A)---Revision of assessment---Prerequisites---Where assessment order was erroneous as well as prejudicial to interest of revenue, then jurisdiction to invoke, S.66-A of Income Tax Ordinance, 1979 (S.122(5-A), Income Tax Ordinance, 2001) would arise---Mere disagreement among officers on result of assessment order or possibility of framing a better or more revenue yielding assessment by IAC/CIT would not be valid ground to treat completed assessment as erroneous and prejudicial to revenue---Where assessment order was not in accordance with law, then erroneousness causing prejudice to revenue would occur---Element of erroneousness would be ruled out, where department never pleaded for enhancement of income in appeals filed against assessment order---Prejudice to revenue alone would not vest jurisdiction for revision of assessment.

1997 PTD (Trib.) 902 fol.

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

----S.122(5-A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Issuance of notice to revise already completed assessment---Validity---Impugned notice had ignored that matter had already been considered at assessment stage and reconsidered in the light of Inspection Note at re-assessment stage with approval of superior officers---Mere disagreement or possibility of framing a better or more revenue yielding assessment by IAC/CIT would not be valid ground for revising such assessment---Pre-conditions prescribed by law to revise completed assessment had not been fulfilled rendering impugned notice without jurisdiction, contrary to law, perverse and arbitrary falling in realm of maladministration---Ombudsman would have jurisdiction to investigate such case, particularly when department had failed to establish bona fides of proposed action---Repeated issuance of notices on same issue was a cause of constant anxiety and harassment revealing maladministration---Federal Tax Ombudsman recommended to revenue to withdraw impugned notice and allow completed assessment to stand good.

1992 PTD 545 rel.

A.A. Zuberi, Advisor, Dealing Officer.

Rehan Hassan Naqvi for the Complainant.

Agha Hadaytullah, (IAC) for Respondent.

2008 P T D 707

[Federal Tax Ombudsman]

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

Messrs SHAHEEN COURIER SERVICES, Proprietor Amir Ali Shroff, Karachi

Versus

TAXATION OFFICER (I.A.C.) RANGE-II/COMPANIES-I, KARACHI

Complaint No.1106-K of 2003, decided on 3rd November, 2003.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), S.66-A & 59(1)---C.B.R. Circular No.9 of 1998, dated 15-7-1998---C.B.R. Circular No.14 of 1998, dated 9-10-1998---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessment---Self-assessment---Show-cause notice to make additional assessment by modifying or cancelling the assessment made under S.59(1) of the Income Tax Ordinance, 1979 on the ground that return was wrongly accepted under Self-Assessment Scheme as tax liability in the return was calculated less than the required calculation of tax to qualify for Self-Assessment Scheme---Complainant/assessee contended that observation of Inspecting Additional Commissioner was misconceived and tax was miscalculated---Tax already paid was more than the tax payable to qualify under Self-Assessment Scheme---Validity---Inspecting Additional Commissioner had no valid reason to consider that tax payable on the basis of return filed was calculated at an amount less than actually payable---Commissioner of Income Tax and all concerned officers above him should have been concerned that Taxation Officers did not apply their mind to appreciate the. facts---Initiation of such proceedings put the credibility of the entire Revenue Division at stake---Inspecting Additional Commissioner, firstly, miscalculated the tax liability of the complainant/assessee on declared income and secondly he failed to appreciate that even if there- was an error of calculation the tax withheld during the income year was much more than even the higher tax liability incorrectly calculated by him---Reasons of such acts of the Inspecting Additional Commissioner could be either incompetence or wilful harassment---Maladministration committed in issuing notice under S.122/66A by incorrectly considering the assessment under S.59 of the Income Tax Ordinance, 1979 to be erroneous and prejudicial to the interest of Revenue was proved.

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

----S.122---Income Tax Ordinance (XXXI of 1979), S.66-A, 59(1), 24(c), 24(ff), 24(fff), 52, 86 & 139---C.B.R. Circular No.9 of 1998, dated 15-7-1998---C.B.R. Circular No.14 of 1998, dated 9-10-1998---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessments---Self-assess­ment---Issuance of show-cause notice to make additional assessment on the ground that audit had pointed out that no details of total receipts were obtained and proposed action under Ss.24(c), 24(ff), 24(fff), 52 & 86 of the Income Tax Ordinance, 1979 after calling for complete information and statement under S.139 of the Income Tax Ordinance, 1979---Validity---Basis of issuing the notice under Ss.122/66A was misconceived---Audit had proposed action under Ss.24(c), 24(ff), 24(fff), 52, 86 and 139 of the Income Tax Ordinance, 1979---Inspecting Additional Commissioner was supposed to forward a copy of the proposal to the Director of the Tax withholding to call for statutory statements under Ss.139 to 143A of the Income Tax Ordinance, 1979 that would have taken care of the compliance of the provisions 'of clause (c) of S.24, S.52 and S.86 of the Income Tax Ordinance, 1979---No prescribed procedure existed to verify the details of total receipts required under S.24(ff) and (fff) of the Income Tax Ordinance, 1979 in the Self-Assessment Scheme cases except where the assessee opts to avail rebate in tax for furnishing party wise details of receipt---Mode of payments envisaged under S.24(ff) and 24(fff) could only be verified during the course of assessment under total audit or under normal assessment procedure---Initiation of proceedings under Ss.122/66A on the basis of action proposed by audit was totally unwarranted in the case and amounted to maladministration---Assessing Officer committed no error in assessing the income under S.59(1) of the Income Tax Ordinance, 1979---Inspecting Additional Commissioner was demoraliz­ing his own subordinates by undermining their valid performance---Federal Tax Ombudsman recommended that Commissioner of Income Tax ensures that proceedings initiated by issuance of the notices under S.122/66A of the Income Tax Ordinance, 2001/Income Tax Ordinance, 1979 were dropped; that the assessment finalized under Self-Assessment Scheme is maintained; that the tax withheld/collected from the complainant in excess of determined tax liability is refunded within seven days along with compensation due under the law for the period such refund has been delayed; that the counselling of the Inspecting Additional Commissioner is done by the commissioner to be careful in examination of records of assessment proceedings, in appreciation of audit observations, in calculation for determination of correct tax liability, in evaluating the reasons to invoke jurisdiction under Ss.66A/122 and in application of the provisions of law, rules and regulations relevant to the case and that the Regional Commissioner of Income Tax Southern Region ensures that written warnings are issued to the Inspecting Additional Commissioner concerned as well as the Audit Officer concerned against making telephone contact with assessees.

PLD 1992 SC 549 = 1992 PTD 932; 2002 PTD 2734; 2001 PTD (Trib.) 3810 and (1992) 66 Tax 14(sic) ref.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), S.66-A, 139 & 3(bbb)---Income Tax Rules, 1982, R.53---C.B.R. Circular No.9 of 1998, dated 15-7-1998---C.B.R. Circular No.14 of 1998, dated 9-10-1998---C.B.R. Circular No.8 of 1999, dated 27-7-1999---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Amendment of assessment---Assessment was finalized under Self-Assessment Scheme---Show-cause notice for additional assessment was issued requiring to furnish statement under S.139 of the Income Tax Ordinance, 1979 giving complete particulars of entire staff whom salary/wages claimed as expenses were disbursed and showed intention to treat the complainant as an assessee in default of failure to withhold tax on salary/wages if statement required under S.139 was not filed or complete details were nor reflected in it---Complainant/assessee pleaded that Inspecting Additional Commissioner, assumed jurisdiction of monitoring tax withholding in spite of the fact that the jurisdiction lies with the Director of Tax withholding as provided under S.3(bbb) of the Income Tax Ordinance, 1979---Validity---Reply was filed by the complainant/assessee that no statement was required to be filed because no employee was paid any taxable salary and the Inspecting Additional Commissioner was under misconception that the prescribed statement to be filed under S.139 of the Income Tax Ordinance, 1979 provides for a statement of all employees irrespective of the fact whether "on the basis of proportionate monthly amount of such salary, income tax was likely to be charged or not---Pro forma of the statement had been prescribed under R.53 of the Income Tax Rules,. 1982 under the caption "Monthly statement of deduction of tax on income chargeable under the head 'Salary'"-Caption itself suggests it was a statement of deduction of tax and not a statement of payment of salaries-Rule provides that "the person making the deduction shall send to the Income Tax Authority specified under S.51 a statement"---Inspecting Additional Commissioner was labouring, under a misconception, to persuade the complainant to file a complete employees-wise statement of salaries disbursed and it reflects Inspecting Additional Commissioner's incompetence rid inaptitude in performance of his duties---Inspecting Additional Commissioner Appeared and attended the hearings but did not file his affidavit or reply signed by him to controvert the allegations regarding mala fides and corrupt motives made against him---Mala fides and corrupt motive in initiating the proceedings leading to passing of impugned order was fully established.

S.M. Sibtain, Advisor, Dealing Officer.

Muhammad Raza Merchant for the Complainant.

Chaman Lal Oad, IAC for Respondent.

2008 P T D 731

[Federal Tax Ombudsman]

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

KASHIF CHEMICAL CORPORATION, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint Nos. 282 and 335 of 2003, decided on 3rd July, 2003.

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

----S.47A, 2(46)(e) & 32A-Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Indirect Taxes Settlement Commission---Value of supplies---Sulphonic Acid---Evasion of tax by suppression of value of supplies of Sulphonic Acid---Complainant proposed that instead of appointing independent auditors the disputes may be resolved in term of S.47A of the Sales Tax Act, 1990 under which the Central Board of Revenue could appoint a committee for resolution of any hardship relating to levy or payment of taxes---Departmental representative agreed to the proposal and it was mutually agreed that cases be referred to Dispute Resolution Committee---Committee so constituted shall examine the record of the cases and after hearing both the parties submit its report/recommendations to the Central Board of Revenue within a reasonable period for resolution of the disputes which will be acceptable to both the parties---Agreement between the parties was recorded and the proceedings were closed by the Federal Tax Ombudsman.

1981 STC 290 ref.

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

----S.33---Informal resolution of disputes---Jurisdiction---Under S.33 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, the Federal Tax Ombudsman may exercise jurisdiction for bringing about consensus between the parties to arrive at an amicable settlement.

Muhammad Akbar, Advisor, Dealing Officer.

Akhtar Javed, for the Complainant.

Mazhar Waseem, D.C. (Audit) and Najeeb Qadir, Cost Accountant for Respondents.

2008 P T D 735

[Federal Tax Ombudsman]

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

Messrs NAZAR KHAN, CONTRACTOR, D.G. KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.143 of 2004, decided on 25th May, 2004.

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

---Ss. 55, 57 & 143-B---Income tax refund claim---Refund would be issued not by Secretary, Revenue Division, but by Taxation Officer in whose jurisdiction case of assessee fell.

(b) Jurisdiction---

----Order passed without jurisdiction---Status---Such order being an illegal and void order, would not confer any right on party concerned.

PLD 2001 Kar. 695 rel.

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

----Ss. 9 & 10(3)---Income Tax Ordinance (XXXI of 1979), S.143-B---Complaint seeking refund---Limitation---Assessment order was made on 15-3-2003, but complaint was filed on 16-2-2004---Effect---Complaint was prima facie time-barred---Issue of refund had not yet been settled, thus, injustice was continuing---Complaint was treated to be in time in. circumstances.

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

----Ss. 62 & 143-B---Constitution of Pakistan (1973), Art.247---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(a)(b), 9 & 11--=Income tax refund claim---Tax deducted for work done in Tribal Area was claimed to be exempt in view of Art.247 of the Constitution---Taxation Officer completed assessment under S.62 of the Income Tax Ordinance, 1979, accepted claim of exemption, but did not issue refund and later on transferred assessment record to another region on point of jurisdiction---Validity---Assessment in such case had been completed without jurisdiction and without following proper procedure---Such claim had not been settled even after a year---Such facts would constitute maladministration on account of neglect, inattention, inefficiency and inaptitude in performance of duties falling within meaning of S.2(3)(i)(a)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Onus to prove that respondent had acted bona fide and for valid reasons was lying on Taxation authorities, which they had failed to discharge---Federal Tax Ombudsman recommended to Revenue to direct concerned Taxation authorities to make thorough enquiries to determine location, where income rose, and if same arose within Tribal Area, refund be made to 'complainant, and if same did not arise in Tribal Area, then proper assessment be made and refund due, if any, be issued immediately after completion of assessment as required by law.

(2000) St Tax 360 and 1993 PTD (Trib.) 249 ref.

Muhammad Mushtaq, Advisor (Dealing Officer).

Sheikh Ghulam Asghar for the Complainant.

Qaiser Mehmood, D.C.I.T. for the Revenue.

2008 P T D 744

[Federal Tax Ombudsman]

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

Messrs BAYER CHEMICALS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.927-L of 2003, decided on 4th October, 2003.

Sales Tax Act (VII of 1990)---

----Ss. 38 & 40-A---Order of Collector, dated 21-9-2002 authorizing all Deputy Collectors/Assistant Collectors to have access to premises, stocks and accounts of assessees within area of their jurisdiction---Validity---Such order neither made specific mention of whether such authorized officer could take records into custody nor specified/particularized names of assessees, whose premises and accounts could be visited---Such omnibus order without making selection of a unit to be visited at a senior level, would be abused by subordinates, who might arrogate to themselves power to do anything that they wished---Action under S.38 of Sales Tax Act, 1990 tending to dovetail into operation under S.40-A thereof must be curbed, unless action was actually intended to be taken under S.40-A after fulfilling all its requirements---Principles.

Master Enterprises v. Federation of Pakistan (88)Tax-I/SC/03 and Ehsan Yousaf's case Writ Petition No.19482 of 2000 ref.

Muhammad Akbar, Advisor (Dealing Officer).

Tahir Razzak Khan, F.C.A., and Ahmad Khalil for the Complainant.

Naureen Ahmed Tarar, A.C. Sales Tax, Lahore and Muhammad Naseem, Senior Auditor, Sales Tax for Respondent.

2008 P T D 768

[Federal Tax Ombudsman]

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

Messrs SNOW LAND HOTEL, NARAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1413 of 2003, decided on 21st November, 2002.

Sales Tax Act (VII of 1990)---

---Ss. 19, 26 & 45-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Non-filing of monthly tax return by complainant after its ex parte compulsory registration---Imposition of penalty---Plea of complainant was that due to closure of communication means during winter season, he could not receive notice either prior to registration or afterwards regarding non-filing of return---Validity---Respondent could not furnish any proof regarding service of notice nor produced evidence providing basis for compulsory registration---No enquiry had been made to determine turnover of complainant---Impugned orders were arbitrary, baseless, contrary to law and suffered from abuse of authority---Maladministration was established---Federal Tax recommended to Revenue to cancel order of registration and order-in-original under S.45-A of Sales Tax Act, 1990 and conduct fresh proceedings after enquiries and proper service of show cause/hearing notice on complainant.

Muhammad Anwar, Consultant (Dealing Officer).

Mubarik Ahmad Qureshi for the Complainant.

Imtiaz Shaikh, DC (Sales Tax) Peshawar for Respondent.

DECLSION/FINDINGS

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Brief facts of the case are that the complainant runs a hotel and restaurant in Naran. He received an ex parte order-in-original dated 14-7-2003 from the concerned Deputy Collector imposing a penalty of Rs.5,000 for non-filing of monthly sales tax return for March, 2003 and thus came to know that he had been compulsorily registered under section 19 of the Sales Tax Act. On contacting the sales tax office the complainant was further informed that a penalty of Rs.5,000 had also been imposed upon him vide an ex parte order-in-­original dated 30-4-2003 for non-filing of return for the month of February 2003. It is contended that the complainant was penalized without hearing as no show-cause notice was served on him for compulsory registration or for imposition of penalty as alleged in the order-in-original dated 30-4-2003 which was personally collected by him and by then the time for appeal had expired. It is prayed that the complainant be declared exempt from levy of sales tax as he was not earning taxable turnover and the order-in-original dated 30-4-2003 be vacated.

1. In reply the respondent has stated that being a registered person the complainant was required to file sales tax return under the law and his failure to do so attracted the penal provisions. It is further stated that for registration under section 19 a notice was issued to the complainant on 31-1-2002 for 11-2-2002 and for its non-compliance the unit was compulsorily registered on 16-12-2002. It is further stated that penalty for non-filing of return for the month of February 2003 was imposed after giving two opportunities of hearing on 24-4-2003 and 30-4-2003. As regards complainant's contention that his business was seasonal which did not fetch him as much turnover as to make him liable to sales tax, the respondent has stated that it was the responsibility of the complainant to prove his contention but he failed to respond to the formal notices before compulsory registration as well as subsequent show-cause/hearing notices.

2. The representatives of the both sides were heard. The A.R. of the complainant argued that during winter season the business was closed and due to closure of Naran Road and suspension of communication the complainant did not receive any notice either prior to registration or afterwards regarding non-filing of returns which culminated in imposition of penalty vide ex parte Order-in-Original dated 30-4-2003. The respondent's representative could not furnish any proof regarding service of the said notices on the complainant. He also could not produce any evidence which provided basis for compulsory registration. In fact no enquiry was made by the department to determine the turnover of the complainant. In these circumstances the registration of the unit under section 19 and subsequent order-in-original for imposition of penalty are arbitrary, baseless, contrary to law and suffers from abuse of authority. Maladministration is thus established.

3. In the light of the above, it is recommended that:-

2008 P T D 770

[Federal Tax Ombudsman]

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

MUHAMMAD SHOAIB

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1222-K of 2003, decided on 18th November, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13 & 63---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Best judgment assessment on basis of Inspector's report without confronting assessee with its facts and details---Validity---While framing such assessment, Assessing Officer had not made proper inquiries, but had finalized same in a slipshod, haphazard and careless manner without following law in its elementary form---Assessment order suffered from gross illegality and was tainted with procedural flaws for being perverse, biased, arbitrary and unjust falling within ambit of "maladministration"---Revenue had already sought explanation from Assessing Officer and directed Commissioner of Income tax concerned to examine case afresh under S.122-A of Income Tax Ordinance, 2001---Federal Tax Ombudsman recommended to Revenue not to give assessment powers to Assessment Officer till completion of inquiry against him and determination of his suitability for assessment work; and that evaluation report of performance of Inspector concerned be sent to office of Ombudsman within specified time.

S.A. Nasser (Dealing Officer).

Udha Ram Rajput for the Complainant.

Sultan Wazir, I.A.C. Larkana Range, Larkana for Respondent.

2008 P T D 776

[Federal Tax Ombudsman]

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

Messrs TAXILA TEXTILE INDUSTRIES, LAHORE through Ch. Muhammad Ali

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1043-L of 2003, decided on 23rd September, 2003.

Sales Tax Act (VII of 1990)---

----S. 21---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Delay of 10 months in deciding complainant's application seeking deregistration for having ceased to carry on business---Validity---Respondent had neither produced evidence regarding extension in time of four months for taking decision on such application nor had shown whether any dues were outstanding against complainant---No notice under S.21(4) of Sales Tax Act, 1990 had been issued to complainant---Audit of complainant had been completed---Four months had passed since filing of application---Such conduct of respondent would amount to maladministration---Federal Tax ombudsman recommended to Revenue to process application promptly on merits in accordance with law.

Muhammad Akbar, Advisor (Dealing Officer).

Ch. Abdul Razzak for the Complainant.

Ms. Azmat Tahira, D.C. (Refunds), Sales Tax, Lahore for Respondent.

2008 P T D 784

[Federal Tax Ombudsman]

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

RELIANCE WEAVING MILLS LTD., MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1143-L of 2003, decided on 31st October, 2003, Sales Tax Act (VII of 1990)---

----Ss. 2(34), 11, 33, 34 & 48(1)(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Deduction of additional tax from sanctioned refund claim without determining additional tax liability through process of adjudication---Validity---Additional tax could be imposed under Ss.33 & 35 of Sales Tax Act, 1990 only after issuance of show-cause notice and providing opportunity of hearing to assessee---Expression "tax" included additional tax---Ends of justice would have been met, if assessee was issued proper show-cause notice for recovery of additional tax as per prescribed procedure to enable him to prepare and enter his defence before adjudicating Authority---Impugned deduction was, held, to be premature and improper, especially when assessee had not consented to such deduction.

Muhammad Akbar, Advisor (Dealing Officer).

Rana Muhammad Afzal for the Complainant.

Fazal-ur-Rehman for Respondent.

2008 P T D 797

[Federal Tax Ombudsman]

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

Messrs PLAYWAY NURSERY & PRIMARY SCHOOL, KARACHI

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD of REVENUE, ISLAMABAD

Complaint No.1171-K of 2003, decided on 13th November, 2003.

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

----S. 61---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Ex parte assessment by making additions in income of assessee---Department alleged to have completed such assessment due to non-compliance of statutory notice and non-filing of balance sheet by assessee---Validity---Assessee along with complaint had filed certified copy of balance sheet obtained by him from department---Copies of balance sheet and statement of accounts were available on record---Such plea of department was not established from record---Additions had been made without providing opportunity to assessee to present her case---Maladministration stood established---Wrong statement with regard to non-filing of balance sheet and effecting of proper service of notice had proved mala fide---Federal Tax Ombudsman recommended to Commissioner of Income Tax to set aside impugned assessment under S.122-A of Income Tax Ordinance, 2001 with directions to Taxation Officer to complete same afresh after providing reasonable opportunity to assessee to present her case.

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

----Ss. 2(3) & 9---Jurisdiction of Federal Tax Ombudsman---Scope---Where impugned action was arbitrary, violative of principles of natural justice or in excess of authority or result of arbitrary exercise of power without observing pre-condition, then Ombudsman would have jurisdiction---Ombudsman would have jurisdiction to investigate allegation of complaint, where maladministration was proved.

S. Asghar Abbas, Consultant (Dealing Officer).

Aminuddin Ansari for the Complainant.

Ms. Naheed Azhar, I.A.C., along with Saadullah ITO for Respondent.

2008 P T D 805

[Federal Tax Ombudsman]

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

Messrs RAFIQUE CENTRE, GOJRA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1072 of 2003, decided on 8th November, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59, 62 & 63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Self-assessment---Selection of case for total audit---Refusal of Taxation Officer to accept revised return filed by assessee in terms of agreement made by Regional Commissioner of Income Tax and Tax Bar Association---Validity---Such agreement had no legal force as assessment was a matter between taxpayer and Taxation Officer---Taxpayers had not authorized representative of Tax Bar Association to enter into such agreement---Regional Commissioner of Income tax was not Assessing Authority, thus, had no legal authority to enter into such agreement---Assessment was to be completed according to provisions of Ss.59, 62 or 63 of Income Tax Ordinance, 1979 and not on basis of a blanket agreement covering all taxpayers---C.B.R. had cancelled such agreement---Assessee had failed to prove any maladministration on the part of Taxation Officer---Federal Tax Ombudsman closed proceedings in such case.

Muhammad Anwar, Consultant (Dealing Officer).

Muhammad Anwar Bhatti for the Complainant.

M. Nawaz Ahmad, I.A.C. for Respondent.

2008 P T D 811

[Federal Tax Ombudsman]

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

Messrs GHOUSIA TRAVELS, RAWALPINDI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1085 of 2003, decided on 15th November, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Reopening of self assessment---Receipt of notice by assessee on a date fixed therein for filing of reply---Framing of assessment by Assessing Officer during pendency of transfer application before Commissioner of Income Tax---Validity---Assessing Officer had acted mala fide in framing assessment order hastily and without affording proper opportunity of hearing to assessee and waiting for Commissioner's decision on transfer application---Record showed that assessee, had not been afforded sufficient time to represent his case--Commissioner should have stayed assessment proceedings pending decision on transfer application---Assessing Officer had acted with predetermined mind and arbitrarily---Maladministration stood established---Federal Tax Ombudsman recommended to Director General Enquiries, C.B.R. to conduct enquiry against Assessing Officer for framing hasty assessment order.

Muhammad Anwar, Consultant (Dealing Officer).

Syed Anees Ahmad for the Complainant.

Tahir Tanveer, D.C.I.T. and Hussain Shahzad Raja, Taxation Officer for Respondent.

2008 P T D 819

[Federal Tax Ombudsman]

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

Ch. SHER MUHA.MMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1415 of 2003, decided on 17th November, 2003.

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

---Ss. 56, 61 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Assessment on basis of Inspector's report showing assessee to be a "Arzi-Nawees" on account of his regular visits to District Courts---Validity---Regular visit to Court might make a person a Court bird, but not a petition writer---Such fact could be ascertained from District Judge, Bar Association or evidence of other petition writers or by producing any document prepared by assessee---Certificates of 4 advocates produced by assessee had established his visits to District Court in respect of land cases---Assessing Officer had framed assessments for five years at a fixed amount for each year, while such report did not state income earned by assessee or period during which he had worked as petition writer---Relying on a false and purposeless report and drawing adverse presumption against assessee without hearing him, would make intention of Inspector and Assessing Officer mala fide---Such behavior and treatment was repugnant to confidence building process, which C.B.R. had started in tax matters---Duty of Assessing Officer was to evaluate such report and apply his own mind to facts of case---Burden was not on assessee but was on department to prove his income as Arzi Nawees---Record produced by assessee did not show that he was a Arzi Nawees---Federal Tax Ombudsman 'recommended to C.B.R. to direct concerned authority to cancel impugned assessments and direct Director General Inspection to examine impugned order to evaluate performance of Assessing Officer and take necessary action against him and Inspector concerned as provided under law.

(b) Practice and procedure---

----Regular visits to Court may make a person a Court bird, but not a .petition writer.

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

----S. 62-- Income earned by son could not be looked into while framing assessment of his father.

Ch. Sher Muhammad for the Complainant.

Muhammad Saleem, D.C.I.T.

2008 P T D 833

[Federal Tax Ombudsman]

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

Messrs WORLDWIDE MOTORS (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1653-K of 2003, decided on 16th April, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.62, 66A, 156, 89 & 100---Income Tax Ordinance (XLIX of 2001), Ss.171 & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Appeal effect---Additional payment on delayed refund---Complainant had pleaded that due to departmental failure to give appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003 the complainant had suffered hardship and harassment and a substantial amount of money of the company had remained locked up with the department---Income Tax Appellate Tribunal had cancelled order passed under Ss.62, 156 and 66A vide order dated 5-1-2003 (Assessment years 1994-95, 1995-96 and 1996-97)---Such order was served on the Commissioner of Income Tax on 31-1-2003---Claim of compensation under section 100 had to be given after three months of receipt of decision otherwise the complainant was entitled to compensation under Ss.100/102/171 of the Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001, legitimate request of the assessee thus was rejected---Lack of response and delay showed inefficiency and incompetence amounting to maladministration---Federal Tax Ombudsman recommended that order giving appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003 be served on authorized representative of the complainant and refund due to the complainant for assessment year 1994-95 be paid together with compensation under section 171 of the Income Tax Ordinance, 2001.

S.A. Nasser, Dealing Officer.

M.D. Gangat, I.T.P. for the Complainant.

Dr. Tauqeer Irtiza, D.C.I.T. for Respondent.

2008 P T D 848

[Federal Tax Ombudsman]

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

AHMED MUNIR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.306 of 2004, decided on 18th June, 2004.

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

----Ss.12(2), 50(4), 59A, 80C & 143B---Income Tax Ordinance (XLIX of 2001), S.221---S.R.O. No.586(I)/99 dated 30-4-1999---Constitution of Pakistan (1973), Arts. 246 & 247---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a), (b) & (c)---Tax deducted---Refund---Statement of Income---Assessment on basis of return---Tax on income of contractors---Exemption---Complainant was resident of Provincially Administered Tribal Area and had executed some contracts with Frontier Works Organization for road works in the Kohistan Pattan Area---Tax was deducted under S.50(4) of the Income Tax Ordinance, 1979---Contractor claimed refund which was refused by the department---Department contended that complainant had filed statements under S.143B of the Income Tax Ordinance, 1979 and tax was deducted under S.5.0(4) on the presumptive income which constituted final discharge---Validity---Provisions of Income Tax Ordinance had not been extended to Federally Administered Tribunal Areas or provincially Administered Tribunal Areas where the complainant resided---Section 12(2) of the Income Tax Ordinance, 1979 was wrongly interpreted---Complainant had not done any activity directly or indirectly in the taxable territories and he could not be considered to have business connection in Pakistan---Context of section 143B was quite invalid---Assessment under S.59A °was to be on deemed income under S.80C of the Ordinance---Assessment under S.59A was made in respect of income which was not chargeable to tax in Pakistan---Federal Tax Ombudsman recommended the Commissioner of Income Tax to make rectification under S.221 of Income Tax Ordinance, 2001 and refund would be considered as due from that date.

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

----S.2(3)(i)(a) & (b) & (V)---Maladministration---Refusal to refund the tax which was not actually payable by the complainant fell within the definition of "maladministration".

Mirza Muhammad Wasim, Adviser (Dealing Officer) Ahmed Munir for the Complainant.

Nemo for Respondent.

2008 P T D 853

[Federal Tax Ombudsman]

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

Syed HUSSAIN ASIF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1502-K of 2003, decided on 3rd January, 2004.

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

----Ss.96, 56, 13(1)(aa) & 143-B---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Re­assessment was completed at nil income but credit for payment made was not allowed in the I.T.30 Form on the pretext of verification of challan of payment and probe of investment of other party---Validity---Department was fully aware of the payment made by the complainant/assessee through pay order as demand was reduced in the subsequent reminder---Credit was not allowed without any lawful justification which amounted to maladministration---"Wilful error" in determination of refund was confirmed by non-response of the Assessing Officer to the applications of complainant/assessee---Department had not been able to resolve the issues during a period of about three and half years---Complainant/assessee's legitimate request for allowing the credit of payment and issuance of resultant refund had remained unattended for such a long time without any lawful justification---Such should not be further delayed' for meeting the future tax liability---Federal Tax Ombudsman recommended that the Central Board of Revenue to direct the concerned officer to decide the complainant's claim of refund for the year 1997-98 within thirty days.

Messrs" Berger Paints, Karachi v. C.B.R./Income Tax Department in Complaint No.1358-K of 2002 rel.

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

----S.96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Contention of the department that refund for the assessment year 1997-98 could not be determined or issued unless the assessment for the subsequent year 1998-99 was completed as it was likely to result in creation of substantial demand, was neither reasonable nor justifiable.

S.A. Asghar Abbas, Consultant (Officer).

Mehtab Khan for the Complainant.

Ejaz Asad Rasul, I.A.C. for Respondent.

2008 P T D 873

[Federal Tax Ombudsman]

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

Messrs INTERNATIONAL CIGARETTE INDUSTRIES (PVT.) LTD., SWABI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.420 of 2004, decided on 24th July, 2004.

Customs Act (IV of 1969)---

----Ss.17 & 180---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Sales Tax Act (III of 1951), Ss.37(c) & 45---Seizure---Adjudication---Show-cause notice---Mal­administration---Complainant was manufacturer of cigarettes, customs staff impounded a truck load of consignment of cigarettes---Show-cause notice was issued by Additional Collector, Customs, which was duly responded---Hearing was held in 1998---Adjudication order was not received and was delayed for about 7 years---Delay in adjudication was cause of complaint---Department had alleged that delay was caused due to changes in jurisdiction and shifting/transfer of record the case file went missing---Validity---Very disturbing aspect was prevailing in the departments where there was no security for the record which was a serious maladministration---Federal Tax Ombudsman recommended that Central Board of Revenue to produce manual circular or instructions relating to maintenance, preservation and transfer of record from one office to another---Parties should be informed of such transfer---Transferee department should issue intimation to parties---Systemic reforms be suggested.

Ch. Riasat Ali for the Complainant.

Fazal Yazdani, Additional Director (Intelligence and Investigation).

Ahmad Rauf, Deputy Collector (Adjudication) Sales Tax, Gujranwala for Respondent.

2008 P T D 891

[Federal Tax Ombudsman]

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

HAZRAT GHANI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.294 of 2004, decided on 18th dune, 2004.

Central Excise Rules, 1944---

----Rr.10(1)(2), (3), 174 & 176---S.R.O. 422(I)/97 dated 13-6-1997---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Licence---Complainant prayed that he be saved from illegal actions of Sales Tax and Central Excise Department who had issued notice for attachment of his property for recovery of alleged licence fee---Department had replied that the officials of the Directorate General, Inspection and Internal Audit, had made a case against complainant regarding recovery of licence fee and penalty for the period of 1990-91 to 1999-2000 in terms of Rules 74 & 76 of the Central Excise Rules, 1944---Validity---No evidence regarding the service of show-cause notice was available on the order-in-original---Facts of case were found to be identical to an earlier decided complaint---Case regarding recovery of licence fee was initiated at the same time and on the same basis---In the light of S.R.O. 422(I)/97 dated 13-6-1997 complainant was not required to obtain a licence with effect from 1-7-1997---Department's action for period 1-7-1997 to 1999-2000 was without jurisdiction---Limitation for action under Rule 10(1) & 10(2) was one to three years and Rule 10(3) was not applicable as no false document was filed---Action for recovery of licence fee for the period 1-7-1997 to 30-6-2000 was illegal and without jurisdiction---Federal Tax Ombudsman, therefore, recommended that all actions taken in the case of the complainant with regard to levy of licence fee including the issue of recovery notice be cancelled and dropped.

Complaint No.696 of 2001 cited.

Mirza Muhammad Wasim, Adviser (Dealing Officer).

Hazrat Ghani, Complainant in person.

Muhammad Saleem, Deputy Collector, ST&CE, Peshawar for Respondent.

2008 P T D 896

[Federal Tax Ombudsman]

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

KHALEEQ AHMED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1389-K of 2003, decided on 14th April, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.22, 23, 61, 62, 63, 66A, 132, 156(3) & 102-Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Refund---Ex parte assessment---Best judgment assessment---Deductions--Notice---Rectification---Compensation on delayed refund---Complainant had challenged non-issuance of refund for the assessment year 1997-98 along with compensation and it was alleged that in ex parte assessment deductions were not made---Complainant filed rectification application which was not decided within statutory time "and therefore the mistake was deemed to be rectified and refund was created=--Department, in reply had alleged that rectification application was never filed and tax deducted was adjusted against demand and no refund was created---Validity---Claim of filing the rectification application was not established---Commissioner Appeal had directed to compute the income under sections 22 and 23 of the Income Tax Ordinance, 1979---No appeal was filed before the Income Tax Appellate Tribunal by the Department---Ex parte assessment was made after a lapse of more than nine months from the date of non-compliance of statutory notice---Such order was served after a lapse of two and half years---No expenses were allowed against substantial receipts in the ex parte order---Ex parte assessment must be best judgment assessment---Order passed by the Assessing Officer under sections 63/132 of the Income Tax Ordinance, 1979 on 20-6-2000 was arbitrary, unreasonable, unjust and oppressive---Federal Tax Ombudsman therefore recommended that Central. Board of Revenue to direct the concerned Commissioner of Income Tax to set aside the order passed under sections 63/132 dated 20-6-2000 for Assessment year 1997-98 and to pass fresh order strictly following the directions given in Appellate Order in presence of complainant.

S.A. Asghar Abbas, Consultant (Officer).

Abdul Razak along with Khaleeq Ahmed, Manager Finance for the Complainant.

Sohaib Ahmed Sehi, I.A.C. for and Saleem Pervaiz, A.C.I.T. for Respondent.

2008 P T D 908

[Federal Tax Ombudsman]

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

SHAHZAD KAJ OVERLOCK

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1332-L of 2003, decided on 21st November, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.154, 56 & 58---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---General Clauses Act (X of 1897), S.27---Service of notice---Assessments of three years were finalized on the basis of notice under S.56 of the Income Tax Ordinance, 1979 served on the complainant/assessee's brother and also mentioning only one assessment year---Department admitted that "due to clerical mistake" only one assessment year was mentioned in the notice although notice under S.58 of the Income Tax Ordinance, 1979 intended to mention all the three assessment years---Validity---Notice was casually prepared mentioning only one year whereas the consolidated ex parte assessment was framed for three years and the mistake was attributed to a clerical lapse although preparation and issuance of statutory notices which were to be made foundation for assessment had to be strictly in accordance with law---Service of notice was not made in the manner prescribed by law i.e. S.154 of the Income Tax Ordinance, 1979 read with S.27 of the General Clauses Act, 1897---Assessment had been framed on a cyclostyled printed form adopting the same figures for each year without caring to find out the extent and volume of business with reference to the number of machines installed, the number of employees, the location of shop, the rates charged etc.---Neglect and indifference with which the notices were issued and assessment framed reflected an arbitrary and unreasonable conduct coupled with neglect, inattention, inefficiency and inaptitude which fell in the definition of maladministration---Federal Tax Ombudsman recommended that the consolidated ex parte assessment framed on 5-6-2003 for the assessment years 2000-2001 to 2002-2003 be cancelled by resorting to S.122-A of the Income Tax Ordinance, 2001; concerned, Income Tax Officer, who framed the assessment be subjected to `counselling' and his performance monitored; all those involved in the preparation of parawise comments whereby the assessment had been justified should be advised to fresh up their knowledge of law as respects preparation/service of notices and framing of assessments; it should be reported as to what corrective/ preventive steps were taken when the mistake allegedly committed by the Peshi Clerk was discovered and since returns were not voluntarily filed appropriate notices, adhering to law and rules, be issued to frame assessment after due enquiry and giving proper opportunity of hearing.

A.A. Zuberi, Adviser (Dealing Officer).

M. Ijaz Bhatti for the Complainant.

Dr. Muhammad Idrees (D.C.I.T.) for Respondent.

2008 P T D 920

[Federal Tax Ombudsman]

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

Malik TANVEER ALI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1245-L of 2003, decided on 22nd November, 2003.

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

----Ss.154 & 65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Service of notice---Complainant/assessee denied service of notice under S.65 of the Income Tax Ordinance, 1979 especially pointing out that whereas on the Returns and on all other correspondence, the signatures of the complainant/assessee were in Urdu, the signatures on the notice were in English and in a `pacca' writing---Validity---Forging of signature on notice under S.65 of the Income Tax Ordinance, 1979 seemed to have been manoeuvred with bad and improper motive which frustrated the entire proceedings---Such fraudulent act robs the entire proceedings of legitimacy and validity---Entire action suffered from malice, bad faith and mala fides---As fraud in service of notice was established, the proceedings became nullity and the Federal Tax Ombudsman had jurisdiction to investigate and provide relief according to law---Federal Tax Ombudsman recommended that Commissioner by resort to section 122-A of the Income Tax Ordinance, 2001 cancel the consolidate Additional Assessment order in respect of the assessment years 1999-2000 and 2000-2001 and disciplinary action against Notice Server be initiated for forging signatures of a person different from the complainant though earlier notices were served by him on the complainant, revealing that he knew and recognized the complainant personally.

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

----S.65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Additional assessment---Definite informa­tion---Observation in the Additional assessment order that the discrepancies were discovered when "assessment record was perused" was an unequivocal admission that on definite information was acquired after the completion of assessments and the information already existing on record was made a basis for initiation of action under S.65 of the Income Tax Ordinance, 1979.

1996 PTD 186 rel. C.No.849-K/2001 ref.

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

----S.154---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Service of notice---Forged service---Notice bore the signature in English as acknowledgement of receipts, whereas even signatures in Urdu, available on the Return and other documents, showed that the complainant/assessee was hardly literate and service was clearly forged.

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

----S.2(3)---Income Tax Ordinance (XXXI of 1979) S.65---Maladministration---Forged signature---Fraud---Act of forging signature on the notice under S.65 of the Income Tax Ordinance, 1979 by the functionaries of tax department amounted to fraud on the complainant and the statute.

A.A. Zuberi, Advisor (Dealing Officer).

Safdar Hussain Nagra for the Complainant.

Muzammil Hussain (D.C.I.T.) for Respondent.

2008 P T D 936

[Federal Tax Ombudsman]

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

MUHAMMAD YOUSAF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1296-K of 2003, decided on 16th January, 2004.

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

----Ss.13(1)(aa) & 63---C.B.R. Circular No.19 of 2000, dated 2-8-2000 para.10(2) [Tax Amnesty Scheme]---C.B.R. Circular No.20 of 2000, dated 29-8-2000 [New Tax Amnesty Scheme]---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Unexplained investment etc., deemed to be income---Issuance of show-cause notice under S.13(1)(aa) of the Income Tax Ordinance, 1979 for making addition of unexplained amount after lapse of two years during which complainant/assessee had already filed declaration under New Tax Amnesty Scheme on account of undisclosed stock in trade and had paid tax---Validity---After a lapse of two years when the case was getting barred by time notice under S.13(1)(aa) of the Income Tax Ordinance, 1979, dated 25-6-2003 was issued for compliance within three days, which was against the principles of natural justice---Complainant/ assessee received the notice on 28-6-2003 and tried to comply with the notice on the same day to avoid any further complication---Assessing Officer finalized the assessment within two days on 30-6-2003 considering the reply unsatisfactory merely to cover up his negligence---Was proved that an unjust and unreasonable assessment was framed in complete disregard of verdict of superior Courts to the effect that ex prate assessment should be based on well considered conclusions and not dishonestly or vindictively---Entire process proved neglect, inefficiency and inaptitude in performance of duties and mala fide intention---Department should have acted in more reasonable manner as such lapses always create litigation and cause harassment---Federal Tax Ombudsman recommended that Central Board of Revenue issue directions to the Commissioner of Income Tax to accept the declaration under Tax Amnesty Scheme and withdraw the show-cause notice under Ss.13(1)(aa) and 61 and proceedings taken in pursuance thereof.

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

----S.59-D---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Tax on undisclosed income---C.B.R. Circular No.20 of 2000, dated 29-8-2000 [New Tax Amnesty Scheme]---Part-IV of the Schedule to the Income Tax Ordinance, 1979 provides that all the three conditions laid down in para 3 of Circular No.20 of 2000 were not to be fulfilled---By using the word "or" at the end of the conditions Nos.(i) and (ii) the assessee/taxpayer was permitted to fulfil any one of the conditions and not all the conditions of para.3 Part-IV for availing the benefit.

Shahida Taj, Director (Dealing Officer).

Ch. Zahoor Elahi Bhatti and Inayatullah Khan for the Complainant.

Abid Mahmood, D.C.I.T./T.O. for Respondent.

2008 P T D 941

[Federal Tax Ombudsman]

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

Messrs BAYER CROPSCIENCE (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-694/K of 2003, decided on 8th December, 2003.

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

----S.104---Income Tax Ordinance (XLIX of 2001), S.170(3)(b)---Sales Tax Act (VII of 1990), Ss.6(2) & 26(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Adjustment of refund against tax---Income tax assessment was finalized and refund was created---Request was made by the complainant/assessee to issue the refund or to allow them to adjust the amount against the sales tax liability under S.104 of the Income Tax Ordinance, 1979---Neither refund was issued nor adjustment of monthly sales tax liability against income tax refund was allowed and a show-cause notice was issued for non-payment of the principal amount of sales tax along with additional tax---Validity---Authorities decided to punish the complainant/assessee by refusing to adjust their refund long over-due for sales tax payment---Department should not have ignored the simple fact that the complainant/assessee might be facing a cash flow problem---Such was a clear case of maladministration on account of inaction, deliberate delay in refund and harassment on the part of Large Taxpayer Unit officials----Adjudication proceedings initiated against the complainant/assessee were mala fide, without justification and legal validity---Federal Tax Ombudsman recommended that Central Board of Revenue direct the DG Large Taxpayer Unit to allow full refund of income tax which became due in January, 2000 (if not already done); allow adjustment thereof against sales tax liability which became due on 15-1-2003; remit the liability of additional tax and penalty against the complainant and withdraw the show-cause notice issued by the Collector (Adjudication).

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

----Ss.2(6) & 9---Income Tax Ordinance (XLIX of 2001), S.170(3)(b)---Relevant Legislation---Non-issuance/adjustment of refund---Complaint against---Department contended that Income Tax Ordinance, 2001 was not included in the list under sub-S.(6) of S.2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, therefore, the jurisdiction of Federal Tax Ombudsman was barred---Validity---In order to redress grievances of the complainant/assessee Federal Tax Ombudsman had the authority 'to take cognizance of and investigate into the cases where maladministration had been alleged; otherwise the very purpose of enacting the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would be defeated---Section 9 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 clearly provided that the Federal, Tax Ombudsman may, on a complaint by any aggrieved person, investigate any allegation of maladministration on the part of the Revenue Division or any Tax Employee---Objection raised was irrelevant.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Athar Saeed, Advocate.

Moshin Waheed, ACA.

Misri Ladhani, Additional Commissioner of Income Tax L.T.U.

Abdul Hameed Memon, Deputy Collector of Sales Tax L.T.U.

2008 P T D 953

[Federal Tax Ombudsman]

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

Sheikh EJAZ AHMAD and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1586-L of 2003, decided on 24th February, 2004.

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

----S.9(2)(a)---Customs Act (IV of 1969), S.194-A---Complaint before Federal Tax Ombudsman against order already challenged in appeal before Appellate Tribunal---Withdrawal of appeal by complainant---Effect---Hurdle in entertaining complainant vis-a-vis provisions of S.9(2)(a) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 stood removed.

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

----S.168---Criminal Procedure Code (V of 1898), S.510---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Seizure and confiscation of vehicle alleged to be non-duty paid on basis of report of Forensic Science Laboratory obtained in another case by Police showing its chassis number to be tampered one and not tallying with its number as entered in import and registration documents---Plea of complainant was that the Forensic test had been carried behind his back; that such report was inadmissible in evidence as such Laboratory was not notified under S.510, Cr.P.C.; that before using such report in evidence, examiner of vehicle, countersigning officer of report should have been summoned for cross-examination---Adjudicating Officer ordered release of vehicle on its recovery on payment of duty, taxes and penalty while observing that vehicle having been stolen was not available for re-test of its chassis number and that show cause had not been issued within period stipulated under S.168(2) of Customs Act, 1969---Validity---Was imperative to have first established, whether vehicle had been imported legally or illegally and whether same was duty paid or non-duty paid---If due to non-availability of vehicle, an independent test from independent laboratory was not possible for re-verification of its chassis number, Adjudicating Officer could call in experts/persons, who had examined and tested vehicle, signed/countersigned test report together with officials, who had earlier presented vehicle to laboratory for test, for recording their evidence and cross-examination by complainant, to which he was entitled---Maladministration was evident from order of Adjudicating Officer being arbitrary, unjust and unreasonable for having ignored legitimate demand of complainant---No appeal was provided against process employed by Adjudicating Officer, thus provisions of S.9(2) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would not stand in way of investigation by Ombudsman---Federal Tax Ombudsman recommended to C.B.R. to direct Adjudicating Officer to consider complainant's case and pass order in accordance with law.

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

----S.168(2)---Release of property to owner due to issuance of time-barred show-cause notice---Validity---Duty and taxes could be recovered and penalty could be imposed for contravention.

PLD 1982 Pesh. 30; 1991 SCMR 647 and PTCL 1983 CL 209 fol.

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

----S.9---Constitution of Pakistan (1973), Art.199---Complaint before Federal Tax Ombudsman during pendency of constitutional petition in High Court---Maintainability---Where complainant withdrew constitu­tional petition before hearing of complaint by Ombudsman, then bar of jurisdiction would stand removed and complaint would becompetent.

Complaint No. 100-K/2002 (Rep.No.59/2002-F.T.O.(LAW) fol.

Muhammad Akbar, Advisor (Dealing Officer).

Mumtaz-ul-Qayyum for the Complainant.

Muneeb Sarwar, D.C. (Customs) Sambrial for Respondent.

2008 P T D 962

[Federal Tax Ombudsman]

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

Messrs DOSSA COTTON & GENERAL TRADING (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-41-K of 2004, decided on 18th May, 2004.

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

----Ss. 3, 33 & 34---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Claim for refund of additional tax and penalty deducted from sales tax not leviable on exported goods---Non-filing of appeal against order of deduction---Refusal of department to pass order on such claim alleging such deduction to have been made with consent of complainant's attorney---Validity---Complainant had not denied such consent given by attorney and his authority to give same---Officials of Department were bound to suitably advise complainant and give him appropriate information about rules and procedure---Refusal to reply or pass any order on complainant's request to review order of deduction, would amount to maladministration---Federal Tax Ombudsman recommended to Revenue to decide complainant's application after hearing him.

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

---S.3---Exported goods---Exporter not liable to pay sales tax or penalty thereon.

(c) Sales Tax---

---Duty of officials of Sales Tax Department is to suitably advise taxpayer and give him appropriate information about rules and procedure after passing any order against him---Taxpayer is expected to know the law as if he has engaged the services of a professional for dealing with case---Principle illustrated.

M. Mubeen Ahsan, Advisor (Dealing Officer) M. Nissar Dossa, Chairman of Company.

S.M. Shoaib, Deputy Collector of Sales Tax, Karachi.

2008 P T D 970

[Federal Tax Ombudsman]

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

Messrs COMMODITY LINKS INTERNATIONAL, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1609-K of 2003, decided on 5th April, 2004

Income Tax Ordinance (XLIX of 2001)---

----Ss.114(6), 122 & 170(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Summary rejection of revised return and refund application without notice to and hearing complainant---Validity---Such rejection was violative of provisions of Ss.122(9), 170(4) of Income Tax Ordinance, 2001---Assessing Officer had committed maladministration as his order was perverse, arbitrary, unreasonable, unjust, biased and oppressive---No appeal was provided against impugned order, which did not relate to plain assessment---Federal Tax Ombudsman recommended to C.B.R. to direct concerned officer to decide refund claim strictly on merit within specified time after providing opportunity of hearing to complainant.

S. Asghar Abbas, Consultant (Officer).

Azhar Chaudhry for the Complainant.

Ejaz Asad Rasul, I.A.C. and Dr. Tariq Ghani, D.C.I.T. for Respondent.

2008 P T D 975

[Federal Tax Ombudsman]

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

TARIQ AZIZ MALIK

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1485-L of 2003, decided on 15th May, 2004

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

----Ss.2(3)(i)(a)(b) & 9(2)(b)---Income Tax Ordinance (XXXI of 1979), S.62---Complaint about assessment and maladministration---Maintainability---Maladministration evident from record---Federal Tax Ombudsman would have jurisdiction in such matter.

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

----Ss.19, 21 & 62---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(a)(b), 9 & 11---Property jointly owned by two persons---Framing assessment in complainant's case (co-sharer in property) in status of Association of Persons on basis of enquiry report of Inspector made from tenants of property---Validity---Report mentioned refusal of tenants to give statement regarding actual rent---Revenue had failed to prove complainant to be sole proprietor of property---F.T.I. Form showed complainant' as co-sharer in property having ascertainable share, thus, assessment in his case could not be completed as sole proprietor thereof---Transfer of complainant's case from Circle, where property was located, to another Circle without inviting his objection was not proper---Such assessment was illegal, unjust, arbitrary indicating negligence, inattention, incompetence and inaptitude in discharge of duties falling within purview of maladministration as defined in S.2(3)(i)(a)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Onus to prove that there was no maladministration was on Revenue, which had not been discharged---Revenue had failed to prove that such assessment was bona fide and for valid reasons-Federal Tax Ombudsman recommended to Revenue to take action under 5.122-A of Income Tax Ordinance, 2001, revise such assessment and initiate proper inquiry to determine gross annual rental value, ownership and jurisdiction of property and complete assessment after proper service of notice and confronting complainant thereto.

PLD 1973 SC 49 ref.

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

----Ss. 2(3) & 9---Maladministration, allegation of---Burden of proof---Onus to prove that there was no maladministration, would lie with Revenue.

Muhammad Mushtaq, Advisor (Dealing Officer).

Latif Ahmad Qureshi for the Complainant.

Muzammal Hussain Butt, D.C.I.T. for the Revenue.

2008 P T D 986

[Federal Tax Ombudsman]

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

Syed MUHAMMAD AHMAD NAQVI, PROPRIETOR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1499-K of 2003, decided on 27th January, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S.50 & 59(1)---C.B.R. Circular No.2 of 1998, dated 16-2-1998---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Deduction of tax at source---Self-assessment---Income declared was accepted under Self-Assessment Scheme but credit for deductions under S.50 of the Income Tax Ordinance, 1979 was allowed to the extent of tax payable on the declared income and credit for total deduction claimed was not allowed---Department contended that assessment was completed on the basis of photocopy of return without making any enquiries with reference to filing the original return in time---Credit was restricted to the extent of tax liability only as not a single original challan was enclosed with the return---Claim regarding deductions under S.50(4) of the Income Tax Ordinance, 1979 was adjustable and not covered under presumptive tax regime, needed careful examination---Validity---Date of filing of return was yet to be ascertained as the same had neither been shown on acknowledgment slip nor mentioned in the complaint---Department did not offer any plausible explanation for allowing credit for deduction only to the extent of tax liability as against the total deduction---Applications addressed to Assessing Officer and Regional Commissioner of Income Tax remained unresponded without any justification---Complainant/assessee should not be allowed to suffer for the negligence, carelessness and inefficiency of the department officials--Facts established neglect, inattention, delay, incompetence, inefficiency and inaptitude in the discharge of duties and responsibilities by the concerned officers---Federal Tax Ombudsman recommended that the Central Board of Revenue to direct the concerned officer to decide the claims of the complainant regarding allowance of deductions under S.50 of the Income Tax Ordinance, 1979, determination and issuance of resultant refund within 30 days of the receipt of this order and the responsibility of passing the order under S.59(1) without proper verification etc. be fixed and disciplinary action be initiated and finalized against the delinquent officer within 60 days.

S. Asghar Abbas, Consultant (Officer).

Haider Naqvi for the Complainant.

Mrs. Adeela Bokhari, D.C.I.T. for Respondent.

2008 P T D 991

[Federal Tax Ombudsman]

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

Messrs WAZIR INDUSTRIES (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1636-K of 2003, decided on 3rd April, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.100 [as amended by Finance Act (I of 1985)], 102(2)(a), 135 & 171---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Claim for determined refund with compensation @ 15 %---Non-issuance of refund and compensation---Validity---Filing of application to claim refund created on assessments under Ss.59, 59(a), 62 & 63 of Income Tax Ordinance, 1979 or by giving appeal effect no longer requirement of law---Order of Tribunal was received by authority on 30-6-2001---Period of compensation would be calculated after expiry of 3 months from 30-6-2001---Compensation would be payable to complainant for period from 1-10-2001 till date of payment---Additional payment for delayed refund would be made under S.171 of the Income Tax Ordinance, 1979---Inordinate and unlawful delay in issuance of such refund and compensation was contrary to law, arbitrary, unreasonable, unjust, biased, oppressive and discriminatory---Federal Tax Ombudsman recommended to C.B.R. to direct concerned officer to issue refund due to complainant with specified time along with additional payment for such period till date of payment as admissible under S.171 of the Ordinance.

Complaints Nos.329-K of 2002, 67-L of 2003, 181 of 2003, 234 of 2002, C-354-K of 2002 and C-93-K of 2002 ref.

Asghar Abbas, Consultant (Officer).

Raza Merchant for the Complainant.

Tauqeer Irtaza, D.C.I.T. for Respondent.

2008 P T D 998

[Federal Tax Ombudsman]

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

Rana ABDUL SHAKOOR KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.181-L of 2004, decided on 4th May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 50(7E)(7-H), 80-C(3) & 143-B---C.B.R's. Circular No.18 of

1993, dated 13--10-1993---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11--Claim for refund of tax collected by WAPDA on account of consumption of electricity---Inaction of department to decide such claim or issue refund voucher---Validity---Tax in complainant's case deducted by its supplier in respect of its income (commission so received) under S. 50(7-H) of Income Tax Ordinance, 1979 would constitute final discharge of its tax liability---Provision of S.80-C(3) of Income Tax Ordinance, 1979 could not be stretched to cover such collection by WAPDA to declare same as non-refundable made under S.50 thereof---Such refund could not held back as complainant's tax liability stood finally discharged---Tax deducted by WAPDA being in excess of total liability under S.80-C bf the Ordinance was refundable and its withholding would not be justified because of collection under S.50(7-E) thereof---Department had allowed similar refund in another case, and thus its action was discriminatory---Department's refusal to respond to such refund application and reluctance to allow refund was arbitrary and unjust amounting to maladministration---Federal Tax Ombudsman recommen­ded to C.B.R. to direct competent authority to allow such refund.

Muhammad Akbar, Advisor (Dealing Officer).

Rana Mushtaq Ahmad, I.T.P. for the Complainant.

Karamat Ullah, D.C.I.T. for Respondent.

2008 P T D 1002

[Federal Tax Ombudsman]

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

INAM ALI BHATTI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.30-L of 2004, decided on 20th March, 2004.

Customs Act (IV of 1969)---

----Ss. 18-A & 33(I)---S.R.O. No.1198(I)/96, dated 22-10-1996--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Claim for refund of pre-shipment inspection charges levied unlawfully-Limitation-Superior Courts declared such charges as unlawful---Authority rejected claim for refund of such charges as time-barred without issuing show-cause notice to complainant---Validity---Where amount recovered by authority was not customs duty/charge or its imposition and levy had no sanction under law, then claim for refund of such amount would not be governed by S.33 of Customs Act, 1969---Amount of such charges did not belong to Government, thus, could not be retained by same---Recovery of such charges was not backed by legal sanction and was without jurisdiction---Claim for refund of such charges, if actually paid, would not be governed by S.33 of Customs Act, 1969---Bills of Entry did not indicate deposit of duty, taxes and such charges as completed Bills of Entry would normally carry stamp of deposit in Treasury or Bank---Payment of refund would be contingent upon proof of payment of such charges and further proof including certificate from Chartered Accountant certifying that incidence of such charges had not shifted to consumers---Such claim not being a case of assessment or determination of liability, would not fall in any category of cases enumerated in S.9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance 2000---Rejection of such claim on technical ground of being time-barred was arbitrary, unjust, unfair and discriminatory---Maladministration was established---Federal Tax Ombudsman recommended to Revenue to cancel impugned order, admit such refund claim for processing and decide same subject to verification of payment of such charges and production of evidence as to non-shifting of its incidence to consumers including production of Chartered Accountant's certificate certifying such fact.

PTCL 1999 CL 752 and Ghulam Abbas v. Member Judicial PTCL 1998 CL 350 rel.

Muhammad Akbar, Advisor (Dealing Officer).

Ashraf Ali for the Complainant.

Irfan Javed D.C. Sambrial for Respondents.

2008 P T D 1019

[Federal Tax Ombudsman]

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

MUHAMMAD SHARIF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.59 of 2004, decided on 7th April, 2004.

Sales Tax Act (VII of 1990)---

----Ss.2(7)(47) & 14---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Registration of complainant as "Distributor" instead of "Retailer" as applied for on prescribed form by ticking box meant for "Retailer" in column of business activity---Plea of complainant was that box ticked therein as "Retailer" had been tampered with by crossing same and instead box meant for "Distributor" had been tick-marked---Plea of authority was that such action had been taken on basis of certificate issued by an industry showing complainant as their authorized dealer; and that he had applied for registration as "Distributor" and not for "Retailer"---Validity---Complainant's version about tampering with his form, prima facie, was correct as alterations made therein did not bear his signatures/ initials---Benefit of doubt in this regard, thus, would go to complainant--On basis of certificate of industry showing complainant to be their authorized dealer, authority could, subject to physical verification, register him as a "wholesaler", which includes a dealer, but not a "Distributor"---Authority had wrongly presumed complainant to be a "Distributor" without being in possession of any concrete evidence to do so---Impugned action was unjust, arbitrary, contrary to law, which amounted to maladministration---Federal Tax Ombudsman recommended to C.B.R. to direct concerned authority to cancel complainant's registration as "Distributor" and process his application afresh by taking into consideration actual facts, certificate by principal and providing him opportunity to produce evidence in support of his plea and register him after due verification in whatever category he may fall; and also appoint a Senior Sales Tax Officer belonging to another Collectorate to investigate complainant's allegation of tampering with his application and initiate appropriate disciplinary proceedings against officials found to be responsible for same.

Muhammad Akbar, Advisor (Dealing Officer).

Malik Z.H. Khawar for the Complainant.

Ms. Sameera Sheikh, A.C., Sales Tax for Respondent.

2008 P T D 1024

[Federal Tax Ombudsman]

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

Messrs TRUST FABRICS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1588-L of 2003, decided on 25th February, 2004.

Sales Tax Act (VII of 1990)---

----S. 21(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Black listing and suspension of registration of complainant for evasion of tax and issuance of fake invoices---Additional Collector on 25-10-2003 passed such order, which was approved by Collector on 24-11-2003---Validity---Impugned order, dated 25-10-2003 was not with approval of Collector---Impugned order had not been passed by Collector nor power of Collector had been delegated to Additional Collector---Impugned order was illegal and without jurisdiction---No remedy of appeal was provided in Sales Tax Act, 1990 against process employed in matters of black listing or suspension of registration---Provisions of S.9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would not stand in way of investigation by Ombudsman in such case---Maladministration was obvious as impugned order had been passed by an authority other than Collector, which was contrary to law---Federal Tax Ombudsman recommended to Revenue to recall impugned order with observation that if Collector wished to proceed against complainant, he would be free to take action permissible in law.

Muhammad Akbar, Advisor (Dealing Officer).

Shahid Mehmood Sheikh for the Complainant.

Mazhar Waseem, D.C. (Audit) for Respondent.

2008 P T D 1032

[Federal Tax Ombudsman]

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

Messrs TOPS FOOD & BEVERAGES, HATTAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1269 of 2003, decided on 30th September, 2003.

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

----S. 36---Provisions of Ss.36(1) & 36(2) of Sales Tax Act, 1990---Distinction and applicability---Section 36(1) of Act, 1990 deals with collusive or deliberate act of non-levy or non-payment-.--Section 36(2) of the Sales Tax Act, 1990 speaks of non-payment due to inadvertence, error or misconstruction.

Subsection (1) and subsection (2) of S.36 of Sales Tax Act, 1990 provide for different contingencies based on different facts and circumstances. Subsection (1) can be applied, where by reason of some collusion or a ,deliberate act any tax or charge has not been levied or made, whereas subsection (2) applies to cases, where by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied. In subsection (1), there are two ingredients viz. (1) collusion or (2) a deliberate act for non-levy or non-payment. Whereas subsection (2) Speaks for non-payment due to inadvertence, error or misconstruction.

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

----S. 36(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Non-payment of sales tax---Issuance of notice under S.36(1) of Sales Tax Act, 1990 without specifying that such non-payment was due to collusion and a deliberate act of complainant or due to inadvertence, error or misconstruction--Validity---In. absence of such particular allegation, complainant would not be able to defend itself properly---Such notice was, held to be defective, vague, illegal, having no legal effect.

Assistant Collector and others v. Messrs Khyber Electrics Lamps 2001 SCMR 838 fol.

M. Zafar Iqbal for the Complainant.

Yousaf Haider Orakzai, Deputy Collector (Adjudication).

2008 P T D 1036

[Federal Tax Ombudsman]

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

Sh. WAJID ALI, Proprietor

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.960-L of 2003, decided on 3rd October, 2003.

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

----Ss. 2(3) & 9---Assessment cases---Jurisdiction of Federal Tax Ombudsman---Scope---Ombudsman could take cognizance of and investigate cases involving maladministration regardless of the fact whether such cases involved assessment etc., otherwise very purpose of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would be defeated.

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

----Ss. 59 & 61---Self-Assessment Scheme years 2002-2003, paras. 7 & 9(ii)--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Self-assessment---Issuance of notice under S.61 of Income Tax Ordinance, 1979 seeking un prescribed information after non-selection of complainant's return for total by audit by random balloting---Validity---Only those returns had been put to balloting, which fully qualified for Self-Assessment Scheme having fulfilled prescribed requirements---Factum of complainant's return having been fed into computer clearly indicated that same had no deficiency of short document---No reason was shown as to why return had been sent for ballot, if same did not qualify for Self-Assessment Scheme. as para. 7 thereof, and further when same did not qualify for Self-Assessment Scheme under para. 7 thereof, then why show-cause notice was issued under para. 9(ii) thereof---Department, in order to cover up such lapses, attempted to revert to paras. 7(ii) & 7(iv) of Self-Assessment Scheme, which would tantamount to maladministration---Federal Tax Ombudsman recommended to Revenue to drop assessment proceedings and accept complainant's return filed under Self-Assessment Scheme for year 2002-2003.

Muhammad Akbar, Advisor (Dealing Officer).

Javed Iqbal Qazi for the Complainant.

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

2008 P T D 1061

[Federal Tax Ombudsman]

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

AIZAD SAYID

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1336-L of 2003, decided on 23rd October, 2003.

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

----Ss. 2(3) & 9---Jurisdiction of Federal Tax Ombudsman---Scope---Every allegation concerning "maladministration" would call for investigation to determine its truth by invoking jurisdiction of Ombudsman.

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

----Ss. 16, 17, 18(2) & 25---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9---Wealth escaping assessment on basis of information provided by an "informer" without conducting independent inquiry to ascertain truth in allegations of concealment of assets by complainant---Validity---Informer when asked by department had failed to substantiate such allegations---Department had neither contacted Bank, with whom complainant was alleged to have pledged property for obtaining loan nor verified same from Excise and Taxation Department or Motor Vehicles Registration Authority and Stock Exchange---Reliance on such half-baked information provided by informer who was inimical to complainant without attempting confirmation or verification as to credibility thereof, had rendered departmental conduct arbitrary, perverse and contrary to law, thus, falling within ambit of maladministration---Department had not established its bona fides to justify impugned order being contrary to law---Federal Tax Ombudsman recommended to Commissioner to cancel impugned assessment by resorting to S.25 of Wealth Tax Act, 1963 and take further action, if called for, after conducting an enquiry adhering to law, rules and procedure, to determine, whether complainant owned movable/immovable assets, which he had not offered for assessment.

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

----Ss. 2(3)(i)(a) & 9---Impugned action/order contrary to law---Bona fides of department---Burden of proof---Complainant not bound to prove lack of bona fides of department---Burden would lie on department to prove to have acted bona fide.

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

----S. 9(2)(b)---Assessment of income or wealth---Interference with---Jurisdiction of Federal Tax Ombudsman---Scope---Such assessment must be in accordance with law---Bar of S. 9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would not apply to assessment, if same was contrary to law, arbitrary, baseless or biased.

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

----S. 9---Merits of impugned decision/order-Interference with--Jurisdiction of Federal Tax Ombudsman---Scope---Ombudsman as a general rule would not interfere with merits of a decision, though unmeritorious but without maladministration in exercise of discretion vested in authority---Appealable order or decision, if tainted with maladministration, could be questioned by Ombudsman.

A.A. Zuberi, Advisor (Dealing Officer).

Javed Iqbal Khan (FCA) for the Complainant.

M. Asadullah (D.C.I.T.) & Shah Khan (D.C.I.T.) for Respondent.

2008 P T D 1066

[Federal Tax Ombudsman]

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

MUHAMMAD ARSHAD JAMAL

Versus

ABDUL WAHID KHAN and another

Complaint, No.801-K of 2003, decided on 31st January, 2004.

Customs Act (IV of 1969)---

----S. 2(s), 16, 32, 79, 192, 156(1) & Cl. (89), (90)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Complaints against Customs Officials by a Customs Clearing Agent in respect of embezzlement and fraudulently encashment of pay orders by the Guarantee Cell of Custom House through collusion between officials of National Bank of Pakistan; destruction of relevant record by the Customs officials with the help of Bank official's and evasion of Customs duty in clearance of miscellaneous goods being aided and abetted under the patronage of Collector Customs (Appraisement)---Biased attitude, inattention and delay in clearance of consignments of such complaint---Validity---Evidence of alleged bias against the complainant in the action of the department in the consignments handled by the complainant---Such action was mala fide because these were in retaliation to complaints made by the complainant to the higher authorities in the Collectorate as well as in the Central Board of Revenue---Evidence was available of inattention and delay, as well, in pursuing the case in the Customs Court as well as in issuing charge sheets and conducting enquiries against tax employees involved in the cases of evasion of duty on clearance of consignments of miscellaneous goods---Biased action, inattention and delay were included in the definition of "maladministration" under S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that the Member Customs, Central Board of Revenue ensured proper representation of the Department in the case pending in Custom Court and the Member Custom, Central Board of Revenue ensured that all tax employees named in F.I.Rs. in case of violations of provisions of law were issued charge-sheets promptly and proper enquiries were held against them in right earnest till the logical conclusion of the legal process.

S.M. Sibtain, Advisor (Dealing Officer).

Arshad Jamal for the Complainant.

Wajid Ali, D.C. Customs (Appraisement) for Respondents.

2008 P T D 1079

[Federal Tax Ombudsman]

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

Messrs DATA COTTON WASTE, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.845 of 2003, decided on 22nd November, 2003.

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

----S. 25---C.B.R. Circular No.3(54)STP/99, dated 6-9-2001---Qanun-e-Shahadat (10 of 1984), Arts. 117, 118 & 119---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11-Inclusion of complainant's name in the list of suspected units on grounds of issuing fake/flying invoices, non-making value addition and non-production of records despite notices issued by department---Validity---Department had first. circulated list of suspected units and had thereafter included complainant's name---No prior notice of such unilateral action had been given to complainant---Such notices did not contain grounds of facts justifying inclusion of complainant's name in suspected list---Such procedure adopted by department was violative of principles of natural justice---Attitude of complainant not to respond such notices was not proper, rather he should have availed such opportunity---Burden to prove charge of issuing fake/flying invoices by complainant was on department---No person could be penalized on basis of suspicion---Department had not produced any evidence before Ombudsman to substantiate their allegations, which made impugned action arbitrary, baseless, biased, abuse of power and administrative excess implying mala fide and improper motives---Maladministration stood established---Federal Tax Ombudsman recommended to Revenue to issue proper notice to complainant stating all facts, grounds and reasons for including his name in suspected list and decide case within specified time after affording him opportunity of hearing.

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

----S. 25---Qanaun-e-Shahadat (10 of 1984), Arts. 117, 118 & 119---Inclusion of name of registered person in list of suspected units on charge of issuing fake/flying invoices---Burden of proof---Such was a serious charge---Burden to establish commission of such charge by registered person would lie on department.

(c) Penalty---

----No person can be penalized on basis of suspicion.

Khalid Pervez for the Complainant.

Jamil Nasir Khan, DC Sales Tax, Faisalabad for Respondent.

2008 P T D 1083

[Federal Tax Ombudsman]

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

MISAL KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1208-P of 2003, decided on 21st November, 2003.

Customs Act (IV of 1969)---

---Ss. 6, 171 & 179---S.R.O. No.1017(I)/74, dated 26-7-1994---Goods seized by Frontier Corps---Order of Adjudicating Authority directing release of such goods---Validity---Officers of Frontier Corps being delegatee of powers under Customs Act, 1969 could not act in contravention thereof---Such order of Adjudicating Authority would be binding on Officers of Frontier Corps---Principles.

Vide S.R.O. 1017(I)/74, dated 26-7-1994 issued in exercise of powers conferred by section 6 of Customs Act, 1969, the C.B.R. has entrusted specified functions of the Officers of Customs to the Officers of the Frontier Corps. The Frontier Corps thus, function within the parameters of the Customs Act and. its officers cannot act in contravention of the said Act. Thus, the order-in-original passed by Deputy Collector (Adjudication) is absolutely binding on the- Officers of the Frontier Corps.

Under the scheme of Customs Act, various functions have been assigned to different authorities. Power of adjudication is conferred on specified authorities only to examine, whether property is liable for confiscation or not. Thus, orders passed by Adjudicating Authorities concerning disposal of goods and conveyance arc binding on the Seizing Officer or Customs Officer notified under section 6 of the Customs Act.

Sultan Muhammad v. Commandant Pishin Scouts, Chaman PLD 1991 Quetta 36 rel.

Mirza Muhammad Wasim, Adviser (Dealing Officer). Khan Zeb, AR for the Complainant.

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

2008 P T D 1094

[Federal Tax Ombudsman]

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

S.A. WASTI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1270-K of 2003, decided on 14th January, 2004.

Customs Act (IV of 1969)---

----Ss. 193 & 193-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Appeals to Collector (Appeals)---Procedure in appeal---Hearing of appeal---Appeal was not heard by the Collector of Customs (Appeals) but files were handed over to Assistant Collector (probationer) to conduct hearing---Validity---Power to hear and decide the appeal could not be conferred, even by consent, to any officer other than the one notified by the competent authority i.e. the Central Board of Revenue, which had the statutory powers to appoint the officers through gazette notifications vesting them with the authority to hear and decide the appeals against the order passed by the officers lower than the Additional Collector---Only the person who had heard the appeal had to pass the order and the process could not be delegated; otherwise the order would be illegal---Department, in the present case, had misstated the facts; interpolated the conduct of hearing in the record; order was contrary 'to law; it was a decision taken' in complete disregard of the established practice and procedure, not bona fide and without valid reason; it was perverse, arbitrary and unjust; it was based on irrelevant grounds and it was a' clear evidence of the inefficiency and the inaptitude of the officer in the discharge of his duty and responsibility---Manner in which the order in appeal had been passed by the Collector (Appeals) was not only arbitrary but lacked bona fides---Maladministration thus was established---Arguments against jurisdiction of Federal Tax Ombudsman had no merit and the same was rejected as frivolous---Federal Tax Ombudsman recommended that Central Board of Revenue to take into consideration the case of gross miscarriage of justice in the disposal of the appeal and similar appeals decided by the officer; set aside the order in appeals; entrust the appeals to another officer with the direction to carefully examine the facts of the case, and the precedents quoted by the complainant/ Consultant i.e. the decisions of the Supreme Court, the high Court, the Appellate Tribunal and the recommendation of this office.

M. Mubeen Ahsan, Advisor (Dealing Officer). S. A. Wasti, Consultant.

S.T.R. Zaidi, Additional Collector (Adjudication).

2008 P T D 1099

[Federal Tax Ombudsman]

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

Messrs NEW BISMILLAH AUTOS, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.756 of 2003, decided on 13th December, 2003.

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

----Ss. 56 & 61---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Notice to furnish return of total income for 3 years---Assessee's plea that no business was conducted during years 1999-2000 and. 2000-2002 was accepted by Assessing Officer, who gave him income tax challan of Rs.550 for year 2001-2002, which he deposited on next date---Assessing Officer thereafter issued consolidated ex parte assessment order of all 3 years for non-compliance of such notice---Validity---Revenue had not denied factum of appearance of assessee before Assessing Officer and handing over him such challan bearing his tax number, stamp and initials of concerned official---Assessee had furnished certificate from Bank regarding his employment as Guard till 3-6-2000 and rent agreement about hiring business premises, but same were not available on record---Assessing Officer in order to support assessed income had not conducted enquiry regarding date of commencement and extent of assessee's business---By issuing challan for 2001-2002, impression had been given that no demand had been created for years 1999-2000 and 2001-2002---Revenue could not explain, why after issuing such challan, assessment creating a demand for 3 years had been made---Entire proceedings by Assessing Officer lacked bona fides and amounted to fraud on statute and assessee as well---Impugned assessment was arbitrary, baseless, abuse of power and violative of principles of natural justice---Maladministration was proved---Federal Tax Ombudsman recommended to Revenue to cancel impugned assessment under S.122-A of Income Tax Ordinance, 2001 and frame fresh assessment after conducting enquiry and hearing assessee.

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

----Ss. 56 & 61---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Framing of ex parte assessment order---Good faith of Assessing Officer---Proof---Not necessary to probe motive of Assessing Officer, where maladministration was proved---Burden would lay on Assessing Officer .to prove his bona fides.

Muhammad Anwar, Consultant (Dealing Officer).

None present for the Complainant.

Tahir S. Bhatti, ACIT for Respondent.

2008 P T D 1106

[Federal Tax Ombudsman]

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

Messrs AMEER-E-HAMZA IMPEX, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1441-K of 2003, decided on 12th December, 2003.

Sales Tax Refund Rules, 2000---

----Rr. 4, 5 & 6---C.B.R. Circular No. C-2(F)-STP/99/PT, dated 1-1-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Deferring refund claim till deletion of supplier's name from suspected list---Validity---Rejection of refund claim would not be justified, where few invoices were found to be fake or issued by suspected supplier---Appropriate course in such cases would be to disallow refund claim, where invoices were found to be fake and sanction amount of genuine invoices without regard to the fact that particular supplier was placed on suspected list---Where purchaser had genuinely paid invoice value inclusive of sales tax through appropriate banking channel, then responsibility of payment of sales tax to Government would lie with registered supplier---Action should be taken against registered supplier in case of his failure to deposit sales tax---Not fair on part of department to demand re-submission of old cases in accordance with Refund Claim Processing System---Department had refused to exercise jurisdiction and deferred claim on irrelevant and baseless grounds---Such unreasonable and unjust action would prove motivated and predetermined mind, which would amount to maladministration---Federal Tax Ombudsman recommended to Revenue to decide such claim after verifying transfer of goods from supplier to purchaser from transport documents, dispatch notes, receipt notes, entry in purchaser's books of accounts, verifying genuiness of payment of cost of goods inclusive of sales tax through banking channels and confirming shipment of goods to foreign buyers.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Ameer Hamza, Proprietor.

Dr. Mubashir Baig, Deputy Collector of Sales Tax.

2008 P T D 1109

[Federal Tax Ombudsman]

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

Messrs HONG KONG CHINESE RESTAURANT, PESHAWAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.544 of 2003, decided on 9th December, 2003.

Sales Tax Act (VII of 1990)---

----Ss. 6, 7 & 33(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Erroneous adjustment of input tax resulting in short payment of sales tax---Imposition of penalty for such short payment---Validity---Complainant inadvertently miscalculated input tax of Rs.7173 as Rs.7143---Imposition of penalty in such situation would not be warranted under S.33(2) of Sales Tax Act, 1990, whereunder no penalty could be imposed, if miscalculation was made for the first time during a year---Department had not alleged that such miscalculation had not been made for first time---Impugned order was arbitrary, perverse, unreasonable, contrary to law and having been made without application of mind---Federal Tax Ombudsman recommended to Revenue to issue direction for cancellation of impugned order.

Shahida Taj, Director (Dealing Officer).

Abdul Malik Khan, AR for the Complainant.

Imtiaz Ahmad, DC (Sales Tax) for Respondent.

2008 P T D 1113

[Federal Tax Ombudsman]

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

MUHAMMAD ASLAM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.842 of 2003, decided on 22nd November, 2003.

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

----Ss. 179, 179-A [as omitted by Finance Ordinance (XXX of 1979)] & 185-A---Decision of Special Judge on merits---Binding force---Extent---Adjudicating Officer in respect of same subject-matter and evidence could not disagree with or ignore decision of Special Judge on merits---Where decision of Special Judge was made on any technical plea or for non-production of material evidence by prosecution, then, Adjudicating Officer, on the basis of such evidence, if admissible, could consider matter afresh by giving reasons for difference of opinion, if any---Principles.

The decision of the Special Judge on merits commands respect by the Customs Authorities in respect of the same subject-matter and on same evidence. But where such decision is made on any technical plea and certain material evidence in possession of the prosecution or the Customs authorities was not produced, the Adjudicating Officer, in the light of such material evidence, if admissible, can have a fresh look into the matter by giving reasons for difference of opinion, if any. Section 179-A omitted by Finance Ordinance, 1979 provided that where the goods and things seized are to be or are being prosecuted before the Special Judge, an order of adjudication made under section 179 or under Chapter XIX shall be subject to the decision of the Special Judge and Special Appellate Authority in appeal or revision, if any. By omission of section 179-A, the statutory binding force of the decision of the Special Judge has been lost and the Adjudicating Authority can only differ within the parameters mentioned above, but on the same evidence, the Customs authorities cannot disagree or ignore the decision of Special Judge passed on merits.

Adam v. Collectors of Customs, Kar. PLD 1969 SC 446 and Muhammad Sarwar v. Fed. of Pakistan 1988 PCr.LJ 213 ref.

(b) Customs Act (IV of 1968)---

----Ss. 158(1)(89) & 168---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Seizure and confiscation of arms alleged to be of foreign origin---Refusal of authority to release goods in spite of acquittal of complainant from both charges of possessing and smuggling of arms on ground of non-production of expert evidence regarding origin of arms by prosecution---Validity---Case property as referred to in F.I.R. was of foreign origin according to expert opinion---Prosecution had not produced expert evidence before Court---Had expert opinion been produced and expert witnesses examined, decision would have been different in cases before Special Judge and Judicial Magistrate, in such circumstances, if Adjudicating Officer takes a different view from decisions of Special Judge and Judicial Magistrate, same would not fall in realm of maladministration---Complainant had already filed appeal, where he could press his objections for final consideration---Maladministration identified was in respect of proceedings conducted before such Courts by prosecution and customs authorities for not producing expert evidence dishonestly, negligently and with improper motive---Federal Tax Ombudsman recommended to C.B.R. to investigate the reasons for non-production of expert evidence before Court and to identify all functionaries of tax administration responsible for such negligent and dishonest act and take action against them according to law with directions to Appellate Authority to decide appeal within specified time.

1993 PCr.LJ 1922 ref.

Khalid Pervez for the Complainant.

Ch. Muhammad Javaid, AC (Adjudication) for Respondent.

2008 P T D 1125

[Federal Tax Ombudsman]

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

Messrs TRANS GLOBAL LOGISTICS PAKISTAN (PVT.) LTD. through Chief Executive/Director

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 27-K of 2003, decided on 23rd April, 2004.

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

----Ss.55, 61, 62, 80C & 143B---C.B.R. Circular No.26(17)/ITP/58 dated 8-10-1958---C.B.R. Circular No.32-C(2) IT-28 dated 28-3-1928---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2) & 2(3)(ii)---Return of total income---Notices---Statements filed by contractors etc.---Confidential record---Inspection of record---Maladministration---Jurisdiction---Maladministration was alleged against Taxation Officer of a particular circle who proceeded to pass assessment order for year (2001-02), without completing order sheet, without taking into account the details, evidence, nature of receipts and erroneously treating some receipts as commission income and remittance of freight bill in USA---Further allegation was that assessment order was passed after about 9-1/2 months---Regional Commissioner of Income Tax, in reply, had objected to the jurisdiction of Federal Tax Ombudsman .as remedies of appeal were available, Taxation Officer had made best judgment assessment after affording several opportunities to the assessee, order sheet was properly maintained, delay in service of assessment order had occurred due to illness and accidental death of Notice Server's near relative---Copies of eight out of nine sheets were provided and ninth being confidential was not provided---Federal Tax Ombudsman found that the Department had failed to comprehend the nature of receipts and his neglect and disregard for the practice of assessment of such receipts followed by the department in complainant's own case in Assessment year 2000-01 proved his incompetence and inaptitude in discharge of his duties---Such incompetence and inaptitude attracted the jurisdiction of Federal Tax Ombudsman---Return of Income filed under S.55 of the Income Tax Ordinance, 1979 was not properly explained and identified during the course of assessment proceedings---Complainant was neither called upon to explain it nor proper opportunity was provided to complainant---Denial of allegations was not supported by affidavits---Allegation of maladministration on account of arbitrariness in refusing to issue copy of ninth order sheet and even disallowing its inspection was found invalid---Federal Tax Ombudsman recommended Commissioner to conduct the written counselling of the concerned Taxation Officer and take cognizance of the apparent error in the assessment order and proceed under S.122A suo motu to allow such relief as found due in the circumstances.

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

----S.9(2)---Jurisdiction---Matters alleged in the complaint related to inattention, neglect, incompetence in discharge of duties and departure from established practice and procedure---Matter did not relate to assessment of Income et cetera---Complaint was not hit by the bar on jurisdiction envisaged under section 9(2)(b) of the Federal Tax Ombudsman Ordinance, 2000.

S.M. Sibtain, Advisor, Dealing Officer.

Arshad Naseem Khan for the Complainant.

Messrs Masood Jahangir, DCIT & Kaleemuddin, T.O. for Respondent.

2008 P T D 1132

[Federal Tax Ombudsman]

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

PAKISTAN MINERAL DEVELOPMENT CORPORATION, HYDERABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-108-K of 2004, decided on 23rd April, 2004.

Sales Tax Act (III of 1951)---

----Ss.7(2), 36(3) & 45---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2) & 2(3)---Input Tax--Limitation-Jurisdiction-Maladministration-Autonomous Corporation had complained against entitlement to claim input tax and demand of penalties and additional tax for violation of the provisions of S.7(2) of the Sales Tax Act, 1951---Corporation had also pleaded that the Sales Tax was paid and excess amount paid was adjusted through a bona fide mistake causing no loss to Revenue and alleged that scrap/assets machinery was auctioned, advance sales tax was paid on estimated weight but on actual weighment it was found that weight was short and excess paid tax was adjusted through another challan for the same month instead of applying for refund---Delayed communication of audit observation, and further delay in demand notice, show-cause notice and adjudication order and inordinate delay in service of adjudication order was also complained against---Department replied and asserted violation of S.7(2) of the Sales Tax Act, 1951 and delay was due to heavy pendency and adjudication order was just and proper---Order complained against was appealable and hence there was no maladministration---Validity---Adjustment of the excess sales tax was inadvertently taken by the taxpayer in the second return of the same month---Sales Tax was not chargeable on the sale of scrap---Sales Tax inadvertently paid was higher than the amount calculated on the basis of actual weight---Inordinate delay of about four years had occurred in issue of the adjudication order---Whole exercise of issue of demand, the show cause notices and adjudication order were contrary to law---Total proceedings were perverse, unjust and oppressive and miscarriage of administrative justice---No evasion of sales tax was committed---Charge of maladministration was established---Federal Tax Ombudsman, therefore, recommended that Central Board of Revenue may set aside the order complained against in circumstances.

M. Mubeen Ahsan, Advisor, (Dealing Officer).

A. Majeed Khan, Legal Officer, PMDC for the Complainant.

Aijaz Ahmed Khan, Deputy Collector of Sales Tax, (Adjudication) for Respondent.

2008 PTD 1139

[Federal Tax Ombudsman]

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

LEEMOONMAL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.124-K of 2004, decided on 24th April, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.58(1), 59, 61, 62, 63 & 129---Income Tax Ordinance (XLIX of 2001), S.122A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9(2)(b)---Complainant was aggrieved by non-acceptance of his returns of income for the assessment years (2000-2001), (2001-02), (2002-03) under self-assessment scheme and for harsh assessments---Department raised preliminary objection about jurisdiction of Ombudsman as action complained of was appealable and on facts it was stated that the Return of the complainant was selected for total audit through computer random balloting; notice was issued for filing wealth statement, trading and profit and loss account---Complainant failed to furnish the requisite documents resultantly ex parts assessment was made and succeeding year's return was filed declaring income of Rs.50,000 less than the income of previous year thus it failed to qualify for self assessment scheme and allegation of maladministration was not correct---Validity---Return was selected strictly in accordance with provisions laid down in the Central Board of Revenue's Circular Self-Assessment Scheme for the year under consideration---Ex parte assessment was made for non-compliance of statutory notices---No maladministration was established---Return for the year 2001-2002 was filed on 11-10-2001 and Income declared was less than the income declared in previous year's return---Return did not qualify for Self-Assessment Scheme as per Board's Circular on Self-Assessment Scheme---Assessment made for year 2001-2002 contained tampering and interpolation--Order sheet for assessment year 2002-2003 was blank---No assessment order existed---Assessing Officer had made the assessment in very irresponsible manner without observing the legal requirements---Such conduct amounted to maladministration---In presence of gross irregularities the objection regarding jurisdiction in terms of section 9(2)(b) of the Federal Tax Ombudsman Ordinance, 2000 was misconceived---Complainant was deprived of his right of appeal, as no order under section 62 was passed as provided in section 129 of the Income Tax Ordinance, 1979---Federal Tax Ombudsman recommended the Zonal Commissioner of Income Tax to cancel the tax demand created on IT-30 for the year 2002-2003 under section 122-A of the Income Tax Ordinance 2001 and assessment pending for the year 2001-2002 be also completed in accordance with law.

S. Asghar Abbas, Consultant.

Nemo for the Complainant.

Hajjan, DCIT, Circle-VI, Hyderabad for Respondents.

2008 P T D 1143

[Federal Tax Ombudsman]

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

Messrs AWAN CNG, REFILLING CO. (PVT.) LIMITED, RAWALPINDI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.229 of 2004, decided on 24th May, 2004.

Sales Tax Act (III of 1951)---

----S.10---S.R.O. 38(I)/98 dated 21-1-1998---Customs Act (IV of 1969), S.18---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Exemption---Goods dutiable---Mal­administration---Interpretation--- Complainant alleged mal-administration on the refusal to issue refund of Customs Duty and Sales Tax paid under protest on import of Spare parts of compressed Natural Gas (CNG) Kits---Exemption from payment of Sales Tax and Customs Duty were claimed within the meaning of S.R.O. 38(I)/98 dated 21-1-1998---Appeal to the Customs, Sales Tax and Central Excise Tribunal---Tribunal found that imported goods were covered under the said SRO and were exempt from the payment of Customs Duty and Sales Tax---After the decision of the Tribunal the complainant filed a refund claim Which was denied by the Department--.Validity---Decision of Central Board of Revenue declaring that the compressed Natural Gas spare parts were not eligible for the exemption under the said S.R.O. did not give any reason as to why it differed from the views of Ministry of Petroleum and Natural Resources especially when the certification of said Ministry was made the basis for the grant of exemption---Customs Department had not gone into appeal against the order of the Tribunal---Fiscal provision of statute was to be construed liberally in favour of taxpayer---Federal Tax Ombudsman recommended that the benefit of exemption under the said S.R.O. be extended to the Compressed Natural Gas spare parts and Customs Duty and Sales Tax be refunded to the complainant.

Commissioner of 'Sales Tax, Central Zone-B, Karachi v. Pakistan Machinery Tools Factory Limited, Karachi GST 2003 CL 123 quoted.

Shamim Ahmad, Advisor, (Dealing Officer).

Shaukat Ali for the Complainant.

Zamir Hassan Zaidi for Respondent.

2008 P T D 1150

[Federal Tax Ombudsman]

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

Messrs MASOOD & COMPANY, MIANWALI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.978 of 2003, decided on 2nd July, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.96, 102 & 66A---Income Tax Ordinance (XLIX of 2001), S.221---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a) & (b)---Refund---Self Assessment---Show-cause notice---Maladministration---Complainant alleged non-payment of refund for years 1994-95, 1995-96, 1996-97 and issuance of notice on baseless grounds just to harass the complainant---Department, in reply had asserted that tax was not paid in the name of the firm it was paid in the name of partners---Refund was wrongly created and show cause under S.221 of the Income Tax Ordinance, 2001 was issued for rectification---Validity---Assessments for the years 1994-95 and 1995-96 were made under Ss. 62 and 59(1) on 30-6-1997 and 23-6-1996 respectively---Show-cause notice dated 28-5-2003 being beyond 5 years time limit was barred by time and therefore of no legal effect---Return for assessment year 1996-97 was filed under Self-Assessment Scheme before the fixed time, was accepted on 30-6-1999 and full credit for tax paid/deducted was given---Passing of order under section 59A dated 30-6-1999 and alleged rectification order under section 156 of the Income Tax Ordinance, 1979 were illegal---Return filed in time was deemed to be accepted on 30-6-1997 by operation of law under section 59(4) of Income Tax Ordinance, 1979---Notice issued after 30-6-2002 thus became time barred---Federal Tax Ombudsman recommended that show cause notice under section 221 of Income Tax Ordinance, 2001 for the assessment years 1994-95 to 1996-97 be withdrawn and refunds due to the complainant for the said years be issued along with compensation under the law.

Muhammad Anwar Consultant, (Dealing Officer) Naik Muhammad Malik for the Complainant.

Masood Aslam Taxation Officer, Sargodha for Respondent.

2008 P T D 1153

[Federal Tax Ombudsman]

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

FAQIR GUL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.282 of 2004, decided on 30th June, 2004.

Sales Tax Act (VII of 1990)---

----Ss.3A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2)(a) & 2(3)---Adjudication---Jurisdiction- Maladministration---Assessment--=Complainant was running a soap manufacturing factory---Railway authorities demolished the factory building and occupied the premises---Manufacturing was closed---Complaint was that Sales Tax Authorities were pestering the complainant with different notices and visits of the audit teams---Department in reply submitted that complainant was evading sales tax; Sui gas bills showed that factory was running; owner had given certificates of his monthly average sales; matter was ser}t to the Collector (Adjudication) in form of "Contravention Report" and was pending adjudication and did not fall within the jurisdiction of the Federal Tax Ombudsman---Validity---Complaint was filed not challenging the amount of tax assessed but the manner in which the proceedings had been conducted---Complainant had stated that the process employed on the basis of a biased complaint filed in the Central Board of Revenue, denied the legal right to the complainant---Maladministration included, decisions, processes, acts of omission or commission which were contrary to law, rules regulations and were arbitrary---Manner in which the proceedings were conducted, then kept in abeyance and revived once again indicated maladministration---Adjudication did not fall within the definition of "being sub-judice before the Court of competent jurisdiction" within the meaning of section 9(2)(a) of the Federal Tax Ombudsman Ordinance, 2000---Objection was therefore overruled---Federal Tax Ombudsman recommended that the Deputy Collector (Adjudication) of Collectorate of Customs, Sales Tax and Central Excise to decide the case of the complainant on basis of impartial inquiry excluding the Senior Auditor who was author of contravention report.

Shamim Ahmad, Advisor, (Dealing Officer)

Faqeer Gul Khan for the Complainant.

Imtiaz Sheikh, DC Sales Tax, Peshawar for Respondent.

2008 P T D 1162

[Federal Tax Ombudsman]

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

Messrs B.P. INDUSTRIES (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1505-K of 2003, decided on 18th June, 2004.

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

----Ss.62, 50 & 156---Income Tax Ordinance (XLIX of 2001), S.122---Establishment of Office of Federal tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2) & 2(3)---Deduction of tax at source---Assessment on basis of evidence---Rectification---Amendment of assessment---Jurisdiction---Maladministration---Complainant Company was aggrieved by issuance of notice under section 122 of the Income Tax Ordinance, 2001 by the Additional Commissioner/Taxation Officer Audit Division---Allegation of the Complainant was that the return of year (1998-99) was filed declaring loss; assessment was completed under S.62 of the Income Tax Ordinance, 1979 which was rectified under S.156 of the Ordinance and credit of tax paid under section 50 of the Ordinance was allowed---Feeling dissatisfied complainant filed appeal against the assessment order and Commissioner of Income Tax by his Appellate Order had remanded the case to Assessing Officer with certain directions---Such order was challenged by the complainant by filing second appeal before the Income Tax' Appellate Tribunal who confirmed the orders of commissioner Income Tax---Case was transferred to Large Taxpayers Unit and Additional Commissioner/Taxation Officer issued notice under section 122 of the Income Tax Ordinance, 2001 along with notice under Rule 68 of Income Tax Rules 2002---Complainant alleged that it was maladministration---Departmental Representative had asserted that since Commissioner of Income Tax and Income Tax Appellate Tribunal had confirmed the order of the Assessing Officer, no appeal effect was required to be given under Ss.132 and 135 of the Income Tax Ordinance, 1979---Validity---Complainant's appeals before Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal had partly succeeded and appeal effect had to be given under section 132 and 135 of the Income Tax Ordinance, 1979---Jurisdiction under S.122(1) of the Income Tax Ordinance, 2001 could be invoked to correct or amend assessment orders issued under Ss.120 and 121 of the Income Tax Ordinance, 2001 or issued under Ss.59, 59-A, 62, 63 or 65 of the Income Tax Ordinance, 1979---Since S.132 or 135 was not included in S.122 of the Income Tax Ordinance, 2001, action of Additional Commissioner/Taxation Officer of issuing notice under S.122(1) of Income Tax Ordinance, 2001 was not in accordance with law.

Messrs Hirjina & Co. Pakistan, Karachi v. Commissioner of Sales Tax Central, Karachi quoted.

Commissioner of Agriculture Income Tax East Bengal v. B.W.M. v. Abdur Rehman 1989 PTD 909 rel.

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

----Ss.122 & 127---Establishment of Office of Federal tax Ombudsman Ordinance (XXXV of 2000), S.9(2)(b)---Jurisdiction---Amendment of Assessment---Reopening of Assessment---Issuance of notice under S.122 was an independent proceedings for reopening assessment---No provision of appeal under S.127 of the Income Tax Ordinance, 2001 against the issuance of notice under S.122 was provided in law---Notice issued was illegal without jurisdiction and not in accordance with law, was void and all proceedings in pursuance of such notice were vitiated---Federal Tax Ombudsman had jurisdiction to investigate whether notice under section 122 was according to law.?

(c) Income Tax Ordinance (XL1X of 2001)---

----S. 122(1)---Establishment of Office of Federal tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of Assessment---Maladministration---Additional Commissioner/Assessing Officer had proceeded to issue notice under S.122(1) of the Income Tax Ordinance, 2001 and proceeded to re-assess the assessments made/adjudicated under sections 131 and 134 of the Income Tax Ordinance 1979 and required to be acted upon under Ss.132 and 135 of the said Ordinance---Federal Tax Ombudsman found such action to be contrary to law and declared the same as maladministration and recommended the Central Board of Revenue to direct Commissioner of Income Tax to cancel the assessment order made in consequence of illegal notice.?

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

----S. 122(1)---Interpretation---Tax statute should be interpreted by the words used in the statute and in the light of what is clearly expressed, as enunciated by the Supreme Court of Pakistan.?

S. Asghar Abbas, Consultant.

Rehan Hasan Naqvi and Miss Lubna Pervez for the Complainant.

Tariq Mehmood Khan, DCIT LTU, Karachi for Respondents.

2008 PTD 1172

[Federal Tax Ombudsman]

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

Ch. BILAL AHMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.116 of 2004 decided on 24th May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 63, 65 & 100---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2)(a) & 2(3)---Ex parte Assessment-Refund-Jurisdiction-Maladministration-Complainant was refused. refund by invoking the provisions of section 100 of Income Tax Ordinance, 1979---Complainant alleged maladministration---Department alleged that the matter was sub judice for all the five years and refund of relevant years was adjusted against the demand for the assessment of succeeding years and refund will be issued if not consumed against the demands created as result of set aside assess­ments---Illegality was denied---Validity---Complaint was not filed to contest the sub judice assessment orders passed by the Taxation Officers or the Appellate orders, `nstead it alleged maladministration for failure to issue the refund which had become legally due to the complainant---section 9 subsection (2) Part (b) of the Federal Tax Ombudsman's Ordinance, 2000 related to the matters "in respect of which remedy of appeal, review, revision are available in the Relevant Legislation---No such remedy was provided in respect of process employed in refusing the legal right---When refund became due it had to be issued immediately---Refund could not be withheld against any future demand---Failure to pass order under section 103 of Income Tax Ordinance, 1979 had aggravated maladministration---Federal Tax Ombudsman recommended that refund claimed be issued within 15 days.

2001 PTD 3956 rel.

2003 PTD 2317 quoted.

2003 PTD 1948 cited.

Shamim Ahmad, Advisor, (Dealing Officer)

Sayyid Ali Imran Rizvi for the Complainant.

Faqir Hussain; DCIT for Respondent.

2008 P T D 1199

[Federal Tax Ombudsman]

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

Ch. SARFRAZ AHMED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.18 of 2006, decided on 27th March, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss.154, 63 & 13(1)(aa)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a)---Service of notice---Signatures on acknowledgment of notice served were found to be different from the complainant's signatures on other documents/returns---Ex parse assessment was illegal as there was no evidence of proper service of any statutory notice prior to its completion---Framing of ex parte assessment involving addition under S.13(1)(aa) of the Income Tax Ordinance, 1979, thus constituted "maladministration" and the matter fell within the jurisdiction of Federal Tax Ombudsman---Federal Tax Ombudsman recommended that action be taken under S.122A of the Income Tax Ordinance, 2001 to cancel the ex parte assessment for the year 1998-99 and to reframe the assessment after allowing the complainant a proper opportunity of hearing.

Mirza Muhammad Wasim, Advisor, (Dealing Officer).

Nemo for the Complainant.

Javed Anwar, DCIT, IP&E, Unit-3, Sargodha and Muhammad Qudrat Ullah Khan, Taxation Officer, IP&E, Unit-11, Mianwali for Respondent.

2008 P T D 1210

[Federal Tax Ombudsman]

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

Messrs SHAHID CABLES INDUSTRY through Chaudhry Shahid Latif

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and 3 others

Complaint No.727-L of 2005, decided on 20th August, 2005.

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

----Ss.170, 171, 177, 122(5A) & 239(8)---Income Tax Ordinance (XXXI of 1979), Ss.143-B, 80C & Second Sched., Part-IV, Cl.(9)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Tax year 2003-2004---Permission for issuance of refund was not granted by the Commissioner of Income Tax on the ground that taxpayer had filed statement under S.143 of the Income Tax Ordinance, 1979 for assessment year 1996-97 to 2002-2003 and by filing such statement from 1996-97 to 2002-2003, he was legally obliged to file statement under S.143-B of the Income Tax Ordinance, 1979 in respect of supplies for the tax year 2003-2004 also in view of Cl. (9) of Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 which had been saved through S.239(8) of the Income Tax Ordinance, 1979---Assessee contended that he had rightly filed regular returns of total income for both the years and had not filed declaration in writing to opt for presumptive tax regime---Validity---Mere filing of statement under S.143B of the Income Tax Ordinance, 1979 did not lead to the conclusion that the assessee had filed a declaration in writing which was a condition precedent to opt for presumptive tax regime---Taxation Officer instead of the Commissioner had rejected the refund application after a period of 18 months---Such order was coram non­judice and nullity in the eye of law---Taxation Officer ignored the judgment of High Court reported as 2004 PTD 1994---Order was liable to be set aside and due refund was to be issued---Federal Tax Ombudsman recommended that the order of Taxation Officer, should be set aside by the Commissioner of Income Tax and the due refund be issued to the complainant/legal representatives of the deceased without any further delay.

2004 PTD 1994 rel.

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

----Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Refund application was filed by one of the legal heirs of the deceased assessee---Taxation Officer rejected the application for refund on the ground that invalid refund application for the tax year 2003-2004 was filed without obtaining power of attorney of all the legal heirs of the deceased assessee---Validity---Assertion that since the complainant did not file the refund application with power of attorney of all the legal heirs of the deceased therefore the application of refund was invalid, shows ignorance of law of the officer---If his position is accepted then it would mean that if one of the legal heirs did not give power of attorney to the applicant then no refund would ever be issued---Under the law any of the legal representatives could apply for the refund of his share and the other legal heirs would be impleaded as parties and the refund could be issued apportioning their shares of inheritance/entitlement---Rejection of application on this score was not based on any legal provision---Apparently Taxation Officer was oblivious of the definition of "legal representative" in S.87(4) of the Income Tax Ordinance, 2001.

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

----S. 170(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Limitation---Under S.170(4) of the Income Tax Ordinance, 2001, the Commissioner within 45 days of the receipt of refund application had to serve on the person applying for refund an order in writing of the decision after providing an opportunity of being heard.

Muhammad Sirjees Nagi, Advisor, (Dealing Officer)

Muhammad Shahid Baig for the Complainant.

Naureen Yaqoob (DCIT) and Muzammil Hussain (IAC) for Respondents.

2008 P T D 1223

[Federal Tax Ombudsman]

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

Messrs H.M. IQBAL & CO., MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.647-L of 2005, decided on 1st August, 2005.

Customs Act (IV of 1969)---

----S.37---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Duty drawback on goods used in the manufacture of goods which were exported---Delay in payment of duty drawback---Validity---Application for the claimed amount was submitted in 1987---Rebate should have been paid at least on submission of missing documents which had been submitted earlier also and in August, 1998---Contention of the Department that case was old and that the complainant had failed to supply the documents was not tenable---Case was that of stark maladministration in that the complainant's revised rebate claim filed in 1987 was unduly delayed blocking its capital---Claim was subjected to inattention and indifference and its payment was inordinately delayed---Excepting one or two communications, the rest of complainant's letters/reminders were not responded to---All this amounted to 'maladministration'---Department statedly had now issued the rebate cheque, which the complainant will hopefully receive---Federal Tax Ombudsman recommended that Central Board of Revenue to inquire into the matter to pinpoint the reasons for long delay in settling complainant's rebate claim for appropriate remedial and administrative action and to identify through inspection of Custom House Rebate Section all such long-delayed' rebate/refund claims and direct the competent authority to dispose of delayed claims on merit in accordance with the provisions of law expeditiously.

Muhammad Akbar, Advisor, (Dealing Officer)

Inayat-ur-Rehman for the Complainant.

Fayyaz Rasool, D.C. (Export), Karachi.

2008 P T D 1246

[Federal Tax Ombudsman]

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

AMEER BEGUM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

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

Income Tax Ordinance (XXXI of 1979)---

----S.62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment on production of accounts, evidence etc.---Estimation of sales---Capital declared for use in business was Rs.60,000 including furniture and fixtures---Sales had been estimated at Rs.12 lacs without any inquiry or verification and without issuing a show-cause notice confronting assessee with the basis on which sales were so estimated and the income assessed---Validity---Sales had been estimated at Rs.12 lacs (i) without any basis (ii) without bringing any material evidence on record (iii) without confronting assessee with, the proposed figure and (iv) without regard to the case history--Estimation of sales at 20 times of the working capital (Rs.60,000) was, on the very face of it, without valid reason, if not outright mala fide--Assessment order passed was bald inasmuch as it lacked the basis on which sales were estimated and income worked out which demonstrated incompetence, inefficiency and inaptitude in the discharge of duties and responsibilities---Order suffered from serious maladministration---Federal Tax Ombudsman recommended that the Commissioner, by resort to S.122A of the Income Tax Ordinance, 2001, recall assessment order, dated 13-1-2003 for de novo consideration and detailed examination for passing a fresh speaking order on merits in accordance with law.

Muhammad Sadiq for the Complainant.

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

Muhammad Akbar, Advisor (Dealing Officer).

2008 P T D 1271

[Federal Tax Ombudsman]

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

Messrs AL-HAMAD WEAVING FACTORY, GOJRA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.441 of 2004, decided on 22nd July, 2004.

Sales Tax Act (III of 1951)---

----S.14 [as amended by Sales Tax (Amendment) Act (VII of 1990)]---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Registration---Maladministration---Provisional Sales Tax Registration Certificate was issued on 29-4-2004 under Sales Tax Act, 1990 on the condition that Registration certificate would be issued after verification of documents under Sales Tax Ruling/Instructions No.21/2003 dated 16-8-2003 with oral order for personal appearance---Validity---Sales Tax Registration Certificate was not issued and was delayed without reasonable explanation---Neglect and inefficiency within the meaning of S.2(3)(ii) of the Federal Tax Ombudsman Ordinance, 2000 was a maladministration---Federal Tax Ombudsman recommended that Sales Tax Registration Certificate be issued and Central Board of Revenue letter bearing No.3(17)/STL &P/2003 dated 5-4-2003 be withdrawn.

Shamim Ahmad, Advisor, (Dealing Officer)

Muhammad Saleem Malik for the Complainant.

Muhammad Masood Sabir, AC, Sales Tax for Respondent.

2008 P T D 1280

[Federal Tax Ombudsman]

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

Khawaja MAQBOOL ELAHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1679 of 2003, decided on 2nd July, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.62, 59A, 50 & 102---Establishment of Office of Federal tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(v)---Refund---Appeal---Effect---Declared income---Self Assessment Scheme---Maladministra­tion---Complainant claimed refunds for assessment years 2000-2001 to 2002-2003---Department had asserted that the refund for assessment year 2000-2001 was sub-jud4ce in appeal filed by the department before the Appellate Tribunal---For assessment year 2001-2002---Short documents notice was served upon the complainant---Taxation Officer had wrongly finalized the assessment under Self-Assessment Scheme under S.59A of the Income Tax Ordinance, 1979, for the assessment year 2002-2003---Verification of challans was awaited---Question of compensation did not arise---Federal Tax Ombudsman disposed of the complaint for assessment year 2000-2001, refund was created as a result of relief allowed by the Commissioner of Income Tax (Appeals) and the refund was enhanced---No provision of law existed under which refund could be withheld---Refund was to be paid together with additional payment under S.102 of the Income Tax Ordinance, 1979, S.171 of the Income Tax Ordinance, 2001---For assessment year (2001-2002) and (2002-2003) it was recommended that verification of tax deductions payments be completed within 30 days and refund be issued within 15 days.

Muhammad Anwar, Consultant (Dealing Officer).

Ch. Abdul Ghafoor, ITP for the Complainant.

Imtiaz Ahmad, DCIT for the Respondent.

2008 P T D 1292

[Federal Tax Ombudsman]

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

Messrs PAN ASIA FOOD PRODUCTS (PVT.) LTD., HATTAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.948 of 2003, decided on 22nd May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.80-DD, 50(5) & 103---Income Tax Ordinance (XLIX of 2001), S.170(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Intended reference---Sub judice---Deletion of tax---Withholding refund--Appellate effect---Minimum tax---Tax Collected under S.50(5) of the Income Tax Ordinance, 1979 was considered as minimum tax under S.80-DD of the Ordinance and was deleted on appeal---Refund was created---Complainant. prayed for issue of refund along with compensation---Department had opposed the request as it had filed appeal and complainant had filed writ petition which was pending adjudication and prayer to issue refund was premature---Validity---Commissioner was bound in duty to follow the decision of the Tribunal notwithstanding the fact that reference was filed by the department under S.124-A of the Income Tax Ordinance 2001---Reasons put forward by the department did not exist---Departmental appeal was dismissed and writ petition was withdrawn---Withholding the refund amounted to maladministration---Federal Tax Ombudsman recommended that the refund of relevant year be issued along with compensation.

Muhammad Anwar, Consultant, (Dealing Officer).

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

M. Nasir Khan, DCIT, Peshawar for Respondent.

2008 P T D 1303

[Federal Tax Ombudsman]

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

Messrs KHANCO INDUSTRIES

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.393-L of 2006, decided on 3rd June, 2006.

Sales Tax Act (VII of 1990)---

----Ss.36(3), 11(4), Proviso. & 45B(2)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Show-cause notice was issued on 30-6-2000 and the case was decided on 2-8-2002 after the expiry of original period of 45 days or even 90 days as prescribed in Ss.11(4) and 36(3) of the Sales Tax Act, 1990---No extension in the period for deciding the case was ever obtained/granted---Order was hit by time limitation and was void and illegal---Order-in-appeal was also not legally sustainable as it failed to hold the order-in-original passed by the D.C. as barred by time despite complainant's plea on that account and failed to provide justice to the complainant---Maladministration was established---Federal Tax Ombudsman recommended that competent authority be directed to reopen impugned order-in-original dated 2-8-2002 and order-in-appeal dated 30-3-2006 under the provisions of section 45-A of the Sales Tax Act, 1990 and annual the aforesaid order­-in-original, as being hit by time limitation as provided in law, as well annual the order-in-appeal for illegally upholding the aforesaid time-barred order-in-original and may proceed in accordance with the provisions of law.

Complaint No. 802 of 2003 rel.

Complaint No.918-K of 2005 reviewed.

Messrs Janjua Welfare Trust (registered Kotly Azad Kashmir) v. Secretary Revenue Division distinguished.

Complaint No.940 of 2005; Complaint No.1133-L of 2005; PTCL 1983 CL 209; Messrs Sufi Restaurant v. Collector of Customs and Sales Tax (Appeals) and others; Sandal Dye Stuff Industries (Pvt.) Ltd v. Collector of Sales Tax, Faisalabad; Khalid Modern Industries (Pvt.) Ltd v. Collector of Customs, Sales Tax and Central Excise (Adjudication), Multan; Messrs Sufi Restaurant v. Collector of Customs, Sales Tax and Central Excise (Appeals); Messrs Innovative Trading Co.; Messrs Falcon Corporation; Messrs Moon Enterprises and Messrs Bull Agencies; Wali Muhammad and others v. Sakhi Muhammad and others PLD 1974 SC 106 and Complaint No. 34-L of 2006 dated 20-3-2006 ref.

Muhammad Akbar, Advisor (Dealing Officer).

Akhtar Javed, Omar Arshad Hakeem and Waseem Ahmad for the Complainant.

Ms. Muneeza Majeed, D.C. Sales Tax, Lahore for Respondents.

2008 P T D 1349

[Federal Tax Ombudsman]

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

Messrs AKRAM INDUSTRIES LIMITED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.58 of 2005 in C.No.538-L of 2005, decided on 24th November, 2005.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---High Court had directed to recover the principal amount plus surcharge only and not further surcharge on the total amount so becoming due---Complainant/assessee raised question in a review application that even the surcharge could not legally be recovered in accordance with the law---Validity---No direction could be made to the Revenue Division to act contrary to the judgment of High Court---Complainant/assessee may seek any remedy against the charging of surcharge if available under the law---Review application was disposed of as being not maintainable as no case of mistake apparent on the face of record in the decision had been made out.

Sardar Qasim Ahmad Ali for the Complainant.

Irfan Javed, DC Customs, Karachi for Respondent.

FIDINGS/DECISION

2008 P T D 1351

[Federal Tax Ombudsman]

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

Messrs RAVI GAS COMPANY (PVT.) LTD. through Manager Finance

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.945 of 2005, decided on 26th September, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5A) & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Amendment of assessments---Withholding of refunds---Initiation of proceedings for amendment of assessment on the ground that assessments were finalized under normal procedure treating the complainant/assessee as manufacturer and tax deducted at import stage was adjustable which resulted in claimed refund, whereas income was to be assessed under Presumptive Tax Regime---Assessee contended that assessments for years 2000-01, 2001-02 and 2002-03 were finalized on 11-2-2002, 6-1-2003 and 28-6-2003 respectively, which could not be reopened under S.122(5A) of the Income Tax Ordinance, 2001---Contention of assessee in respect of tax years 2003, was that order dated 12-4-2004 under S.122 of the Income Tax Ordinance, 2001 had created refund and under S.122(4)(b) of the Income Tax Ordinance, 2001 it could be amended within one year after the Commissioner had issued the amended assessment, but notice to further amend the assessment was issued on 3-5-2005 and the re-assessment was not completed up to 30-6-2005 i.e. within the prescribed time and it could not be done now---Contention of assessee, in respect of tax year 2004, was that refund had been determined vide order dated 15-7-2005 which means that the notice under S.122 of the Income Tax Ordinance, 2001 for amendment of assessment stands withdrawn/cancelled and proceedings initiated under S.122 of the Income Tax Ordinance, 2001 amounted to maladministration---Validity--Complainant had submitted valid arguments---Ratio of decision of the President of Pakistan in C.No.36 of 2003 that refund could not be withheld on account of expected tax liability was applicable---Federal Tax Ombudsman recommended that the refund of Rs.1,03,71,247 pertaining to assessment years 2000-01, 2001-02, 2002-03 and tax years 2003 and 2004 be issued as per law.

2004 PTD 1901 ref.

2005 PTD 1316 and President's C.No.36 of 2003 rel.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

M. Shahid Abbas for the Complainant.

Muhammad Tahir (DCIT) for Respondent.

2008 P T D 1361

[Federal Tax Ombudsman]

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

Messrs QAMAR CARRIAGE COMPANY through (Member of A.O.P.)

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.267 of 2006, decided on 29th May, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss.92 & 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Recovery of tax from persons holding money on behalf of an assessee---Notice under S.92 of the . Income Tax Ordinance, 1979 was issued to withholding agent for the recovery of arrears without quoting any assessment years---Withholding agent withheld such tax and paid the amount to government treasury without any verification from the complainant/assessee---Complainant/assessee applied for refund of this deduction of tax in financial year 2000-01 but Taxation Officer refused to issue the refund on the ground that the arrears were outstanding for the assessment year 1981-82---Validity--Department failed to prove that demand of arrears was against present Association of Persons of the complainant which was a continuation of the earlier Association of Persons---National Identity Card of the complainant gave year of birth as 1971 which means that complainant was about 11 years old in 1982 when arrears for assessment year 1981-82 were raised against the Association of Persons---National Tax Number in question was not allocated at that time to the complainant as member of Association of Persons---Inaction of the department for not effecting recovery for 15 years had not been explained---Absence of assessment record and applications for allocation of National Tax Number raised presumption that the complainant was not the same which owed the arrears pertaining to assessment years 1982 to 1985---Recovery had been effected without notice to the complainant after a period of over 15 years and without ascertaining the liability of existing members of complainant Association of Persons---Order of rejection of refund were not maintainable in the eye of law---Federal Tax Ombudsman recommended that the impugned orders of rejection of refund should be set aside and case remanded for de novo decision after giving an opportunity of hearing to the complainant and disciplinary action be initiated against the concerned officials for not effecting the recovery of arrears for over 15 years.

Muhammad Sirjees Nagi, Advisor (Dealing Officer)

Mirza Muhammad Saleem Baig and Niaz Ahmad Khan for the Complainant.

M. Abid (DCIT) and Muhammad Sultan (ITO) for Respondent.

2008 P T D 1379

[Federal Tax Ombudsmen]

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

Messrs SIDDIQUI SONS DENIM MILLS (PVT.) LIMITED through Law Associates, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-386-K of 2008, decided on 8th April, 2008.

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

----S. 11(4), proviso---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Assessment of tax---Limitation---Extension of time limitation after expiry of 90 days --Complainant contended that show-cause notice was issued on 9-10-2007 and since no order had been passed within 90 days (i.e. by 9-1-2008) in terms of proviso to subsection (4) of S.11 of the Sales Tax Act, 1990, no action could now be taken pursuant to such show-cause notice---Department pleaded that law did not place any bar on Collector's power to grant extension even after the expiry of the first 90 days and that it was not necessary that the extension in time must be granted before the expiry of the first 90 days---Since proposal for extension in time was submitted to Collector on 22-2-2008 which he allowed on 23-2-2008 the proceedings could be completed up to 23-5-2008 by which time an order will be passed after examining the facts of the case---Validity---If the arguments of the Department is accepted then it would amount to giving the Collector unlimited power to cure an inherent defect of jurisdiction---Collector's power would then appear limitless making altogether nugatory the period of 90 days for passing an order prescribed in the statute---Since show-cause notice was issued on 9-10-2007 the order should have been passed by 9-1-2008 unless the Collector had extended the period before the expiry of the original 90 days---Since the period for passing the order had already expired and no extension was allowed by the Collector before the expiry thereof, any further proceedings pursuant to such show-cause notice would be void ab initio and would tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue should direct the concerned Collector to vacate the show-cause notice, dated 9-10-2007 within 30 days of the receipt of present order in accordance with law.

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

---S. 11(4), proviso---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Assessment of tax---Limitation---Nature and purpose of the provisions of S.11(4), proviso, Sales Tax Act, 1990---Proviso to subsection (4) of S.11 of the Sales Tax Act, 1990 lays down a mandatory condition that the order shall be made within 90 days of the issuance of the show-cause notice or within such extended period as the Collector may fix provided that such extended period shall, in no case, exceed 90 days---Said provision is in the nature of safeguard provided to the citizens---Period of 90 days laid down in the proviso for completion of proceedings was not without purpose; intention of the Legislature is that the matter should not be allowed to linger on and the citizens should not be left at the mercy of the tax officials for an indefinite period---Department is required to complete the proceedings expeditiously and the Adjudication Officers are required to apply their mind to the material placed before them to decide the matter within the period prescribed in law if they intended to proceed with the adjudication.

Asad Arif, Adviser (Dealing Officer).

Muhammad Afzal Awan for the Complainant.

Shafiq Ahmed, Deputy Collector, Sales Tax for Respondent.

2008 P T D 1388

[Federal Tax Ombudsman]

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

Messrs GULAB INDUSTRIES (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.296-L of 2006, decided on 31st May, 2006.

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

----Ss.36(2)(3), 33, 34 & 11(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O.698(I)/96 dated 22-8-1996---Recovery of tax not levied or short-levied or erroneously refunded---Refund was claimed on the use of electricity unit and the same was issued by the Department---Order was passed for recovery of sanctioned excess refund erroneously along with additional tax and penalty on the ground that input tax was not apportioned---Complainant contended that show-cause notice was time-barred as it was given after a period of three years and order-in-original was time-barred as it was passed after 14 months of the issuance of show-cause notice---Department contended that show-cause notice was not time-barred as it was issued within three years of the relevant date---Case could not be decided within time limitation because of abolition of Adjudication Collectorate and because the complainant did not attend the hearing---Validity---Show-cause notice was issued on 26-7-2004 and the case was decided on 29-9-2005 after the expiry of original period of 90 days as prescribed in S.36(3) of the Sales Tax Act, 1990---Admittedly, no extension in time for deciding the case was obtained/granted---Order was hit by time limitation and was liable to be annulled---Argument that case could not be finalized within time because of abolition of the Collectorate of adjudication and because the complainant did not attend the hearing in response to case notice, was not tenable----Adjudication of the case had to be finalized within the prescribed time limitation----If the complainant did not appear for hearing; the case could have been decided on the basis of record on merit---Department could have easily adhered to the time limitation prescribed in law---Federal Tax Ombudsman recommended that Revenue Division direct the competent authority to reopen impugned order-in-original under the provisions of section 45-A of the Sales Tax Act, 1990 and annul it as being hit by time limitation as provided in section 36(3) of the Sales Tax Act, 1990 and proceed in accordance with the provisions of law.

Complaint No.1197 of 2005; Complaint No.66 of 2006 filed by Messrs Rashid Model Industries, D.G. Khan and Sales Tax Appeal No.2149-LB of 2002 dated 5-3-2003 ref.

(b) Complaint No.805 of 2003 rel. (b) Sales Tax Act (VII of 1990)---

----S.34--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Additional tax/default surcharge could not be demanded under S.34 of the Sales Tax Act, 1990 on erroneously paid refund as the same was not due to the default of the taxpayer.

Muhammad Akbar, Advisor (Dealing Officer).

Abdul Sattar, FCA for the Complainant.

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

2008 P T D 1397

[Federal Tax Ombudsman]

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

FAUJI SUGAR MILL through Ijaz Ahmad Awan Advocate

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.298-L of 2006, decided on 16th May, 2006.

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

----Ss. l1(4) & 7---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment of tax---Limitation---Refund---Complainant contended that Order-in-Original was passed after the expiry of mandatory period of ninety days prescribed under S.11(4) of the Sales Tax Act, 1990---Department contended that bar of limitation of S.11(4) of the Sales Tax Act, 1990 would not be attracted as it was not a case where after allowing the amount of refund to the complainant who had already received the same, it was being recovered having been paid through mistake or otherwise and it was the case where the application of the complainant claiming refund had been dismissed on merits, therefore, S.11(4) of the Sales Tax Act, 1990 could not be pressed into service---Validity--Bar of limitation under S.11(4) of the Sales Tax Act, 1990 or otherwise-was not attracted in the case therefore, the contention of the complainant in this regard was repelled and overruled by the Federal Tax Ombudsman.

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

----S.45-B---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Appeal---Appeal and complaint---Complainant contended that fair opportunity was not granted to substantiate by production of necessary documentary evidence that burden of the sales tax was not passed on to the consumer---Validity--. Appeal had been filed against the Order-in-Original before the First Appellate Authority in which all these points had been raised---Collector (Appeals) shall take into consideration the contentions raised that it had evidence to prove that burden had not been shifted to the consumer if an opportunity was given to it to do so---In appeal, entire case was reopened and the appellate forum had all the powers while deciding an appeal to grant opportunity to the appellant if the circumstances of the case according to its finding so justified to produce evidence in respect of any matter in controversy---Order-in-Original was based on the only ground that complainant did not produce evidence to prove that burden of sales tax paid was not shifted to the consumer, therefore, it would be all the more very material for the appellate forum to consider whether the case should be decided without giving opportunity to the complainant to produce evidence in these respects to do complete justice---Though the appeal before the Collector was filed later than the institution of complaint and for that matter, jurisdiction of Federal Tax Ombudsman was not barred as the matter was not pending on the date of filing of complaint but Federal Tax Ombudsman recommended that Collector (Appeals) should decide the appeal on merits after hearing, the complainant and giving due consideration to the contentions raised by it and in case, the complainant would feel aggrieved against the decision to be made by the Collector (Appeals), it will be open to it to seek further remedy before the higher forum under the law or bring fresh complaint as the case may be which shall be decided on its own merits.

Ijaz Ahmad Awan and Nauruan Mushtaq Awan for the Complainant.

Dr. Irfan Wahid, Deputy Collector Customs.

2008 P T D 1414

[Federal Tax Ombudsman]

Before Munir A. Shaikh, Federal Tax Ombudsman

Messrs DEFENCE CNG SERVICES

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.279-L of 2006, decided on 15th May, 2006.

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

----Ss.11(2) and 36(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3) & 10(3)---Assessment of Tax---Show-cause notice was issued on 11-1-2005 and the case was decided as on 30-6-2005 long after the expiry of original period of 90 days---Validity---No extension in the time for deciding the case was ever obtained from or granted by the competent authority---Order-in-Original was hit by time limitation as provided in Ss.11(4) and 36(3) of the Sales Tax Act, 1990 and was void and illegal, and was liable to be cancelled---Maladministration was clearly established---Federal Tax Ombudsman recommended that the Revenue Division should direct the competent authority to cancel Order-in-Original in question.

Complaint No.805 of 2003 rel.

PTCL 1983 CL 209 review by.

2000 PTD 2407 overruled.

Muhammad Akbar, Advisor (Dealing Officer).

Waheed Shahzad and M. Irfan Aslam, ITP for the Complainant.

Ms. Muneeza Majeed, D.C. Sales Tax for Respondents.

2008 P T D 1437

[Federal Tax Ombudsman]

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

Messrs MOHMANDS (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.331 of 2006, decided on 15th May, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S.177---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Audit---Tax year 2003---Fresh notice---Department conceded the contention of the assessee that fresh notice had to be issued under S.177 of the Income Tax Ordinance 2001 (as prevailing at that time) to process the case---Federal Tax Ombudsman recommended that while following the directions of apex Court the case of the complainant/assessee had to be processed at the earliest---Grievance of the complainant/assessee had been redressed, the case was closed and file was consigned to record by the Federal Tax Ombudsman.

Imtiaz Ali Khan, Advisor (Dealing Officer).

Riaz Hussain for the Complainant.

Ms. Shabana Mumtaz (DCIT) for Respondents.

2008 P T D 1444

[Federal Tax Ombudsman]

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

BILAL QADIR JASKANI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1165 of 2005, decided on 10th April, 2006.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 221 & 122---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Rectification of mistake---Concealment---Complainant/assessee alleged that repeatedly issuance of illegal and unlawful notices by the tax functionaries fell within the definition of maladministration---List of discrepancies found in the tax return was filed by the department---Federal Tax Ombudsman observed that it was not necessary to go into details as the department had not been able to initiate so far any action of concealment against the complainant/assessee---No misstatement by the complainant/assessee as per record was found; it was a case of naked extortion by the Special Officer/Inspector---Repeated (uncalled for) notices had been issued to the complainant/assessee for settling "alleged" discrepancies and it was an act of extortion as per facts obtaining on record---Such delinquent officials should be severely dealt with---Federal Tax Ombudsman recommended that concerned Special Officer/Taxation Officer should not be given assessment work as he had tendency to go beyond his jurisdiction and harass the taxpayers and said officer may be warned to be careful in future and the observation may be placed in his PER (ACR).

Imtiaz Ali Khan, Advisor (Dealing Officer).

Abdul Majeed Malik for the Complainant.

Muhammad Abid (DCIT) for Respondent.

FINDNGS/DECISION

JUSTICE (RETD.) MUNIR A. SHAIKH, FEDERAL TAX A OMBUDSMAN.---The grievance of the complainant is against issuance of repeated illegal and unlawful notices by Mr. Tabassum Tahir, Taxation officer and Mr. Muhammad Bakhsh, Inspector, Income Tax/Wealth Tax, Circle No.38, Dera Ghazi Khan. It has been alleged A that issuance of repeated illegal and unlawful notices by the aforesaid tax functionaries falls within the definition of "maladministration". It has been prayed that serious legal as well as E&D action under the law may be taken against these officials.

1. Brief facts of the case are that the complainant is a senior Executive of National Bank of Pakistan and has paid @ Rs.18,000 P.M. as Income Tax during the tax years 2004 and 2005 and now paying @ Rs.26,000 P.M. w.e.f. 1-7-2005. During the posting of complainant as Regional Business Chief, National Bank of Pakistan, Dera Ghazi Khan (from August, 2002 to July, 2003) Return/Employer Certificates under section 115 of Income Tax Ordinance for the assessment years 2002-2003 and also for the tax year 2003 and 2004 were submitted in Circle No.38, Income Tax Office, Dera Ghazi Khan out of which assessment year 2002-2003 has been finally adjudicated and the refund of Rs.10,744 was created. The refund for tax years 2003 has also been finalized but has been withheld by the above mentioned Special Officer (Mr. Tabassum Tahir). Further, Special Officer (Mr. Tahir Tabassum) had sent 3 (three) show-cause notices to the Complainant vide Nos.307, 308 and 309 on 26-5-2005 for rectification. The complainant alleges that the repeated notices were issued just to defame, blackmail, harass and extract the money from him. It is also alleged that the accused tax functionaries contacted the nephew of the complainant (Mr. Yasir) at D.G. Khan and got an amount of Rs.6',000 as token money of illegal gratification to close the case and for issuance of final refund for the tax years 2003 and 2004. It is further alleged that on account of non-fulfilment of their further illegal demands, they started sending Notices to the complainant. The complainant also moved applications/complaints to the C.I.T., Multan but no action has been taken by them. This amounts to "maladministration" and cause of the instant complaint.

2. Respondents have forwarded parawise comments as under:--

(i) That issuance of notice does not constitute "maladministration" as held by the Hon'ble FTO vide order dated 29-9-2005, in C.No.912 of 2005 (Messrs Sang-e-Meel).

(ii) That the taxpayer is an employee of the NBP --- a salaried person, and filed his return of income for the assessment years 2002-2003, salary certificate for the tax years 2003 and 2004.

(iii) That in response to queries made by the assessing officer, the Regional Officer, D.G. Khan and Area Head Office, Multan informed the assessing officer that in addition to salary certain perquisites/allowances were also received by the complainant. These had not been disclosed in the return of income for this year.

(iv) The Executive had availed a facility of Advance Rent Ceiling from bank for Rs.222,804 for a period of two years i.e. 1-3-2002 onward on a house owned by Miss Zargoona Khawar and Miss Tanzeela Khawar daughter of Rafiq Khawar (Lessor) situated at No.50, Block "Z" Model Town, D.G. Khan. Monthly rent of the House amounted to Rs.25,000 P.M. as per lease agreement with an advance of Rs.600,000.

(v) The Executive also availed loan for Motor Car and Computer for Rs.611,100 and Rs.50,000 dated 19-8-1999 and 5-11-2002 respectively at a concessional mark-up @ 4% while benchmark rate is at least 7.5%. The amount equal to the difference as per these rates was required to be declared and taxed which was not done by the complainant.

(vi) That the Executive received bonus on the eve of Eid ul Fitar at Rs.21,209.

(vii) That during the above mentioned assessment and tax years the complainant also failed to declare perquisites regarding accommodation, conveyance, Guards/driver provided by the Bank. In view of above deficiencies, show cause notices/letters for rectification/amendment in assessment for each year separately were issued which gave rise to this complaint.

(viii) That on the basis of information obtained from the Bank Authorities, the taxpayer/complainant was intimated regarding discrepancies/anomalies observed in the Income Tax Returns/ Salaries Certificates.

(ix) That the allegation regarding issuance of notice under section 221 'is misconceived as the Commissioner had duly delegated the power of rectification under section 221 of the Income Tax Ordinance, 2001 to the Taxation Officers.

1. During the course of proceedings, the DR submitted that an enquiry has been initiated against Mr. Tabassum Tahir, Taxation Officer and Mr. Muhammad Bakhsh, Inspector and requested for adjournments.

2. Today i.e. 31-3-2006, on the date of hearing, Mr. Abdul Majeed Malik (Advocate), AR appeared for the complainant and Mr. Muhammad Abid (DCIT), DR, attended on behalf of the respondents. Both the representatives reiterated their arguments already submitted through complaint and parawise comments.

3. Respondents have given above list of discrepancies found in the Tax Returns of the complainant. It is not necessary to go into details as the respondents have not been able to initiate so far any action of concealment against the complainant. It appears that there has never been any misstatement by the complainant as per record. The alleged allegation regarding bribe of Rs.6,000 paid to official (Mr. Tabasum Tahir, Taxation Officer and Mr. Muhammad Bakhsh, Inspector) by nephew of the 'complainant is also very complicated affairs. The respondents made an enquiry in this respect but could not make out a case against the officials. This whole affairs is so tortuous that benefit of doubt goes in favour of the officials. This aspect does not need further probe.

4. After lengthy proceedings, DR could only submits a copy of Letter No. PF-32/ADMN/05-06/7791 dated 30-3-2006 addressed to Mr. Tabbasum Tahir, SOIT, E&IP Unit-31, Layya, which is reproduced for facility of reference:

"Perusal of the complaint tiled against you by the subject mentioned person, affidavits filed by the witness of the complainant and after examination of the reply filed by you along with counter affidavits and after personal hearing with you, this office is of the view that you failed to handle tax payer properly. Therefore, you are hereby directed to be careful in future while dealing with the tax payers".

The above said letter, is indeed insufficient. It is neither a warning nor a reprimand. In such-like cases the officials should not be let off as has been done above. It is a case of naked extortion (by the Special Office + Inspector). Repeated (uncalled for) notices had been issued to the complainant. It is evidently for setting `alleged' discrepancies. It is an act of extortion as per facts obtaining on record. It is not desirable to condone such acts (extortion) by simply issuing the letter cited above. On the contrary such delinquent officials should be severely dealt with. It is, therefore, recommended that:

(i) Mr. Tabassum Tahir, Special Officer/Taxation Officer should not be given assessment work as he has tendency to go beyond his jurisdiction and harass the taxpayers.

2008 P T D 1452

[Federal Tax Ombudsman]

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

MUHAMMAD HUSSAIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.101-L of 2006, decided on 10th April, 2006.

Customs Act (IV of 1969)---

----Ss.216 & 201---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---Appellate Tribunal directed to release illegally seized goods---Goods were found short in number/ quantity, which were seized and stored in warehouse and the same were also not in genuine condition----Complainant requested the department to arrange delivery of seized goods in genuine conditions---Seizing agency was reluctant to release the same quantity/number of goods as were seized and entered in the seizure report nor were they willing to release them in their original condition---Complainant contended that the department may be directed to release the same quantity/number of goods as were seized and in genuine/original condition and loss caused due to illegal seizure and wrong prosecution, based on mala fide intention, may be calculated---Validity---Necessarily an inquiry was to be instituted to inquire into the allegations levelled regarding loss of and damage to the goods stored---Revenue Division should appoint an inquiry officer to inquire into the allegations---Inquiry Officer so appointed should examine the stored goods in the presence of complainant or his authorized representative as well as in the presence of concerned functionaries to determine the veracity/truth or otherwise, of the allegations levelled---If the Inquiry Officer came to the conclusion that the goods were missing or/and they were seriously damaged or deteriorated he may call upon the complainant or his authorized. representative to prove that such loss or damage had occurred due to negligence of the officer/officers or by their wilful acts as per the requirements of S.216 of the Customs Act, 1969---If the Inquiry Officer concludes that the loss and damage had indeed occurred due to negligence and wilful acts of the concerned functionaries he will identify the officer responsible for such loss or damage/injury to the goods; he will also determine the extent of loss and the damage in monetary terms---Federal Tax Ombudsman recommended that Revenue Division appoint an Additional Collector, belonging to Collectorate/formation other than the Directorate of Customs Intelligence and the Collectorate, as an Inquiry Officer for inquiring into the allegations made by the complainant independently and impartially to determine the truth of the matter---While conducting the inquiry, the Inquiry Officer will also keep in view the issues discussed and the questions framed, and report his detailed findings to Ombudsman to enable it to further process the case under the provisions of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, including section 22(1) thereof.

Muhammad Akbar, Advisor, Dealing Officer).

Ch. Muhammad Asghar Saroha for the Complainant.

Ahmad Kamal, Deputy Director (Intelligence) for Respondent.

2008 P T D 1464

[Federal Tax Ombudsman]

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

Messrs MISBAH TRADING COMPANY

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1324-L of 2005, decided on 18th January, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Ss.170 & 171--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Non-issuance of refund along with additional payment for delayed refund---Validity---Department assured that rectification would be done and resultant refund would be issued within two weeks without fail---Complainant had shown satisfaction on the assurance of department---On assurance of department and satisfaction of the complainant the case was closed and file was consigned to record by the Federal Tax Ombudsman with the recommendation that refund should be paid within 15 days.

Imtiaz Ali Khan, Advisor (Dealing Officer).

Sh. M. Akram for the Complainant.

M. Ghias-ud-Din (D-C.I.T.) for Respondents.

2008 P T D 1555

[Federal Tax Ombudsman]

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

MUSHTAQ AHMAD KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.41 of 2005, decided on 19th April, 2005.

Customs Act (IV of 1969)---

----Ss.201, 216, 217 & 169(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O. 739(I) of 1999, dated 12-6-1999----Customs General Order (1 of 1997), dated 12-6-1997---Procedure for sale of goods and application of sale proceeds---Redemption fine---Adjudicating Officer (Additional Collector) ordered outright confiscation of truck, which was upheld by Collector of Customs---Appellate Tribunal ordered release of truck on payment of duty and taxes and redemption fine---Complainant approached the concerned authorities for release of truck as ordered by the Appellate Tribunal but department did not release the vehicle on the ground that it had been auctioned before the receipt of Appellate Tribunal's order---Refund of sale proceeds of truck was demanded after deduction of duty and taxes but to no, avail---High Court directed the department to refund sales proceeds of auctioned vehicle after deducting duty, taxes and fine as ordered by the Appellate Tribunal---At the time of seizure the department had shown the value of truck as Rs.20 lac (market price) in the seizure' document but the vehicle was sold in auction at a low price for (Rs.10,63,000) without associating the complainant with auction proceedings---Additional Collector refunded an amount of Rs.547,408 after deducting duty, taxes and redemption fine---Complainant contended that redemption fine could not be deducted from the auction proceeds because the goods having 'been auctioned were not available for redemption---Validity---Vehicle being nine years old at the time of auction was required to be assessed/appraised by the department in terms of provisions of Customs General Order (1 of 1997), dated 12-6-1997 keeping in view the condition of vehicle---As the vehicle was old and used the department had to appraise it on its physical condition---Nomaladministration' was observed on this account nor can maladministration' be attributed to the department for their refusal to refund the redemption fine in the first instance for they were acting at the time in accordance with High Court's order passed in the complainant's own case directing the department to return the sale proceeds after deduction of duty, taxes and fine---It was a different matter that the department had now, on their own, agreed to remitting the redemption fine in deference to High Court and Tribunal's judgments in some other cases---High Court had allowed the complainant the cost of petition and their was no provisions in the Customs Act, 1969 permitting payment ofinterest' being sought by the complainant---Federal Tax Ombudsman declined to award cost of litigation and compensation---Complainant would get relief by way of repayment of redemption fine and the department agreed during the complaint proceedings to remit the same---Department will remit the amount of redemption fine to the complainant within one month.

Muhammad Aslam Kalia v. Customs (Lahore High Court's ruling dated 9-10-2002) and Customs Appeal No.188/LB of 2002 (C.No.779 of 2002) rel.

Muhammad Akbar, Advisor (Dealing Officer).

Abdul Bari Rashid for the Complainant.

Rashid Munir, A.C. Dryport, Multan for Respondents.

2008 P T D 1578

[Federal Tax Ombudsman]

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

Rana MUHAMMAD NAEEM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-313-K of 2005, decided on 11th July, 2005.

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

----Ss.9 & 2(3)---Jurisdiction, functions and power of the Federal Tax Ombudsman---Whenever maladministration is alleged independent of the controversy in the matter, there will be no bar to jurisdiction of the Federal Tax Ombudsman to investigate into the allegation of maladministration irrespective of the fact that a remedy under the statute has been provided---Whenever maladministration is alleged and proved, then the Federal Tax Ombudsman can give recommendations and findings which may even affect the merits of case.

2002 PTD 2984 rel.

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

----S.16---S.R.O. 634(I) of 2004---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Power to prohibit or restrict importation and exportation of goods---Confiscation of vehicle---S.R.O. 634(I) of 2004 was made the basis for confiscation of vehicle---Since the vehicle in question was 1993 Model which was registered in February, 1994, therefore, the S.R.O. issued in 2004 could not have been applied.

(c) Interpretation of statutes---

---All official acts are presumed to have been done in accordance with law and under authority vested in this regard unless contrary is proved.

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

---Ss.16, 32(2)(3), 156(1), Cl. (89)(90), 168(2), 180, 186, 187 & 211---Import Trade and Procedure Order, 2004, Appendix-C, S.No.10---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Power to prohibit or restrict importation and exportation of goods---Confiscation of vehicle/car after ten years of its registration with Motor Registration Authority due to non-production of its import documents---Validity---Presumption was that vehicle was registered by Motor Registration Authority under valid documents required for registration of vehicle--Department did not challenge the genuineness of the registration book---Complainant was in possession of the vehicle under the valid registration book issued by the Motor Registration Authority under the law---Complainant, who was the sixth purchaser of vehicle, had produced valid registration book which was never doubted and he discharged the burden cast upon him by S.187 of the Customs Act, 1969---Federal Tax Ombudsman recommended that Central Board of Revenue to set aside the order-in-original and release the vehicle and return the same to its lawful owner.

Custom Appeal No.H-866 of 2002 and 1992 SCMR 1898 ref.

2003 PTD 2118 rel.

Nadeem Ahmed Mirza, Consultant.

Dr. A. Rehman Rind, Deputy Collector of Customs.

2008 P T D 1589

[Federal Tax Ombudsman]

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

Messrs MICRON LAB through Ex Proprietor

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and another

Complaint No.C-665-L of 2005, decided on 20th July, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.72(1) & 63---Income Tax Ordinance (XLIX of 2001), S.1, 2-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), 2(3)---Assessment in the case of discontinued business or profession---Assessee intimated the relevant Taxation Officer through notice under S.72(1) of the Income Tax Ordinance, 1979 regarding closure of its business---Ex parte assessment order was passed in spite of producing evidence in respect of intimation regarding closure of business and copies of statements of the landlord and neighbours who confirmed the contention of the assessee---Validity--Factum of closure of business was on the file which could be verified from the neighbours and the landlord of the building in which the complainant/assessee has hired a room for business---Taxation Officer, instead of taking evidence of the landlord and the neighbours of the complainant/assessee, had relied upon an uncorroborated and un-confronted report of the Inspector after the closure of business---Such report was contradicted on oath and in writing that business was closed---Rejection of the statement of assessee was not only unreasonable but also arbitrary amounting to `maladministration'---Order passed on fudged report was liable to be set aside---Federal Tax Ombudsman recommended that the Secretary Revenue Division, should advise the concerned Commissioner of Income Tax to set aside the impugned order under S.122-A of the Income Tax Ordinance, 2001.

2005 PTD 1390 rel.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

Malik Tabasam Maqsood Khan for the Complainant.

Jafar Nawaz Natt (DCIT) for Respondents.

2008 P T D 1598

[Federal Tax Ombudsman]

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

Messrs AL-NOOR DEVELOPER & PLANNERS through Khalid Mehmood

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and another

Complaint No.962-L of 2005, decided on 12th September, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Assessment order was assailed on the grounds that order did not bear any date and was served after a lapse of 6 months from the last date of hearing; that the order was not a speaking order and that the Assessing Officer had not followed the directions of First Appellate Authority which made it illegal and unlawful---Validity---Undated order had been communicated to the complainant/assessee after a period of more than 6 months from the date of conclusion of the hearing---Such communication of order was contrary to settled law---Order was a mere repetition of the previous assessment order and no reason had been given for increase in the total income---Order in fact being not a speaking order, Federal Tax Ombudsman recommended that Commissioner of Income Tax to invoke the provisions of S.122(5-A) of the Income Tax Ordinance, 2001 for setting aside the order and de novo proceedings in the case as per law.

Messrs Crescent Sugar Mills Ltd. v. C.B.R. and others NLR 1982 Tax 1 rel.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

Muhammad Ajmal Khan and M. Sadiq Chaudhry for the Complainant.

Ms. Shabana Mumtaz (ACIT) for Respondent.

2008 P T D 1603

[Federal Tax Ombudsman]

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

SHAUKAT HAYAT BALOCH

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.93-L of 2005, decided on 3rd May, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122, 170(4) & 15(2)---Income Tax Ordinance (XXXI of 1979), S.96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---C.B.R. Circular No. 5 of 2003, dated 30-6-2003---Amendment of assessment---Tax year 2004--Claim of refund--Proceedings for amendment of assessment were initiated on the ground of definite information that property income was not declared in the return and payments would be adjusted against the tax demand---Complainant/assessee contended that it was his wife who received the rent of subject property and she had filed a separate return and paid income tax on declared income and also conceded that property in question had not been formally transferred in the name of his wife---Validity---Complainant/assessee admitted that property in question had not been formally transferred in the name of his wife and complainant/assessee continued to hold the property in his own name---Department issued notice for amending the `assessment' on the basis of definite information that complainant/assessee had rented out property but had failed to declare the rental income in his own return---Notice issued had only asked the complainant/assessee to give his reply to the notice and also to produce relevant accounts/documents before the competent authority to enable it to determine the correct income and the amount of tax actually payable---Same was merely a show-cause notice---Complainant/assessee would have the right to defend his position---No 'maladministration' was found---Complainant/assessee should join the proceedings initiated under S.122 of the Income Tax Ordinance, 2001 before the competent authority---Complaint was disposed of accordingly.

Muhammad Akbar, Advisor (Dealing Officer).

Rana Mushtaq Ahmad Toor, ITP for the Complainant.

Muzammil Hussain, DCIT, Lahore for Respondents.

2008 P T D 1618

[Federal, Tax Ombudsman]

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

Messrs GREEN GRO (PVT.) LTD. through Chief Executive

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and another

Complaint No.C-470-L of 2005, decided on 28th May, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5A)---Income Tax Ordinance (XXXI of 1979), Ss.50(2A), 80-B(5), 143B & 59-A----Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessment---Issuance of notice, inter alia, on the ground that taxpayer being a company was not justified to claim tax deduction under S.50(2A) of the Income Tax Ordinance, 1979 as final discharge of tax liability as scope of S.80-B(5) of the Income Tax Ordinance, 1979 had not been extended to a "company" and tax deducted was not full and final discharge of tax liability to the extent of income earned from Bank profits---Assessee averred that assessments finalized before 1-7-2003 could not be reopened/revised/amended in exercise of jurisdiction under the provision of S.122 of the Income Tax Ordinance, 2001 and initiation of proceedings which . were contrary to law amounted to `maladministration'---Validity---Section 122(5A) of the Income Tax Ordinance, 2001 was effective from 1-7-2003 and was not applicable to a matter decided and closed prior to enactment of Finance Act, 2003---Proceedings initiated against the complainant/assessee under S.122 of the Income Tax Ordinance, 2001 were without jurisdiction, illegal and void ab initio---Federal Tax Ombudsman recommended that proceedings initiated against, the complainant under S.122 of the Income Tax Ordinance, 2001 by issue of notices be dropped/withdrawn and cancelled.

ITAT in ITA No.833/LB of 1982-83 and Writ Petition No.7788 of 2003 ref.

Messrs Monnoo Industries Ltd. v. The Commissioner of Income Tax, Central Zone, Lahore 2001 PTD 1525 and 2007 PTD 2051 rel.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

Iqbal Haider, A.R. for the Complainant.

Chaudhry Mubarik Ali (ACIT), Bahawalpur.

2008 P T D 1623

[Federal Tax Ombudsman]

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

Rana GHULAM DASTGIR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and another

Complaint No.C-534-L of 2005, decided on 1st June, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Refund was adjusted against the demand of next year and against the demand of a partner and balance amount was issued---Assessee contended that at the time of making refund application no demand was pending for the next year and assessment of this year had been set aside by the First Appellate Authority and thus department be directed to pay the refund amount with additional payment for causing delay---Validity---Explanation offered by the department for delay in issuance of refund was not satisfactory---Assessing Officer issued the letter to DPC for cancellation of the adjusted amount aid to date no reply had been received which indicated that he did not pursue the matter diligently---Federal Tax Ombudsman recommended that refund voucher of the amount due should be forthwith issued in favour of the complainant; explanations from Incharge of DPC should be called for the delay in responding to the Taxation Officer's letter and from the Taxa­tion Officer for not following up of his letter.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

Rana Ghulam Dastagir for the Complainant.

Ms. Naureen Yaqoob (DCIT) for Respondent.

2008 P T D 1646

[Federal Tax Ombudsman]

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

RECKIT BENCKISER PLC UK

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1076 of 2005, decided on 25th November, 2005.

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

----Ss. 9 & 2(3)---Income Tax Ordinance (XXXI of 1979), Ss.27, 28, 29 & 62---Companies Ordinance (XLVII of 1984), Ss.284, 287(1)(a)(d), 288---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Capital gain---Amalgamation of companies-Assessment of capital gain---Assessee contended that in case of amalgamation of one company with `another with all its assets and adjustment or allotment of shares of the company with which it was amalgamated did not legally amount to transfer of capital assets as amalgamated with entire assets and stood dissolved without winding up---Department contended that Federal Tax Ombudsman had no jurisdiction to make any recommendation as regards decision or judgment of judicial Tribunal set up under the Income Tax Ordinance, 1979 which was not part of the Revenue Division and judgment passed in the case by the Income Tax Appellate Tribunal dismissing appeal filed by the complainant/assessee was immune from challenge before Federal Tax Ombudsman---Validity--Complainant/assessee availed statutory remedies by filing appeal before First Appellate Authority against the order of Assessing Officer and before the Income Tax Appellate Tribunal, which were dismissed---Jurisdiction of Federal Tax Ombudsman extended to proceedings within Revenue Division. and its officers and not the Income Tax Appellate Tribunal, which was a judicial Tribunal and not part of revenue division---Appellate Tribunal was an independent body and Federal Tax Ombudsman had no power to make any recommendation or pass any direction in respect of judgment passed by the Appellate Tribunal---Complaint was disposed of being not maintainable and the case was closed.

Barrister Ibrahim Shahid for the Complainant.

Basharat A. Qureshi Additional Commissioner of Income Tax for Respondents.

2008 P T D 1676

[Federal Tax Ombudsman]

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

M.N. IMP. & EXP. COMPANY, KARACIH

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-533-K of 2008, decided on 28th May, 2008.

Customs Act (IV of 1969)---

----Ss. 25A(3), 25D, 25(1)(8), 79 & 80(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2)(b) & 10(2)---Federal Tax Ombudsman Investigation and Disposal of Complaints Regulations, Regulation No.23(i), (ii) and (iv)---Action where declared value is less than the value determined---Import of consignment of Battery Operated Toys and Toys without Battery---Goods declaration was filed and the leviable duty and taxes were deposited under S.79 of the Customs' Act, 1969---Complainant alleged that Department was under obligation to make an order for clearance---Department, after wasting fourteen days time, unlawfully assessed the customs. value and collected additional amount of duty and taxes---Contention was that customs value of the goods was enhanced in violation of the mandatory provision of law under S.25(1) of the Customs Act, 1969, misuse of State power and possible designs of bribery and jobbery without disclosing any evidence for not accepting the declared value and arbitrarily and unlawfully, determined the value of goods; that delay, neglect, harassment, detention and duress resulted into penalty and storage and demurrage charges which were borne by the complainants; action of Department was unlawful, perverse and arbitrary and amounted to maladministration; and that enquiry be conducted and direction be issued to the Department to compensate the complainants with the refund of, the money paid in duty and taxes, storage and demurrage charges---Validity---Value of Battery-operated Toys and Hand-operated Toys were determined by the Valuation Department taking into consideration the data of past assessment and cost of raw materials, and after discussion with the representatives of the KCCI and FPCI and other stakeholders---Valuation Advice was issued under S.25A of the Customs Act, 1969---Values of imports from China were revised on the representations of the importers Associations and under the direction of Federal Board of Revenue---Valuation Directorate had determined the assessable values in accordance with law and Collectorate had stated that the assessment had to be made in accordance with the valuation Advices issued from time to time---Allegation of maladministration against the Valuation and Customs Department was not established---Complainant had the option to file a review application before the Directorate-General of Customs Valuation under S.25D of the Customs Act, 1969; however, protest of the importer for payment of demurrage of KICT for port/demurrage charges was justified---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Director General of Customs Valuation to examine the review application and, after hearing the importer, decide the same on merits within thirty days of its receipt; that the Collector of Customs to investigate into the reasons of delay of 14 days in the examination of consignment by the shed staff and that in case the delay took place because of the customs examination, the Collector of Customs may take up the matter with the KICT to refund the excess amount of charges recovered from the importer.

No.1386-L/2002 and No.214-L/2002 ref.

M. Mubeen Ahsan, Advisor, Dealing Officer. M. Afzal Awan.

Ameeruddin and Muhammad Rashid Khan for KCIT.

Zeba Bashir, Deputy Director of Customs Valuation.

Syed Fawad Ali Shah, Deputy Collector of Customs PACCS.

2008 P T D 1712

[Federal Tax Ombudsman]

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

AKHTAR HASSAN, MEMBER OF AOP

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-987-L of 2005, decided on 24th October, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.96, 59-A, 50(4), 50(4A), 80C, 143B---Income Tax Ordinance (XLIX of 2001), S.122(5A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Assessee contended that department had given appeal effect and issued demand notice creating refund but the issue of voucher had been withheld without any justification---Department submitted that order creating refund was totally illegal and appeal had been filed before Income Tax Appellate Tribunal which made the issue sub-judice---Refund voucher was withheld till the decision of appeal---Validity---Department had filed an appeal before the Income Tax Appellate Tribunal against the order of First Appellate Authority from which the refund flowed---Matter being sub­judice, it was not appropriate to give any finding which would pre-empt the decision of the case---Complainant/assessee should wait for the decision of the Income Tax Appellate Tribunal---Complainant/assessee had not been able to target any maladministration on the part of the Department---Investigation of the complaint was closed by the Federal Tax Ombudsman in circumstances.

Complaint No.882 of 2005 rel.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

Sh. Zafar-ul-Islam and Tanveer Ahmed for the Complainant).

Ahmad Shuja Khan (DCIT) for Respondent.

2008 PTD 1719

[Federal Tax Ombudsman]

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

Messrs M.N.H. EXPORTS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1095-L of 2005, decided on 24th October, 2005.

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

----S.9(2)(a)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Sales Tax appeal against Collector (Appeals)' order was filed and complaint in Federal Tax Ombudsman's Secretariat too was filed on the same day but earlier in time during the day---Validity---Admittedly appeal was filed before Appellate Tribunal---Fact was that Deputy Collector and the Collector (Appeals) decided the complainant's case after following the due process of law---No `maladministration' was observed---Federal Tax Ombudsman advised that the complainant should pursue its appeal pending before the appellate Tribunal, which was competent to sort out both points of law and fact---Complaint was disposed of accordingly by the Federal Tax Ombudsman.

1997 SCMR 503 ref.

Muhammad Akbar (Advisor) Dealing Officer.

Muhammad Ashraf, Consultant, for the Complainant.

Munir Sarwar D.C. Sales Tax, Lahore, for Respondents.

2008 P T D 1726

[Federal Tax Ombudsman]

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

Messrs HYUNDAI GUJRANWALA MOTORS (PVT.) LTD.

Versus

SECRETARY REVENUE DIVISION; ISLAMABAD

Complaint No.1209 of 2005, decided on 17th January, 2006.

Sales Tax Act (VII of 1990)---

----S.14---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Registration---Delay in issuance of registration certificate---Department. alloted computer number but failed to issue the requisite registration certificate as data relevant to registration had not been fed into the computer by the Registration Office nor it was transferred to Central Registration Office for issuance of registration certificate---Validity---Very purpose for which the system appears to have been devised was being frustrated by tardy feeding of data and its transfer to the central registry---Undue delay had occurred due to failure to feed and transfer the relevant data to the central registry, despite complainant's requests for issuance of registration certificate---Maladministration was established---Department should complete its inquiry for appropriate disciplinary action against those found responsible for causing delay in issuance of registration certificate to the complainant---Federal Tax Ombudsman recommended that Revenue Division should direct the competent authority to establish a system of inspections binding the senior officers to periodically check and monitor the working of local as well as central registries engaged in the task of processing applications for registration and issuance of registration certificates so as to eliminate snags and delays occurring in issuance of certificates of registration applied for by the assessee.

Muhammad Akbar (Advisor) Dealing Officer.

Nemo for the Complainant.

Syed Faisal Bukhari, D.C., Gujranwala for Respondent.

2008 P T D 1734

[Federal Tax Ombudsman]

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

Messrs NEW HAJI WARIS & CO

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.78-L of 2004, decided on 19th May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 89, 63/66A & 61---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Preamble---Additional tax---Assessment made was set aside for de novo proceedings---Fresh notice under S.61 of the Income Tax Ordinance, 1979 was issued---Soon thereafter, notice was received by the assessee whereby additional tax was levied on an alleged default in non-payment of tax demand created against such set aside assessment---Penalty order though, dated 30-6-2003 (served on 13-1-2004) alleged to be mala fide as having been issued at a time when assessment already stood set aside thus obliterating demand of which default was penalized under S.89 of the Income Tax Ordinance, 1979---Validity---Grievance had been redressed to the extent of deletion of demand for Tax and Additional Tax but serious mala fide amounting to maladministration was evident by way of passing an ante-dated order; lapse on the part of those who prepared the parawise comments, and by those who signed the reports without examining the record carefully before reducing a categorical statement in writing---Federal Tax Ombudsman recommended that an enquiry be conducted to identify those who passed an antedated order of penalty purported to be of 30-6-2003 and issued notice on that basis; that those who prepared the parawise comments for the Regional Commissioner of Income Tax be identified by name and warned to be careful and that Central Board of Revenue to impress on Regional Commissioners of Income Tax to be careful in drafting reports to the Federal Tax Ombudsman.

A.A. Zuberi, Advisor (Dealing Officer).

None for the Complainant.

Karamatullah (DCIT) for Respondent.

2008 P T D 1744

[Federal Tax Ombudsman]

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

Messrs M.I. TEXTILE MILLS LTD.

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.1325-L of 2005, decided on 17th January, 2006.

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

----Ss.36(3), 34, 33(2)(cc), 3 & 2(33)---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---Non-invoking of specific section/subsections of the applicable law in the show-cause notice---Limitation for passing of order-in-original after issuance of show-cause notice---Show-cause notice was issued alleging that stock had been supplied without payment of sales tax---Complainant along with explanation of stock contended that show-cause notice was issued on 22-3-2003 and order-in-original was passed on 5-9-2005 after two years and seven months whereas the order was required to be passed within 45 days of the issuance of show-cause notice, extendable by another 90 days if extension was allowed of which there was no evidence---Case had to be decided within 135 days (subject to extension) which was not done---On pointing out that adjudicating officer had not invoked Ss.36 and 34 of the Sales Tax Act, 1990 in the show-cause notice, the complainant submitted that, in that case the show-cause notice was defective and so were the subsequent proceedings---Show-cause notice that failed to invoke the specific sections/subsections of the applicable law for determination/recovery of dues was illegal as were all the subsequent proceedings---Validity---Adjudicating authority failed to invoke in show-cause notice the applicable provisions of law i.e. specific subsections of Ss.36 and 34 of the Sales Tax Act, 1990 for determination/recovery of tax and additional tax and specific clause/ clauses of subsection (2) of S.33 for imposition of penalty as provided in law---Vague show-cause notice issued was legally defective, invalid and ab initio void---Order-in-Original passed, was not sustainable---Maladministration was established as the order was passed on the basis of legally flawed, defective and vague show-cause notice---Order was passed beyond the scope of show-cause notice and was illegal, unjust, arbitrary and out of jurisdiction---Federal Tax Ombudsman recommended that the Central Board of Revenue should direct the competent authority to cancel the impugned Order-in-Original.

Complaint No.805 of 2003 and Complaint No.1028-L of 2005 rel.

2001 SCMR 838 ref.

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

----S.36(3)---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---Extension by Central Board of Revenue after initial period---Validity---Department although obtained extension from Central Board of Revenue in the period for deciding the case up to 31-10-2005 but even then the Order-in-Original dated 5-9-2005 was barred by time because the extension was sought and given much after the expiry of initial period of 45 days as prescribed in S.36(3) of the Sales Tax Act, 1990.

Complaint No.805 of 2003 and Complaint No.1028-L of 2005 rel.

Muhammad Akbar (Advisor) Dealing Officer.

Abdul Qaddus Mughal for the Complainant.

Syed Mahmood Hassan D.C., Sales Tax, Lahore for Respondents.

2008 P T D 1757

[Federal Tax Ombudsman]

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

Messrs MANS ENTERPRISES

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.1363-L of 2005, decided on 17th January, 2006.

Sales Tax Act (VII of 1990)--

----S.10---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Import of knitting machinery items---Knitting services---Sales tax was not leviable on such services---Refund was claimed as paid on machinery at import stage---Department did not heed its written and oral requests for more than three years---Validity---Department submitted that supplies of textiles items had been zero-rated since 6-6-2005, department would be prepared to allow refund subject to verification that complainant had not claimed any adjustment of input tax---`Maladministration' had taken place as refund application and subsequent reminder were not responded to be the department leading to delay in payment of refund---Federal Tax Ombudsman recommended that Central Board of Revenue was to direct the competent authority to refund an amount of Rs.252472 to the complainant after verification that the complainant had not claimed any adjustment of input tax during the period March, 2004 onwards, as offered and undertaken by the Departmental Representative during complaint proceedings.

Muhammad Akbar (Advisor) Dealing Officer.

Malik Tabbasum Maqsood Khan for Complainant.

Muhammad Saeed Wattoo, D.C. Sales Tax, Lahore for Respondents.

2008 P T D 1762

[Federal Tax Ombudsman]

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

Messrs AZAM TEXTILE MILLS LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1198 of 2005, decided on 17th January, 2006.

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

----Ss.34, 36(1), 33 (2)(cc) & 57---Special Procedure for Ginning Industry Rules, 1996--S.R.O.1271(I) of 1996 dated 10-1-1996---S.R.O.134(I) of 2002 dated 6-3-2002--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Additional tax--Issuance of corrigendum of order-in-original by holding that principal amount had been paid late, demanded additional tax and imposed penalty---Order was passed in another case and applied the same to the complainant/assessee---Complainant contended that order-in­-original passed along with corrigendum amounted to maladministration' on the ground that order-in-original was passed in a stereotyped manner, without consulting the record because of which the corrigendum had to be issued; that it was without providing opportunity of hearing, militating against the principles of natural justice and that the principal amount had already been deposited, adjudicating officer was obliged to issue a fresh show-cause notice by calculating the amount of additional tax and penalty instead of issuing a corrigendum-Validity--Adjudicating authority had invoked only S.33(2)(cc) of the Sales Tax Act, 1990 for taking penal action and recovery of penalty vide un-­amended order-in-original---Authority had neither invoked S.34 nor S.36 of the Sales Tax Act, 1990 in show-cause notice for recovery of sales tax/additional tax---After four months from the issuance of order-in-­original, it issued a corrigendum ordering recovery of additional tax and penalty and applied this order, among others, to the complainant also---In a bid to determine the tax liability the adjudicating officer invoked in Order-in-Original the provisions of Ss.34 and 36(1) of the Sales Tax Act, 1990, which provisions were not invoked by him in the show-cause notice-As relevant sections were not invoked in the show-cause notice; as required under law, for determination/recovery of additional tax, the show-cause notice was defective and without lawful foundation---Applicable provisions of law having not been invoked in the first instance in the show-cause notice, the same could not be introduced and applied via the corrigendum to cover a legal flaw in the show-cause notice---Demand for payment of additional tax made in the corrigendum was without lawful authority and of no legal effect---Un-amended Order-in-Original is so far as it related to imposition/recovery of penalty, would stand---Corrigendum constitutedmaladministration' at that same had been issued illegally, unjustly, arbitrarily and without jurisdiction and was legally not maintainable--Federal Tax Ombudsman recommended that Revenue Division should direct the competent authority to cancel corrigendum dated 27-7-2005 in so far as it related to the complainant only in the present complaint.

2001 SCMR 838 and Complaint No.805 of 2003 rel.

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

----Ss. 57, 34 & 36---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Correction of clerical errors, etc.---Issuance of corrigendum order imposing additional tax and penalty under the provision of S.57 of the Sales Tax Act, 1990---Validity---Corrigendum had affected a substantial amendment in order­-in-original essentially to cover up the failure to invoke Ss.34 and 36(1) of the Sales Tax Act, 1990 in the show-cause notice---Amendment affected via the corrigendum could, by no stretch of imagination be, regarded as rectification of clerical/arithmetical errors---Show-cause notice also did not disclose the real intention of the adjudicating officer as it only said that some clerical errors in writing were to be rectified requiring issuance of corrigendum and that if no one appeared on that date, the corrigendum would be issued---Case was not that of removal of clerical errors because corrigendum affected major amendment in order­-in-original without, invoking in the first instance applicable provisions of law in the show-cause notice---If any tax was required to be paid, the Department should have issued a separate show-cause notice to determine the liability under the applicable provisions of law---Corrigendum was out of the scope of the show-cause notice issued and was void, without jurisdiction and no legal effect.

Muhammad Akbar (Advisor) Dealing Officer.

Rana Muhammad Afzal for the Complainant.

Dr. Muhammad Nadeem Memon, D.C. Sales Tax, Hyderabad for Respondents.

2008 P T D 1777

[Federal Tax Ombudsman]

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

Messrs YOUNUS TEXTILE MILLS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1438-K of 2005, decided on 13th March, 2006.

Customs Act (IV of 1969)---

----Ss.83(2) & 224---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Clearance for home consumption---Mark-up--Demand of mark-up @ 20% against Bank guarantee---Validity---Twenty percent mark up as agreed between the customs authorities' and the importer was not chargeable under customs law and when an importer failed to pay the customs dues, only the rate prescribed under S.83(2) of the Customs Act, 1969 could lawfully be imposed---Charging of 20% mark-up was contrary to law, arbitrary and unjust and amounted to maladministration-Demand was raised vide notices and payment of the principal amount was made----Since customs dues were not paid within thirty days of the issue of notices, surcharge @ 14% per annum for the intervening period would be payable---Federal Tax Ombudsman recommended that the Central Board of Revenue direct the Collector of Customs to recover the amount of surcharge under subsection (2) of section 83 of the Customs Act, 1969 and release the Bank guarantees after the payment of surcharge.

Petition No.843 of 2003 ref.

M. Mubeen Ahsan (Advisor) Dealing Officer.

Imran Iqbal for the Complainant.

Irfan Javed, Deputy Collector of Customs for Respondents.

2008 P T D 1782

[Federal Tax Ombudsman]

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

Mian MUHAMMAD RIZWAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1180-L of 2005, decided on 25th November, 2005.

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

----S. 10(1)(2)---Sales Tax Refund Rules, 2002, Rr.4 & 5---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Refund claim was not processed on the ground that registration status' of the complainant's supplier was invalid and only verification of invoices and transactions of payment did not make refund claims genuine as the objection created a doubt about the complainant's supplier and the genuineness of complainant's refund claim---Validity---Department got supplier's invoices verified yet it failed to finalize the refund claim---Instead they wanted to verify theregistration status' of the supplier and also to check whether the supplier had deposited the tax into the treasury vis-a-vis the purchases made by the complainant---Complainant contended that the invoices and other documents had been verified, including deposit of sales tax on input invoices; that he had made payments to the supplier in accordance with the provisions of S.73 of the Sales Tax Act, 1990 and that if the supplier had not deposited sales tax into the government treasury, it was not the responsibility of the complainant---Department had committed maladministration' by delaying their decision on the complainant's refund claim and by withholding refund for which the complainant had filed the documents long ago, without any valid reason---Federal Tax Ombudsman recommended that Central Board of Revenue should direct the Collectorate of Sales Tax, to obtain from the other Collectorate of Sales Tax report regardingregistration status' of complainant's supplier, asked for vide its communication dated 19-10-2005, promptly to examine and decide complainant's refunded claim on merit, in accordance with the provisions of law but by taking into consideration the contentions of the complainant and after hearing him.

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

----S.10(1)(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Department did not even intimate the complainant as to why his claim was being withheld---Complainant's claim suffered from inattention' and inordinate delay on the part of the department, which amounts tomaladministration'.

Muhammad Akbar (Advisor) Dealing Officer.

Ashfaq Ahmad Sheikh, ITP for the Complainant.

M. Abid Raza Bodla, D.C. Sales Tax for Respondents.

2008 P T D 1800

[Federal Tax Ombudsman]

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

FEDERAL BOARD OF REVENUE

Versus

SIDDIQSONS DENIM MILLS LTD.

Review Application 23 of 2008 in Complaint No.386-K of 2008, decided on 9th July, 2008.

Sales Tax Act (VII of 1990)---

----S.11(4), Proviso---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Preamble---Assessment of tax---Limitation---Admittedly order was passed after expiry of period of 180 days of the date of show-cause notice---If the contention raised by the Department that period could be extended after expiry of the original period of 90 days was accepted, even then the order was passed two days after the expiry of the period of 180 days and therefore, the show-cause notice became ineffective and no proceedings thereafter could be continued---Order passed therefore, was nullity being superstructure raised on void proceedings---Federal Tax Ombudsman recommended, in addition to the recommendations already made, that Federal Board of Revenue should reopen the case under S.54-A of the Sales Tax Act, 1990 and cancel the order-in-original which had been held to be void and close the proceedings so far as show-cause notice was concerned.

PLD 1958 SC 104 rel.

Muhammad Afzal Awan for the Complainant.

S.A. Sajjad Rizvi, Deputy Collector Sales Tax.

2008 P T D 1804

[Federal Tax Ombudsman]

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

Messrs JOTAANA ENTERPRISES through M. Shahid Baig (Advocate)

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1038-L of 2005, decided on 23rd November, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 61, 62 & 143-B---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment was deemed to be finalized under S.59(4) of the Income Tax Ordinance, 1979 by 30-6-2003---Neither assessment was made till the date of limitation nor any intimation was sent to the complainant/assessee regarding non-acceptance of the return---Return was ousted from the scope of Self Assessment Scheme on the basis of statement filed under S.143-B of the Income Tax Ordinance, 1979 for the previous assessment year---Validity---Assessment had not been made fairly and carefully---Present case was indeed 'a case of "maladministration" where inaptitude, inefficiency and bias of the Taxation Officer was so obvious that it could not be easily condoned---Assessment was deemed to have been made on 30-6-2003 and subsequent proceedings were not at all warranted---Taxation Officer in haste had made mistake after mistake and fell into error by making a "Duplicate Assessment" on 30-6-2005 almost two years after the assessment year was deemed to have been concluded---Taxation Officer could resort to any other legal measure at that time but the action taken was indeed ab initio illegal and could not be sustained---Lenient view was taken by the Federal Tax Ombudsman in the light of verbal apology by the Taxation Officer and recommended that the concerned officer should be warned to be careful in future---Since grievance of the complainant had already stands redressed by the First Appellate Authority, the case was closed.

Imtiaz Ali Khan (Advisor) Dealing Officer.

M. Shahid Baig for the Complainant.

Ghulam Mujtaba Bhatti (IAC), Ms. Fatima Hussain (D-CIT) and S.H. Qamar Muftee (Taxation Officer) for Respondents.

2008 P T D 1825

[Federal Tax Ombudsman]

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

Messrs AIRF HUSSAIN & SONS (TRIDEWALY)

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1264-L of 2005, decided on 18th January, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59(1), 56 & 63---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment---Double assessment---Ex parte assessment was made in addition to the assessment which had already been deemed to be finalized under Self-Assessment Scheme---Validity---Department admitted that return filed under Self-Assessment Scheme was in time which was deemed to have been accepted as such but at the time of making ex parte assessment evidence regarding filing of return was not available---Commissioner of Income Tax had been advised to cancel the order under S.122-A of the Income Tax Ordinance, 2001---Since grievance was being redressed by the Department, investigation was closed and file was consigned to record by the Federal Tax Ombudsman.

Muhammad Sirjees Nagi (Advisor) Dealing Officer.

Nemo for the Complainant.

Muhammad Ghias-ud-Din (D-CIT) for Respondent.

2008 P T D 1831

[Federal Tax Ombudsman]

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

MUHAMMAD FIAZ KHALID

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1184-L of 2005, decided on 23rd November, 2005.

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

----S.9(2)(a)---Sales Tax Act (VII of 1990), S.36(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Complainant filed appeal against the order before the Collector of Appeals on 29-7-2005 and filed complaint in Federal Tax Ombudsman's Secretariat on 10-10-2005---Copy of appeal preferred before Collector of Appeals showed that the complainant was agitating therein the same issues, including the question of limitation under S.36(3) of the Sales Tax Act, 1990 as were being agitated in the complaint filed before the Federal Tax Ombudsman---Appeal was filed in Collectorate of Appeals prior in point of time to the filing of complaint in the Federal Tax Ombudsman's Secretariat---Case was sub judice before the appellate authority on the day that the complaint was filed---Complaint could not be investigated under the provisions of S.9(2)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 in the circumstances and the same was closed by the Federal Tax Ombudsman.

Complaint No.805 of 2003 ref.

PTCL 1983 CL 2009 (sic) not relevant.

Muhammad Akbar (Advisor) Dealing Officer.

Akhtar Ali for the Complainant.

Saeed Akram, D.C. Sales Tax, Lahore for Respondent.

2008 P T D 1838

[Federal Tax Ombudsman]

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

Messrs UNITED INDUSTRIES LIMITED through Executive Director

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and another

Complaint No.1067-L of 2005, decided on 25th October, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.96, 100 & 132---Income Tax Ordinance (XLIX of 2001), Ss.170 & 239(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Application for giving effect to appeal and issuance of refund---Department contended that appeal had been filed before Income Tax Appellate Tribunal against order of First Appellate Authority and final tax liability of the complainant/assessee was yet to be determined---Provisions of Income Tax Ordinance, 1979 were not applicable to the complainant's refund---Application dated 18-7-2005 was to be dealt with under S.170 of the Income Tax Ordinance, 2001---Complainant/assessee contended that there was no provision in the existing taxation law which linked the refund with the final outcome of appeal/litigation---Validity---Department should undertake to issue the refund voucher, as the main issue by Federal Tax Ombudsman stood resolved---Since order of First Appellate Authority in appeal was given effect under Income Tax Ordinance, 1979 from which the refund flew, compensation thereon was to be dealt with under the same law-Federal Tax Ombudsman recommended that the department should issue the requisite refund voucher to the complainant on production of challans of payment of tax and compensation for delayed refund should also be paid to the complainant as per law.

Muhammad Sirjees Nagi (Advisor) Dealing Officer.

Shahid Pervez Jami for the Complainant.

Khawaja Muhammad Irshad (DCIT) for Respondents.

2008 P T D 1844

[Federal Tax Ombudsman]

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

Messrs BISMILLAH CARPETS (PVT.) LIMITED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.34-L of 2006, decided on 20th March, 2006.

Sales Tax Act (VII of 1990)---

----Ss.36(3) & 73---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---Issuance of show-cause notice alleging that refund was sanctioned without providing proof of payment made to the supplier as required under S.73 of the Sales Tax Act, 1990 and why such amount be not recovered---Adjudicating officer upheld the charges with the observation that payment involving input tax was made beyond the statutory limit of 180 days---First Appellate Authority upheld the order-in-original---Complainant contended that order-in-original was not passed within 90 days of the issuance of show-cause notice as provided in S.36(3) of the Sales Tax Act, 1990; period for deciding the case was not extended before the expiry of original time of 90 days and order was hit by time limitation and thus was nullity in the eyes of law---Validity---Order-in-original was passed after the expiry of mandatory period of 90 days as prescribed in S.36(3) of the Sales Tax Act, 1990 and was hit by time as provided in law and was liable to be cancelled---First Appellate Authority ignored complainant's plea that order-in-original was hit by time limitation---Order-in-appeal was also not legally sustainable as the same failed to hold the order-in-original as barred by time despite complainant's pleas on that account and to provide justice to the complainant---Maladministration in circumstances was established---Federal Tax Ombudsman recommended that the Revenue Division should direct the competent authority to cancel the order-in-original and order­-in-appeal.

PTCL 1983 CL 209 and Wali Muhammad and others v. Sakhi Muhammad and others PLD 1974 SC 106 ref.

Appeal Nos.154/ST/IB/05 and 155/ST/IB/05 held not binding.

Complaint No.805 of 2003 rel.

Muhammad Akbar (Advisor) Dealing Officer.

Waseem Ahmad for the Complainant.

Azhar Iftikhar, Collector (Appeals) and Muneeza Majeed, D.C., Sales Tax for Respondents.

2008 P T D 1865

[Federal Tax Ombudsman]

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

MUHAMMAD KHURSHID and another, Islamabad

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 772 of 2003, decided on 3rd January, 2004.

Sales Tax---

----Central Excise---Establishment of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9(4), 11 & 13---Information about evaded duty---Reward---Reward rules---Malpractices---Complainant and one other person provided information to Collector regarding evasion of Central Excise Duty by a company---Recovery of evaded Central Excise Duty was made---Collector rewarded Rs.1,46,667.to the informers but they were not satisfied and demanded larger amount of reward---Since their prayer was turned down, they lodged complaint with the Wafaqi Mohtasib (Ombudsman), who transferred the same to the Federal Tax Ombudsman--Validity--Information was supplied from the official record of the Collectorate where the complainant had worked before his retirement---Complainant was acting in collusion with the other complainant citing him as informer---Complainants had not come with clean hands---Reward rules were not comprehensive---In giving the reward the concerned authorities had not given proper consideration to the issues involved and doled it out in a negligent manner which cast doubt on their bona fides---Revenue authorities were required to investigate the matter to stop such malpractices to avoid erosion in the credibility of the department---C.B.R. was recommended to set up a Rule Committee to consider the existing Reward Rules and submit its report for enforcing comprehensive and uniform Reward Rules in respect of Income Tax, Sales Tax, Customs and Excise Duty.

Muhammad Anwar, Consultant (Dealing Officer).

Muhammad Khurshid and Amir Ahmad, the Complainants in person.

Zahid Hussain Bhayo, Additional Collector (Sales Tax) for Respondent.

2008 P T D 1875

[Federal Tax Ombudsman]

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

ABDUL WAHEED, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1243 of 2003, decided on 3rd November, 2003.

Customs Act (IV of 1969)---

----S.19(2)(3)---S.R.O. 358(I)/2002, dated 15-6-2002---S.R.O. dated 22-10-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---General power to exempt from customs duties---Vehicle/car was imported under Disabled Persons Scheme---Documents for clearance of vehicle were filed well in time---Bill of entry was filed on the date, i.e. 22-10-2002, on which the concession to disabled persons was withdrawn through another S.R.O. dated 22-10-2002 and complainant was asked to pay the duty and taxes at full rates---Validity---There was no dispute regarding the facts of the case as admittedly the concession was withdrawn on the same date as the bill of entry was filed and thus legally the concession was no longer available with effect from the said date, particularly in view of subsections (2) & (3) of S.19 of the Customs Act, 1969; on the other hand, authorization of the Ministry of Commerce was obtained as far back as on 11-6-2002 and the L.C. was opened by the Complainant on 27-8-2002 viz. almost two months prior to the submission of the bill of entry---Such was a clear case of hardship to a disabled person who had spent a substantial amount as cost of the vehicle and who probably would not have made the investment if he knew that full duty would be charged--Such an arbitrary exercise of authority by the Revenue Division, particularly in respect of a disabled person, did not appear to be justified---If the Revenue Division had decided to withdraw the duty concession on imported vehicles for disabled persons, the concession should at least have been retained for such persons who had already opened their LCs before the date of withdrawal of the concessionary duty---Federal Tax Ombudsman recommended that the matter be considered by the Revenue Division for exercise of powers under S.19 of the Customs Act, 1969 in the cases of disabled persons, such as the complainant, who had already opened their LCs before 22-10-2002.

Mirza Muhammad Wasim, Adviser (Dealing Officer).

Abdul Waheed for the Complainant with Riaz Malik, Consultant, A.R.

Asif Abbas, Deputy Collector Customs (Appraisement), Karachi present for Respondent.

2008 P T D 1901

[Federal Tax Ombudsman]

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

Messrs ACCOMPANY SURGICAL through Muhammad Alamgir

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 110 of 2004, decided on 12th June, 2004.

Income Tax Ordinance (XLIX of 2001)---

----S. 148---S.R.O. 593(I)/91 dated 30-6-1991---Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), S.2(3)---Benefit of exemption of Income Tax---Tax. levied on imported raw materials---Customs Authorities assessment---Exemption certificate---Income Tax charged by Customs Authorities---Protest in writing-Despite presentation of a valid certificate of exemption, the Deputy Collector Customs, exceeding her powers, had charged income tax from the complainant--Telephonic and written requests for clarification in the matter were not responded---Complainant requested redress and suitable action against the Deputy Collector if her action was proved wrong--Collector of Customs had submitted that bill of entry was filed on 19-9-2003---Appraising staff assessed it on 26-9-2003---Exemption Certificate was produced on 27-9-2003---Income Tax therefore was charged since no certificate was produced at the time of assessment--Validity-Photocopy of the bill of the relevant entry (on record) did not clearly indicate as to when the assessment was completed---Duties and taxes were deposited on 27-9-2003 the same day as when the exemption certificate was produced---During hearing, applicant's representative had not contradicted plea taken by department's representative---Complainant or its agent had not protested in writing against payment of income tax to the Customs Department---Complainant had wanted clarification to overcome ambiguity and confusion; its communication addressed to the department suffered from "inattention"---Such indifference and failure to issue necessary clarification tantamount to "maladministration"---Departmental Representative had admitted and undertook to issue necessary clarification and offered to hold a meeting with complainant's representative to streamline the procedure for processing similar bills of entry in future without any obstacle---Refund of tax could be paid by the Income Tax Department as the law does not authorize the Collector Customs to refund the amount paid in excess---Complaint was disposed of accordingly.

Muhammad Akbar, Adviser (Dealing Officer).

Muhammad Alamgir, Sales and Marketing Director for the Complainant.

S. Fawad Shah, D.C. Customs for Respondents.

2008 P T D 1921

[Federal Tax Ombudsman]

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

Messrs MUNIR BROTHERS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 31-L of 2004, decided on 31st March, 2004.

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

----Ss.59(1), 66-A, 100 & 156---Income Tax Ordinance (XLIX of 2001), Ss.170 & 239---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Non-issuance of determined refund even after vacation of order under S.66-A of Income Tax Ordinance, 1979 by Tribunal---Reason for non-issuing refund was filing of application by authority for recall of Tribunal's order---Validity---Such reason was invalid as law never provided for automatic stay of due refund during pendency of litigation---Order under S.156 of the Income Tax Ordinance, 1979 was made on 23-7-2001, while order under S.59(1) thereof was cancelled on 12-10-2001, thus, refund could be issued to complainant during such period---Tax credit claimed by complainant had been proved to be correct by allowing same ultimately---Department had not kept proper account of collection in relevant records---Authority had committed wilful error in determining refund in original order, then deliberately withholding same after its determination and had again withheld same after restoration of refund order without any valid reason---After vacation of order under S.66-A of the Ordinance by Tribunal, there was absolutely no justification to withhold such refund, which constituted maladministration---No fresh application for refund under S.170 of Income Tax Ordinance, 2001 was required in such case for same being covered by S.239 thereof---Onus lying on authority to show absence of maladministration in such case had not been discharged---Federal Tax Ombudsman recommended to Revenue to issue such refund and pay compensation, if due, to complainant immediately.

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

----S.100---Determined refund, claim for---Such refund could not be withheld to cover assessee's expected liability---Authority had no power to withhold such refund at his sweet-will without passing a valid order.

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

----Ss.100 & 156---Tax credit, claim for---Law does not require assessee to furnish copy of paid challan to claim tax credit---Duty of department is to keep proper account of tax paid by or withheld or collected from assessee in respective Circles, where they are assessed.

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

----Ss.100, 129, 134, 136 & 137---Due refund or due demand---Automatic stay of refund/demand during pendency of litigation---No provision of law existed to provide for such stay.

Muhammad Mushtaq and S.M. Sibtain, Advisors (Dealing Officers).

Muhammad Ejaz Ali Bhatti, Advocate for the Complainant.

Ghulam Rasul, DCIT for Respondent.

2008 P T D 1936

[Federal Tax Ombudsman]

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

IFTIKHAR HUSSAIN JANJUA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 284-/L of 2004, decided on 15th June, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.50(7E) & 50(7H)---Income Tax Ordinance (XLIX of 2001), S.170(4)-Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), S.2(3)---Refund--Maladministration---Tax paid in electricity bills---Income tax collected with electricity bills---Complainant alleged that Income Tax at Rs.21900 was collected under section 50(7E) of Income Tax Ordinance, 1979 was refundable but same was not refunded to him, nor any reply was given by the Income Tax Authorities---Validity---Taxes deducted/collected under Ss.50(7E) & 50(7H) Income Tax Ordinance, 1979 were acknowledged---Taxes deducted/collected under Ss.50(4), 50(4A), 50(5), 50(5AAA), 50(7A) & 50(7H) of the Ordinance were covered by the provisions of S.80C(3) read with Ss.80C(1) & 80C(2) of the Income Tax Ordinance, 1979---Any tax charged in excess of the amount was refundable---Once application for refund was filed under S.170(2) of the Income Tax Ordinance, 2001 Commissioner of Income Tax was bound to pass order under S.170(4) of the Income Tax. Ordinance, 2001 within 45 days---No such action was taken by the Commissioner which constituted "maladministration" on account of inattention, negligence, inefficiency and inaptitude in performance of duties---Commissioner of Income Tax shall issue order under S.170(4) of the Income Tax Ordinance, 2001 and direct the concerned Taxation Officer to issue refund at the earliest---Compliance report was directed to be submitted within 30 days of the receipt of the recommendations of the Federal Tax Ombudsman by the Revenue Division.

Muhammad Mushtaq, Adviser (Dealing Officer).

Rana Mushtaq Ahmed Toor, ITP for the Complainant.

Mr. Karamat Ullah, DCIT, for the Revenue.

2008 P T D 1950

[Federal Tax Ombudsman]

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

Messrs B.P. INDUSTRIES LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION ISLAMABAD

Complaint No.C-1112-K of 2008, decided on 30th August, 2008.

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

---S.81---Final determination of duty---Principle---In case of assessment disputes, provisional determination of duty and taxes be made on submission of security by importer and Customs officials are required to complete final determination of correctly payable duty etc. within the stipulated time frame failing which provisional determination on the basis of importer's declaration becomes final.

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

---S.81---Customs General Order No.12 of 2002, para.66---Establish­ment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2, (3) & 10(3)---Maladministration---Limitation---Final determina­tion---Electronic message---Importer was aggrieved of demand notice issued by customs authorities informing that assessment had been finalized and post dated cheque issued at the time of provisional assessment was liable to be encashed---Plea raised by importer was that authorities did not issue final assessment appealable order within 180 days under S.81 of Customs Act, 1969---Contention of authorities was that they had, issued an electronic message to importer thus complaint was time barred---Validity---After provisional assessment, necessary action to finalize determination of assessment was with Customs Group, which might carry out necessary investigation, complete final determina­tion with due process and issue a formal appealable order as mentioned in para. 66 of Customs General Order, 12 of 2002---Order for final determination of duty and taxes payable by importer had to be passed by concerned Customs Group---Electronic message of Valuation Department sent on 16-8-2007, could not be termed as the date of final determination of import levies---Only notice dated 14-5-2008 was issued after about 17 months of provisional determination of duty and taxes, which was notice of recovery and not of final determination of duty and taxes period for which had already lapsed---Such was a case of clear maladministration where provisions of S. 81 of Customs Act, 1969, procedure prescribed in Customs Valuation Rules and instructions contained in Customs General Order 12 of 2002, had been violated---Importer had also expressed apprehension of blocking of imports on account of warning contained in para. 2 of Assistant Collectors Securities' notice dated 14-5-2008---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct Collector of Customs to finalize determination of duty and taxes on the basis of declaration made by importer, quash demand notice and return post-dated cheque to importer---Ombudsman further recommended to the Board to direct Collectors of Customs to formulate and notify procedure for blocking the .import/export of filing of documents for goods declaration.

M. Mubeen Ahsan, Advisor, (Dealing Officer).

M. Afzal Awan for the Complainant.

Muhammad Anwar, Deputy Collector of Customs (PACCS).

Taslim Akhtar, Assistant Director of Customs Valuation.

Altaf Ahmad, Principal Appraiser, Valuation.

FINDING/DECISION

JUSTICE (RETD.) MUNIR A. SHEIKH, (FEDERAL TAX OMBUDSMAN).---Messrs. B.P. Limited, S.I.T. E, Karachi, manufacturers of Bakery products, have filed this compliant against the Demand Notice for Rs.579, 112 dated 14-5-2008 (for recovery of alleged short-levied duty and taxes) issued by the Assistant Collector Customs (Securities), Model Customs Collectorate, Care, Karachi. The facts of the case are as follows:--

(i) The Complainants imported 4600 pieces of Strach Trays at the declared value of Euro 2.38 per piece vide bill of lading dated 7-11-2006.

(ii) Goods declaration was filed on 20-12-2006 (not 12-6-2006 as stated in tile complainant) and assessment was provisionally made under section 81 of the Customs Act at $ 2.5117 Kg. after obtaining post-dated cheque of Rs.579,112 and indemnity bond as security for the disputed amount.

(iii) They received the aforesaid Demand Notice dated 14-5-2008 that the assessment had been finalized and the post-dated cheque was liable to be encashed.

(iv) A detailed representation dated 16-5-2008 was made to the Collector of Customs, Director of Customs Valuation and the Assistant Collector of Customs (Securities) requesting them to withdraw the demand notice apprehending that the respondents shall block the customs clearance of their imports for no fault or negligence on their part.

(v) It has been alleged that opportunity of hearing was not granted to them. It is a well settled law that if the customs authorities disagree with the transaction value they should give the importer an opportunity of hearing before passing the final assessment order. Failure to do so was an act of maladministration.

(vi) The respondents are legally required to issue a final assessment appealable order within 180 days under section 81 of the Customs Act. Since no such order was passed the declared value became the final value.

(vii) The respondents have failed to substantiate that the transaction value of Euro 2.30 per piece under section 25(1) of the Customs Act was not the transaction price and, therefore, the determination of customs value other than the declared value also amounted to maladministration.

1. It has been stated by the complainants that "a decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations or is perverse, arbitrary or unreasonable, unjust, biased, oppressive or discriminatory or there is neglect, delay, incompetence, inefficiency in the administration of discharge of duties and responsibilities" have been defined as maladministration under section 2(3) of the Federal Tax Ombudsman Ordinance, 2000. It was thus alleged that the issue of demand notice for Rs.597,112 amounted to maladministration on the part of the respondents.

2. The complainants stated that they had approached this office with the prayer that the following acts be declared as acts of maladministration: --

(i) The issuance of the demand notice dated 14-5-2008 for Rs.579,112 without passing any final assessment order.

(ii) The issue of the Demand Notice without giving opportunity of hearing as required under law.

(iii) The non-communication of any reason or reservation for not accepting the invoice price.

It was requested that since the respondent failed to pass final assessment order within six months, the declared price be declared as final and any other relief deemed fit be granted.

1. The Deputy Collector Customs (PACCS) Group-II, in reply to the complaint raised preliminary objections that the matter pertained to determination of value and duties/taxes and was outside the jurisdiction of the Federal Tax Ombudsman. It was stated that under subsections (3) and (4) of Section 81 of the Customs Act read with the "Explanation" the provisional assessment (including the secured duty and taxes) attained finality after expiry of the stipulated period. Additionally, the complainants have not exhausted the legal remedy of review before the Director-General of Customs Valuation under Section 25D of the Act. It was requested that the subject complaint be dismissed.

2. With regard to the facts of the case it was stated that the recovery notice was issued when the complainants' Bank refused to encash the post-dated cheque submitted as security. It was added that the computerized record and evidential GD were shown to the complainants and opportunity of hearing was provided before provisional assessment. Valuation Department also provided opportunity of hearing a number of times before finalization of assessment but the complainants did not respond to the notices. Therefore, Valuation Department vide decision dated 8-6-2007 advised finalization of provisional assessment as per valuation data/evidence available with the Collectorate and under provisions of subsections (3) and (4) of section 81 and the "Explanation", the assessment was finalized. It was stated that the Department acted within the ambit of law and procedure and the allegation of maladministration was misconceived.

3. It was further stated that the complainants failed to substantiate the declared value under subsection (1) of section 25 of the Customs Act, and provisional assessment was made under section 81(1) ibid after obtaining the security. After clearance of goods the complainants did not make any representation or appeal before any forum which proved that they had no objection to the rejection of the declared value which was not considered payable value for assessment.

4. It was further argued that issue of an order was mandatory only where confiscation of goods and imposition of penalty was involved. Further, it has been held by the High Court of Sindh vide order dated 26-4-2006 that the date on which the endorsement is made on the note-sheet (on the basis of Valuation Advice) for finalization of original assessment is adequate to treat it as final. The complainants had an opportunity to file a review application before the D.G. Valuation under section 25D of the Customs Act or file an appeal under section 193 of the Act. The argument that a final assessment order was a must was not correct. Section 81 of the Act does not provide for issuance of any order and provisions of its subsection (3) call for forthwith adjustment of the security under subsection (2) ibid.

5. It was also stated that under section 10(3) of the F.T.O. Ordinance, 2000, no complaint could be entertained after expiry of six months from the date of "being first aggrieved." It was submitted that considering the submissions made above the complaint be dismissed.

6. The authorized Representative of the Directorate-General of Customs Valuation also raised some legal objections which need not be repeated here. With regard to the facts of the complaint it was stated that the declared transaction valuation of Wooden Starch Trays imported from Germany was considered to be on the lower side and it was felt necessary to verify the prices. The importer was asked to furnish requisite documents and sample of goods and three hearing not ices were electronically transmitted but nobody appeared for hearing. He did not respondent to the notices and the matter was decided on merits.

7. During the hearing of the complaint, the learned counsel stated that the demand notice dated 14-5-2008 was issued by the Assistant Collector (Securities) intimating that the post-dated cheque had been returned unpaid and demanding the importer to pay the amount immediately failing which the imports would be blocked and recovery action would be initiated. He stated that the Customs authorities should have issued a final assessment order after finalizing the price of goods and determining the differential amount of duty and taxes due to the Customs.

8. The learned Counsel stated that Valuation Directorate claims to have issued hearing notices through the electronic computer system which they did not receive. However, even if the importer did not appear before the relevant Valuation Officer to contest or present his case, the advice given by the Valuation Department to the Appraisement Group was not made known either through electronic message or through a letter. The Customs Group did not pass any formal order of finalization of assessment as required under subsection (4) of Section 81 of the Customs Act.

9. The learned counsel stated that, firstly, since the department failed to finalize assessment within nine months of the date of provisional assessment, the assessment on the basis of declared value attained finality and the case should have been closed. Alternately, the customs authorities should have passed a speaking order showing the basis under which the value of goods had been converted to `valuation on weight' instead of "valuation per piece" as declared, and the evidence on which the provisionally appraised value had been finalized to enable the importer to seek redressal of his grievance from-the appropriate forum as repeatedly mentioned by the department in its parawise comments. Without the document, an appeal could not be filed before the Director-General Valuation.

10. The Deputy Collector of Customs (Appraisement) replied that after referring the case to the Valuation Department, several hearing notices were issued to the importer electronically to appear for hearing in the month of February 2007 but nobody attended the hearing. Final hearing was fixed for 4-6-2007 before the Assistant Director of Valuation; on 6-8-2007 the Valuation Officer wrote a note that the assessment be finalized as per 90 days' data of identical/similar goods. (It seems that the final figure of value of goods/duty and taxes payable determined by the Valuation Department was not specifically mentioned in the last electronic message conveyed to the Group concerned). He stated that under the PACCS system of Customs working, there is no provision for issuing a formal order of assessment.

11. The Assistant Director Valuation submits that the valuation was finalized on the unit value of Euro 2.5117/Kg. as mentioned in the assessment sheet electronically conveyed to the Customs Group stating that "The case may be finalized as per 90 days data of identical/similar goods (as per assessed notes) in the light of delineation of valuation work between MCC and Directorate Valuation." He stated that the direction had been given to the Customs Group to finalize the assessment on the basis of data available with them. He further stated that according to his view a formal assessment order should have been issued by the Group on the basis of advice given by the Valuation Department.

12. The learned Consultant reiterated that arbitrary blocking of clearance of goods or filing of goods declaration created serious problems for a large number of importers. Therefore, it was necessary that the FBR/ the Collector of Customs should lay down a procedure under which notice for blocking and action to that effect should only be made after passing an order for finalization of assessment under section 81 of the Customs Act.

13. The statements made and the arguments put forward by the Counsel for the complainants, the Deputy Collector of Customs, PACCS, and the Assistant Director of Customs Valuation have been examined. The contention of the Customs Department is summarized below:

(i) The Customs Group-II, after provisional assessment and submission of security, referred the matter to the Valuation Department.

(ii) The appropriate Valuation Officer sent several electronic hearing notices to the importer but nobody attended. The complainants stated they received no notice from the Valuation.

(iii) Assistant Director advised the Customs Group on 6-7-2007 to finalize the assessment as per 90 days data of identical/similar goods. (Clearly the final value was not determined and the matter was left to the Group).

(iv) The Deputy Collector of Customs stated that the new wording of section 81 of the Customs Act does not provide for issuance of an order and the provisions of it subsection (3) require forthwith adjustment of the security.

(v It is significant that the customs officials have argued that with the addition of "Explanation under section 81 of Act, if final determination is not made, the provisional assessment including the amount of secured duty and taxes shall be included in the final assessment.

1. The Counsel for the complainants has objected to the unit of value which was changed from per piece to per Kg. without explaining the basis of change. He has argued that date of hearing for final value determination was not communicated to the complainant within the stipulated, period and after provisional assessment on 20-12-2006, the demand notice was issued on 14-5-2008 i.e. after a lapse of 17 months. The counsel also agitated against arbitrary blocking of clearance of goods and urged that this action should only be made after passing a legal formal order of finalization of assessment whether electronically or through a letter/notice.

2. From the foregoing facts it transpires that the customs authorities do not consider it legally necessary to inform the importer about the basis of value determination and the duty and taxes correctly chargeable, concerned Customs Group does not issue an assessment order, they consider it their authority to order recovery of import dues without meeting the legal obligation/procedure of assessment. They have also taken the position that if the determination of duty and taxes is not finalized within the prescribed period the appraised (higher) value automatically attains finality and the security is encashable. In short, it would mean, that the Customs officials' negligence and inaction shall justify arbitrary assessment at higher value, they are free to pass an order for recovery of duty etc., and the Bank Guarantee Section is at liberty to encash the security without prior notice. This approach is clearly arbitrary, unjust, unreasonable, contrary to the provisions of law, it disregards the fair system of, provisional and final assessment where the importer's declaration is not acceptable, and contrary to the established practice of determining correctly payable duty and taxes within the legal time-frame, failing which provisional determination shall, on the basis of importer's declaration, be deemed as the final determination.

3. It is established that the correctly payable duty etc., was not 3determined by the Customs Group or the Valuation Department and the Valuation Officer only sent an electronic message on 16-8-2007 to finalize the assessment as per 90 days' data of identical/similar goods without giving specific valuation advice or ruling. The Customs Group did not pass an order about the final determination of the import dues. (This date cannot be treated as the date of final determination of import levies). The Bank Guarantee Section/the Securities Section issued a notice dated 14-5-2008 for recovery of Rs.579,112 when the post dated cheque was returned unpaid. It is significant that the Customs officials have given a different meaning to the provisions of section 81 of Customs Act. They wrongly contend that if a final determination is not made within the specified period the provisional assessment inclusive of the security amount should be deemed to be the correctly payable amount. This interpretation is completely at variance with the provisions of section 81 ibid, which allows, that in case of assessment disputes, provisional determination of duty and taxes be made on submission of security by importer, and the Customs officials are required to complete the final determination of correctly payable duty etc., within the stipulated time-frame failing which the provisional determination on the basis of the importer's declaration shall become final.

4. It may be added that after the provisional assessment, necessary action to finalize the determination of assessment lies with the Customs Group who may carry out necessary investigation, complete final determination with due process and issue a formal appealable order as laid down by the Federal Board of Revenue in para.66 of the Customs General Order 12 of 2002. Thus the order for final determination of duty and taxes payable by the importer has to be passed by the concerned Customs Group.

5. As mentioned in paragraph 19 of this order, the electronic message of Valuation Department sent on 16-8-2007 cannot be termed as the date of final determination of import levies. The only notice dated 14-5-2008 was issued after about 17 months of the provisional determination of duty and taxes; it was a notice of recovery and not of final determination of duty and taxes whose period has already lapsed. This is a clear case of maladministration where the provisions of section 81 of the Customs Act, the procedure prescribed in the Customs Valuation Rules and the instructions contained in CGO 12/2002 have been violated. The complainants have also expressed apprehension of blocking of imports on account of the warning contained in para of Assistant Collector Securities' notice dated 14-5-2008.

6. It is recommended that Federal Board of Revenue direct the Collector of Customs to

(i) finalize the determination of duty and taxes on the basis of declaration made by the importer, quash the demand notice and return the post-dated cheque to the importer;

(ii) also direct the Collectors of Customs to formulate and notify the procedure for blocking the import/exports of filing of documents for Goods Declaration.

2008 P T D 1962

[Federal Tax Ombudsman]

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

Messrs MAMA AND SONS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. No.1611 of 2003, decided on 29th January, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.63 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Income was assessed by an ex parte order passed arbitrarily on the basis of notice issued under S.62 of the Income Tax Ordinance, 1979 without considering the history of the case---Validity---Process adopted by the Assessing Officer was improper, arbitrary, baseless and without any foundation---Federal Tax Ombudsman had jurisdiction to look into the maladministration committed during the process of arriving at an assessment---Regional Commissioner of Income Tax had taken notice of this fact and on his direction the Commissioner had passed the order against the Assessing Officer and the Complainant/assessee was satisfied with the relief granted to it---Regional Commissioner of Income Tax had dealt with the matter by. examining the case himself and not only provided justice to the party immediately and without any loss of time but also took disciplinary action against the tax officials---Such actions, if followed by other officials as well, will create a better and healthy image of the department and will help in building confidence in the tax officials---Regional Commissioner of Income Tax had not only taken note of the arbitrary and baseless assessment but had also given the Assessing Officer warning personally which was bound to create positive effect and also bring discipline amongst the officers leading to their efficiency---Case was closed by the Federal Tax Ombudsman with such remarks.

Ameeruddin Shaikh for the Complainant.

Taj Muhammad Jonejo, D.C.I.T. for Respondent.

2008 P T D 1979

[Federal Tax Ombudsman]

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

MUHAMMAD RAFIQUE RANA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1250-K of 2003, decided on 13th December, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Cls.78(E) & (50)---S.R.O. 871(I)/1998 dated 5-8-1998---S.R.O. 278(I)/2002, dated 30-5-2002---Exemption--Deduction of tax at source---Special Saving Certificates---Deduction of withholding tax from interest on Special Saving Certificates converted out of foreign currency account ignoring the statutory exemption provided vide cl.78(E) to the Second Schedule of the Income Tax Ordinance, 1979---Matter was referred to Member Income Tax, Central Board of Revenue seeking redress and clarification on the issue and Central Board of Revenue had not bothered to issue clarification---Validity---No valid reason existed to doubt the veracity of Complainant/assessee's 'contention that he had referred the matter to Central Board of Revenue for clarification particularly when he was aware of the fact that his grievance could only be redressed by the Central Board of Revenue's clarification. Federal Tax Ombudsman recommended that Central Board of Revenue to issue clarification regarding the issue of exemption within 30 days of the receipt of this order after providing opportunity to the Complainant to present his case.

S. Asghar Abbas, Adviser (Dealing Officer).

Muhammad Rafique Rana, complainant present along with Abid Shirazi, Advocate.

Mrs. Lubna Ayub Asif, IAC Range-II Zone-E, Karachi present for Respondent.

2008 P T D 2009

[Federal Tax Ombudsman]

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

Messrs WESTERN COMPUTER (PVT.) LIMITED, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-422-K of 2008, decided on 31st July, 2008.

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

----Ss.81(3), 80, 79, 25D, 193 & 21---Customs Rules, 2001, Rr.440 & 441---Customs General Order (12 of 2002), Chap. 66---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Provisional assessment of duty---Outstanding dues---Blocking of electronic filing of Goods Declarations at ports without any notice or order by the appropriate officers---Validity---Filing of customs documents was blocked in January 2008 whereas the order-in-original was passed on 10-5-2008 which showed that blockage of documents had been imposed before creation of demand of dues---Customs Group/Bank Guarantee Section did not issue any notice to the importer for recovery of outstanding dues intimating that if the dues were not paid within a specified period the processing of their documents/clearances of goods would be blocked---Standard operating procedure (SOP) should serve as an early warning system for the concerned customs officials to ascertain the latest position of the relevant case and recovery of dues and notify the defaulter to pay the dues immediately---Standard operating procedure shamed be modified in the complete system so that the blockage did not take place prior to the completion of assessment and without issuing notice of the outstanding dues---Federal Tax Ombudsman recommended Federal Board of Revenue to issue appropriate instructions to the Collector of Customs to decide the cases of provisional assessment on the lines proposed in paragraph 24; to revise the blocking procedure; to direct the Director General of Customs Valuation to review the valuation of goods under S.25A of the Customs Act, 1969 after affording the complainants the opportunity to represent their case, contest the evidence relied upon by the Valuation Department, and after hearing their arguments, decide the valuation within thirty days and to direct both the Collector of Customs to de-block the filing of customs documents by the importer till the decision by the Director General.

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

----S.81---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Provisional assessment of duty--Non­-finalization of provisional assessment within time frame prescribed under S. 81 of the Customs Act, 1969---Complainant contended that assessment on declared value had attained finality and the post-dated cheque be returned---Demand-cum-Show-cause notice issued was not legally valid---Validity---Customs authorities often ignored the requirement of issuing an order about the finalization of provisional assessment under S.81 of the Customs Act, 1969 which was a progressive legislation and should implemented judiciously---Assessment on the basis of value determined by appropriate officials be finalized by the concerned assessing officials/group and communicated to the importer---Action taken under S.81(3) of the Customs Act, 1969 be intimated to the importer; where final determination was not made under sub-S. (2) of S.81 of the Customs Act, 1969, action under Sub-S. (4) of S.81 of the Customs Act, 1969 be implemented under intimation to the importer.

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

----S.25---Finance Act (III of 1998), Preamble--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---GATT Code of Valuation---Value of imported and exported goods---Transaction value system of determining the customs values of imported goods had been comprehensively prescribed under S.25 of the Customs Act, 1969---Said enactment under the Finance Act, 1998 was made on the internationally recognized principles of GATT Code of Valuation---Customs officials were duty bound to determine the value of goods in accordance with the provisions of S. 25 of the Customs Act, 1969 and even the powers under S. 25A of the Customs Act, 1969 had to be exercised by following the methods laid down in S. 25 of the Customs Act, 1969.

M. Mubeen Ahsan, Advisor (Dealing Officer).

M. Afzal Awan for the Complainant.

Agha Saeed Ahmed, Deputy Collector of Customs (Law), Port Qasim and Muhammad Amir, Deputy Collector of Customs, PACCS for Respondent.

2008 P T D (Trib.) 19

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas and Syed Nadeem Saqlain, Judicial Members and Syed Aqeel Zafarul Hasan, Accountant Member

I.T.A. No.2133/LB of 2003, decided on 14th September, 2005.

Per Munsif Khan Minhas, Judicial Member, Syed Nadeem Saqlain, Judicial Member, agreeing

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Gift---Cash gift by husband to wife without banking channel but same was made from known sources out of cash available with the donor---Addition of such amount of gift---Validity---Addition was deleted by the First Appellate Authority with the observation that husband could give gift to his wife and keeping in view the relation, there must not be transaction through crossed cheque---Real thing to be ascertained was genuineness of the transaction that is whether the husband had means to give a gift to his wife---Gift had been accepted as genuine one---Law of "deemed income' was enacted in order to detect bogus transactions made in order to evade proper taxation and not genuine and verifiable transactions---Transaction between husband and .wife was not to be suspected---Departmental appeal being without any merit was dismissed by Appellate Tribunal.

2002 PTD 63 and I.T.A. No.1683/LB of 2002 rel.

Per Syed Aqeel Zafarul Hasan, Accountant Member---[Minority view]

Income Tax Ordinance (XXXI of 1979)---

----S.12(18)---Income deemed to accrue or arise in Pakistan---Gift---Cash gift by husband to wife without banking channel but gift was made from known sources out of cash available with the donor---Addition of such amount of gift---Validity---Fact that a gift was permissible subject to three conditions of a valid offer, its acceptance by the donee and the passing of the corpus from the donor to the donee, however, seen in the context of the income tax law a valid offer must take the form of a crossed cheque, even between a man and his wife---Such condition was neither violative of the Constitution nor did it depend upon the verifiability of the transaction or the availability of adequate sources with the donor.

Income Tax Ordinance (XXXI of 1979)---

----S.12(18)---Income deemed to accrue or arise in Pakistan---Gift---Cash gift by husband to wife without banking channel but gift was made from known sources out of cash available with the donor---Addition of such amount of gift---Validity---Admittedly, the gift was not made through a crossed cheque, it was hit by the provisions of S.12(18) of the Income Tax Ordinance, 1979---Gift from husband to wife should have been made through a crossed cheque drawn on a bank or through banking channels---Strict interpretation had to be made of the words of fiscal law.

2002 PTD 63 and I.T.A. No.1683/LB of 2002 distinguished.

Per Syeed Nadeem Sa lain Judicial Member agreeing with Munsif Khan, Judicial Member]

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Gift---Cash gift by husband to wife without banking channel but gift was made from known sources out of cash available with the donor---Addition of such amount of gift---Validity---Cash gift from husband to wife and from brother to sister was distinguishable from the gifts made during an ordinary course of business---Keeping in view the peculiar circumstances and the culture prevalent in Pakistan a gift from husband to wife or involving any other family member could not be anticipated to be made through banking channels.

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Gift---Object of provision---Intention of the legislature and spirit of law at the time of legislation could not be overlooked---Purpose of provision of S.12(18) of the Income Tax Ordinance, 1979 was to check the bogus and fictitious transactions which were effected to evade taxation---When a husband made a gift to his wife and which stood proved being genuine one, such gift could not be considered to be one which was envisaged by law makers while enacting S.12(18) of the Income Tax Ordinance, 1979.

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Gift---Principle that "every thing should be done in a particular manner", application of---If a gift is to be made compulsorily through banking channels it would amount to going against settled law on the issue of gift under Islamic Law because making gift through banking channels equated with the gift made in writing---Principle of `every thing should be done in a particular manner' was not attracted in such a case---First Appellate Authority was justified to deviate from the same while deleting the addition made under S.12(18) of the Income Tax Ordinance, 1979 regarding cash gift made in favour of the assessee by her husband.

2007 PTD (Trib.) 199 and 2006 PTD 529 rel.

(e) Interpretation of statutes---

---Fiscal law---Strict interpretation has to be made of the words of such law.

Gh. Muhammad Zulfiqar Ali, D.R. for Appellant.

Mumtaz Hussain Khokhar for Respondent.

2008 P T D (Trib.) 32

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahid Azam Khan, Accountant Member

I.T.As. Nos. 589/KB and 872/KB of 2005, decided on 26th January, 2007.

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

----Ss. 80-D & 134---Appeal to Appellate Tribunal---Inclusion of subsidies, donation and exchange gain to total turnover---Assessing Officer, having included subsidies, donation and exchange gain in total turnover, assessee filed appeal before Commissioner of Income Tax (Appeal) against said inclusion, but Commissioner confirmed action of Assessing Officer, on which assessee had filed appeal before Appellate Tribunal---Finding of Commissioner that Assessing Officer had passed a speaking order, was not correct---Assessing Officer had only included the impugned receipts/gains in the turnover without discussing as to how those were included in the turnover as defined in the Explanation to S.80-D of Income Tax Ordinance, 1979---Assessment order on that point was set aside for de novo order.

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

----Ss.50(2-A) & 80-B, D---Deduction of tax---Tax paid under S.50(2-A) of Income Tax Ordinance, 1979 was final discharge of tax liability under S.80-B of Income Tax Ordinance, 1979 and could not be allowed as a credit against any other tax liability under Income Tax Ordinance, 1979.

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

----Ss.50(2-A), 80-B, D & 134---Appeal to Appellate Tribunal---Refusal to give credit of tax paid against tax liability---Issues raised in the other grounds of appeal were related to Assessing Officer's refusal to give credit of tax paid under S.50(2-A)/80-B of Income Tax Ordinance, 1979 against the tax liability under S.80-D of the Ordinance-First ground of appeal was not very clear as to what issue had been raised therein---Tribunal had already held in appellant's appeal for assessment year 1999-2000 that the tax paid under S.50(2-A) of Income Tax Ordinance, 1979 as a final discharge of tax liability under S.80-D of the Ordinance, could not be allowed credit against any other tax liability---Assessing Officer's action was upheld---Appeal filed by taxpayer/assessee was dismissed being devoid of merit.

Irfan Ahmad for Appellant.

Chaman Lal, D.R. for Respondent.

2008 P T D (Trib.) 47

[Income Tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.As. Nos.5714/LB of 1996, 2249/LB and 2282/LB of 2000, decided on 2nd November, 2007.

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

----Ss.66-A, 62 & 13(1)(a),(aa)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Quality of assessment---Evidence regarding obtaining of loan, addition made in building account, rental income and copies of bank statement were furnished---Assessing Officer after satisfying himself with the explanation tendered by the assessee completed the assessment under S.62 of the Income Tax Ordinance, 1979---Appellate Tribunal agreed that a brief order was passed by the Assessing Officer in terms of S.62 of the Income Tax Ordinance, 1379, nevertheless, the fact remained that the assessment was completed after conscious application of mind to all the evidences and the documents which were brought on record---Assessment originally made in circumstances, could not be said to be erroneous being prejudicial to the interest of revenue---Assessing Officer had resorted to check quality of assessment order which was not permissible under S.66-A of the Income Tax Ordinance, 1979.

1999 PTD 285; 1993 PTD 201 and 1997 PTD (Trib) 902 ref.

2002 PTD (Trib.) 3027 and 1984 PTD 137 rel.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---If an assessment order is not found up to the mark or quality of the assessment order is poor this weakness would not be a sufficient ground for inviting S.66-A of the Income Tax Ordinance, 1979.

2002 PTD (Trib.) 3027 and 1984 PTD 137 rel.

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

---S.13(1)(aa)---Unexplained investment etc., deemed to be income---Addition was factually incorrect as the source of cash credit and parties were verifiable.

1996 PTD (Trib.) 1069 rel.

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

----Ss.66-A & 13(1)(d)---Income Tax Rules, 1981, R.207(a)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Disagreement with the Assessing Officer---Cancellation of assessment---Validity---Show-cause notice proved that Inspecting Additional Commissioner had no material whatsoever to consider that assessment order was erroneous and prejudicial to the interest of revenue as no details of property viz. location of the property was even mentioned for which it had been alleged that the same had been disposed of---Assessing Officer failed to ascertain the exact amount of value and taxed its profitability---Inspecting Additional Commissioner having failed to mention the location of the properties, he had incorrectly invoked the provisions of. S.66-A of the Income Tax Ordinance, 1979 without assigning any reason or showing any material as to why he had considered the assessment order to be erroneous and prejudicial to the interest of revenue except that he did not agree with the treatment meted out by the Assessing Officer.

1984 PTD 137 rel.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Erroneous order prejudicial to the interest of revenue---Where Assessing Officer had applied his mind while making assessment or granting the exemption after examining the accounts and arrived at a judicious conclusion, such a conclusion could not be termed as erroneous because the Assessing Officer had. exercised the quasi judicial powers vested in him---Assessment for the charge year could not be reopened/revised under S.66-A of the Income Tax Ordinance, 1979---Order passed under S.66-A of the Income Tax Ordinance, 1979 was annulled and that of Assessing Officer originally passed under S.62 of the Income Tax Ordinance; 1979 was restored by the Appellate Tribunal.

1999 PTD (Trib.) 3229 rel.

Javed Zakaria for Appellants (in I.T.As. Nos.5714/LB of 1996 and 2249/LB of 2000).

Abdul Rasheed Ch., D.R. for Respondents (in I.T.As. Nos.5714/LB of 1996 and 2249/LB of 2000).

Abdul Rasheed Ch., D.R. for Appellant (in I.T.A. No.2282/LB of 2000).

Javed Zakaria for Respondents (in I.T.A. No.2282/LB of 2000).

2008 P T D (Trib.) 69

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shahid Azam Khan, Accountant Member

I.T.A. No.1311/LB of 2005, decided on 30th September, 2006.

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

---Ss.80-C(2)(a)(ii), 143-B & 50(5)---Tax on income of certain contractors and importers ---Value for computation of advance tax ---Collector of Customs shall collect advance tax computed, on the basis of value of such goods as increased by the customs duty and sales tax and for the purpose of S.80-C(2)(a)(ii) Income Tax Ordinance, 1979, the amount computed under S.50(5) of the Income Tax Ordinance, 1979, would be the value of the goods.

Writ Petition No.18268 of 2001; Ramna Pipe's case 1994 PTD 848 and 2003 PTD (Trio) 735 distinguished.

2005 PTD 194 and Writ Petition No.19286 of 2001 ref.

Messrs Madina Enterprises Ltd. v. Federation of Pakistan and others in Constitutional Petition No. 398 of 2001 rel.

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

----S.50(5)---Customs Act (IV of 1969), S.25----Deduction of tax at source---For purpose of income tax on the import of the goods, value of the goods is to be taken as per S.25 of the Customs Act, 1979 plus customs duty and sales tax, if any, paid on it.

Messrs. Madina Enterprises Ltd. v. Federation of Pakistan and others in Constitutional Petition No. 398 of 2001 rel.

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

----Ss.61, 62 & 80C---Notice for production of books of accounts, etc.---Non-issuance of notice ---Return was revised inviting the attention of Taxation Officer for calculating income tax pursuant to S.80C of the Income Tax Ordinance, 1979 on the value of imported finished goods excluding the customs duty and sales tax ---Was not necessary to issue fresh notice in that context being purely a legal issue agitated in view of the judgments of High Court ---No controversy being involved and no explanation was required of whatsoever nature for determination of the issue, in the situation, neither notice under S.61 and S.62 of the Income Tax Ordinance 1979 was necessary nor mandatory.

2003 PTD 739 rel.

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

----Ss.23 & 80-C---Deduction---Exchange loss---Claimed exchange loss was disallowed by observing that it was not possible as the assessee was subject to tax under S.80-C of the Income Tax Ordinance, 1979---Issue having already been decided in favour of Department, appeal was dismissed on the issue by the Appellate Tribunal.

2003 PTD 739 rel.

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

---Ss.30, 23 & 80C---Income from other sources ---Assessment under presumptive tax regime---Profit on bank deposits ---Taxation of---Validity---Presumptive tax regime was entirely different from the normal assessment of tax, neither any total income was computed nor any expenses were allowed, no total income was determined and the entire sales were deemed to be income on which fixed rate of tax was covered---In presumptive tax regime, there was no concept of probe, enquiry or proceedings---Assessing Officer had no option but to decline the claim in this context.

1989 PTD 582 and 1993 PTD 383 rel.

Soli Parekh, C.A. for Appellant.

Rehmatullah Khan Wazir, D.R. for Respondent.

2008 P T D (Trib.) 154

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.1266/LB of 2006, decided on 6th July, 2007.

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

----Ss.13(1)(aa), (d) & (e)---Addition---Assessment year 2001-02---Additions were deleted by the First Appellate Authority with the observation that assessment was made before assessment year 2000-01; that TAS declaration was. also made during assessment year 2000-01 and accepted in good faith; that wealth statement as on 30-6-2000 was compulsory requirement of return filed under Self-Assessment Scheme was accepted in good faith that Return for the assessment year 2000-01 was accepted under S.59(1) of the Income Tax Ordinance, 1979 in good faith, that Prize Bonds were purchased and encashed during 3-12-1988 to 7-3-1995 and thus it was beyond the control of assessee to declare these in wealth statements dated 30-6-1986, 30-6-2000 or 30-6-2001 and that genuineness of 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 and while doing so Assessing Officer ignored the fact that it was a typing mistake due to which date was endorsed 1st January, 1990 instead of 21st January, 1990---Affidavit of donor had also been 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 the donor nor any cogent reasons were brought on record by which this fact 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 on the only ground that as per wealth statement on 30-6-1985 assessee was owner of 10-Tolas of gold ornament while he had shown sale of 25-Tolas; Assessing Officer had ignored the affidavit of the mother of the assessee that she had gifted 15-Tolas to her son and the same were sold in 1996---No notice under S.148 of the Income Tax Ordinance, 1979 was issued to goldsmith which was necessary---While making addition under S.13(1)(d) of the Income Tax Ordinance, 1979, element of intangible was ignored which was covered by the addition made in the trading account and assessee was taxed twice---Order of the First Appellate Authority was upheld by the Appellate Tribunal.

2003 PTD 2109; 1988 PTD 227; I.T.As. Nos.5803 and 5804/LB of 2003 and 1996 PTD (Trib.) 334 ref.

2004 PTD (Trib.) 1523 rel.

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

----S.130(3)---Form of appeal and limitation---Condonation of delays--Service of notice---Delay in filing of appeal was condoned by the First Appellate Authority on the ground that assessee had established that the service upon the assessee was not proper---Service of demand notice must be on proper person---No limitation against void order---Validity---Held, in revenue matter, prayer for condonation by an assessee/citizen should all the more be considered sympathetically---Appellant was prevented by sufficient cause from presenting the appeal within due time limit and First Appellate Authority had rightly condoned the delay in filing the appeal---Departmental appeal was dismissed on this score also by the Appellate Tribunal.

1986 PTD (Trib) 188; 2004 PTD (Trib.) 1517; 2002 PTD 549 and (1987) 56 Tax 130 rel.

(c) Income-tax--

----Limitation---Condonation of delay---Principles.

2002 PTD 549 and (1987) 56 Tax 130 rel.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Mumtaz Hussain Khokhar and Mrs. Afreen Maqsood for Respondents.

2008 P T D (Trib.) 179

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.6924/LB of 2005, 1807/LB and 1808/LB of 2006, decided on 17th May, 2007.

Income Tax Ordinance (XLIX of 2001)---

----S.122(5A)---Amendment of assessment---Assessment was amended in manners that tax @ 5% was charged on the declared receipts earned so as to bring same within the scope of presumptive tax regime---First Appellate Authority annulled the orders passed under S.122(5A) of the Income Tax Ordinance, 2001 with the conclusion that neither it was erroneous nor prejudicial to the interest of Revenue---Validity---First Appellate Authority had in detail dilated upon the two conditions required for invoking the provisions of S.122(5A) of the Income Tax Ordinance, 2001 which were that firstly the Commissioner could amend an order if it was erroneous and secondly it was also prejudicial to the interest of Revenue---Revising authority without bringing on record any legal justification for converting the income which had already been processed under the normal tax regime by conscious application of mind, had brought it into the scope of presumptive tax regime merely on surmises which could not be approved---For determining as to whether a particular income which fell in the presumptive tax regime proper parameters had been laid down in the statute, still the revising authority preferred to proceed arbitrarily without making the basis known for so proceedings in the manner---Exercise by the revising authority had been undertaken when application in form of complaint before the Federal Tax Ombudsman was lodged on not receiving the determined refund that proceedings under S.122(5A) of the Income Tax Ordinance, 2001 were initiated and finalized in haste---Held, orders were unexceptionable which did not call for any interference at level of Appellate Tribunal---Department appeals were rejected by the Appellate Tribunal being devoid of any merit.

Muhammad Akram Tahir, D.R. for Appellant.

Nemo for Respondent.

2008 P T D (Trib.) 216

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2163/LB of 2006, decided on 29th August, 2007.

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

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Power to modify an `assessment' to be exercised by Additional Commissioner was restricted to an order passed by an Assessing Officer---Cut-off date was provided as 1-7-2003 in respect of original assessment order issued under S.62 of the Income Tax Ordinance, 1979 only.

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

----S.122(5A)---Amendment of assessment, finalized before 1-7-2003---Interpretation of---Rational interpretation of the expression "finalized before 1-7-2003 with reference to proceedings under S.122(5A) of the Income Tax Ordinance, 2001 would be that the matter would be taken to have been finalized when Assessing Officer exercised his original jurisdiction regarding assessment prior to the said date as the powers to modify/revise an assessment order by an Additional Commissioner was restricted to an `order' issued by the Assessing Officer---Record clearly revealed that original assessment was finalized prior to 1-7-2003 and such order had admittedly been attempted to be revised by the Additional Commissioner of Income Tax---First Appellate Authority had rightly annulled the assessment order as the finding of the First Appellate Authority did not suffer from any infirmity.

2005 PTD 1316 rel.

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

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.66(1A)---Amendment of assessment---Doctrine of merger explained---Time limitation---Correct explanation of the doctrine of merger, while applying the `time limitation' provided for in statute, was that a later order merges into former order and modifies/corrects the original/former order to the extent of issues decided in the later order---Time limitation, in respect of issues that had not been the subject-matter of the later order runs from the date of the former/original order-et-Time limitation in respect of exercise of jurisdiction under S.122(5A) of the Income Tax Ordinance, 2001 implies that the cut-off date of 1-7-2003 was to be applied in respect of original assessment order passed under S.62 of the Income Tax Ordinance, 1979---Revised order was also not maintainable for the reason that no provisions parallel to S.66(1A) of the Income Tax Ordinance, 1979 had been introduced in the Income Tax Ordinance, 2001---Order of First Appellate Authority, was upheld by the Appellate Tribunal in toto in the circumstances.

2005 PTD 1316 and 2005 PTD 1679 rel.

1993 SCMR 39 = 1992 PTD 1681; 2000 PTD 2407; 1999 PTD 3419; 1996 PTD 562; 1984 PTD 234 and 2003 PTD 2109 distinguished.

Rana Javed Iqbal, I.A.C. for Appellant.

Asim Zulfiqar, A.C.A. for Respondent.

2008 P T D (Trib.) 226

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.As. Nos.2252/LB, 2253/LB and 2283/LB of 2000, decided on 2nd November, 2007.

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

----S.27(2)(a)(ii)---C.B.R. Circular No.10 of 1979 dated 1-10-1979---Constitution of Pakistan (1973), Fourth Sched. Cl. (50)---Capital gain---Assessee engaged in letting out properties---Sale of a piece of agricultural land---Assessing Officer treated the said transaction to be the 'adventure in the nature of trade' which was subject to tax---Appeal on the point of taxing gain earned on the sale of such land was dismissed by the First Appellate Authority---Validity---Transaction undertaken by the assessee-company was not an adventure in the nature of trade as the facts fully established beyond any shadow of doubt that at the time of purchase the assessee had no intention of sale---Land in question was purchased as agricultural land and at the time of acquisition/purchase there was no intention to sell and earn profit thereon; neither assessee was engaged in business of purchase and sale of plot estate in the past; business was contemplated only after 11 years from the date of purchase of said property; in the entire history of the case the agricultural plot of land was declared as a capital asset and not even once as stock in trade and department. never disputed such proposition in any of the past years and land was purchased with sole intention of investment for establishment of industrial unit i.e. weaving unit and in this regard assessee did his best but could not achieve desired target; for establishment of industrial unit and for fulfilling. this object assessee took steps viz., that letter of credits opened for 100 powerlooms to set up weaving unit; copy of Letter of Credit was submitted before the Assessing Officer along with Debit Advice of bank charges; purchase of 100 powerlooms could not be materialized due to non-fulfillment of required permissions; assessee prepared detailed feasibility studies regarding establishment of Industrial Unit, number of correspondence made with the concerned department regarding required permission but could not get the same---Assessee had been trying to establish the industrial unit but difficulties were enormous which clearly showed that assessee had no intention of making profits at the time of purchase of such plot and the transaction of sale of plot thus was not an 'adventure in the nature of trade.

(1991) 187 ITR 316; 1992 PTD 1051; 1990 PTD (Trib.) 671; (1978) 37 Tax 236 and Messrs Julian Hosong Dinshaw Trust v. I.T.O. (1992) 65 TAX 102 (SC Pak) rel.

1989 PTD 460; 1996 PTD (Trib.) 771; 61 Tax 105 SC; 1994 PTD (Trib.) 1034; Janab Abubucker Sait v. C.I.T. (1962) 45 ITR 37 (Mad.); Sri Gajalakshmi Ginning Factory Ltd. v. CIT (1952) 22 ITR 502 (Mad.); CIT v. Premji Gopalbhai (1978) 113 ITR 785 (Guj.); Sawardas Devram v. CIT (1984) 150 ITR 576 (MP); Naseer A. Shaikh v. CIT 1992 PTD 621 (SC Pak); 1975 PTD (Trib.) 6; 1989 PTD 460; (1959) 35 ITR 594; (1965) 57 ITR 21 (SC); Leeming v. Jones (1930) 15 TC 333; Commissioner of Inland Revenue v. Rinhold (1953) 34 TC 389; Janki Ram Bahadar Ram v. Commissioner of Income Tax (1965) 57 ITR 21 (SC); CIT v. Jalannagar Tea Estate (1962) 45 ITR 626 (Assam); M. Raman Pillai v. CIT (1964) 51 ITR 829 (Ker); CIT v. A. Muhammad Mohideen (1989) 176 ITR 393 (Mad.) Tribhuvandas Vallabhadas v. CIT (1966) 61 ITR 518 (Bom); Vadlamani Kameswara Rao v. CIT (1964) 51 ITR 304 (AP) and CIT v. Sutlej Cotton Mills Supply Agency Ltd. (1975) 100 ITR 706 (SC Ind) ref.

(b) Income-tax---

----Adventure in the nature of trade---Onus---Onus lies on the department to show that a transaction was 'adventure in the nature of trade'.?

61 Tax 105 SC rel.

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

----S.23---Income Tax Appellate Tribunal Rules, 1981, R.20---Deductions---Profit and Loss accounts---Add backs---Department had taken vague and unspecific grounds of appeal which were not in accordance with the Income Tax Appellate Tribunal Rules, 1981, which speak that the grounds should be concise and under distinct heads---Departmental appeal was dismissed on such legal plane by the Appellate Tribunal---On factual plane, expenses were fully verifiable and incurred wholly and exclusively for the purpose of business, details of which had been provided to Assessing Officer---Order of First Appellate Authority deleting the add backs made in the Profit and Loss account expenses was maintained by the Appellate Tribunal in circumstances.?

1991 PTD (Trib.) 53, PTCL 1992 CL 383 and I.T.As. Nos.630 and 6371/LB/2005 rel.

M. Jawed Zakaria for Appellant (in I.T.As. Nos.2252/LB and 2253/LB of 2000).

Abdul Rasheed Ch. D.R. for Respondent (in I.T.As. Nos.2252/LB and 2253/LB of 2000).

Abdul Rasheed Ch. D.R. for Appellant (in I.T.A. No.2283/LB of 2000).

M. Jawed Zakaria for Respondent (in I.T.A. No.2283/LB of 2000).

2008 P T D (Trib.) 278

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.893/LB of 2006, decided on 11th July, 2007.

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

----S. 122(5A)-Income Tax Ordinance (XXXI of 1979), S.66-A---General Clauses Act (X of 1897), S.6---Amendment of assessment---Issuance of corrigendum that while passing the order, the section under which the assessment was modified was inadvertently mentioned as S.122(5A) of the Income Tax Ordinance, 2001---Said order was passed under S.66-A of the Income Tax Ordinance, 1979 read with S.6 of the General Clauses Act, 1897 and S.122(1) of the Income Tax Ordinance, 2001---Order was annulled by the First Appellate Authority---Department, on the strength of corrigendum contended that order was in fact passed under S.66A of the Income Tax Ordinance, 1979 and since right of appeal against such an order lay with Appellate Tribunal the First Appellate Authority erred in assuming jurisdiction in respect of such order/appeal---Validity---No provision of law existed which authorized issuance of a corrigendum after an assessment was finalized---Once an assessment was finalized, the only way an Assessing Officer could modify the earlier order was by resorting to provisions relating to `rectification of mistakes' and for which a statutory notice was a mandatory requirement---No concept of issuance of corrigendum existed and as such rectification without a mandatory notice was null and void and without any legal force---Record including notice and order clearly showed that the entire proceedings were undertaken under S.122(5A) of the Income Tax Ordinance, 2001 and such entire proceedings could not be said to have been undertaken under S.66A of the Income Tax Ordinance, 1979 through issuance of subsequent corrigendum---Issuance of corrigendum was clearly an afterthought---Corrigendum being illegal, same could not, in any way, change the fate of order under S.122(5A) of the Income Tax Ordinance, 2001-First Appellate Authority was right in assuming the appellate jurisdiction---First Appellate Authority, though made a reference to the corrigendum but had rightly disregarded same while deciding the matter as it was a nullity in the eyes of law from the very beginning---Objection raised by the Department in respect of jurisdiction of First Appellate Authority was devoid of any merit and was rejected by the Appellate Tribunal.

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

----S.80C(5A)---Income Tax Ordinance (XXXI of 1979), S.122(5A)---Tax on income of certain contractors and importers---Assessment year 2000-2001---Provisions of S.80C (5A) of the Income Tax Ordinance, 1979 were not applicable for assessment year 2000-2001---Invoking the provisions of S.122(5A) of the Income Tax Ordinance, 2001 was clearly illegal---No interference was called for in the order of First Appellate Authority by the Appellate Tribunal.

I.T.A. No.6374/LB of 2003 and 2005 PTD 1316 rel.

Muhammad Asif D.R. for Appellant.

Asim Zulfiqar Ali, A.C.A. for Respondent.

2008 P T D (Trib.) 290

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Mian Masood Ahmad, Accountant Member

W.T.As. Nos.1987/LB and 1986/LB of 2001, decided on 3rd November, 2007.

Wealth Tax Act (XV of 1963)---

---S.3---Charge of wealth tax---Association of persons---Assessment of property in the hands of co-owners assigning them the status of association of persons in spite of filing various documents as proof acknowledging the factum of family arrangement and copies of PT-I Forms issued by the Provincial Excise and Taxation Department---Assessee had also contended that present was the case of double assessment since individual shares had already been assessed in the hands of some of the co-owners---Validity---Record showed that division of property had been acknowledged by the Provincial Excise and Taxation Department----Assessing Officer's only reservation was that the same could not be accepted with retrospective effect---Family arrangement duly recorded in the Excise and Taxation Department's record was not accepted---Appellate Tribunal accepted the various explanations put forth by the assessee---Documentary as well as circumstantial evidence brought on record was sufficient to warrant the assessment of the subject property in the hands of its co-owners and not in the hands of association of persons----Orders of both the authorities below were set at naught by the Appellate Tribunal and Assessing Officer was directed to file the proceedings in the case of association of persons---Revenue was at liberty to proceed to assess the shares of various individuals in their own hands if so warranted.

Muhammad Zaman v. Muhammad Jamil and 4 others 1992 CLC 873 and Income Tax Officers v. Narayanganj Company Pvt. Ltd. 1971 Taxation 223 (SC) ref.

Mumtaz-ul-Hassan for Appellant.

Abdul Rasheed Ch. D.R. for Respondent.

2008 P T D (Trib.) 296

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.A. No.2515/LB of 2005, decided on 4th December, 2007.

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

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Amalgamation of companies---Creation of liability against non-surviving company---Validity---Merger of the group of companies plays a vital role to minimize the expenses and raise/generate profits---.Merger theory was globally followed for survival economically---Assessee company had been merged with the other one---No action could be taken against the assessee being non-surviving company/defunct/dissolved/legally non-existing company---Only surviving/ transferee company could be sued and appeal could lie against the same and not against merged assessee company---Merger approved by the High Count 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 assessee 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 be recoverable from the surviving company and that the surviving company would be bound to duly discharge the same.

2007 PTD (Trib.) 1885 ref.

(b) Income-tax---

----Amalgamation of companies---Liability of merged assessee company--All the liabilities of non-surviving company will be burdened by the surviving company---Law provides that if a tax payer dies then outstanding amount of tax payable is recoverable from their legal representatives; on the same analogy merged company would be deemed to have died and surviving company was its legal representative/heir and was liable to face any suit/case/litigation or to pay any amount or clear the liabilities of merged company.

2004 PTD 1173 distinguished.

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

----S. 66-A---C.B.R. Notification No. 2 (1) S/ASSTT/2004, dated 25-8-2004---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Jurisdiction---Commissioner of Income Tax, Special Zone, had no jurisdiction to pass order under S.66-A of the Income Tax Ordinance, 1979 on 22-3-2005 as the assessee company was transferred to another Zone vide C.B.R Notification No.2(1)S/ASSTT/ 2004, dated 25-8-2004---Proper jurisdiction of the case, after transfer, vests is the transferee zone---Order passed by the Commissioner of Income Tax Special Zone, under S.66-A of the Income Tax Ordinance, 1979 lacked jurisdiction.

I.T.A. No. 85 of 2000-2001 and I.T.As. Nos. 1970 to 1972/KB of 1999-2000 ref.

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

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Amalgamation of companies---Recovery proceedings or proceedings under S.66-A of the Income Tax Ordinance, 1979 against merged. company---Validity and scope---After amalgamation all the assets, properties, rights, privileges and liabilities of the assessee company stood transferred and vested in transferee company which was sole responsible for all kinds of liabilities, if the same had accrued to the merged assessee---Where a company was amalgamated with another company, recovery of tax due from transferor company from transferee company without making transferee company a party to re-assessment proceedings against transferor, was invalid---No proceedings under S.66-A of the Income Tax Ordinance, 1979 could be initiated against the assessee and recovery of any amount in consequence of such proceedings without making the transferee company a necessary party, was not permissible---If it is presumed that proceedings under S.66-A of the Income Tax Ordinance, 1979 were valid then it was not possible that recovery could be effected from transferor company after having been merged with transferee company---No notice was issued to transferor company---Proceedings enunciated by the Department against assessee when the assessee merged with transferor company would be null and void.

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

----S.239---Income Tax Ordinance (XXXI of 1979), S. 66-A---Savings---Any proceedings---Meaning and impact---Words "any proceedings" used in S.239 of the Income Tax Ordinance, 2001 had been clearly categorized by the legislature as "appeal, reference, revision by the (Commissioner) and prosecution"---Appeal and revision fell under Chapter XIII of the Income Tax Ordinance, 1979---Appeal relates to Ss.129 to 137 of the Income Tax Ordinance, 1979 while revision by the Commissioner relates to S.138 of the Ordinance---Prosecution fell under Chapter XII of the Income Tax Ordinance, 1979---Commissioner of Income Tax misconstrued S.239(4) of the Income Tax Ordinance, 2001 as S.66-A of the Income Tax Ordinance, 1979 falls under Chapter VII, which was regarding "assessment"---No appeal, reference or revision was pending in assessee's case, order of Commissioner of Income Tax passed under S.66A of the Income Tax Ordinance, 1979 was without any merit.

2002 PTD (Trib.) 3027 and 2003 ITR 108 ref.

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

----Ss. 66-A, 12(9A), 62 & First Sched. Paragraph (F)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Finalization of assessment by the Panel---Cancellation of---Validity---Original assessment was finalized by the Panel comprising of senior officers by calling various details viz. published statement of accounts, consisting of cash book, ledger, stock register, bank book, sale and purchase vouchers, sales tax record and the same had been examined by the Panel---Panel, after giving due deliberation to these details, passed the conscious order by applying judicious mind and addition of Rs.10 Million only was made by the Panel---Such assessment could not be termed as erroneous and prejudicial to the interest of revenue---Order of Commissioner of Income Tax passed under S.66-A of the Income Tax Ordinance, 1979 was based on mere presumption, surmises and conjectures which was unjustified and mala fide as Commissioner had transgressed his powers by invoking S.66-A of the Income Tax Ordinance, 1979 and no such powers were available with the Commissioner to hold order of the Panel to be erroneous and prejudicial to the interest of revenue---Bona fide orders with good intentions has to be within the limits prescribed by the law---Order passed by the Commissioner under S.66-A of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal and the assessment made under S.62 of the Income Tax Ordinance, 1979 restored.

2002 PTD (Trib.) 3027 and 1997 PTD (Trib.) 2137 ref.

M. Jawed Zakaria for Appellant.

Ghanzanfar Hussain, D.R. for Respondent.

2008 P T D (Trib.) 319

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos.256/KB and 300/KB of 2006, decided on 8th June, 2007.

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

----Ss.80C, 143-B, 50(4), 62 & Second Sched., Part-IV, Cl. (9C)---C.B.R Circular No.11 of 1991-dated 30-6-1991---S.R.O. 55(I)/2000, dated 10-2-2000---Tax on income of certain contractors and importers---Throughput charges---Receipts in relation to implementation Agreement called Throughput Charges' on the basis of throughput of oil per month regardless of quantity of oil actually handled at the oil Terminal---Tax was deducted at source---Return was filed under presumptive tax regime but the department assessed it under normal law due to insertion of Cl. (9C) in Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 to the effect that S.80C of the Income Tax Ordinance, 1979 will not apply in respect of receipts on account ofproviding services' by way of operation of a container, chemical or oil Terminal at a sea port---First Appellate Authority maintained the order of Assessing Officer on the ground that Appellate Tribunal in the assessee's own case decided the issue and held that assessee's income was not covered under S.80C of the Income Tax Ordinance, 1979---Assessee contended that assessment was based on Cl. (9C) in Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 which was ultra vires' in the light of various judgments of higher judiciary---Validity---For the earlier assessment years Appellate Tribunal had found that assessee's receipts qualified as income fromservices rendered' which should have been assessed under normal law---S.R.O. was non-existent at the time when the judgment was passed---Appellate Tribunal found itself not competent to hold the Tribunal's said order `per incurium' for want of jurisdiction---First Appellate Authority had rightly followed the Appellate Tribunal's judgment while deciding the issue---Order was maintained by the Appellate Tribunal.

CIT v. Kashmir Edible Oil 2006 SCMR 109; Messrs Caltex Oil (Pakistan) Limited v. Collector (Adj.) GST 2006 CL 404; 2002 PTD 2850; 2002 CLC 1819; Central Insurance v. C.B.R 1993 SCMR 1232; Ellahi Cotton v. Federation of Pakistan PLD 1997 SC 582; Excise and Taxation Officer v. Burma Shell 1993 SCMR 338(b); 1997 PTD (Trib.) 1143; CIT v. Sir F.H. Jaffer and Sons Private Limited ITC 98 of 1998; CIT v. Sir E.H. Janet. and Sons (Pvt.) Limited Civil Petitions Nos.265-K and 362-K of 2000; Fauji Oil Terminal Distribution Company Limited v. Additional Commissioner 2006 PTD 734; 1999 PTD (Trib.) 1494; PLD 1997 SC 351 and 2004 PTD (Trib.) 2749 ref.

2007 PTD (Trib.) 803; I.T.As. Nos. 728 to 733(IB) of 1998-99; Messrs International Tanners Industries v. Federation of Pakistan 2004 PTD 2180 and 1995 Tax 28 rel.

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

----S. 25(c)---Amounts subsequently recovered in respect of deductions, etc.---Trading liabilities written-back---Amount claimed on account of trading liabilities written-back was disallowed as no such disallowance under S.25(c) of the Income Tax Ordinance, 1979 was made by the department in the previous assessment years---Assessee contended that amount did not figure in the accounts as assessment for previous years were finalized under presumptive tax regime---Position became clear after the revision of the previous assessments---Addition was deleted by the First Appellate Authority---Validity---First Appellate Authority had erred in accepting the futuristic suggestion of revision of assessments and determination of the claim---Assessee having not proved the claim to the entire satisfaction of the department, the amount could not be allowed---Finding of the First Appellate Authority was reversed and assessment order was restored by the Appellate Tribunal on the issue.

Muhammad Farogh Naseeni for Appellant.

Dr. Farrukh Ansari; D.R. for Respondent.

Dr. Farrukh Ansari, D.R. for Appellant (in I.T.A. No. 300/KB of 2006).

Muhammad Farogh Naseem for Respondent (in I.T.A. No.300/KB of 2006).

2008 P T D (Trib.) 332

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.As. Nos. 382/IB and 383/IB of 2007, decided on 18th October, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170, 120 & 153---Refund-Carriage contractor---First Appellate Authority found that carriage contractor was covered within the definition of the services rendered and thus exempt from charge under presumptive tax regime---Validity---Under S.170 of the Income Tax Ordinance, 2001 the power of issuance of refund did not include the power to discuss the nature of the business of the assessee as well as dilation on the issue whether the same was a case of presumptive income or nor---Enforcement wing had no power to determine the status of carriage contractor and the entire assessment as well as appeal on the basis thereof was illegal---Entire proceedings were without jurisdiction, the cancellation of order by the First Appellate Authority was valid but not for the reason he had mentioned in his order---Some discrimination was being made in respect of various carriage contractors which could neither be appreciated nor approved---Department was instructed to issue refund within 45 days to the assessee unless any other proceedings had been initiated against him till the service of present order.

CIT Medium Taxpayers Unit, Karachi v. Mr. Mukhtar Ahmad C/o KPT I.T.A. No. 30/KB of 2006 and 2006 PTD (Trib.) 1936 rel.

Sardar Taj Muhammad, D.R. for Appellant.

Ch. Inayat Ail Chheena for Respondent.

2008 P T D (Trib.) 342

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 1123/LB of 2006, decided on 29th October, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A), 120(3) & 114---Amendment of assessments---Computation chart---Non-availability---Effect---Department contended that as no computation chart was available with the return and this being part and parcel of the return attracted provisions of S.122 (5A) of the Income Tax Ordinance, 2001---Validity---Return filed did not carry the computation chart which was a part and parcel---Return was incomplete and invalid as per provisions of S.120(3) of the Income Tax Ordinance, 2001---No notice under S.120(3) of the Income Tax Ordinance, 2001 was issued---Notice under S.114 of the Income Tax Ordinance, 2001 was required to be issued as the original return was incomplete, invalid and was of no legal consequence---Further proceedings, under S.122(5A) of the Income Tax Ordinance, 2001 could be initiated on an invalid document---Superstructure had been built having no foundation at all---Return being invalid and incomplete, order passed under S.122(5A) of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal being an invalid and incomplete return.

Muhammad Ajmal Khan for Appellant.

M. Muzaffar Khan Lashari, D.R.

2008 P T D (Trib.) 357

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.A. No. 128/LB of 2007, decided on 3rd December, 2007.

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

----S. 170(4)---Refund---Limitation---Refund was withheld on the ground that assessee was not engaged in manufacturing activities rather was engaged in business of processing and bottling of pesticides---Assessee contended that pesticides in bulk was imported and after refilling and packing the bottles those were sold in the market---First Appellate Authority concluded that assessee was involved in manufacturing activities and assessee was entitled for refund in accordance with law which may be issued as claimed---Validity---Assessee was registered with Sales Tax Department as an "importer-cum-manufacturer"---Zone Commissioner had also issued an exemption certificate in terms of S.148 of the Income Tax Ordinance, 2001---In view of the matter, tax deducted at source could not be held to be the final discharge of the tax liability rather than was adjustable against the tax worked out on the total net income declared by the assessee---Issue of refund was processed after the lapse of prescribed period of 45 days from the date of receipt of application---Commissioner had clearly violated the provisions of S.170(4) of the Income Tax Ordinance, 2001---Assessee was entitled for refund---Findings of First Appellate Authority were endorsed by the Appellate Tribunal in its verbatim and departmental appeal was dismissed being bereft of any merit.

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

----S. 170(4)---Refund---Limitation---Statute had provided forty five (45) days for issuance of refund, either full or in part or refuse to allow the same---Commissioner was under legal obligation to serve on the person applying for the refund an order in writing about the fate of his refund application which had been filed under S.170(1) of the Income Tax Ordinance, 2001.

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

Shabbir Fakhar-ud-Din, ITP for Respondent.

2008 P T D (Trib.) 369

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Baloch, Judicial Member and Ashrafuddin Bhatti, Accountant Member

M.A. (Recalling) No.218/KB in M.A. (Rect.) No.78/KB of 2006 and M.A. (Recalling) No.219/KB in M.A. (Rect.) No.79/KB of 2006, decided on 17th November, 2007.

Income Tax Ordinance (XLIX of 2001)---

----S. 221---Rectification of mistake---Issuance of notice of hearing by registered post---Absence of assessee---Application for recall of order:--Endorsement on envelope supported the contention of the Authorized Representative that he was not available on the given address---Postal Department returned the envelope bearing notice of hearing with endorsement that "addressee was not available", but the Appellate Tribunal due to an oversight mistakenly observed that assessee refused to accept the notice of hearing---Absence of assessee side on the date of hearing was neither intentional nor deliberate---Order was recalled by the Appellate Tribunal in circumstances and restored the application.

Abdul Tahir Ansari, I.T.P. for Appellant.

B.A. Memon, D.R. for Respondent.

2008 P T D (Trib.) 370

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.A. No.2070/LB of 2006, decided on 24th October, 2007.

Income Tax Ordinance (XLIX of 2001)---

----S. 170(2)(c)---Refund---Limitation of refund application---First Appellate Authority had found that according to S.170(2)(c) of the Income Tax Ordinance, 2001 the application should have been moved within two years period and since it was filed beyond that period, it had rightly been rejected by the Assessing Officer---Validity---Claim of refund could not be refused on account of limitation---Applications though were filed beyond the prescribed time limit yet the refund could be issued---Authorities below were not justified in rejecting the application of refund on account of limitation---Appellate Tribunal directed that the genuine refund, if any, due to the taxpayer should be allowed.

1998 PTD 2012; PTCL 1998 CL 354 (SC of Pak.) and 2004 CTLR (sic) rel.

Javed Iqbal Qazi for Appellant.

Sabiha Mujahid, D.R. for Respondent.

2008 P T D (Trib.) 378

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos. 1932/LB to 1937/LB of 2006, decided on 23rd October, 2007.

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

----Ss. 80-D, 113, 63 & 2(16)(b) & Second Sched., Part-I, Cl.. (90)---Minimum tax on income of certain persons---Pakistan Hockey Federation---First Appellate Authority annulled the assessments by holding that charging tax on a non-taxable entity being an institution recognized by the Government for the purposes of promoting, controlling and regulating any sport or game was illegal---Department contended that Federation was a body corporate and well under the definition of a company and its receipts were liable to minimum taxation even if it was otherwise exempt from taxation under the Second Schedule to the Income Tax Ordinance, 1979---Validity---Pakistan Hockey Federation qualified as a body corporate and fell within the four corners of the definition assigned to a company under S.2(16) of the Income Tax Ordinance, 1979-Being a sports organization established for the promotion and controlling the game of hockey, its income was exempt from taxation under Cls. (90) & (91)(i) of Part I of the Second Schedule to the Income Tax Ordinance, 1979 but S.80D of the Income Tax Ordinance, 1979 did not exclude from its ambit, a company enjoying exemption under any other provisions of law except those entities to whom the decision of the Supreme Court in PLD 1997 SC 582 related---Hockey Federation could not be crabbed with those taxpayers enjoying the benefit of Protection of Economic Reforms Act, 1992---Federation being a non-business/non-profit organization was also not substantiated through submission of annual accounts---Pakistan Hockey Federation fell within the definition of a company and was hit by mischief of S.80-D of the Income Tax Ordinance, 1979 unless it was proved that the sources of receipts were from non-commercial activities.

Black's Law Dictionary ref.

2003 PTD 1264 and Messrs Ellahi Cotton Mills v. Federation of Pakistan PLD 1997 SC 582 rel.

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

----Ss. 80-D & 63---Minimum tax on income of certain persons---Estimation of turnover/receipts for levy of minimum tax---Validity---Provision of S.80-D of the Income Tax Ordinance, 1979 expressly mentioned that it should be the "aggregate to the declared turnover"---Such turnover could not be hypothetical figures (s) based on presumptions and surmises of the Tax. Authority---Assessing Officer had levied tax on the "presumed figures of receipt", which were neither declared nor based on an independent source---Assessee deliberately avoided to present/file statements of accounts before the departmental officer---Appellate Tribunal' vacated the order and set aside the assessment order to be made `de novo' in circumstances.

Sabiha Mujahid, D.R. for Appellant.

Aslam Malik, C.A. for Respondent.

2008 P T D (Trib.) 383

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.As. Nos. 1617/LB, 1618/LB, 1682/LB of 2002, 2101/LB of 2003, 1593/LB of 2005, decided on 15th November, 2007.

(a) Income-tax---

----Profit and loss expenses---Penalty and additional tax---Allowable­ness---Any fine or penalty imposed due to irregularity committed by the assessee for non-adherence to statutory provision of law, could not be termed to be the fine or penalty, rather additional tax was levied which was charged in accordance with the provisions of law and was not allowable business expense.

1999 SCMR 1213 distinguished.

(b) Income-tax---

----Profit and loss expenses---Ad hoc observations---Addition made on ad hoc observations was not sustainable and was deleted by the Appellate Tribunal.

(c) Income-tax---

----Gross profit rate---Addition---Department contended that First Appellate Authority was not justified in deleting the trading addition which was worked out consequent upon applying gross profit rate of 25% against declared rate at 22.78%-Validity---Obtaining more volume of turnover lessens the margin of profit---Volume of turnover was exhibiting increasing trend year after year---First Appellate Authority after thorough appreciation and appraisal of the facts had directed to accept declared GP rate of 22.78%-Order of First Appellate Authority was maintained being well based on the history of the case---Department objection was rejected by the Appellate Tribunal.

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

----Ss. 24(c) & 50---S.R.O. No.586(I)/91, dated 30-6-1991---Deductions not admissible---Advertisement expenses---Addition on the ground that while making payment to local authorities Cantonment Board City Development Authority and Horticulture Authority tax under S.50 of the Income Tax Ordinance, 1979 was not deducted---Validity---Department while holding the assessee to be the assessee in default conceded that no tax was leviable from the payments made to the local authorities by virtue of S.R.O. No. 586(I)/914, dated 30-6-1991---Addition made was Addition made was liable to be struck down---Order of First Appellate Authority was upheld by the Appellate Tribunal.

(e) Income-tax---

---Profit and loss expenses---Sales tax paid to Government Exchequer was claimed as a business expense in the profit and loss account--Amount was added back by observing that since the "Sales Tax" was recoverable from the consumers, that could not be allowed as a business expense---Assessee contended that some of the bakery items were subjected to "Sales Tax", their sale prices were fixed inclusive of "Sales Tax"---Gross sales were offered for taxation and payment of `sales tax' was claimed in the profit and loss expenses-Appellate Tribunal did not find any infirmity in findings of First Appellate Authority whereby the issue was set aside for reconsideration---Objection was rejected by the Appellate Tribunal.

(f) Income-tax---

---Profit and loss expenses---Payment of "Workers Welfare Fund" was an allowable expense under the head `profit and loss account'.

(g) Income-tax---

----Sales tax---Methods for recording payment of `sales tax' in the books of accounts---Explained.

(h) Income-tax---

---Profit and loss expenses---Sales tax---Disallowance of---Validity--Since, gross sales inclusive of sales tax were declared in the trading account, the disallowance of amount of sales tax claimed in the profit and loss account was uncalled for---Claiming payment of sales tax in the profit and loss account will not affect the assessee's net profit rather will set off the two amounts for the reason that the sales tax was recovered from the one hand and was deposited in the Government Exchequer by the other hand---Add back made on the score deleted by the Appellate Tribunal.

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

---S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Invocation of provision of S.66-A of the Income Tax Ordinance, 1979 on the ground that payment of sales tax was claimed in the profit and loss account--Validity---Claiming of payment of "sales Tax" was an allowable expenses because the assessee declared its sales inclusive of sales tax the payment of which had already been made to the exchequer and thus Inspecting Additional Commissioner's objection .dashes to the ground---Order passed under S.66-A of the Income Tax Ordinance, 1979 was declared to be of no legal effect which was annulled/cancelled by the Appellate Tribunal.

Javed Iqbal Khan, F.C.A. for Appellant (in I.T.As. Nos.1617/LB, 1618/LB of 2002, 2101/LB of 2003 and 1593/LB of 2005).

Shahban Bhatti, D.R. for Respondent (in I.T.As. Nos.1617/LB, 1618/LB of 2002, 2101/LB of 2003 and 1593/LB of 2005).

Shahban Bhatti, D.R. for Appellant (in I.T.A. No.2682/LB of 2002).

Javed Iqbal Khan, F.C.A. for Respondent (in I.T.A. No.2682/LB of 2002).

2008 P T D (Trib.) 397

[Income-tax Appellate Tribunal Pakistan]

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

M.As. (A.G.) Nos.106/LB to 108/LB of 2007 and I.T.As. Nos. 4322/LB to 4324/LB and 4644 of 2004, decided on 8th December, 2007.

(a) Income-tax---

----Legal grounds---Additional grounds having been taken by the assessee were legal grounds and also went to the roots of the case, the miscellaneous applications filed were accepted by the Appellate Tribunal and additional grounds submitted were formed part of the original grounds.

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

----Ss. 52 & 86---Liability of persons failing to deduct or pay tax---Limitation---Assessee contended that original assessment framed under Ss. 52/86 of the Income Tax Ordinance, 1979 were time-barred and all the subsequent proceedings conducted were void ab intio as assessments were framed on 16-10-1999 while proceedings under Ss. 52/86 of the Income Tax Ordinance, 1979 for the respective assessment years were supposed to be concluded by 30-6-1997 for the assessment year 1993-94", by 30-6-1998 for the assessment year 1994-95", and by 30-6-1999 for the assessment year 1995-96---Validity---Stance of assessee had been substantiated by the judgments of superior Courts-Held, assessments framed for all the three years were time barred and directed to be cancelled by the Appellate Tribunal.

2003 PTD 1571; 2003 PTD (Trib.) 1167; 2003 PTD 2287 and 2003 PTD 963 rel.

Siraj ud Din Khalid for Respondent Appellant (M.A. (A.G.), Nos.106/LB to 108/LB, I.T.As. Nos.4322/LB to 4324/LB of 2004).

Manzoor Hussain Shad, D.R., for (M.A. (A.G.). Nos.106/LB to 108/LB, I.T.As. Nos.4322/LB to 4324/LB of 2004).

Manzoor Hussain Shad, D.R., for Appellant (I.T.A. No.4644/LB of 2004).

Siraj ud Din Khalid for Respondent (I.T.A. No.4644/LB of 2004).

2008 P T D (Trib.) 400

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.A. No.5825/LB of 2005, decided on 4th August, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 52, 86 & 50(4)---Liability of persons failing to deduct or pay tax---Setting aside of time-barred order passed. under S.52 of the Income Tax Ordinance, 1979 when legally order merited cancellation/ annulment---Validity---All the recipients statedly were limited companies---If for any reason they were held to be as supply contractor, they had already suffered the incident of tax in the manner that their assessments were to be made before the end of the two subsequent years in which they had filed their returns---Assessing Officer did not find the assessee to be in default during the financial years, or on inspection of their books during proceedings under S.61 of the Income Tax Ordinance, 1979 and suddenly he became wiser after almost 5 years without having access to books or any such other relevant material---Was not known in whose account this deducted tax was going to be adjusted: admittedly this was not the tax of present assessee---Order passed by the authorities below were vacated by the Appellate Tribunal, in circumstances.

2003 PTD (Trib.) 1167 rel.

Siraj-ud-Din Khalid and Aurangzeb for Appellant.

Najam-ud-Din Khan, D.R. for Respondent.

2008 P T D (Trib.) 403

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 6475/LB, 6476/LB of 2004 and 502/LB of 2006, 2313/LB, 2314/LB of 2005, decided on 6th November, 2007.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), S. 62---Amendment of assessment--Amended assessment was cancelled by the First Appellate Authority as the provisions of S.122 of the Income Tax Ordinance 2001 were not applicable to the orders passed prior to its enforcement---Validity---Assessment was completed under S. 62 of the Income Tax Ordinance, 1971---Case having been decided in the light of judgment of High Court, was not interfered by the Appellate Tribunal.

2001 PTD 1525 rel.

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

----S.122---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Assessment was finalized before 1-7-2003---Amendment of such assessment---Assessment was set aside by the First Appellate Authority--- Validity---Re-assessment proceedings under S.122 of the Income Tax Ordinance 2001 were initiated by issuance of notice on 15-4-2004 and completed on 25-5-2004---Assessments in question already stood completed under S.62 of the Income Tax Ordinance, 1979 meaning thereby that nothing was pending before promulgation of Income Tax Ordinance 2001---Assessments finalized before 1-3-2003 could not be reopened revised/amended in exercise of jurisdiction under the provision of law---First Appellate Authority was not justified in setting aside the case---Order of First Appellate Authority was vacated and amended assessment order under S.122 of the Income Tax Ordinance, 2001 were annulled.

2005 PTD1316; 2006 PTD 734 and 2006 SCMR 109 rel.

Ghazanfer Hussain D.R. for Appellant (in I.T.As.Nos.6475/LB, 6476/LB of 2004 and 502/LB of 2006).

Siraj Khalid for Respondent (in I.T.As. Nos.6475/LB, 6476/LB of 2004 and 502/LB of 2006).

Siraj Khalid for Appellant (in I.T.As. Nos.2313/LB and 2314/LB of 2005).

Ghazanfer Hussain D.R. for Respondent (in I.T. As. Nos.2313/LB and 2314/LB of 2005).

2008 P T D (Trib.) 425

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.A. No.418/LB of 2007, decided on 15th November, 2007.

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

----S.122(5)---Amendment of assessment---'Definite information'---Assessment of Gross Annual Letting Value by the Provincial Excise and Taxation Authorities constitute the 'definite information'.

1993 PTD 1108 distinguished.

(b) Income-tax---

----Gross Annual Letting Value---Assessment of Provincial Excise and Taxation Department---Contention that agreement of lease could not be questioned halving been entered into by two Muslim signatories could sustain under the law if there had been no information to the contrary---Where assessment of Gross Annual Letting Value by the Provincial Excise and Taxation Department belied the taxpayer's claim, the lease agreement had no sanctity.

1991 PTD 488 distinguished.

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

----Ss.39(1)(j), 15 & 122---Income from other sources---Property income---Provisions of S.39(1)(j) of the Income Tax Ordinance, 2001 provided for assessment of the benefit derived from the use or exploitation of property on the basis of fair market value of the benefit---Departmental action in invocation of said provision instead of S.15 of the Income Tax Ordinance, 2001 was justified.

1991 PTD 488 distinguished.

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

----S.111(2)---Unexplained income or assets---Departmental action regarding inclusion of rental income of last five years in a single year was justified as the provisions of S.111(2) of the Income Tax Ordinance, 2001 provided for inclusion of person's income chargeable to tax in the tax year immediately preceding the financial year in which it was discovered.

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

----S.122(9), (5) & (5A)---Amendment of assessment---Opportunity of being heard---Action under 5.122 of the Income Tax Ordinance, 2001 could not be taken unless the taxpayer was provided with an opportunity of being heard as provided under S.122(9) of the Income Tax Ordinance, 2001---Plea that no notice was issued under subsection (5) or (5A) of S.122 of the Income Tax Ordinance, 2001 was not tenable---Departmental action in providing an opportunity of being heard as per subsection (9) of S.122 of the Income Tax Ordinance, 2001 was justified.

2007 PTD (Trib.) 1959 distinguished.

Muhammad Iqbal Khawaja for Appellant.

Muhammad Akram, D.R. for Respondent.

2008 P T D (Trib.) 442

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Faiyaz Khan, Accountant Member

I.T.As. Nos. 160/IB and 161/IB of 2007, decided on 26th January, 2008.

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

----Ss.161(1)(a) & 236(1)(b)(3)---Finance Ordinance (XXVII of 2002), Preamble---Failure to pay tax collected or deducted---Pay-phone company---Assessee in default---Assessee was held in default on account of not deduction of income tax @ 10% on its sales under S.236(1)(b)(3) of the Income Tax Ordinance, 2001 on the ground that assessee was a pay phone company and liable to collect withholding tax on its sales as the pay phone companies were brought under the ambit of withholding tax regime through Finance Ordinance, 2002---Validity---Tax @ 10% was deductible by the companies dealing with pre-paid cards for telephones---Assessee was admittedly a pay-phone company and there was visible difference between the pre-paid system and payphone card system due to different nature and character with each other---Provisions of S.236(1)(b)(3) of the Income Tax Ordinance, 2001 were not attracted and assessee was exempt from withholding tax @ 10%---Smart card was not similar to a prepaid card; both these cards were not one and the same thing---Provisions of S.236(1)(b)(3) of the Income Tax Ordinance, 2001 were not applicable in the case of a pre-pay-phone company---Orders passed by both the Authorities below under S.161 of the Income Tax Ordinance, 2001 were vacated and annulled by the Appellate Tribunal.

2004 PTD 3032 and (2006) 94 Tax 2007 distinguished.

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

----S.236(1)(b)(3)---Telephone users---PCO operators---Non-deduction of tax---Provisions of S.236(1)(b)(3) of the Income Tax Ordinance, 2001 were not very clear about PCO operators and it was a settled law that where there was any ambiguity in taxation laws, the benefit of same had to be given to the assessee.

Shahzad Ahmed Malik, F.C.M.A. for Appellant.

Nemo for Respondent.

2008 P T D (Trib.) 475

[Income-tax Appellate Tribunal Pakistan]

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

W.T.A. No.825/LB of 2004, decided on 20th June, 2007.

Wealth Tax Act (XV of 1963)---

----Ss.17-B, 25 & 16(3)---Wealth Tax Rules, 1963, R.8(2)(c)(ii)---Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order---Service of notice and merger---Assessee contended that impugned order did not mention the factum of service either on the assessee or his representative which clearly showed that no notice whatsoever was served upon the assessee; that in absence of proper service of notice the Assessing Authority could not be vested with jurisdiction to decide the case; that Original order passed by the Deputy Commissioner of Income Tax had merged in the subsequent order passed under S.25 of the Wealth Tax Act, 1963 by the Commissioner of Wealth Tax in his revisional jurisdiction that original order was also rectified by the Assessing Officer and that original order having merged with the subsequent revisional order as well as with the rectified order, original order passed under S.16(3) of the Wealth Tax Act, 1963 would not hold the field and S.17-B of the Wealth Tax Act, 1963 could not be invoked in the case of assessee---Validity---Held, admittedly there was no order holding the field since the original order stood merged in a subsequent rectified as well as in the revisional order passed under S.25 of the Wealth Tax Act, 1963 and that no notice was served upon the assessee which was a sine qua non for initiating any proceedings under the law---Order passed by the Inspecting Assistant Commissioner under S.17-B of the Wealth Tax Act, 1963 was vacated by the Appellate Tribunal and the original order restored.

2006 PTD 37; 2000 PCTLR 28;1988 PTD (Trib.) 117 and PLD 1992 SC 549 = 1992 PTD 932 rel.

2000 PTD (Trib.) 3773 and 1990 PTD (Trib.) 914 ref.

Siraj Khalid for Appellant.

Ghazanfar Hussain, D.R.

2008 P T D (Trib.) 493

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.A. No.234/LB of 2007, decided on 7th December, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss.233(3), 115(4), First Sched., Part-IV, Division-II, First Sched., Part-II, Division-IV, Second Sched., Part-II Cl. (5) & Seventh Sched., Part-II---Brokerage and Commission---Indenting commission---Rate of tax---Statement under S.115(4) of the Income Tax Ordinance, 2001 was filed giving rise to a claim of refund on the ground that leviable rate of tax was 1.25% on indenting commission derived on export of cotton yarn as per Cl. (5) of Part-II of the Second Sched. read with Part-II of the Seventh Sched. as also Division-IV of Part-II of the First Sched. to the Income Tax Ordinance, 2001---Assessing Officer assessed rate of tax as 5% in terms of S.233 read with Part-IV of the First Sched., to the Income Tax Ordinance, 2001 as final discharge of liability giving rise to no refund on that account---Validity---Clause (5) of the Part-II of the Second Schedule to the Income Tax Ordinance, 2001 provides that the tax chargeable in respect of commission received by an export Indenting Agent shall be at the rate equal to the rate of tax applicable to the exporter on export of goods to which such commission related---Assessee had earned indenting commission on export of cotton yarn---Cumulative reading of Division-IV of Part-III of the First Sched. and Part-III of the Seventh Sched. of the Income Tax Ordinance, 2001 clarified the point that rate of deduction of tax in respect of export of cotton yarn was 1.5% at the relevant point of the time -Tax was deductible from the indenting commission receipts of the assessee at the rate of 1.5% whereas it was deducted at 5%---Excess of tax deducted was refundable---Appeal was allowed and the Assessing Officer was directed to issue refund representing the excess of tax deducted.

(2007) 96 Tax 180 (Trib.); I.T.A. No.319/KB of 2006; PLD 1950 Lah. 111, PLD 1956 FC 157; PLD 1957 SC 219 and 1999 PTD 4138 ref.

Siraj Khalid for Appellant.

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

2008 P T D (Trib.) 598

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Faiyaz Khan, Accountant Member

I.T.A. No.4559/IB of 2002, decided on 8th December, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.52, 86, 50(3) & Second Sched., Cl. (177-A)---Liability of persons failing to deduct or pay tax---Exemption---Interest payable to non-resident on account of loan utilized towards industrial investment was claimed as exempt from tax---Exemption was refused on the ground that assessee company had to file an application for issuance of exemption certificate in case the income was exempt from tax which was not filed at the relevant time---Determination of taxability and exemption was the exclusive prerogative of the Assessing Officer and assessee himself had not to become the Judge of his own cause---Assessee was treated assessee in default under S.52 of the Income Tax Ordinance, 1979 for not withholding tax under S.50(3) of the Income Tax Ordinance, 1979---Validity---Interest payable to a non-resident company in respect of foreign loan utilized for foreign industrial investment of Pakistan was exempt from the income tax under Cl.(77-A) of the Second Schedule of the Income Tax Ordinance, 1979---No provision for filing of application existed or was a condition precedent; it had not been specifically provided in Cl. (77-A) of the Second Schedule of the Income Tax Ordinance, 1979 that assessee will file an application to the Deputy Commissioner of Income Tax---Interest on foreign exchange loan was exempt from tax and assessee was not required to withhold any amount of income tax on the interest income.

1993 PTD 722 rel.

Mian Muhammad Faisal Banday, A.C.A. for Appellant.

Mohy-ud-Din Ismail, D.R. for Respondent.

2008 P T D (Trib.) 634

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

M.A. (AG) No.15/LB of 2007 and I.T.A. No.474/LB of 2005, decided on 6th June, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.29(3)(b), 5(1)(c) & Third Sched. Rr.7/8(5)---Cost of acquisition and consideration for transfer, how to be determined---Estimation of sale rate of fabrics. by the Inspecting Additional Commissioner as Assessing Officer without prior approval of concerned Commissioner of Income Tax---Validity---Where prices of assets were not ascertainable for determining the price in accordance with fair market value approval of the Inspecting Additional Commissioner in writing was a mandatory requirement---Admittedly, the price of asset as per assessment order was not ascertainable and for determining the price in accordance with the market value the approval was pre-requisite which had not been fulfilled---Order passed by the Additional Commissioner had become nullity in the eyes of law as the mandatory provision of law had been ignored but the First Appellate Authority, without any justification, had remanded the matter to the Assessing Officer giving further chance to fill in lacunae which was not permissible under the law---Orders of First Appellate Authority and the Assessing Officer to the extent of determination of the value of sale of fixed assets were vacated and the Taxation Officer was directed to accept the value declared by the assessee.

1997 PTD (Trib.) 853 ref.

Shahbaz Butt for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2008 P T D (Trib.) 666

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

M.A. No. 530/LB of 2007 and I.T.A. No.7438/LB of 2005, decided on 21st February, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S.221---Rectification of mistake---Miscellaneous application before Appellate Tribunal for recall of order---Application was dismissed by the Appellate Tribunal as the order had been passed after hearing both the sides as well as treatment meted out by the First Appellate Authority was upheld by the Appellate Tribunal against which no rectification application was filed before the First Appellate Authority as no mistake was apparent from the record.

1976 PTD 109 rel.

Mrs. Sabiha Mujahid, D.R. for Applicant.

Ahmad Nadeem Ahsan for Respondent.

2008 P T D (Trib.) 679

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 7261/LB of 2005 and 1291/LB of 2006, decided on 28th September, 2007.

(a) Income Tax---

----Company---Amalgamation of companies---Shares---Goodwill---Cash payment---Issuance of shares in lieu of goodwill was a payment equating with cash payment.

(b) Income Tax---

----Company---Merger of company---Shares---Treatment of value of shares against the goodwill as notional value---Validity---As result of merger of the assessee company and the amalgamating company shares were issued in lieu of goodwill of the amalgamating company---Taxation Officer erred in law while treating the value of the shares against the goodwill as notional value---Even otherwise, under the principle of accounting, goodwill had always been considered an item of balance sheet, and shown as an asset though intangible.

1999 PTD (Trib.) 2152 and Seth Kishori Lal Babulal v. C.I.T. (1963) 49 ITR 502 rel.

(c) Income Tax---

----Goodwill---Explained.

1974 PTD 1; Black's Law Dictionary, Sixth Edition; North Clackamas Community Hospital v. Harris C.A. Or., 664 F.2nd 701, 706 and Bump v. Steward, Wimer & Bump, P.C. Lowa, 336 N.W. 2nd 731, 736 rel.

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

----S.24---Deductions not admissible---Intangibles---Goodwill---Difference in value between the net assets and the purchase price at the time of merger of company was goodwill which was purchased through issuance of shares---Section 24 of the Income Tax Ordinance, 1979 allowed writing off of intangibles assets and the same could be claimed as an expense by the assessee---Order passed by the First Appellate Authority was confirmed by the Appellate Tribunal.

1999 PTD (Trib.) 2152 and Seth Kishori Lal Babulal v. C.I.T. (1963) 49 ITR 502 ref.

(e) Income Tax---

----Capital gain---Receipts arising out of sale of shop was capital receipt---Treatment accorded to the assessee on the issue by the First Appellate Authority was confirmed.

2006 PTD (Trib.) 1979 rel.

(f) Income Tax---

----Capital gain---Allocation of expenses---Expenditure actually incurred by the assessee on earning the exempt income could be set off against the exempt income---Assessee declared gross gain after deducting the expenses incurred in respect thereof, and after setting off these expenses against the said gain, the net gain was declared---Since assessee had already set off the actual expenses relating to the earning of capital gain, no expenses could be allocated to exempt income.

2005 PTD 2586 rel.

M. Asif, D.R. for Appellant.

Yousaf Saeed, F.C.A. for Respondent.

2008 P T D (Trib.) 691

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 7438/LB of 2005, decided on 7th August, 2007.

Income Tax Ordinance (XXXI of 1979)---

----S.59(1)---C.B.R. Circular No.7 of 2002 dated 15-6-2002, Paras.9(a)(ii), & 1.2, Explanation (iii)---Self assessment---Selection of case for total audit---First Appellate Authority directed the Assessing Officer to accept the return under Self-Assessment Scheme on the ground that an existing assessee took over the business of another existing assessee---Comparison of tax with tax payable by the successor was no doubt on the higher side and return filed under Self-Assessment Scheme had duly fulfilled the conditions of the Explanation of clause (iii) para. 1.2 of the C.B.R. Circular No.7 of 2002---No interference was warranted by the Appellate Tribunal and order of First Appellate Authority was upheld---Appeal filed by the department was dismissed.

Manzoor Hussain Shad, D.R. for Appellant.

Ahmad Nadeem Ahsan, I.T.P. for Respondent.

2008 P T D (Trib.) 701

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.637/LB of 2006, decided on 19th May, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66, 63/66A, 62 & 64---Limitation for assessment in certain cases---Order had been made under S.66A of the Income Tax Ordinance, 1979 on 15-2-2001 and Taxation Officer had made the order in consequence of giving effect to that order on 14-2-2005, which should have been made at any time within two years from the end of financial year in which such order was received---Admittedly, order under S.66A of the Income Tax Ordinance, 1979 cancelling the original assessment had been made on 15-2-2001 and in compliance with that order, the assessment order under Ss.66A/63 or 62 of the Income Tax Ordinance, 1979 had to be made on or before 30-6-2003, but the Taxation Officer had made the order on 14-6-2005, which was barred by time---If otherwise appeal filed by the assessee before the Appellate Tribunal was also given consideration, even then, the appellate Tribunal had decided the matter on 17-10-2003 while assessment had to be made within one year from the end of the financial year in which the said order was received by the Assessing Officer---First Appellate Authority had mentioned in its order that order of Appellate Tribunal was received on 30-11-2003 and assessment had to be made within one year from the end of the financial year in which the said order was received, but the order had been passed on 14-6-2005, which was barred by time limitation---Order passed by the Taxation Officer under Ss.63/66A dated 14-6-2005 being passed after the period of limitation, was void ab initio and illegal and was cancelled---Declared return was restored and appeal filed by the assessee was allowed by the Appellate Tribunal.

2000 PTD (Trib.) 3377 ref.

Nadeem Munawar for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2008 P T D (Trib.) 718

[Income-tax Appellate Tribunal Pakistan]

Before Javed Iqbal, Judicial Member and Liaqat Ali Khan, Accountant Member

I.T.As. Nos. 758/PB to 762/PB of 2004, decided on 21st February 2007.\

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

----S.50(4)---Constitution of Pakistan (1973), Art.146(3)---Deduction of tax at source---Service charges---Retention of 5% service charges by the Provincial Government on deduction of tax at source---Validity---Issue of retaining of 5% of deducted amount as service charges was covered by Art.146 of the Constitution, was not for the forum of appellate Tribunal to decide as there was a mechanism for resolving of dispute between the Federal Government and the Provincial Government---Such was basically an issue between two governments i.e. Provincial and Federal Government and the same should have been taken up through the Central Board of Revenue with the Federal Government for resolving the problem as had been done by the Punjab Government.

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

----S.50(4)---Deduction of tax at source---Provincial Government---Finance Secretary---Accountant-General---Responsibility of deduction of tax---Finance Secretary though was the principal accounts officer of the Provincial Government as he was the custodian of all finances of the Province but he was not strictly responsible for withholding of taxes as he was not disbursing payments to various recipients under the provisions of S.50(4) of the Income Tax Ordinance, 1979---Responsibility for such disbursement was of the Accountant General to whom such amounts were transferred through budget documents after due sanctions by the Provincial Legislature who in turn had authorized various subordinate Account Officers for disbursement of such payments to various recipients and to contractors/service providers---Principal ,,accounts officer figured nowhere in this scheme of things as he was not the paying authority responsible to withhold taxes.

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

----S.50(4)---Deduction of tax at source---Notice issued on 25-2-2004 requiring to deposit the tax by 28-6-2004 was delivered through Fax and Circle Inspector but nowhere was mention of treating the Finance Secretary of Provincial Government as the person responsible for not depositing the amount retained as service charges---Whole exercise was to pressurize the appellant to pay, so that the yearly budgetary target fixed could be achieved---Not only the appellant had been treated as a person responsible by following the provisions of S.50(4) of the Income Tax Ordinance, 1979 but the appellant could not be treated as a defaulter since the obligation to deduct/deposit the tax had been made---Entire exercise had been misplaced and the appellant had been wrongly treated to be a person responsible for deduction of taxes under S.50(4) of the Income Tax Ordinance, 1979---Order of both the forums below were not maintainable and were annulled by the appellate Tribunal.

1969 SCMR 212; 2003 PTD (Trib.) '2287; 2003 PTD 1167; 2005 PTD (Trib.) 1303 and 1992 PTD 342 ref.

Nazir Ahmad for Appellant.

Yousaf Ghaffar, D.R. assisted by Malik Akhtar Hussain for Respondent.

2008 P T D (Trib.) 752

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 5637/LB and 5638/LB of 2005, decided on 7th August, 2007.

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

----Ss. 143-B, 80C, 50(4)(4A), 56, 62 & 63---Statement regarding certain assessees---Assessee filed statements declaring commission---Tax was not deducted at source on commission and the assessee itself paid the amount of tax---Assessment was framed under normal law by the Assessing Officer---Validity---Although no tax under S.50(4) of the Income Tax Ordinance, 1979 was deducted, which was deductible under S.50(4A) of the Income Tax Ordinance, 1979, but non-deduction by withholding agent could not deprive the assessee of facility being covered under the proviso to S.80C(4) of the Income Tax Ordinance, 1979, as the law would follow the course as provided under the Income Tax Ordinance, 1979 for such default, but it would not be a tourney to punish/penalize the recipient for the default of the taxpayer---Provisions of S.80-C of the Income Tax Ordinance, 1979 were applicable and by filing statement under S.143-B of the Income Tax Ordinance, 1979, the assessee had not taken any illegal benefit of presumptive tax regime, as the provisions of Ss.55, 56, 62 or 63 of the Income Tax Ordinance, 1979 were not applicable---Assessee had rightly not filed regular return on IT-11---Order of First Appellate Authority was vacated and the assessments were cancelled by the Appellate Tribunal in circumstances.

1998 PTD (Trib.) 1201 and 2005 PTD (Trib.) 986 ref. I.T.As. Nos. 1682-1684/LB of 1997 rel.

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

----Ss. 80C(2)(1) & 143-B---Tax on income of certain contractors and importers---Services---Exclusion of services from presumptive tax regime had been made applicable for the period relevant to assessment year 2002-2003 and as per provisions of law i.e. S.80-C(2)(1) of the Income Tax Ordinance, 1979 up to assessment year 2000-2001 only the doctors, lawyers, accountants etc. were excluded from presumptive tax regime---Other services were excluded for the assessment year 2002-2003 by virtue of proviso added to S.80-C of the Income Tax Ordinance, 1979.

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

----S.62---Assessment on production of books of accounts, etc.---Opportunity of being heard---Assessing Officer, who had passed the assessment order was not the Officer, who had heard the case of the assessee on various dates and also on the last date of hearing---Assessment order passed in the circumstances was without giving a personal hearing to the assessee, which was not only violative of the principles of natural justice, but also of the statutory requirements of S.62 of the Income Tax Ordinance, 1979.

1999 PTD. 1358 rel.

(2006) 93 Tax 279 (H.C. Ind.) ref.

Rehan Bashir, ITP and Irfan Ahmed Pasha for Appellant.

Ashraf Ahmed Ali and Mrs. Sabiha Mujahid, DRs for Respondent.

2008 P T D (Trib.) 779

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.As. Nos. 2080/LB to 2082/LB of 2006, decided on 12th February, 2008.

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

----Ss. 62, 79 & 80AA---Assessment on production of accounts, evidence etc.---Income from transactions with non-resident---Fee for technical services---Assessee (received payment of royalty in respect of use of trademarks under an agreement as well as free for technical services provided for development of products---Assessing Officer invoked the provisions of S.79 of the Income Tax Ordinance, 1979 and considered part of the receipts on account of royalty and fees for technical services as dividend income---Annulment of such assessment was by the First Appellate Authority---Validity---Assessing Officer was of the view that the payment of royalty, by the local company, at a uniform rate did not match with the number of trademarks used in relation to any particular products---Taxation Officer had failed to appreciate that the rate of royalty was agreed in the context of aggregate trademarks---Royalty would be received for aggregate trademarks irrespective of the number---View of Taxation Officer was based merely on presumption---Contribution of the assessee's entity towards business management, strategy development, development of milk sourcing, development of milk products, safety and quality assurance procedures etc. of the local company clearly supported the charge of fee on this account---Such process had clearly improved the business efficiency, volumes and the image of the local company in the market justifying the receipt and its classification---View regarding absence of growth in business of the local company after payment of amounts to assessee company was not based on proper reasoning---After achieving a particular level of business volumes extraordinary and sophisticated business processes were required to be employed to penetrate further in the market and it also made reasonable business sense---Growth in the business volumes of the local company was there, which was undoubtedly being achieved only due to technical assistance by the assessee in the hard competition---First Appellate Authority rightly annulled the orders and had directed to accept the declared version---No interference was warranted by the Appellate Tribunal in the circumstances.

1991 PTD 488 and PLD 1991 Kar. 158 rel.

(b) Income-tax---

----Agreement---Intention of the parties to the agreement could only be analyzed by the conduct of the parties.

1991 PTD 488 rel.

Ghazanfar Hussain, D.R. for Appellant.

Asim Zulifqar, ACA for Respondent.

2008 P T D (Trib.) 787

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.As. Nos. 5924/LB to 5928/LB, 1582/LB to 1587/LB of 2005 and 6979/LB of 2004, decided on 17th January, 2008.

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

---Ss. 161 & 205---S.R.O. 586(I)/91, dated 30-6-1991---Failure to pay tax collected or deducted---Various additions out of profit and loss account---Default had been determined by the Taxation Officer on the basis of presumption and stock phrase and not a single instance of payment had been specifically pointed out---Order vacated by the First Appellate Authority was upheld by the Appellate Tribunal in circumstances after considering the details submitted by the assessee.

2004 PTD 1293; 2004 PTD 1096; Vol. 10 No.7 Tax Forum 34 and 2001 PTD (Trib.) 1816 rel.

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

----Ss. 161, 129 & 205---Failure to pay tax collected or deducted---Limitation---Second round of appeal---Assessee pleaded that order passed by the Taxation Officer was time barred and was hit by time limitation---Order was upheld by the First Appellate Authority with the remarks that since limitation issue was not highlighted by the taxpayer in the first round, the same could not be invoked in the second round of appeal--Validity-Issue of limitation being the legal issue could be raised at any stage of the proceedings---Order of First Appellate Authority was vacated and order passed by the Taxation Officer under Ss.161/129/205 of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal.

2003 PTD (Trib.) 1167; 2003 PTD (Trib.) 1167; I.T.As. Nos. 3056/LB of 2003; 5187/LB of 2002; 3057/LB of 2003; I.T.A. No.5670/LB of 2002 and 3530/LB of 2003 rel.

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

----Ss. 161 & 153(1)(c)---C.B.R. Circular No. 12 of 1996, dated 28-8-1996---Failure to pay tax collected or deducted---Jurisdiction---Assessee contended that order of Taxation Officer was without jurisdiction as the jurisdiction lay with Officer holding jurisdiction over the assessee in default while the taxpayers jurisdiction lay with the Large Tax Payers Unit at L'---Validity---Taxation Officer at placeK' had no jurisdiction to pass the order without any justification---Order of First Appellate Authority was vacated and order passed by the Taxation Officer was cancelled by the Appellate Tribunal being without jurisdiction.

Ghazanfar Hussain, DR for Appellants (in I.T.As. Nos.5924/LB to 5928/LB of 2005).

Asim Zulifqar Ali, ACA and Humayun Hayat, ACA for Respondents (in I.T.As. Nos.5924/LB to 5928/LB of 2005).

Asim Zulifqar Ali, ACA and Humayun Hayat, ACA for Appellants (in I.T.As. Nos.1682/LB to 1587/LB of 2004 and 6979.LB of 2004).

Ghazanfar Hussain, DR for Respondents (in I.T. As. Nos.1682/LB to 1587/LB of 2004 and 6979.LB of 2004).

2008 P T D (Trib.) 800

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos. 1663/LB to 1667/LB of 2006, decided on 18th October, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 30, 31, 80CC, 143-B, 50(5A) & 62---Income Tax Rules, 1982, R.190(1)---C.B.R. Circular No.14 of 1992, dated 1-7-1992---Income from other sources---Assessee an exporter---Interest income---Taxation---Assessee company contended that it was not liable to pay tax separately on any amount received from bank as interest as income covered under S.80CC of the Income Tax Ordinance, 1979 was not confined to export receipts only, but the entire income was relating to export and assessee was not obliged to file separate returns in respect of such income---Validity---Orders were set aside by the Appellate Tribunal with the directions to ascertain, whether the amount claimed as interest income was purely from the export business and had been deposited regarding transactions related to export excegencies---If it was established that the amounts deposited in the banks were purely due to the export excegencies, then that could not be assessed under S.30 of the Income Tax Ordinance, 1979 as "Income From Other Sources"---Otherwise, if the amounts deposited in the bank were only to earn interest income, then that will be assessed under S.30 of the Income Tax Ordinance, 1979---Order of First Appellate Authority was vacated and assessments were set aside to be made in accordance with such directions.

CIT v. National Newsprint and Paper Mills Limited (1978) 114 ITR 388; Punjab Cooperative Bank Limited v. CIT (1940) 8 ITR 635 (Privy Council); CIT v. Vikram Cotton Mills (sic) ITR 592 (SC) (sic) and CIT v. Ganeshdas Sreeram 180 ITR 397 ref.

PLD 1962 SC 128; 2002 PTD (Trib.) 107; 1999 PTD (Trib.) 708 and 2003 PTD (Trib.) 322 rel.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Rizwan Arshad for Respondent.

2008 P T D (Trib.) 814

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

W.T.As. Nos. 451/LB to 457/LB of 2006, decided on 1st December, 2007.

Wealth Tax Act (XV of 1963)---

----Ss. 5(1)(xv)(i) & 16(3)---C.B.R. Circular No.3(2)/PT-III/90 (Pt.), dated 9-11-1990---Exemption in respect of certain assets---Shares in lieu of machinery---Exemption was denied on the ground that amount invested in purchase of machinery enjoyed exemption and since the assessee was holding shares and not the machinery, the exemption was not admissible to the assessee---Conversion of investment in machinery into the shares disentitled the assessee from allowability frown exemption---Assessee clarified that exemption was available in respect of assets brought by non-resident assessee from abroad and once that asset had been disposed of sale proceeds of the assets will no longer be covered by the exemption---Assets had never been disposed of as the assessee being Director had held the shares of the company in lieu of the asset brought by him from abroad and as neither, there was any change in the shape of assets nor the assets had been used for any other purpose, except for the purpose it was brought, only on the basis of presumption, the claim could not be disallowed---Validity---Until and unless it was established that the assessee had changed the status of the assets, the exemption could not be disallowed---Assessing Officer had failed to established that the assessee in any way changed the status of the assets, as he was shareholder of the company in lieu of assets brought from abroad and was entitled to exemption---Orders of Assessing Officer were vacated by the Appellate Tribunal and the Assessing Officer was directed to allow the exemption claimed by the assessee.

W.T.A. No.180 of 2001 rel.

Zulfiqar Ali Sheikh, I.T.P. and Asim Zulfiqar, C.A. for Appellant.

Mehboob Alam, D.R. for Respondent.

2008 P T D (Trib.) 851

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.A. No. 6218/LB of 2005, decided on 1st September, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.108(a), 116 & 62---Penalty for failure to furnish return of total" income and certain statements---Limitation---Penalty imposed by the Taxation Officer after lapse of eight years, which was also barred by time due to mandatory provisions of law, had rightly been deleted by the First Appellate Authority---Order was not interfered by the Appellate Tribunal in circumstances.

2004 PTD (Trib.) 1218; 1994 PTD 199 and (1997) 35 Tax 39 rel.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Nemo for Respondent.

2008 P T D (Trib.) 859

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

M.As. (Cond.) Nos. 13/LB to 15/LB and I.T.As. Nos.361/LB to 363/LB of 2007, decided on 1st September, 2007.

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

----Ss.129(4) & 131(2)(d)---Income Tax Ordinance (XXXI of 1979), S.132(4)---Decision in appeal---Service of order on "Authorized Representative" of the assessee---Legality---Section 132(4) of the Income Tax Ordinance, 1979, provided that on disposal of appeal, Appellate Additional Commissioner shall communicate the order passed by him to the appellant and to the Commissioner---Likewise, under S.129(4) of the Income Tax Ordinance, 1979, similar provisions had been enacted that after deciding the appeal, the Commissioner (appeals) shall serve his orders on the appellant and the Commissioner; in both the Ordinances, the word "shall" had been used regarding service of orders passed by the First Appellate Authority and it had been mentioned that the order will be served upon the appellant and the Commissioner and the word "representatives" had not been provided---Although, the Authorized Representative represented the assessee before First Appellate Authority, but order under the law was to be served upon the appellant, which did not include representative of the appellant---Due to clear provisions of law, the order of First Appellate Authority shall be communicated to the appellant and to the Commissioner---Department failed to establish that order of First Appellate Authority had been served or communicated to the assessee/appellant---Application for condonation of delay was allowed and the main appeals were directed to be fixed for hearing after issuing notices to both the parties.

I.T.A. No.664 of 1999; 2007 PTD 1; 1984 PTD (Trio.) 143; 1986 PTD (Trib.) 188; (1960) 2 Tax (Supply) 279; (1978) 38 Tax 148 (India HC); 1988 PTD 135; (1960) 2 Tax (Supply 166); 2002 PTD 608; 2002 PTD 506; 2003 CLC 1841; 1989 SCMR (sic); 2005 PTD 2586 and (2005) 91 Tax 419 (Trib.) ref.

2007 SCMR 49; 2004 PTD 1784; Ramnivas Hanumanbux Somani v. S. Venkataraman. Income Tax Officer 1989 PTD 843; 2002 PTD 3998; 19 Tax 01; 1989 PTD 817; 2005 PTD 2376; PLD 1983 SC 385; 2001 SCMR 1429; 2001 SCMR 1822 and AIR 1938 Nagpur 156 distinguished.

Ch. Anwaar-ul-Haq for Applicant.

Rana Javed Iqbal, C.I.T.(LTU) for Respondent.

2008 P T D (Trib.) 885

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos. 1099/LB and 1100/LB of 2006, decided on 1st September, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss.62 & 24(ff)---Assessment on production of accounts, evidence etc.---Rejection of accounts---Additions/disallowances---Assessing Officer in the assessment order had accepted that in response to notice, assessee had filed reply along with necessary documents and details, but in the assessment order; nowhere it had been mentioned that the Assessing Officer, after considering that evidence, had issued any further notice confronting the assessee regarding defects in the evidence/ documents/details furnished by him---Assessment order showed that returns of the assessee were accompanied by details of trading, profit & loss accounts, wealth statement, personal expenditure statement, bank statement, copies of tax payment challans and evidence of deduction of tax, but nowhere in the assessment order, it had been pointed out that the assessee was ever asked by the Assessing Officer to produce any further evidence in this regard---Likewise, Assessing Officer made the disallowances out of telephone, transportation, hiring charges and washing charges, without giving any specific reason for disallowance under each of the expenses claimed by the assessee---For making disallowances, reason under each of the expenses should be given---No reason for the disallowance made by the assessee was given---First Appellate Authority ignored all these facts and assessment had been made, without considering previous history of the case as well as without giving any reason for the estimation---Receipts declared by the assessee were directed to be accepted, additions made under S.24(ff) of the Income Tax Ordinance, 1979 were deleted and the disallowance under all the heads were deleted by the Appellate Tribunal in circumstances.

2005 PTD (Trib.) 814; 1998 PTD 390; 2002 PTD 407; 2004 PTD (Trib.) 1642; 1997 PTD (Trib.) 853; 2006 PTD (Trib.) 2179; 2006 PTD (Trib.) 2344; 2003 PTD (Trib.) 2157; 2003 PTD (Trib.) 1803 and 2003 PTD (Trib.) 1586 ref.

Ijaz Ali Bhatti for Appellant.

Rai Tallat Maqbool, D.R. for Respondent.

2008 P T D (Trib.) 901

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 6998/LB and 6999/Lii of 2005, decided on 4th June, 2007.

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

----S.62---Assessment on production of accounts, evidence etc.---Flour Mill---Rejection of sales---Assessee filed detailed documents regarding declared version, which had been mentioned in the assessment order itself---All required documents were furnished in response to notice under S.62 of the Income Tax Ordinance, 1979 but the Taxation Officer in concluding paras had given observation that "A.R. did not furnish books of accounts on the plea that the same had not been properly maintained"; moreover, no evidence in respect of expenses claimed was produced except of electricity bills, and salaries paid to employees---Taxation Officer had nowhere mentioned that except the documents which he was admitting and were produced by the assessee, he had further asked the assessee to furnish further documents and the declared version had been rejected---For the assessment year 2001-02, assessment had been made on the basis of Inspector's report, who had reported that the factory had worked only for three months, but the Taxation Officer had rejected the declared version without any justification---Substantial increase had been shown in sales declared, which had been 'rejected without justification---Appellate Tribunal directed Taxation Officer to accept the declared sales for both the years in circumstances.

(b) Income Tax---

----Gross profit rate---Flour Mill---Declared gross profit rate at 2.9% seemed to be very reasonable---Many cases of Flour Mills had been placed before Appellate Tribunal wherein gross profit rate less than what was declared by the assessee had been declared or accepted, despite the fact that the years under review were first years of the assessee; while the cases furnished by the assessee were of the established Flour Mills.

(c) Income Tax---

----Profit & Loss expenses---Details furnished in respect of Profit & Loss expenses had been in the assessment order, but in the concluding paras, disallowances had been made with the observation that no evidence in this respect had been furnished by the assessee---No justification existed for rejection of accounts and the First Appellate Authority had also not considered these facts while upholding the treatment meted out to assessee by the Taxation Officer---Declared sales, gross profit rate and claim of expenses out of Profit & Loss account 'were directed to be accepted for both the years---Assessee's appeal was allowed by the Appellate Tribunal.

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

----Third Sched., R. 1(3)(b)---C.B.R. Circular No. 6 of 1979 dated 8-9-1979---Allowances for depreciation---Depreciation allowance of machinery claimed for the whole year was not allowed but was restricted only for three months, for the period of working and the rest of the amount was added-back----Validity---Taxpayer shall be allowed deprecation to which he was entitled under the law, notwithstanding the fact of his claim---Through Finance Ordinance, 1980, certain words were omitted and now repreciation was admissible on assets even if used for a single day during the income year---No justification existed for disallowing the claim of depreciation---Appellate Tribunal directed the Taxation Officer to allow depreciation claimed by the assessee.

Sh. Muhammad Yousaf, I.T.P., for Appellant.

Mrs. Sabiha Mujahid, DR for Respondent.

2008 P T D (Trib.) 916

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.A. No.1386/LB of 2006, decided on 1st September, 2007.

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

----Ss.24(c) & 50(4A)---Deduction not admissible---Insurance-company--Addition was made by rejecting the pleas of the assessee that no element of payment was involved in commission transaction and it was a general practice of insurance companies that premium in respect of insurance business ceded by other insurance companies was distributed after charging their commission/service charges and no physical payments were involved in these transactions---Validity---Assessee had incurred the expenses through general entry and such expenses could not be disallowed---First Appellate Authority had rightly deleted the additions made under S.24(c) as well as charge of tax under S.50(4A) of the Income Tax Ordinance, 1979.

2003 PTD 589; 1999 PTD (Trib.) 2172 and 2002 PTD (Trib.) 1952 rel.

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

----Ss. 24 & Fourth Sched., R. 5(c)---Insurance Act (IV of 1938), S.40C---Insurance Ordinance (XXXIX of 2000), Ss.167(h) & 56(s)---Insurance Rules, 1958, Preamble--Deduction not admissible---Insurance company---Management expenses. .-Curtailment of-Validity-Taxation Officer disallowed the claim of management expenses following R.5(c) of the Fourth Schedule of the Income Tax Ordinance, 1979 which had become redundant due to the repeal of Insurance Ordinance, 2000 and the subsequent rules made thereunder---First Appellate Authority rightly deleted the disallowance with the observation that "the fact cannot be denied that the provisions of law on which the Assessing Officer had relied for making the addition did not exist at the time of assessment"---No limitation as to the curtailment of management expenses had been laid down by the rules made by the Securities and Exchange Commission of Pakistan---Curtailment of expenses having been based on non-existent provisions were deleted and departmental appeal was dismissed by the Appellate Tribunal.

1991 SC 842 (sic); 2005 PTD (Trib.) 474 and Messrs Premier Insurance Company's case I.T.A. No.2171/KB of 2001 ref.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Iqbal Hashmi for Respondent.

2008 P T D (Trib.) 929

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 536/LB and 537/LB of 2006, decided on 2nd July, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5A), 122(3), 114(6) 177(4)(6) & 115(4)---Income Tax Ordinance (XXXI of 1979), Ss.80C, 143-B, 50(4) & Second Sched., Part-IV, Cl. (9)---C.B.R. Circular No.11 of 1998 dated 25-7-1998---C.B.P. Letter C. No.1(1)S.(ITAS) 2004 dated 28-7-2004---Amendment of assessment---Tax years 2003 and 2004---Assessment was amended on the ground that taxpayer exercised option to be assessed under presumptive tax regime by filing statement under S.143-B of the Income Tax Ordinance, 1979 for the assessment year 1002-2003 and the said option was irrevocable for tax year 2003 and tax year 2004 and taxpayer was obliged to file statement under S.115(4) of the Income Tax Ordinance, 2001---Validity---No declaration had been furnished opting for the presumptive tax regime---No justification existed for amending the order on the basis of statement filed by the assessee under S.143-B of the Income Tax Ordinance, 1979 which had been upheld by the First Appellate Authority without any basis---Order of First Appellate Authority for the two years was vacated and orders passed under S.122(5A) of the Income Tax Ordinance, 2001 were cancelled by the Appellate Tribunal with the direction to accept the declared version and issue refund vouchers in accordance with law.

Zeeshan Riaz, A.C.A. for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2008 P T D (Trib.) 1007

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Chairperson and Muhammad Faiyaz Khan, Accountant Member

I.T.As. Nos.6557/IB, 6558/IB 1475/IB, 1486/IB of 2005 and 1170/IB to 1172/IB of 2006, decided on 8th February, 2008.

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

----Second Sched., Part-I, Cl. (86), Ss.64 & 62---Exemption---Limitation---Assessments were annulled by the First Appellate Authority by holding that those were made on a day which was a "public holiday"---Assessment order having been annulled, there was hardly any occasion to assail the order by the assessee in further appeal as the assessee's claim of exemption from charge of income tax on the profit declared from the educational institution had stood accepted---No assessment order being in the field, the assessee's appeals were dismissed by the Appellate Tribunal being infructuous.

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

----S. 64(3)---C.B.R. Letter No.1(8)-Rev-Bud/98, dated 26-6-2002---Limitation for assessment---Public holiday---Order was passed on a day when there was a "public holiday"---Assessee contended that there was "public holiday" on 30th June, 2002 and limit of time was available to the Assessing Officer to pass the order was till 29th June, 2002---Validity---Notice issued under S.56 of the Income Tax Ordinance, 1979 was served upon the assessee on 11-12-1999---Last date on which the order was to be made by the Assessing Officer fell on 29-6-2002 and not on 30th June, 2002 because on the said date, there was a "public holiday" being the "Sunday"---Assessing Officer had become functus officio not to pass the order on any other date falling beyond 29th June, 2002---Since, the order was passed on 30th June, 2002 when the Courts were closed to conduct judicial proceedings, because of a "public holiday" on the said date order was passed by the Assessing Officer without any lawful authority being hit by limitation as provided under S.64(3) of the Income Tax Ordinance, 1979---Assessment annulled by, the First Appellate Authority was not intervened by the Appellate Tribunal.

(c) Word and Phrases---

----Public Holiday---Sunday---Expression "Public Holiday" includes "Sunday" and any other day declared by the government by notification in the official Gazette to be the "Public Holiday".

(d) Income Tax---

----Limitation---Public holiday---Application of period of limitation---Principles---Generally and usually every statute provides limitation to cater the eventualities which may, for the purposes of implementation of its provisions, be required---Some of them relate to filing of suit, appeal or application while some of them pertain to passing or making of orders---As far as suit appeal or application is concerned, where the period of limitation prescribed in the statute expires on a day when the court was closed, that may be instituted, preferred or made on the day when it re-opens which does not mean that the period of limitation prescribed under the law has been extended; it simply permits a suit, appeal or application to be filed on re-opening of the court where period of limitation had expired on the day when the court was closed---Where the order is, to be made, a cut date is always provided so that the proceedings may be concluded within that period of time---Strict adherence to the limit of time provided by the statute for making the order is to be made because question of assumption of jurisdiction is always involved in such situation.

(e) Income Tax---

----Legal Holiday' or aPublic Holiday'---Limitation---Computation---Principles---Order could not be passed on a day when there was a "Legal Holiday" or a "Public Holiday" for the reason that all the judicial proceedings would stand terminated on the day of "Public Holiday" because the Court had ceased to have seisin over the case---Powers to pass the order could not be extended to the next working day by virtue of limitation provided by the statute which stands expired on the day when it was a "Public Holiday"---While counting the period of limitation, the day on which there was a "Public Holiday" was to be excluded.

(f) Income Tax Ordinance (XXXI of 1970)---

----S. 64(3)---C.B.R. Letter No.1(8)-Rev-Bud/98, dated 26-6-2002---Limitation for assessment---Public holiday---All officers were instructed to keep their offices open on 30th June, 2002 vide C.B.R. Letter No.1(8)-Rev-Bud/98, dated 26-6-2002---Purport and the tenor of such letter was to collect taxes and a request was made to the State Bank of Pakistan and the National Bank of Pakistan to remain open in order to ensure proper accounting the payments of taxes and to facilitate the taxpayers---Said letter of Central Board of Revenue, in no way, casts any impact or had any relevance with regard to conducting judicial proceedings or framing of assessment on 30th June, 2002---Even otherwise same had not any binding effect on the courts or the Appellate Tribunal.

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

----S. 20-A---Income Tax Ordinance (XXXI of 1979), S.64(3)---C.B.R. Letter No.1(8)-Rev-Bud/98, dated 26-6-2002---Letter issued by the Central Board of Revenue to keep open the offices on 30th June, 2002 was not published in the official Gazette---All rules, Orders, Regulations and Circulars having the effect of law made or issued under any enactment have to be published in the official Gazette---Section 20A of the General Clauses Act, 1897 deal with the mischief in all those cases where the authorities who were conferred with the. powers to issue instructions or make rules/regulations under the statute could do the same within the secrecy of their offices without publishing the notification or publicizing the same thereby sets a trap for the citizens; under section 20-A notwithstanding the absence of requirement of notification in the statute, all regulations must necessarily be published in the official gazette---Such exercise had not been made by the Central Board of Revenue while issuing the letter directing to remain open the offices on 30th June, 2002.

2005 PTD 53 rel.

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

---Second Sched., Part-I, Cl. (86)---Exemption---Educational institution--Charitable institution---.Exemption was denied by the Assessing Officer that the institution being not established solely for educational purposes rather it was set up for various other purpose which were enumerated in the aims and objectives of the society such as establishment of blood bank, financial aid to the poors, dowers for the girls etc.---Refusal to grant exemption was upheld by the First Appellate Authority after observing that the limitation did not have sole purpose of education Validity-Although the assessee had mentioned other aims and objectives in the memorandum but the fact remained that no material had been gathered to find out as to whether the assessee was carrying on .such activities or not---Mere mentioning other aims and objectives, though also revolve around charitable purposes, did not debar the assessee from availing exemption---Assessing Officer was all out to disbelieve the claim of exemption after grappling with irrelevant material or on account of extraneous considerations which did not empower him to do so---Revenue could have a better case for denying exemption to the assessee if it could bring sufficient material on record to show that the premises owned by the institution had been rented out or the income earned by it had been channelized to other profit earning avenues---Nothing was available on record wherefrom it could be deduced that the surplus arising out of the earning of the school or any part thereof had been distributed amongst the Members of the Board or had been misused by the management---In absence of any evidence to the contrary, exemption to the institution could not be refused under the garb of flimsy or lopsided reasoning---Neither any glaring disability nor any disqualification having been pointed out by the Revenue on the basis of which claim of exemption to the profit earned by the assessee could be denied department had no case---Assessee's claim of exemption had been refused on whimsical inference drawn from the set of facts which were recorded ante, exemption to the educational institution of the assessee was allowed in terms of Cl.86 of the Part-I of the Second Schedule to the Income Tax Ordinance, 1979.

1994 PTD (Trib.) 1294 rel.

Black's Law Dictionary, Fifth Edn.; p.659; 2002 PTD 2832; 2001 PTD 987; 1998 PTD (Trib.) 1099 and 1998 PTD "(Trib.) 1099 ref.

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

----Second Sched. Part-I, Cl.86---Exemption---Educational institution---Ratio and principle---Exemption claimed must be granted to the educational institutions, which are established solely for educational purposes having non-profit motives.

1994 PTD (Trib.) 1294 rel.

Saleem Ahmed, I.T.P. and Khawaja Ali Rauf for Appellant (I.T.As. Nos.6557/IB, 6558/IB of 2005 and 1170/IB to 1172/IB of 2006).

Nemo for Respondent (I.T.As. Nos. 6557/IB, 6558/IB of 2005 and 1170/IB to 1172/IB of 2006).

Nemo for Appellant (I.T.As. Nos. 1475/IB and 1476/IB of 2005).

Saleem Ahmed, I.T.P. and Khawaja Ali Rauf for Respondent (I.T.As. Nos. 1475/IB and 1476/IB of 2005).

2008 P T D (Trib.) 1040

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.As. Nos.1373/LB, 4335/LB, 2947/LB of 1997, 5487/LB, 5378/LB of 1999, 2641/LB, 2996/LB of 2000, 3227/LB of 2002, 5162/LB, 5174/LB of 2003, 3922/LB to 3924/LB, 5129/LB to 5131/LB of 2004 and 1530 of 2005, decided on 23rd January, 2008.

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

----S. 62---Assessment on production of accounts, evidence, etc.---Rejection of book version without confrontation---Assessment had been made on whimsical and fanciful grounds even without considering mandatory requirements of law---Law did not give any arbitrary, unguided, uncontrolled, or naked power to the Assessing Officer---Once it was admitted that books of accounts had been furnished by the assessee, there was no justification to reject the book version without confronting the assessee---Order of First Appellate Authority was vacated,' assessment order was annulled and Taxation Officer was directed to accept the declared version.

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

----S. 62---Assessment on production of accounts, evidence, etc.---Additions out of profit and loss accounts---Additions were made on the basis of stock phrases and not only without meeting the mandatory requirements of S. 62 of the Income Tax Ordinance, 1979 but also without quoting even one instance of un-verifiability---Where books of accounts were being maintained and were produced before the Department, the disallowances should not be made without confronting the assessee and pointing out the defects in the books---Disallowances made by the Taxation Officer were deleted by the Appellate Tribunal.

2003 PTD (Trib.) 1668; 2007 PTD 1483 and 2007 PTD 345 rel.

(c) Income Tax---

----Credit for taxes---Assessee claimed credit for taxes deducted at source, but the same had not been allowed in terms of the claim filed with the returns---Taxation Officer was directed to look into the matter and the same be allowed in accordance with law.

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

----Ss. 23 & 62---Deduction---Bad debts written off---No justification was available regarding addition under the head `Bad Debts Written Off', as the Taxation Officer had made the additions only for the reason that suits for the recovery of the amounts were not filed and that the disputed amounts were not authenticated, despite the fact that books of accounts had been admittedly furnished and the assessee had not been confronted regarding the authenticity of the amounts---Disallowances made in that regard were deleted by the Appellate Tribunal.

Messrs FMC United (Pvt.) Ltd. I.T.A. Nos.836 to 839 & 3759/LB of 2003 and I.T.A. Nos.2061 to 2064, 5113 & 5114/LB of 2003 rel.

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

----Ss. 23 & 62---Deduction---Improvements on leasehold and claimed as a revenue deduction---Assessee being a cellular mobile phone company had built radio towers at various leased locations, which were shown in the financial statements as equipments---In order to protect and safeguard these radio towers, sheds were being built constructed on such premises---Expenditure on this account was claimed as revenue deduction, which according to Department should have been capitalized--Validity---Department in another case had itself allowed improvements on leasehold and as a revenue deduction---Equal treatment should have been extended to the assessee---Case was remanded for reconsideration with the directions to Taxation Officer to allow the similar treatment to the assessee as had been given to another assessee, or to give distinguishable factor from that case.

215 ITR 815, 105 ITR 389, 117 ITR 466, 130 ITR 385, 148 ITR 144, 130 ITR 305 & 148 ITR 99 ref.

N.T. No.06-34-TR-02923 rel.

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

----S. 23, Explanation---Deduction---Mercantile system of accounting---Expenses were partly disallowed by the Taxation Officer for the reason that these had not been paid in the year in which these were booked in the financial statements---Assessee contended that under mercantile system of accounting, the expense was claimable and allowable on the basis of accrual, without any regard to the actual payment---Validity---Expressed provisions of law had made it clear whereby an explanation had been appended to S.23 of the Income Tax Ordinance, 1979 stating that under mercantile system of accounting, the expression "paid" means actually paid or incurred under such method of accounting---Departmental appeal was dismissed, while the appeal filed by the assessee on the issue was allowed by the Appellate Tribunal.

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

----S. 62---Assessment on production of accounts, evidence, etc.---Disallowance out of profit and loss accounts without confrontation of defects from the books of accounts, or quoting any instance of un-verifiability, were deleted by the Appellate Tribunal.

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

----Third Sched: R. 8(8)(e) & S.62---Depreciation allowance---Foreign currency loans from non-resident lenders---Loss on account of devaluation of local currency---Differential amount was claimed as revenue deduction---Addition by the Department on the ground that amount was not an admissible deduction as it was a notional loss and since the expense was not actually realized due to non-payment of the loan amount---First Appellate Authority annulled addition by stating that expense was admissible as the mercantile system of accounting was being followed---Such finding of First Appellate Authority being based on the settled law was upheld by the Appellate Tribunal and Departmental appeal was dismissed.

2004 PTD 151; 1991 PTD 171; 63 Tax 14 and 1993 PTD 1327 rel.

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

----S. 52---Liability of persons failing to deduct or pay tax---Addition on account of `rent' expense for non-deduction of tax---Deletion of such expense as the provisions of S. 52 of the Income Tax Ordinance, 1979 were invoked---Validity---Assessee could not be subjected to double jeopardy and where proceedings under S.52 of the Income Tax Ordinance, 1979 were concluded, simultaneous disallowance of expenditure was not permissible---Finding of First Appellate Authority being supported by settled law were upheld by the Appellate Tribunal and Departmental appeal was dismissed.

2002 PTD (Trib.) 3118 rel.

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

----S. 50 & Second Sched: Part-I, Cl.135---Deduction of tax at source---Exemption---Assessment years 1998-99 & 1999-2000---Income of the recipient was specifically exempt in the relevant period and no withholding was required---For assessment year 2000-01, assessee produced evidence that the recipient had already discharged the incidence of tax on its income, no adverse inference could have been taken on account of non-deduction of tax-s-First Appellate Authority deleted the addition for assessment years 1998-99 and 1999-2000 and set the same for assessment year 2000-01---No irregularity in such findings having been noticed the orders were maintained by the Appellate Tribunal and departmental appeals were dismissed.

1999 PTD (Trib.) 2172 rel.

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

----Ss. 24(b) & 52---Deduction not admissible---Loans from non-resident lenders---Interest was payable against such loans---No actual payment was made and only interest expense had accrued---Such expense was disallowed on the grounds that no tax was withheld under S.24(b) of the Income Tax Ordinance, 1979---Assessee contended that since actual payment was not made, the incidence of withholding could not be said to have arisen---Validity---Incidence of withholding is attracted at the time of actual payment and the expense could not be disallowed by invoking S.24(b) of the Income Tax Ordinance, 1979 for non-deduction of tax in the year of accrual in the books of accounts simply for the reason that when an assessee was not by law required to deduct tax, he could not be expected to do so---Provisions of law were to be read and applied as a whole and the system of accounting could not be disturbed on impossible propositions---Tax was not required to be deducted at the time of accrual, the expense could not have been disallowed or upheld by the authorities below---Appeal of the assessee was accepted and the departmental appeals were rejected by the Appellate Tribunal.

1985 PTD 698 and 2003 PTD 589 rel.

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

----Ss. 52 & 62---Liability of persons failing to deduct or pay tax---Corporate recharge expenses---Claim was disallowed on alleged non-withholding of tax at source---Addition was deleted by the First Appellate Authority on the ground that since the Assessing Officer had invoked S.52 of the Income Tax Ordinance, 1979, the assessee could not be subjected to double jeopardy through simultaneous disallowance---For assessment year 2000-01, the matter was remanded back for fresh adjudication on the basis of argument of the assessee that non actual payment was made the question of withholding did not arise in the year under consideration---No irregularity in the findings having been found, the departmental appeals were rejected by the Appellate Tribunal.

2002 PTD (Trib.) 3118 rel.

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

----S. 23---Deduction---Provisions for obsolete stock---Claimed deduction on account of `provisions for obsolete stock' was allowed in view of the matter being already settled by the Appellate Tribunal and thus the Departmental appeal was dismissed.

I.T.A. No.706/LB of 2006 rel.

(n) Income Tax---

----Set-off of loss---Set-off of business loss against other income was held to be permissible.

Messrs Crescent Steel and Allied Industries Ltd., decided on 17-5-2007 rel.

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

----S. 23---Deduction---Mark-up on running finance---Part of the claim was arbitrarily held to be capital expenditure---Expense being fully allowable under the law was wrongly disallowed by the Assessing Officer and the First Appellate Authority upheld the same without any justification, which was deleted by the Appellate Tribunal.

1993 PTD 758 rel.

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

----S. 62---Assessment on production of accounts, evidence, etc.---Estimation of sale proceeds of fixed assets disposed of--,Estimated sale proceeds were reduced by the First Appellate Authority---Assessee contended that the case, with foreign shareholding, maintaining proper books of accounts which were even otherwise subject to internal and external audits, such addition/estimation, based on surmises and assumptions, was not comprehensible---Such being not supported by any provisions of law, or precedent was liable to be disapproved--Contention of the assessee was accepted and the addition was deleted by the Appellate Tribunal---Assessee's appeal was allowed and the cross appeal filed by the Department was dismissed.

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

----S. 80C---Tax on income of certain contractors and importers---Pro­-ration of expenses to income under S.80C of the Income Tax Ordinance, 1979---Assessing Officer pro-rated expense to activities covered within the scope of S.80C of the Income Tax Ordinance, 1979 on the basis which were contrary to the established parameters/basis for the attribution of common expenses---Matter was remanded for re-examination by the First Appellate Authority---Decision of the First Appellate Authority being well based was upheld by the Appellate Tribunal and the departmental appeal was dismissed.

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

----S. 52---Liability of persons failing to deduct or pay tax---Royalty, payment of---No deduction of tax owing to the fact that royalty payments to residents did not fall under any of the withholding provisions of the Income Tax Ordinance, 1979---Since payee was also exempt from levy of tax and no withholding was required even logically speaking, matter was remanded by the First Appellate Authority---Order of First Appellate Authority was maintained there being no irregularity in the same; departmental appeal was dismissed by the Appellate Tribunal in circumstances.

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

----S. 221---Rectification of mistake---Adjustment of brought forwarded losses worked out on the basis of relief allowed by the First Appellate Authority for prior years---Losses were curtailed by the Assessing Officer by invoking S.221 of the Income Tax Ordinance, 2001 on the ground that either the appeal effect orders were not issued, or on certain issues, the matter had been remanded back for re-adjudication---Decision of First Appellate Authority being based on an already settled principle was maintained and the appeal filed by the Department was dismissed by the Appellate Tribunal.

1997 PTD (Trib.) 1466 rel.

Asim Zulfiqar Ali, A.C.A. and Humayun Hayat, A.C.A. for Appellant (in I.T.As. Nos.1373/LB, 4335/LB, 2947/LB of 1997, 5487/LB of 1999, 2641/LB of 2000, 3227/LB of 2002, 3922/LB to 3924/LB of 2004).

Ghazanfar Hussain, DR (L.T.U.) for Respondent (in I.T.As. Nos.1373/LB, 4335/LB, 2947/LB of 1997, 5487/LB of 1999, 2641/LB of 2000, 3227/LB of 2002, 3922/LB to 3924/LB of 2004).

Ghazanfar Hussain, DR (L.T.U.) for Appellant (in I.T.As. Nos.5378/LB of 1999, 2966/LB of 2000, 5129/LB to 5131/LB of 2004, 5162/LB, 5174/LB of 2003 and 1530/LB of 2005).

Asim Zulfiqar Ali, ACA and Humayun Hayat, ACA for Respondent (in I.T.As. Nos.5378/LB of 1999, 2966/LB of 2000, 5129/LB to 3031/LB of 2004, 5162/LB, 5174/LB of 2003 and 1530/LB of 2005).

2008 P T D (Trib.) 1102

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 285/LB to 287/LB of 2007, decided on 19th September, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss.221(1A) & 122(5A)---Income Tax Ordinance (XXXI of 1979), S.59 (1) & (4)---Finance Act (1 of 2003)---Rectification of mistake---Imposition of Workers Welfare Fund by rectifying assessment finalized under S.59 (1) of the Income Tax Ordinance, 1979---Provision of subsection (1A) of S.221 of the Income Tax Ordinance, 2001 would not be applicable to the proceedings which pertained to the assessment years which were ending on or prior to 30-6-2003---Assessment years in the present case were ending on or prior to 30-6-2003 thus the proceedings, viz. the order under S.221 of the Income Tax Ordinance, 2001 were illegal void ab initio---Assessing Officer also failed to mention the issuance date of notice under S.221(2) of the Income Tax Ordinance, 2001 and also the person on whom it was served with its date of service---Such defects were fatal because the absence of proper service of notice for a reasonable opportunity of being heard, had made the order as illegal---Creating of tax demand after so inordinate delay could not be approved where a limit of 90 days from the date of passing the assessment order had been taken as legal---Workers welfare demand created in all the assessment years was deleted by the Appellate Tribunal.

2005 PTD 1316 rel.

Noor Muhammad Qureshi for Appellant.

M. Muzaffar Khan Lashari ,D.R. for Respondent.

2008 P T D (Trib.) 1111

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Chairperson

I.T.A. No.7304/LB of 2005, decided on 30th January, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss.129 & 62 ---Appeal to Appellate Additional Commissioner--Setting aside of assessment by the First Appellate Authority by observing that "Assessing Officer failed to fulfil procedural requirements of confronting the assessee with the intention of making additions in the profit and loss expenses through notice under S.62 of the Income Tax Ordinance, 1979 and in absence of statutory and procedural formalities, this mode of arbitrary additions in the profit and loss account were not sustainable in the eye of law"---Validity---By recording such categorical finding, additions were not sustainable in the eye of law; there was hardly any occasion to set aside such issue for fresh adjudication---Appropriate course was to delete the addition---Certain documents were furnished, on the strength of which profession receipts stood accepted---Books of accounts were also maintained and it was mandatory to confront the assessee with the proposed addition to be made out of profit and loss expenses---Addition was deleted by the Appellate Tribunal and appeal of assessee was accepted.

Azhar Ehsan Sheikh for Appellant.

Nemo for Respondent.

2008 P T D (Trib.) 1119

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 3509/LB and 1658/LB of 2005, decided on 5th September, 2007.

Income Tax Ordinance (XXXI of 1979)---

---Ss.111 & 13(1)(c)---Penalty for concealment of income etc.---Addition on account of under-statement in valuation of stock declared in the account and as per reports furnished to the Banks---Every addition under S.13 of the Income Tax Ordinance, 1979 except addition under its S.13(1)(a) was tantamount to concealment---Such concealment was treated wilful, deliberate and penalty was imposed with prior approval of Commissioner of Income Tax---First Appellate Authority observed that no such penalty could be levied unless there was positive income and there was tax sought to be evaded and that too in the same income year--Penalty was not leviable, as instead of positive income, loss had been assessed and tax leviable before addition and after addition remained the same---Validity---Charging and penal provisions of fiscal statute were to be interpreted very strictly and in favour of taxpayer---When provisions of S.13 and S.111 of the Income Tax Ordinance, 1979 were compared it became obvious that the same were based on different principles---Addition in the declared income or loss could be made under S.13 of the Income Tax Ordinance, 1979, irrespective of the facts whether assessee had declared loss or income; or whether income had been determined or the loss---While imposing penalty under S.111 of the Income Tax Ordinance, 1979 on account of addition under S.13 of the Income Tax Ordinance, 1979 a different yardstick was to be applied---Such yardstick was that of actual tax sought to be evaded and not of any notional or deemed tax---In other words, it was the tax which an assessee was required to pay as a result of assessment which contained an addition under S.13 of the Income Tax Ordinance, 1979---Imposition of penalty on the basis of notional or deemed evasion of tax cuts at the very roots of income tax jurisprudence---Deletion of penalty under S.111 of the Income Tax Ordinance, 1979 by the First Appellate Authority was maintained by the Appellate Tribunal being fair and reasonable in the given facts and circumstances of the case.

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

----S.13(1)(c)---Unexplained investment etc., deemed to be income---Valuation of stock on the basis of declaration made in the books and in the bank---Addition was made on account of difference in value of hypothecated stock---Validity---Assessing Officer should have tried to find out whether the correct value was declared in the books or the same was suppressed and the actual value was the one declared to the bank---If the value declared in the books was the correct one then obviously there was no room for any addition---If it contained some element of suppression then the addition could have been made, in such a situation addition would have been made on the basis of independent evidence and not merely on the basis of monthly statements of hypothecated stock furnished to the bank---Mere difference between the value of hypothecated stock declared to the bank and disclosed in the books was too weak a basis of any addition under S.13 of the Income Tax Ordinance, 1979---Deletion of addition by the First Appellate Authority was maintained by the Appellate Tribunal.

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

----S.205--- Income Tax Ordinance (XXXI of 1979), S. 80-D---Additional tax---Tax under S.80-D of the Income Tax Ordinance, 1979 was not fully paid along with the return---Assessee failed to make compliance of show cause notice on the due date---Imposition of additional tax---Assessee contended that assessee was entitled for refund, the short payment of tax, if any, should have been adjusted against such refund---First Appellate Authority found that admittedly there was short payment of turnover tax---Default of late payment was established and Assessing Officer was justified to charge additional tax---No created refund on the material dates existed---Validity---Matter was remanded to Assessing Officer for de novo consideration, especially when it was assessee's contention that its refund was legally available and Assessing Officer was not justified to impose additional tax---First Appellate Authority had given a categorical finding that there was no `created refund' on the material dates---Order of First Appellate Authority was vacated and Assessing Officer was directed to decide the matter afresh, after giving proper opportunity of being heard to the assessee.

Sajid Ijaz Hotiana for Appellant (in I.T.A. 3509/LB of 2005).

Ghazanfer Hussain, D.R. for Respondent (in I.T.A. 3509/LB of 2005).

Ghazanfer Hussain, D.R. for Appellant (in I.T.A..I658/LB of 2005).

Sajid Ijaz Hotiana for Respondent (in I.T.A. 1658/LB of 2005).

Date of hearing: 5th September, 2007.

2008 PTD (Trib.) 1146

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Faiyaz Khan, Accountant Member

M.A. (R) No.14/IB of 2008, decided on 8th March, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S.221 (1-A)---Income Tax Ordinance (XXXI of 1979), S.156/87---Finance Act (I of 2003) Preamble---Rectification of mistake---Assessment year 1998-99---Limitation---Assessee's appeal succeeded being barred by limitation was contradictory to the provisions of S.87 of the Income Tax Ordinance, 1979 which dealt with charging of additional tax for failure to pay advance tax---Department contended that limitation of four years under S. 156 of the Income Tax Ordinance, 1979 had yet to expire on 18-10-2003 while the limitation was extended to five years from the date of order sought to be rectified through S.221 (1-A) of the Income Tax Ordinance, 2001 having effect from 1-7-2003; that order sought to be rectified could be rectified within five years from the date of order i.e. by 18-10-2004 whereas order under S.87 of the Income Tax Ordinance, 1979 (S.205 of the Income Tax Ordinance, 2001) was passed on 22-1-2004 i.e. within time limitation and that order was not barred by limitation of time---Validity---Enlarged limitation by the income Tax Ordinance, 2001 could not be applied in cases of those pending assessments which were to be governed by the Income Tax Ordinance, 1979 and S. 156 of the Income Tax Ordinance, 1979 provided limitation of four years which had expired before passing of the order---Contention of the department that limitation was extended by way of new legislation did not carry weight because for the year 1998-99 provisions of old laws were applicable and limitation enlarged in the Income Tax Ordinance, 2001 was not to apply---No error was found in the order passed by the Appellate Tribunal, which needed to be rectified---Miscellaneous application of the department was dismissed by the Appellate Tribunal.

Messrs Shah Jewana Textile Mills Limited v. I.T.A.T. 2003 PTD 2023; 2005 PTD 14; Messrs Sadiq Brothers Poultry v. C.I.T., Rawalpindi I.T.A. No.111/IB of 2006; Home Services Syndicate v. C.I.T. 2003 PTD 2109 and Messrs Ellahi Motors v. C.I.T. 2004 PTD 1173 ref.

Mazhar Iqbal, Legal Officer/D.R. for Applicant.

Hafiz M. Idrees for Respondent.

2008 P T D (Trib.) 1175

[Income-tax Appellate Tribunal Pakistan]

Before Javid Iqbal, Judicial Member and Liaqat Ali Khan, Accountant Member

I.T.A. No.28(PB) of 2004, decided on 8th October, 2007.

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

----Ss.12(9A), 66A & Second Sched., Cl. (118C)---Economic Reforms Act (XII of 1992), S.6---C.B.R. Circular No. F.12 (9A) I.T.P./99 dated 16-6-2001---Income deemed to accrue or arise in Pakistan---Inspecting Additional Commissioner directed the Assessing Officer to invoke the provisions of S.12(a) of the Income Tax Ordinance, 1979 considering the assessment framed under S.62 of the Income Tax Ordinance, 1979 as erroneous and prejudicial to the interest of Revenue on the ground that after-tax profits had not been worked out properly---Assessee contended that income being exempt from taxation under Cl. (118C) of the Second Schedule of the Income Tax Ordinance, 1979, he was exempt from other provisions of income tax as per protections of S.6 of the Economic Reforms Act, 1992 and for non-distribution of mandatory dividend he was not liable to action under S.12(9A) of the Income Tax Ordinance, 1979---Validity---Plea of assessee with regard to protection under S.6 of the Economics 'Reforms Act, 1992 was not correct---Clause 118C of the Second Schedule of the Income Tax Ordinance, 1979 provided that income only from the process manufacturing was exempt from the taxation---Section 12(9A) of the Income Tax Ordinance, 1979 was a quite different levy, the said section of law had been inserted to protect the interest of share-holders to pay them their dividend well within time---Question of exemption from levy under S.12(9A)of the Income Tax Ordinance, 1979 did not arise at all in the circumstance---Assessee was supposed to distribute the dividend as per the provision of law---Assessee having failed to do so, action under S.12(9A) of the Income Tax Ordinance, 1979 was justified and reserved of the year under appeal only be subjected to action of taxation under S.12 (9A) of the Income Tax Ordinance, 1979.

I.T.As. Nos. 116 to 120/PB of 2002; 2004 PTD (Trib.) 1062; I.T.As. Nos. 2256 and 223(KB); 2004 PTD 1135; Kadnath Jute Manufacturing Co. Ltd. v. C.I.T. 82 ITR 363 SC 1; Kerala Arecant Co. v. C.I.T. 43 ITR 445; C.I.T. v. Royal Boot House 75 ITR 507; Garesh Lal Ram Kumar v. C.I.T. 77 ITR 974; C.I.T. v. New Jehangir vabil Mill Co. Ltd Hancok v. General Reversionary & Co. Ltd. 37 ITR 136; C.I.T. v. Hira Lal-Mittal 7 TC 358, 375; C.I.T. v. Jai Bajrang Nail Industries 86 ITR 463; (19b0) 2 Tax (V-405) 95 ITR; (2004) 89 Tax 342 (Trib.); Seward v. Vera Cruz 1884 to AP. Ca 59; 2004 PTD 2087; 49 Tax 34; 1976 PTD 11; Messrs Tuticorn Alkali Chemicals and Fertilizers Ltd. 1998 PTD 900; S.S.C. Footwear Ltd. v. Ridghay (Inspector of Tax) (1970) 77 ITR 857, 860 (CA); C.I.T. v. Mahashtra Electrosmlt Ltd. (1995) 214 ITR 489 ref.

2004 PTD 1135; I.T.A. No. 51/LB of 2002; Writ Petition No.665 of 2001 and 2000 PTD 2737 rel.

(b) Income Tax---

----Income---International accounting standard---For determination of income for income tax assessment purpose under the Income Tax Law, the pattern suggested by IAS had no binding force on the income tax law, because income tax law is independent and the purpose of said law is entirely different.

2004 PTD 1135 and I.T.A. No.51/LB of 2002 rel.

(c) Income Tax---

----Mercantile System of Accounting---Fiscal liability---Allowability---Income Tax Law recognize the cash as well as Mercantile System of Accounting---Mercantile system provided that a fiscal liability under statute should be allowed in the year in which the transactions takes place although the precise quantification-of the liability in the form of an assessment in demand may come later; that the assessee may contest the liability in appeal or other proceedings and that the assessee may have made no provision for the liability in his books.

(d) Income Tax---

----Deduction---Claim of deduction in the subsequent years---Assessee may claim a deduction in a subsequent year in which the taxes assessed and the demand is made, although the transaction may pertain to earlier years or he may even postpone his claim of deduction to the year in which he loses an appellate proceedings and the levy becomes final.

Kadnath Jute Manufacturing Co. Ltd. v. C.I.T. 82 ITR 363 SC; Kerala Arecant Co. v. C.I.T. 43 ITR 445; C.I.T. v. Royal Boot House 75 ITR 507; Ganesh Lal Ram Kumar v. C.I.T. 77 ITR 974; C.I.T. v. New Jehangir Vakial Mill Co. Ltd. Hancok v. General Reversionary & Co. Ltd. 37 ITR 136; C.I.T. v. Hira Lal-Mittal 7 TC 358 375; C.I.T. v. Jai Bajrang Nail Industries 86 ITR 463 and (1960) 2 Tax (V-405) 95 ITR rel.

(e) Income Tax---

----Deduction---Demand of sale tax was created relevant to the year under appeal and assessee had rightly claimed the provision of excise duty for the year under appeal.

(1960) 2 Tax (V-405) 95 ITR rel.

Shaukat Amin Shah, FCA and Mehmood Mirza for Appellant.

Tariq Bakhtiar, DR for Respondent.

2008 P T D (Trib.) 1192

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Chairperson

I.T.As. Nos.4122/LB and 4123/LB of 2003, decided on 4th March, 2008.

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

----S.27---Capital gains---Fee for non-competition---Amount received by the assessee on account of fee for "non-competition" was found to be revenue in its nature by the Assessing Officer---Validity---Sole selling agency and exclusive distribution rights for the specified cities were terminated by the principal coupled with it not only the assessee was refrained but also his affiliates, directly or indirectly, were stopped not to carry on business of producing, distribution and selling of soft drinks in Pakistan for period of five years---Compensation was paid for agreeing to refrain from carrying on competitive business in the commodities in respect of agency terminated---Agency rights were an income yielding asset and a' capital asset and compensation received for loss of a capital asset was prima facie of the nature of a capital receipt---No evidence was on record to suggest that the assessee was acting as a sole distributor or selling agent of the products of other numerous concerns as well, or that the termination of agency in question did not affect the trading structure of assessee's business by depriving its source of income---Amount received by the assessee on account of termination of agency/franchise rights under the nomenclature of "non-competition agreement" was a capital receipt' and it had been taxed erroneously as arevenue receipt'---Addition made was deleted by the Appellate Tribunal.

(1964) 53 ITR 283 (SC India); (1983) 140 ITR 159 and PLD 1978 Kar. 1047 = 1978 PTD 328 ref.

(2001) 83 Tax 75 and Gillandes Arbuthnot & Co., Ltd. v. C.I.T., Calcutta 1979-ITR-Volume-Z III-283 (S.C.) of India) distinguished

1978 PTD 328 and C.I.T. Bombay v. Automobile Products of India Ltd. 1983 ITR 140 page (H.C. Bombay) rel.

(b) Income tax---

----Payment for cancellation of agency-'Capital' or Revenue receipts'--Principles---Where as a result of cancellation of the agreement or the agency the trading structure of assessee was impaired or such cancellation resulted in loss of what may be regarded as the sources of the assessee's income, the payment made to compensate for cancellation of the agreement is normally thecapital receipt'.

(c) Income tax---

----Capital receipt---If the compensation was paid for agreeing not to compete with the principal's business, it would prima facie be a `capital receipt'.

1978 PTD 328 rel.

(d) Precedent---

----Norm of judicial discipline---If the cases of Pakistani jurisdiction are available, then support cannot be had from the cases of foreign jurisdiction because those have merely the persuasive value.

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

Nemo for Respondent.

2008 P T D (Trib.) 1206

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.4844/LB and 6416/LB of 2005, decided on 10th January, 2008.

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

----S.62---Assessment on production of accounts, evidence etc.---Estimation of receipts after rejecting the declared receipts---First Appellate Authority observed that notices were issued twice and books of account were also checked---Nothing was detected by the Assessing Officer even in second scrutiny of account---No specific defects having been pointed out by the Assessing Authority, the directions made by the First Appellate Authority to accept the' declared version was legally justified.

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

----Third Sched. R.2---Rate of depreciation allowance---Hospital building---Allowing depreciation @ 10% by the First Appellate Authority by declaring the hospital building to be a factory building---Validity---Equipment/machinery used in hospital could not be equated with the machinery which was used in a factory with the objective of manufacturing/making production of various kinds---If using machinery equipments by any establishment was allowed to be treated as factory building, every house-hold where different kinds of machinery were used i.e. computer electric gadget even generators, might fall within the ambit of definition of factory building---If the hospital building was to be declared factory building then the industrial law attracted to the factories would have to be applied to the hospital as well---First Appellate Authority erred in law while declaring the hospital building to be "factory building"---Depreciation allowed @ 10% was not sustainable in the eye of law---Order of First Appellate Authority was vacated by the Appellate Tribunal while that of Assessing Officer allowing depreciation @ 5% was restored.

Ghazanfar Hussain, D.R. for Appellant.

Qamar Rashid, A.C.A. for Respondent.

2008 P T D (Trib.) 1219

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 347/LB of 2006, decided on 11th December, 2007.

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

----Ss. 64 & 62---Limitation for assessment---Passing of order as on 30-6-2005---Assessee wrote two letters one directly to Taxation Officer and other reminder was sent to department through Commissioner but despite these two letters no assessment orders were conveyed to the assessee---Apparent facts of the case were that had there been any assessment order passed on 30-6-2005, it would have definitely been sent to the assessee specially in view of two letters submitted by the assessee to revenue---such events lead to the conclusion that no assessment order was available with the department on 30-6-2005 otherwise the same could have been dispatched to the assessee immediately or at least after the receipt of two letters from the assessee---First Appellate Authority though annulled the assessment on different basis, Appellate Tribunal upheld the finding recorded by the First Appellate Authority not for the reason that assessment orders were dispatched belatedly but for the reason that the same had become time-barred having been passed after 30-6-2005.

I.T.A. No.6288/LB of 1999 distinguished.

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

----S.62---Assessment on production of accounts, evidence etc.---Re­assessment framed by the Taxation Officer was not sustainable in the eye of law for the additional reason that no notice under S.62 of the Income Tax Ordinance, 1979 was issued by the Taxation Officer which was mandatory requirement of law and failure to adhere to the same entailed cancellation of assessments.

Ghazanfar Hussain, D.R. for Appellant.

Zaeem-ul-Farooq for Respondent.

2008 P T D (Trib.) 1253

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Nazir Ahmad, Accountant Member

M.A. No.1115/LB of 2006, decided on 1st September, 2007.

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

----S.221---Rectification of mistake---Decisions of the Appellate Tribunal of equal strength have binding force and an omission to follow them entails a mistake apparent from record.

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

----S. 221---Rectification of mistake---Inadvertently ignoring ratio settled by the High Court was a mistake floating on the face of record.

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

----S. 38(8)-Income Tax Ordinance (XLIX of 2001), S.221---Limitation as to set off and carry forward of losses in the case of firms, partners, etc.---For purpose of carrying forward and setting off a loss, an order under S.38(8) of the Income Tax Ordinance, 1979 was mandatory---No loss could be made to carry forward and set off on the basis of merely a computation chart by the Assessing Officer in the rectification order.

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

---S. 221---Income Tax Ordinance (XXXI of 1979), S.38(8)---Rectification of mistake---Unless any mistake in the preceding year was corrected in that year, or within the period of limitation specifically provided, the figure of the brought forward loss could not be altered merely on the basis of a computation chart outside the assessment record.

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

----S.221---Rectification of mistake---Brought forwarded losses---If the figure of loss brought forward and set off in ay year was in conformity with the assessment record of the immediately preceding year, no mistake therein could be attributed to the current assessment year---Mistake, if any, occurring in an earlier year, could not be held to be a mistake for the current year and the inadvertent findings of the Appellate Tribunal were thus not in consonance with law.

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

---S.221---Income Tax Ordinance (XXXI of 1979), Ss.35 & 38---Rectification of mistake---Mistake occurring in respect of business loss could not be held rectifiable by curtailing depreciation loss, which was altogether different in nature and was allowable under distinct provisions of law vis-a-vis S.38(6) as against the business loss allowable under S.35 read with S.38(8) of the Income Tax Ordinance, 1979.

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

----S. 221---Finance Ordinance (XXV of 2001)---Rectification of mistake---Assumption of jurisdiction---Scope---Income Tax Ordinance, 2001 was enacted through Finance Act, 2001, which came into force with effect from 1-7-2003---Order was passed on 28-6-2003 before enforcement of Income Tax Ordinance, 2001---Assumption of jurisdiction through show-cause notice, dated 24-1-2003 for making rectification under S.221 of the Income Tax Ordinance, 2001 and the consequential order was ab initio void and illegal and could not be maintained---Appellate Tribunal had inadvertently not considered said legal position although same was specifically contended on behalf of the assessee---Such was an apparent mistake, which was liable to be rectified---Rectification made by the Assessing Officer vide order, dated 28-6-2003 was not sustainable in the eyes of law---Orders of Appellate Tribunal were recalled and order of First Appellate Authority was vacated and order passed by the Taxation Officer under S.221 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal--Miscellaneous application filed by the assessee was allowed and his main appeal also succeeded.

2002 PTD (Trib.) 2422; 1997 PTD (Trib.) 879; 2004 PTD (Trib.) 745; 1992 PTD 570 SC (Pak.); 2006 PTD 2474; 2005 PTD (Trib.) 1697; 2007 PTD (Trib.) 322 and 2007 PTD (Trib.) 394 ref.

Shabbir Ahmed, I.T.P. for Applicant.

Rai Tallat Maqbool, DR for Respondent.

2008 P T D (Trib.) 1285

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant

Member

M.A. (AG) No.126/LB of 2007 and I.T.A. No.2511/LB of 2004, decided on 6th December, 2007.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 52 & 86---Liability of persons failing to deduct or pay tax---Limitation---Matter being of assessment year 1993-94, the order should have been made up to 1997-98, but the Taxation Officer had passed the order on 29-6-2000---Validity---Order admittedly had been passed on 29-6-2000, which was hit by limitation, it having been made after the period of four years---Order was ab initio void and illegal but such legal fact had not been considered by the First Appellate Authority---Even­ otherwise, on merit, assessee filed details of all payments, wherein most of the amounts were less than Rs.25,000 but the Assessing Officer had failed to consider that fact---Order of First Appellate Authority was vacated and order passed by the Taxation Officer under Ss.52/86 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal having been passed beyond the limitation period provided under the law---Miscellaneous application as well as appeal filed by the assessee were allowed.

2002 PTD 1; 2003 PTD (Trib.) 1167 and 2007 PTD (Trib.) 406 ref.

Zulfiqar Ali Sh., I.T.P. for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2008 P T D (Trib.) 1312

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.308/LB to 310/LB of 2007 and M.As. Nos.308/LB to 310/LB of 2007, decided on 28th July, 2007.

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

----Ss. 224 & 176---Income Tax Ordinance (XXXI of 2001), S.158---Qanun-e-Shahadat (10 of 1984), Art. 1(2) & 146---Income Tax Appellate Tribunal Rules 1981, R.13---Proceedings under the Income Tax Ordinance to be judicial proceedings---Notice to obtain information or evidence---Filing of affidavit---Summoning the First Appellate Authority in person by the Appellate Tribunal---Validity---Associating the two officers of the First Appellate Authorities by the Appellate Tribunal was quite legal, fair, just which was required as per law as well as under doctrine of natural justice---Non-compliance by the First Appellate Authorities was against the law and also official conduct which was required as a government functionary---Attempt for associating the two First Appellate Authorities in the proceedings were quite just, legal, fair, proper, important and judicious---Non-compliance had not only caused a serious prejudice to the interest of Revenue but had given a vested right to the aggrieved party (the applicant) to claim the correctness of its duly substantiated stance/contentions with affidavits, giving legal justification to Appellate Tribunal to draw adverse inference from the conduct/ expressions of the two First Appellate Authorities and to allow the necessary relief by accepting what had been stated by duly corroborated affidavits.

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

----S. 224---Income Tax Ordinance (XXXI of 2001), S. 158---Judicial proceedings---Proceedings under the Income Tax Ordinance to be judicial proceedings---Appellate Tribunal is vested with power/authority to call for any evidence and summon any person when particularly prayed for by another contending party on its own for reaching to a proper conclusion for holding a judicious view---Calling for affidavit and or counter -affidavit which authority could be exercised as Appellate Tribunal is empowered under specific provisions of Qanun­e-Shahadat, 1984 and Income Tax Ordinance, 1979---Facts which could not be borne out from record were to be supported by affidavit and to challenge the contents of such affidavit, counter-affidavit could be submitted do its own by opposing party or on specific directions of the Appellate Tribunal for arriving at just conclusion, so Appellate Tribunal could also order for submission of counter-affidavit---Such powers were vested in the Appellate Tribunal firstly by drawing force from the provisions of Qanun-e-Shahadat, 1984 which had specifically been made applicable to the Appellate Tribunal---Proceedings under the erstwhile and also under the Income Tax Ordinance, 2001 were judicial proceedings as per provisions contained in S.158 of the Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001.

(c) Income Tax---

----Affidavit---Proceedings before the Appellate Tribunal were judicial proceedings and without submitting the counter-affidavit contradicting the appellant/assessee's assertion, counter-claim/contention could not be accepted as true of the other party opposing it.

PLD 1957 SC Pak. 91; 2001 PTD 1002; 2001 MLD 1257; 1991 MLD 1243; 2005 PTD (Trib.) 1364 and 2001 PTD 3545 rel.

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

----S. 129(7)---Decision in appeal---Despite putting initials on application filed in terms of S.129(7) of the Income Tax Ordinance, 2001, not recording entry in the order sheet was an attempt just to deprive the assessee of his legal right and cover own faults.

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

----S. 129(7)---Decision in appeal---Glaring deficiencies/discrepancies in the order sheet amount to flouting with impunity norms of judicial propriety/decency which warrants acceptance of the contentions taken by the assessee that the authority at the first appeal stage failed to be exercised in a judicial manner rather speaks of vindictiveness.

1996 PTD 279; 2000 PTD 39 and 2005 PTD 862 rel.

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

----S. 129(5), (6), (7)---Decision in appeal---Service of notice---Proceedings of appeal in a casual manner by not fixing the appeal within the stipulated time and on being becoming aware of assessee's vested right---Validity---Relief became due to the assessee because it was refusal to receive prescribed applications that these were duly sent through Registered Post as well as through private courier---Applications were available on record bearing the initials of First Appellate Authority---By putting up signatures on such applications, it had manifestly been made clear that notices were served personally and failure to take cognizance of such notices by both the predecessor viz. the successor in office, had made the assessee entitled to relief under the provisions of S.129(5)(6), (7) of the Income Tax Ordinance, 2001 by acceptance of appeal as per prayers contained in appeals---Predecessor in office had not refuted in her affidavit that she refused to receive the applications under S.129(7) of the Income Tax Ordinance, 2001 and that the receipt through postal AD/Courier/by Dak through special messenger of the assessee---Successor in office preferred to proceed in a similar casual manner by not fixing the appeal within the stipulated time and on being becoming aware of assessee's vested right, still had not allowed relief by-operation of law, such negligence was not pardonable at the level of appellate forum---Prior to proceedings, for exercising the authority/jurisdiction over it the First Appellate Authority, was legally beyond to take serious notice of vested right created in favour of assessee by operation of law in terms of S.129(7) of the Income Tax Ordinance, 2001 debarring not only issuance of call notices resultantly intimating the fixation but also passing the order by adjudicating the grounds or in other words deciding the appeals on merits as relief sought was treated to have been given under S.129(6)(7) of the Income Tax Ordinance, 2001---Order had become illegal, which merited cancellation; to make it further clear, firstly issuing the notice intimating the fixing of appeal by the First Appellate Authority was illegal, thereafter adjudicating grounds of appeal, deciding the appeal was also illegal because relief sought in appeal was treated to have been given in terms of S.129(5) of the Income Tax Ordinance, 2001---By another manner assessee had been denied another vested right by betrayal by adjourning the appeals still same had been disposed of by marking, 'non-appeared' on exactly the same dates the Authorized Representative marked present by the First Appellate Authority in other cases---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 stood vacated and orders subjected to action under S.122(5A) of the Income Tax Ordinance, 1979 stood restored to its original position and statement filed under S.143-B of the Income Tax Ordinance, 1979 and under S.115(4) of the Income Tax Ordinance, 2001 stood accepted---Such was a matter of concern for higher ups in the administrative structure of the department to take cognizance of lapses and of such attitude of both the First Appellate Authorities who happened to be first appellate forum importantly should not have allowed to take place unjust, illegal acts at their own level as well as in its office and making assessee victim of such discrepancies when vested legal right was brought to the notice of First Appellate Authority by the assessee---Negative relation to it, however, had been shown whereby the assessee had been made to suffer loss which was unbecoming of judicial officer.

(1978) 114 ITR 19; PLD 1966 Lah. 16; PLD 1987 Quetta 141; 1993 PTD 206; 2001 PTD 1002; 2001 MLD 1257; 1991 MLD 1243; 2005 PTD (Trib.) 1364; 2001 PTD 3545; 1996 PTD 279; 1996 PTD (Trib.) 282; 2000 PTD 39; 2005 PTD 862; 2005 PTD 872; 2006 PTD 2439; PLD 1957 SC 91 and 2001 MLD 1257 rel.

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

----S. 129(7)---Decision in appeal---Remarks of Appellate Tribunal on not allowing relief by the First Appellate Authority became due by operation of law---Order passed by the First Appellate Authority at the best could be described as worst shape of violation of, non-adhering to, non-compliance with, the expressed legal provisions as well as implementation of judgments of High Courts, further adding to the worst in allowing the adjournment, but still on the fixed date concluding the proceedings for deciding the appeals by marking the Authorized Representative as not present, this speaks so badly of personal behaviour of a judicial officer---Such behaviour was unbecoming of a judicial officer as well as of administration, it was unforgivable conduct, even in an uncivilized set-up this would not be permitted---Judicial officers were to establish high moral standards in their conduct which in the present case was totally absent---Conducting in such a way the judicial proceedings was in fact to circumvent the confidence building measures/steps taken by the Government of Pakistan viz. the Revenue Division; at the highest level these required to be probed into sabotaging the confidence-building steps even by the higher officers who were associated for policy making by Central Board of Revenue---Assessee through his Authorized Representative had set an excellent example of pursuing for a legal right steadfastly with perseverance and endurance---Assessee had been forced to face this ordeal simply on seeking a legal relief in a legal manner---Assessee's miscellaneous applications and appeal succeeded.

Shahbaz Butt for Appellant.

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

2008 P T D (Trib.) 1354

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 4541/LB of 2005, decided on 13th February, 2007.

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

----S. 122(5A)---Income Tax Ordinance (XXXI of 1979), S.66-A---Amendment of assessment---Profit and loss account additions---Invoking of S.122(5A) of the Income Tax Ordinance, 2001 was upheld by the First Appellate Authority on the ground that assessee was not able to justify the admissibility of the expenses on legal and factual grounds during the assessment proceedings with the help of books of accounts and other supporting documentary evidence---Validity---Action on the part of Assessing Officer to have allowed expenditure which was not genuine did result in passing of an assessment order which was "prejudicial to the interest of Revenue" as the Revenue was deprived of the legitimate tax due from the assessee, and at the same time the Assessing Officer, probably due to lack of experience, was not able to appreciate the facts of the case in view of which the order passed by him was also erroneous---Two conditions co-existed, the action on the part of the Commissioner by invoking S.122(5A) of the Income Tax Ordinance, 2001 was justified in the ambient circumstances of the case---Assessee's appeal was dismissed accordingly.

(1968) 18 Tax 2 (H.C. Dacca) and 1969 SCC 335 rel.

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

----S. 122(5A)-Amendment of assessment---Prejudicial to the interest of Revenue---If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person it will certainly be prejudicial to the interest of Revenue.

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

---S. 122(5S)---Amendment of assessment---Loss of revenue---Erroneous order---Order when erroneous/prejudicial to the interest of Revenue---Every loss of revenue as a consequence of order of. the Income Tax Officer could not be treated as prejudicial to the interest of Revenue---When the Assessing Officer adopted one of the courses permissible under the law and it had resulted in loss of revenue or where two views were possible in law and the Assessing Officer had taken one view with which the Inspecting Additional Commissioner did not agree, it could not be treated as a erroneous' order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer was not sustainable in law---Order waserroneous' when there was an incorrect assumption of facts or incorrect application of law.

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

----S. 122(5A)---Amendment of assessment---Disallowance of expenditure not supported by documentary evidence---Prejudicial to the interest of Revenue---Assessing Officer had disallowed expenditure which was not supported by documentary evidence---Expenditure allegedly incurred for providing free petrol to the police, "gup shup" programme, free petrol to truck and tanker drivers/free meal to drivers etc.---Expenditure incurred by a business to earn "profit" against expense which were either admissible or otherwise if these were not properly supported by documentation---Onus of proof regarding an expenditure incurred was on the taxpayer who should prove before the Assessing Officer that it was genuine and was supported by proper documentation---In case the assessee was unable to produce relevant documentary evidence then the Assessing Officer could disallow the expenditure or curtail same according to the facts of the case.

(e) Income tax---

---Commercial expediency- -Expenditure---Commercial expediency could not be used for inflating expenditure or evasion of tax, etc., which was not allowed under the law.

(f) Income tax---

----Expenditure---Illegal gratification-Law did not recognize any expenditure which could be described as "illegal gratification" for securing any benefits from any official, for example the Police Department for patrolling the area for providing security etc. to the assessee and his business, in other words, not under the table payments were permissible in law.

S.A. Khan for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2008 P T D (Trib.) 1448

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

I.T.As. Nos.12/LB to 15/LB of 2008, decided on 10th April, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 90(4)(a) & 170(4)---Transfers of assets---Gift of usufruct and not corpus---Income from Special Saving Certificates invested by the husband of assessee---Gift of such income to wife i.e. assessee---Returns were filed declaring such income and tax deducted thereon---Claim of refund was rejected with the observation that the letter rejecting the claim may be treated as an order under S.170 of the Income Tax Ordinance, 2001---First Appellate Authority directed to issue refund for all the years---Department contended that First Appellate Authority was not justified to ignore the provisions of S.90 of the Income Tax Ordinance, 2001 as there was no transfer of assets to spouse or minor child, the income of the subject asset would always be considered to be the income of the transferor---Refund, if any arising out of the same was to be claimed/adjusted by the husband of the assessee---Validity---Actual asset namely "investment certificates" were not transferred to the assessee but as per transfer deed executed by the donor (husband) it was the income arising out of the investment certificates which were to be given to the assessee (wife)---Commissioner was supposed to dispose of the application within 45 days which was not complied with and even otherwise, when the application of the assessee with regard to the claim of refund was rejected, the assessee was not given an opportunity of being heard as contemplated vide S.170(4) of the Income Tax Ordinance, 2001---Even if the income from certificates was to be treated as income of the husband, he did not claim refund with regard to the deduction by the concerned authority---Appeals preferred by the Revenue did not have any merit which were dismissed by the Appellate Tribunal and order of First Appellate Authority was upheld.

1982 CLC 2082 and 1979 CLC 587 rel.

Ghulam Kazim Hussain, D.R. for Appellant.

Ahmed Nadeem Ahsan, ITP and M. Waseem Bilal for Respondents.

2008 P T D (Trib.) 1466

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 3227/LB, 2811/LB and 2812/LB of 2005 and 1082/LB of 2007, decided on 31st October, 2007

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

----S. 56---Income Tax Ordinance (XLIX of 2001), S.239(2)---Notice for furnishing return of total income---Savings---Assessment years 1998-99 and 1999-2000---Assessee contended that assessing authority erred in law while assuming jurisdiction by invoking S.56 of the Income Tax Ordinance, 1979 for the reason that no proceedings were pending and S.56 of the Income Tax Ordinance, 1979 was not saved by S.239(2) of the Income Tax Ordinance, 2001---Validity---Section 56 of the Income Tax Ordinance, 1979 though a procedural/machinery section had not been saved in S.239 of the Income Tax Ordinance, 2001---Courts never allow to dig out anything by peeping into the mind of the legislature whether something was missing---Mentioning of phrase "in accordance with the procedure specified in S.59...." would show that the word procedure mentioned in S.239 of the Income Tax Ordinance, 2001 was to be relied upon once application of S.59 etc. had come into play---Section 56 of the Income Tax Ordinance, 1979 was to be invoked by the Assessing Officer before he embarked upon making assessment under the provision of law mentioned in S.239(2) of the Income Tax Ordinance, 2001---Section 239(4) of the Income Tax Ordinance, 2001 made it abundantly clear that only the proceedings pending on or before 30-6-2002 could be continued under the Income Tax Ordinance, 1979; this was very much on record that no proceedings were pending on 30-6-2002 and for that reason proceedings could only be initiated through invocation of machinery provision provided for under the Income Tax Ordinance, 2001---If there was any ambiguity in interpretation of any provision of law, the interpretation favouring the assessee could be adopted---Proceedings commenced by issuance of notice under S.56 of the Income Tax Ordinance, 1979 were coram no judice and unsustainable in the eyes of law---If at all proceedings were to be started, those ought to have been commenced by issuance of notice under S.114 of the Income Tax Ordinance, 2001---Order passed by the First Appellate Authority was vacated and proceedings initiated through issuance of notice under S.56 of the Income Tax Ordinance, 1979 being Without jurisdiction were directed to be annulled by the Appellate Tribunal.

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

----S.114(4) & (5)---Return of income---Assessment year 1997-98---Assessee contended that initiation of proceedings through a notice under S.114(4) of the Income Tax Ordinance, 2001 was not sustainable in the eyes of law for the simple reason that notice, dated 28-6-2003 by itself was time-barred as S.114(5) of the ,Income Tax Ordinance, 2001 provided that notice under S.114(4) of the Income Tax Ordinance, 2001 could only be issued in respect of assessment year of the last five completed assessment years; that notice could only be given for the assessment year 1997-98 before 30-6-2002 and that since the very inception of the proceedings was time-barred, all the subsequent proceedings would also fall flat---Validity---Proceedings were initiated through notice under S.114 of the Income Tax Ordinance, 2001, dated 28-6-2003 which was clearly time-barred as the period provided under S.114(4) of the Income Tax Ordinance, 2001 was that the notice under S.114 of the Income Tax Ordinance, 2001 could only be issued in respect of previous five completed tax years---Since very initiation of proceedings was without jurisdiction for the reason that same commenced through a time-barred notice, all the penultimate proceedings were coram non judice, hence nullity in the eyes of law---Order of First Appellate Authority whereby appeal of the assessee was dismissed as having been held to be time-barred was vacated by the Appellate Tribunal and assessment framed by the assessing authority started in pursuance of notice under S. 114 of the Income Tax Ordinance, 2001 having been issued after 30-6-2002 was directed to be annulled.?

1992 PTD (Trib.) 1587 and 2000 PTD 2407 rel.

Qamar Haider, D.R. for Appellant.

Syed Saghir Tirmizi for Respondent.

2008 P T D (Trib.) 1477

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

I.T.A. No.51/LB of 2008, decided on 16th May, 2008.

Income Tax Ordinance (XXXI of 1979)---

----S.23---Deduction---Profit and Loss expenses---Disallowances were made by using stock phrases like "unverifiable element of personal nature"---First Appellate Authority confirmed the same without any cogent reasons---No relief was allowed in respect of travelling and it was not acceptable that no expense had been incurred under the head travelling---Disallowance under the head travelling was reduced and no indulgence of Appellate Tribunal was called for in respect of remaining add-backs being reasonably made.

A.D. Asghar for Appellant.

Shaban Bhatti D.R. for Respondent.

2008 P T D (Trib.) 1491

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.653/LB of 2007, decided on 4th April, 2008.

(a) Income-tax---

---Proration of expenses---Deviation from past treatment without solid reasons---Department had itself accepted the stance that assessment was prorating the expenses on the same pattern as in the preceding as well as succeeding years---Expenses should be prorated on reasonable basis taking account of the relative nature and size of activities and the department itself had accepted the stance of the assessee in the preceding as well as succeeding years---Assessing Officer having not given any solid reasons for deviating from the past treatment deviation was not justified.

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

---S. 122(5A)---Income Tax Ordinance (XXXI of 1979), S.66-A---Amendment of assessment---Powers of Inspecting Additional Commissioner---Under S.66A of the Income Tax Ordinance, 1979, the Inspecting Additional Commissioner had the powers to make necessary inquiries as he deemed fit but under S.122 (5A) of the Income Tax Ordinance, 2001, these powers were not there.

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

---S.122(5A)---Amendment of assessment---Show-cause notice issued were merely calling for evidence rather than inquiries---Such notices were not within the jurisdiction/powers of the amending authority.

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

---S. 122(5A)---Amendment of assessment---Notice calling for details and fishing enquiries---Validity---Revenue issued show-cause notice calling for details and then subsequently fishing enquiries were made and no proper findings for amending the order were given in the notices---Action of the Revenue was ab initio illegal as there was no proper/legal basis for invoking provisions of S.122(5A) of the Income Tax Ordinance, 2001---Amended order in question was cancelled by the Appellate Tribunal restoring the original one.

Farooq Ejaz, I.T.P. for Appellant.

Sardar Masood Raza Qazlibash, D.R. for Respondent.

2008 P T D (Trib.) 1522

[Income-tax Appellate Tribunal Pakistan]

Before Iqbal Ahmed, Accountant Member

I.T.As. Nos.4/KB to 11/KB of 2008, decided on 16th May, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S.221---Income Tax Ordinance (XXXI of 1979), S.156---Workers Welfare Fund Ordinance (XXXVI of 1971), Preamble---Rectification of mistake---Workers Welfare Fund---Tax years, 2006---Levy of Workers Welfare Fund was agitated on the ground that after repealed Income Tax Ordinance, 1979 with effect from 2002; and enforcement of Income Tax Ordinance, 2001 the correspondents in Workers Welfare Fund Order, 1971 were not made---Mention of authorities was made by the Income Tax Ordinance, 1979 and no such mention had been made in the Income Tax Ordinance, 2001---Levy of Workers Welfare Fund under the Income Tax Ordinance, 2001 was illegal---Appeal was allowed by the First Appellate Authority---Subsequently, it was pointed out in a rectification application that original appeal order had inadvertently mentioned the tax year, 2006 which was to be corrected and assessment years from the assessment years 1989-90 to 2002-2003 and tax year 2003-2004 were to be mentioned with different amount of revenue pertaining to each year---Rectification application was accepted and Workers Welfare Fund was levied in each year accordingly---Validity---Original order passed by the First Appellate Authority was based on the finding that entire levy pertained to assessment year, 2006 and that such levy under the Income Tax Ordinance, 2001 was not leviable---Rectification order passed by the First Appellate Authority had totally changed the situation---Rectified order mentioned assessment years wherein Workers Welfare Fund was leviable under the Income Tax Ordinance, 1979 also pertaining to assessment years 1998-99 to 2001-2002---Finding of First Appellate Authority with regard to assessment years, 2002-2003, tax years, 2003-2004 and 2005 was based on correct findings the levy of Workers Welfare Fund .in the assessment year 1998-99 to 2001-2002 under the Income Tax Ordinance, 1979 was also justified by the Taxation Officer which was upheld by the Appellate Tribunal---Rectification order of First Appellate Authority may be amended and Workers Welfare Fund leviable under Income Tax Ordinance, 1979 may be confirmed.

2007 PTD (Trib.) 1860 ref.

Ali Gohar D.R. for Appellant.

Abdul Tahir Ansari, ITP for Respondent.

2008 P T D (Trib.) 1549

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.1331/LB of 2007, decided on 2nd June, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(1)(5) & 111(4)(b)---Amendment of assessment---Tax year, 2003---Issuance of show-cause notice under S.122(1) of the Income Tax Ordinance, 2001 without mentioning of its subsections 122(5) or 122(5)(a)---Validity---Assessing Officer had nowhere mentioned as to which assessment order was being amended and the additions had been made on the basis of assessment for the years, 2001-2002 and 2002-2003, without any reference to the assessment order regarding tax year, 2003---Order had been passed by the Taxation Officer under S.122(1) of the Income Tax Ordinance, 2001 and notice had been sent to the assessee as mentioned in the amended order under S.122(9) of the Income Tax Ordinance, 2001 and nowhere in that order subsections (5) or (5)(a) of S.122 of the Income Tax Ordinance, 2001 had been mentioned---First Appellate Authority had upheld the amended order and had not considered the fact that Taxation Officer had not mentioned in the order as to which of the orders was going to be amended---Order of First Appellate Authority was vacated and the amended order passed by the Taxation Officer being illegal was annulled.

2002 PTD 2160; 2006 PTD 673; 2006 PTD 2729 and 2007, PTD 2319 rel.

Shoaib Ahmad Sheikh for Appellant.

Sabiha Mujahid, D.R. for Respondent.

2008 P T D (Trib.) 1625

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.1312/LB of 2007, decided on 2nd June, 2008.

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

----Ss. 114(4) & 121---Return of income---Best judgment assessment---Limitation---Notice was issued on 31-1-2004 under S.114(4) of the Income Tax Ordinance, 2001---Assessment was to be framed on or before 30-6-2006 whereas the assessment was framed under S.121 of the Income Tax Ordinance, 2001 on 5-6-2007---Such order was without jurisdiction and void ab initio being time-barred and legally not sustainable.

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

----S.121---Best judgment assessment---Approval of Commissioner---Assumption of jurisdiction order S.121 of the Income Tax Ordinance, 2001 without delegation of powers by the Commissioner was not justified---In the order there was nowhere mentioned that the Taxation Officer was delegated powers to proceed with the case---Action of Taxation Officer was without jurisdiction/in excess of jurisdiction without lawful authority void 'ab initio and illegal in circumstances.

2006 PTD (Trib.) 2607 rel.

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

----Ss. 121 & 139---Income Tax Ordinance (XXXI of 1979), S.63---Finance Ordinance (XXVII of 2002), Preamble---S.R.O.633(I)/2002, dated 14-9-2002---Best judgment assessment--Application of law---Prospective or retrospective---Amendment in law would apply prospectively as new law could not be applied, to any period prior to the date of its coming into force unless a specific saving provision was provided in the new law---Section 121 of the Income Tax Ordinance, 2001 could not be applied for the assessment period from 1-7-2001 to 30-6-2002 relevant to assessment year 2002-2003 and assessment for the said period was to be completed under S.63 of the Income Tax Ordinance, 1979 instead of S. 121 of the Income Tax Ordinance, 2001---S.R.O.633(I)/2002, dated 14-9-2002 inserted through Finance Ordinance, 2002 had no retrospective effect and was effective from 1-7-2003.

2006 SCMR 109 rel.

(d) Income-tax---

----Assessment of income---Income assessed without formulating the sales/receipts and allowing profit and loss expenses was not legally sustainable under the law.

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

----S.114(4)---Return of income---Assessment year 2002-2003---Words "assessment year" were not available in the statute on the date when the notice under S.114(4) of the Income Tax Ordinance, 2001 was issued by the Taxation Officer on 31-1-2004---Subsequent proceedings thus were nullity in the eyes of law.

2007 PTD (Trib.) 1763 rel.

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

----Ss. 114(4) & 121---Return of income---Notice under postal certificate---Statutory notice under S.114(4) and S.121 of the Income Tax Ordinance, 2001 were sent under postal certificate without acknowledgements and there was no evidence that the notices were served upon the tax payer which clearly showed that the income had been determined without associating the taxpayer---In absence thereof assessment so framed was arbitrary and unjustified.

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

----Ss.114(4) & 115(5)--Return of income---Assessment year 2002-2003--Words `assessment year' in S. 114(4) of the Income Tax Ordinance, 2001 were inserted on 1st July, 2003 and in subsection (5) the words "assessment year" were inserted through Finance Act, 2004 applicable from 1st July, 2004---Subsection (4) of S.114 of the Income Tax Ordinance, 2001 was subject to subsection (5) of S.115 of the Income Tax Ordinance, 2001---Prior to insertion of these words notice under S.114(4) of the Income Tax Ordinance, 2001 could not be issued---As words "assessment year" being not available in statute on the date when the notice was issued under S.114(4) of the Income Tax Ordinance, 2001, the action of Taxation Officer was without any jurisdiction and not in accordance with law.

2007 PTD (Trib.) 1763 rel.

Sabiha Mujahid, D.R. for Appellant.

None for Respondent.

2008 P T D (Trib.) 1630

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2311/LB to 2313/LB of 2006, decided on 7th April, 2008.

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

----S. 156(3)-Rectification of mistake---Application for rectification--Unabsorbed depreciation---Limitation---Order was passed by the Taxation Officer on rectification application after expiry of financial year next following the date in which it was so brought of its notice---Validity---Rectification application, dated 17-8-2000 seeking rectification of order, dated 12-6-2000 relevant to assessment year 1999-2000 was served in the office of Assessing Officer on 21-8-2000---Under the provisions of S.156(3) of the Income Tax Ordinance, 1979, where any such mistake was brought to the notice of any Income Tax Authority by the assessee and no order under subsection (1) of S.156 of the Income Tax Ordinance, 1979 was made by such authority before expiration of the financial year next following the date in which it was so brought to its notice, ,the mistake shall be deemed to have been rectified and all the provisions of the Income Tax Ordinance, 1979 shall have effect accordingly---No order rectification could have been passed in the present case, after the expiration of 30-6-2002---Order of rectification passed on 30-6-2003 was hit by limitation and so it was totally beyond jurisdiction, hence nullity in the eyes of law---Further, no limitation shall run against a non existent void order and the appeal filed by the assessee on 26-7-2005 impugning the order, dated 30-6-2003 passed under Ss.62/132/221 of the Ordinance, was well within time and First Appellate Authority was incorrect in ignoring the submissions made by the assessee and dismissing the appeal in limine---Order passed by the Taxation Officer under Ss.62/132/221 of the ordinance was coram non judice and no limitation shall run against the said order and First Appellate Authority was not correct in dismissing the appeal in line on the point of limitation---Appeal filed before the First Appellate Authority was held within time by the Appellate Tribunal and orders passed by both the authorities below on 30-6-2003 and 12-9-2006 were ordered to be vacated and the claimed rectification was deemed to have been allowed and granted to the appellant unabsorbed depreciation claimed in the rectification application would be understood to have been allowed to the assessee.

2001 SCMR 1822 and PLD 1996 Lah. 99 rel.

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

----S.38 & Third Sched.---C.B.R. Circular No.4 of 1979, dated 23-8-1979---Limitation as to set-off and carry forward of losses in the case of firms, partners, etc.---Depreciation allowance---Unabsorbed depreciation---Limitation---No limitation runs against carried forward unabsorbed depreciation as laid down in para. 9 of C.B.R. Circular No.4 of 1979, dated 23-8-1979.

1985 PTD 389 (Kar. HC) rel.

Shahbaz Butt for Appellant.

Sardar Masood Qazilbash, D.R. for Respondent.

2008 P T D (Trib.) 1641

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.165/LB of 2007, decided on 2nd June, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1)(b), 122, 120(1)(a), 114(1) & 1st Sched., Part-II---Income Tax Rules, 2002, R. 68 & 62---Unexplained income or assets---Assessment already completed under S.120(1)(a) of the Income Tax Ordinance, 2001 was amended under S.122 of the Income Tax Ordinance, 2001 on the ground that assessee had purchased plot for which he had not sufficient sources to acquire the same according to the tax record---Assessee contended that addition made was without any valid jurisdiction, as the assessee had sufficient well known sources to make investment in purchase of plot, as assessee, prior to doing the business, was cultivating agricultural land and had also life savings and contribution of his wife, who was earning income from embroidery works and was existing assessee---Validity---Copy of Registered Haqdaran Zameen showing receipt of land along with wealth statement and its re-conciliation in respect of assessment and his wife were filed before the Taxation Officer and First Appellate Authority---First Appellate Authority also observed that last notice was issued fixing the date of hearing 4-10-2006 and in the diary sheet, the Taxation Officer had failed to mark absence of the assessee on 4-10-2006, or to show his intention to proceed ex parte on that date of default, if any---Ex parte assessment was made on 6-10-2006, which was the date when neither the case was fixed for hearing, nor any notice regarding appearance was issued to the assessee---First Appellate Authority had rightly cancelled the order---Assessee had sufficient, well known and explained sources to make the said investment---Addition made was deleted by the Appellate Tribunal and Departmental appeal was dismissed.

1973 PTD 283 rel.

C.I.T. V. Messrs Akram Brothers Rahim Yar Khan ITA No.5884/B/2004 and 2001 PTD 781 ref.

Sabiha Mujahid, D.R. for Appellant.

Malik Mumtaz Hussain Khokhar for Respondent.

2008 P T D (Trib.) 1652

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.1356/LB of 2007, decided on 2nd June, 2008.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 121, 120 & 176---C.B.R., Circular No.7 (8)S) (Asstt.)/03 (Misc.), dated 10-9-2003---Best judgment assessment---Assessee contended that he was an existing taxpayer and assessment had been finalized under S.120 of the Income Tax Ordinance, 1979---In absence of an assessment order, the completion of an ex parte order under S.121 of the Income Tax Ordinance, 2001 was a double assessment, which was unlawful and without jurisdiction---No notice had ever been served and ex parte order had been passed without issuing statutory notice under S.176 of the Income Tax Ordinance, 2001---Validity---Taxation Officer had made the order under S.121(1) of the Income Tax Ordinance, 2001 without proper service of notice ignoring the mandatory provisions of law as no notice under S.176 of the Income Tax Ordinance, 2001 had been issued to the assessee nor any approval from Commissioner had been obtained---Order had been passed on the basis of information regarding purchase of agricultural land and the assessee had explained that no such land had ever been purchased but had purchased the shop which clearly showed that the information was never confirmed from the relevant authorities and no document in this regard had been mentioned in the assessment order---Assessee was an existing taxpayer having NTN but both the officers below had ignored to verify the same and had made the assessment on the basis of presumptions and assumptions without any justification---Order of First Appellate Authority was vacated as it had rejected the version of the assessee without confirming from the record of the case that the assessee was an existing taxpayer and the order passed under S.121(1) of the Income Tax Ordinance, 2001 was cancelled having been passed without any jurisdiction and being void ab intio and illegal ignoring the mandatory requirements of law.

2003 PTD 2037; ITA No. 2714/LB/2002; 1967 PTD 189; 1987 PTD (Trib.) 335; 2004 PTD (Trib.) 1391; 2003 PTD (Trib.) 242 and 2004 PTD (Trib.) 106 ref.

Naeem Munawar for Appellant.

Sabiha Mujahid, D.R. for Respondent.

2008 P T D (Trib.) 1662

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.1195/LB of 2007, decided on 2nd June, 2008.

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

----Ss. 184 & 122---C.B.R. Circular No.2 of 1959, dated 21-9-1959---C.B.R. Circular No.6(II) IT-6/7/561, dated 17-6-1975---Penalty for concealment of income---Limitation---Assessment was amended by making certain additions on account of difference in purchases as per sales tax return provided by the assessee and accounts annexed with the return---Such addition was upheld by the First Appellate Authority on account of furnishing of inaccurate particulars of income/purchases---Penalty was imposed equal to 100% of the tax sought to be evaded---Such penalty was deleted by the First Appellate Authority with the observations that imposition of penalty after lapse of 11 months was not legally sustainable having been imposed after inordinate delay which was invalid and not sustainable in the eye of law---Department contended that deletion of penalty on the ground of late imposition was unjustified and unlawful as the statute did not draw any boundary of time limit to invoke S.184 of the Income Tax Ordinance, 2001 and that period of 11 months could not be termed as inordinate delay---Validity---Assessing Officer had imposed penalty only on the basis of assessment, which had rightly been deleted by the First Appellate Authority---Instructions. had been issued by the Central Board of Revenue to complete penalty proceedings within three months after the assessment, but penalty proceedings had been initiated after about a year, which was invalid---Departmental appeal was dismissed by the Appellate Tribunal in the circumstances.

ITA No. 5796/LB of 2005 (Assessment year 2002-2003); 1994 PTD 688 (Trib.); 1994 PTD 675 & 688; 1995 PTD 359; 2007 PTD (Trib.) 932; 1993 PTD 245 (Trib.); (1972) ITR 368 (S.C. of India) and 2007 PTD (Trib.) 932 rel.

(b) Income-tax---

----Penalty---Taxation Officer should not impose the penalty solely on the ground that the addition made by the Taxation Officer had been upheld by the Appellate Authority.

1993 PTD 245 (Trib.) rel.

(c) Income-tax---

----Penalty---Limitation---Penalty imposed after inordinate delay of about one year was not justified.

2007 PTD (Trib.) 932 rel.

(d) Income-tax---

----Assessment proceedings and penalty proceedings are on two different footings.

1994 PTD 688 rel.

(e) Income-tax---

----Assessment proceedings---Penalty proceedings---Burden of proof---Onus is on the assessee to prove his case, whereas in the proceedings for imposition of penalty, the onus in this regard is on the Department to establish that the assessee had concealed its income.

(f) Income-tax---

----Penalty proceedings---Nature of---Benefit of doubt---Penalty proceedings are criminal in nature and the standard of proof which is required in a criminal case is also required to sustain the order imposing the penalty---Even otherwise, benefit of doubt should be given to the assessee---Bona fide belief on the part of assessee on the point of fact or law shall entitle him for extending benefit of doubt---Even if, the assessee's explanation in regard to allegation was not accepted and amount was assessed at the hand of the assessee, it did not, by itself, justified the Revenue to impose a penalty.

(1972) ITR 368 (S.C. of India) rel.

(g) Income-tax---

----Penalty, levy of---Principles---Taxation Officer should take into consideration the explanation of the assessee and the facts of the case, unless it is discovered that assessee has concealed his income deliberately, or has furnished inaccurate particulars of his income consciously only then, a penalty should be imposed.

(h) Income-tax---

----Penalty---Deliberate concealment---Fraud could not be presumed and it must be proved---Penalty proceedings should be started only, when the Assessing Officer had fairly strong reasons to believe that there was a wilful default or deliberate concealment on the part of assessee.

Sabiha Mujahid, D.R. for Appellant.

Nemo for Respondent.

2008 P T D (Trib.) 1683

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.1194/LB of 2007, decided on 2nd June, 2008.

Income Tax Ordinance (XLIX of 2001)--

----Ss. 161, 166, 120(1)(b), 122, 153, 155 & 205---Income Tax Ordinance, (XXXI of 1979), S.52---Failure to pay tax collected or deducted---Assessee in default--Assessment finalized was amended, later on, order was passed under Ss.161/205 of the Income Tax Ordinance, 2001 treating the assessee in default and imposing additional tax for non-compliance of S.153 of the Income Tax Ordinance, 2001 on the ground that assessee, while making certain payments in the fixed assets like computers, furniture and vehicles etc. had not withheld the tax---Contention of the assessee company was that fixed assets was purchased from its sister concern and tax was rightly not deducted, as the provisions of S.153 of the Income Tax Ordinance, 2001 were not attracted upon the transactions of fixed assets---Assessment was made under Ss.161/205 of the Income Tax Ordinance, 2001 instead of making order under S.122 of the Income Tax Ordinance, 2001 by amending the order as Taxation Officer had a right to amend the order---Order in field was illegal and against the spirit of provisions of S.122 of the Income Tax Ordinance, 2001 and needed to be declared as null and void---Assessment order under S.122(1) of the Income Tax Ordinance, 2001 had been passed on 26-6-2006 and assessee had been declared as taxpayer in default on 10-1-2007, which was against the law---Order was cancelled by the First Appellate Authority---Considering the factual as well as legal position, Appellate Tribunal held that First Appellate Authority had rightly cancelled the assessment order and did not interfere in the order of First Appellate Authority---Departmental appeal was dismissed.

1999 PTD 4028; 2006 PTD 1888; 2002 PTD 2705; 2005 PTD 1303 (Trib.) and 2003 PTD 1167 ref.

Sabiha Mujahid, D.R. for Appellant.

Dawood Iqbal, ITP for Respondent.

2008 P T D (Trib.) 1703

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.269/LB of 2008, decided on 1st July, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A), 111(1)(a) & 120---Amendment of assessment---During course of proceedings of refund claimed, assessee revised return declaring same income, but reducing the amount of tax deduction and claimed refund---Balance Sheet was also revised---Taxation Officer amended the assessment on the ground that finalized assessment was erroneous and prejudicial to the interests of Revenue, as the assessee himself failed to declare the, correct results---Amount of receivable in the revised Balance Sheet had been omitted just to avoid proper taxation and the taxpayer had failed to explain with documentary evidence regarding the amount of receivable, which was added in total income of the assessee---Assessee contended that two conditions required for invoking provisions of S.122(5A) of the Income Tax Ordinance, 2001 had not been fulfilled, as firstly the Commissioner could amend the order, if it was erroneous and secondly it was also prejudicial to the interests of Revenue, but revising authority, without bringing on record any legal justification for converting the income, which had already been processed merely on the basis of surmises,. could not be modified/amended; that Taxation Officer may apply subsection (5) of S.122 of the Income Tax Ordinance, 2001, which was regarding any income chargeable to tax and had escaped assessment, or total income had been subject of excessive relief or refund, or any amount under a head of income had been misclassified, but subsection (5A) of S.122 of the Income Tax Ordinance, 2001 could not be applied by any stretch of mind, as assessment was neither erroneous, nor prejudicial to the interests of Revenue---Validity---Taxation Officer had not invoked proper provision of law and had passed the order under S.122(5A) of the Income Tax Ordinance, 2001 on conjectures and surmises, without establishing that order was erroneous as well as prejudicial to the interests of Revenue and the First Appellate Authority had upheld the order passed by the Taxation Officer without any justification---Order of First Appellate Authority was vacated and the order passed by the Taxation Officer under S.122(5A) of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal.

2004 PTD 330 (Kar.) ref.

2008 and PTD (Trib.) 1959 and 2008 PTD (Trib.) 179 rel.

Sohail Mutee Babri, ITP for Appellant.

Saibha Mujahid, D.R. for Respondent.

2008 P T D 1706

[Income Tax Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Iqbal Ahmed, Accountant Member

I.T.As. Nos.21/KB, 22/KB, 51/KB and 52/KB of 2007, decided on 11th June, 2008.

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

----S. 162 & Seventh Sched. Part-III, Division-IV---Recovery of tax from the person from whom tax not collected or deducted---Service of notice---Opportunity of being heard---Taxation Officer after confronting notices for short deduction of tax levied tax @ 1.25% instead of tax withheld @ 1 %---Order of Taxation Officer was cancelled by the First Appellate Authority for the reason that service of notice was improper---Validity---Notice admittedly had been issued---Order of the Taxation Officer embodied defect that explanation furnished by the assessee was unsatisfactory---Department having issued notice, there was no jurisdictional defect---Held, withholding tax in respect of dry dates had to be 1.25% as per provision of Part-III of the Seventh Schedule to the Income Tax Ordinance, 2001---Order framed by the First Appellate Authority was not in accordance with law---Order of First Appellate Authority was vacated by the Appellate Tribunal and that of Taxation Officer was restored.

2006 (94) Tax 317 (SC Pak.) ref.

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

----Ss. 162(2), 169(3), 122(1) & 122(5)--Recovery of tax from the person from whom tax was not collected or deducted---Assessee contended that he being exporter, filed statement under S.69(3) of the Income Tax Ordinance, 2001 which was deemed to be finalized for reopening the same, it was necessary to take steps under S.122(1) or S.122(5) of the Income Tax Ordinance, 2001 but department instead of that, had preferred to pass order under S.162 of the Income Tax Ordinance, 2001, which was without any jurisdiction---Validity---Subsection (2) of S.162 of the of the Income Tax Ordinance, 2001 was related to additional tax and not for collection of short tax---Taxation Officer had passed the order under 6.162(1) of the Income Tax Ordinance, 2001 which was an independent section and invoking of such section was correct---Tax deducted @ 1% was treated as short deduction of tax, it was just and proper to pass order, under S.162(1) of the Income Tax Ordinance, 2001, which was an independent section and related to such relevant situation as in the case in hand.

1993 SCC 1049 and 2006 PTD 1542 ref.

Abdul Tahir for Appellant (in I.T.As. Nos. 21/KB and 22/KB of 2007).

Shahabuddin Osto D.R. for Respondent (in I.T.As. Nos. 21/KB and 22/KB of 2007).

Shahabuddin Osto D.R. for Appellants (in I.T.As. Nos.51/KB and 52/KB of 2007).

Abdul Tahir for Respondent (in I.T.As. Nos.51/KB and 52/KB of 2007).

2008 P T D 1722

[Income-tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmed, Accountant Member

I.T.As. Nos.545/KB to 549/KB of 2003, decided on 28th April, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss.65, 80D & Fourth Sched.---Additional assessment---Assessee a Life Insurance Company---Appellate Tribunal directed that income falling under S.80D of the Income Tax Ordinance, 1979 regime shall 'be properly sifted/examined and after providing, an opportunity to the assessee, the income may be worked out as pointed out in the order of the Appellate Tribunal---Against such direction, Assessing Officer rectified the assessment order and increased the amounts of items assessed as well as brought in new taxes instead of confining himself to the specific directions of the Appellate Tribunal---Assessing Officer charged tax on dividend income @ 5% which was not charged in the original assessment order which was subject-matter of earlier appeal---First Appellate Authority observed that Assessing Officer could not do so without first issuing notice under S.65 of the Income Tax Ordinance, 1979---If, Assessing Officer felt that some of the source of income or quantum of income from some of the sources were missing, which required the reopening of the assessment under S.65 of the Income Tax Ordinance, 1979, for which he was legally authorized/empowered--Dividend income were deleted by the First Appellate Authority and original assessment orders were restored-Validity-Fourth Schedule of the Income Tax Ordinance, 1979 laid the prescribed rules for computation of profits and gains of insurance business---Income of Life Insurance Company was to be taken as one unit income or a single basket income---First Appellate Authority had rightly decided that no notice under S.65 of the Income Tax Ordinance, 1979 was issued which was a legal requirement---Order of First Appellate Authority was confirmed by the Appellate Tribunal in circumstances.

2000 PTD (Trib) 3776 and 1997 PTD 1693 (SC Pak.) rel.

2006 PTD (Trib.) 1979 ref.

Farrukh Ansari, D.R. for Appellant.

Muhammad Farid for Respondent.

2008 P T D 1731

[Income Tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmed, Accountant Member

I.T.As. Nos.614/KB and 617/KB of 2004, decided on 30th April, 2008.

Income Tax Ordinance (XXXI of 1979)---

----S.80-C---Tax on income of certain contractors and importers---Import of raw sugar for own consumption---Due to technical problem of processing total raw sugar was not utilized in own manufacturing and was sold to other Mills---Assessing Officer observed that raw material sold attracted the levy of tax under S.80-C of the Income Tax Ordinance, 1979 as the assessee did not utilize such raw sugar for personal consumption---Assessee contended that the raw sugar was not marketed as a commercial item and it was not sold in open market but in fact the same was transferred to other Sugar Mills for industrial process and the provisions of S.80-C of the Income Tax Ordinance, 1979 was not applicable---First Appellate Authority, after examining the history of the case, directed for acceptance of the trading accounts but upheld the action of Taxation Officer regarding levy of tax under S.80-C of the Income Tax Ordinance, 1979---Validity---Assessee had history of acceptance of accounts and trading results which had been upheld at the level of Appellate Tribunal---Order of First Appellate Authority with regard to acceptance of trading result was in conformity with the history of the taxpayer and was confirmed by the Appellate Tribunal---With regard to levy of tax under S.80-C of the Income Tax Ordinance, 1979, the emphasis in the provisions is on the word "own consumption"---Taxpayer sold out the total imported raw sugar and not used same for its own consumption which required levy of S.80-C of the Income Tax Ordinance, 1979 as not utilized for own consumption---Order of First Appellate Authority was not interfered by the Appellate Tribunal.

Farrukh Ansari, D.R. for Appellant (in I.T.A. No.614/KB of 2004).

Mian Mukhtar Ahmed for Respondent (in I.T.A. No.614/KB of 2004).

Mian Mukhtar Ahmed for Appellant (I.T.A. No.617/KB of 2004).

Farrukh Ansari, D.R. for Respondent (I.T.A. No.617/KB of 2004).

2008 P T D 1737

[Income Tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmed, Accountant Member

I. T. A No.1666/KB of 2005, decided on 6th May, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S.21(k) & Fourth Sched. Rr. 2 & 3----Income Tax Ordinance (XXXI of 1979), Fourth Sched. Rr. 2 & 3---Deductions not allowed--Life Insurance Company---Payment of excess perquisites---Addition made by the Taxation Officer was deleted by the First Appellate Authority---Validity---Amount of allowance exceeding fifty per cent of salary was to be disallowed, however, under Rr.2 & 3 of the Fourth Schedule of the Income Tax Ordinance, 1979 this was made allowable in respect of Life Insurance Corporation/employees---Such was not the situation in Rr.2 & 3 of the Fourth Schedule of the Income Tax Ordinance, 2001---Substantial change occurred in the scope of excessive perquisite as mentioned in Rr.2 & 3 of the Fourth Schedule of the Income Tax Ordinance, 2001 regarding Life Insurance business---First Appellate Authority had not appreciated the change in the Income Tax Ordinance, 2001 and had based his finding on the Income Tax Ordinance, 1979---Taxation Officer was correct as far as taxing the excess perquisite under S.21K of the Income Tax Ordinance, 2001 was concerned---Order of First Appellate Authority was modified by the Appellate Tribunal and findings of Taxation Officer were upheld.

I.T.A. No.1171 to 1175/KB of 2000-2001; Order I.T.A. No.162/KB of 2002; I.T.A. No.558 to 560/KB of 2003 and ITA No.187/KB to 1190/KB of 1998-98 distinguished.

Farrukh Ansari, D.R. for Appellant.

Muhammad Farid for Respondent.

2008 P T D 1751

[Income Tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmad, Accountant Member

I.T.As. Nos.1200 and 1201/KB of 2007, decided on 30th April, 2004.

Income Tax Ordinance (XLIX of 2001)---

----Ss.233, 170(4), 169, 120, 115(4) & 114---Brokerage and commission---Franchisee---Commission agent---Claim of refund was rejected on the ground that the tax had been deducted under S.233 of the Income Tax Ordinance, 2001 which fell under the ambit of S.169 of the Income Tax Ordinance, 2001 and was the final tax liability under Presumptive Tax Regime---Assessee was required to furnish statement under S.115(4) of the Income Tax Ordinance, 2001 instead of return of income under S.114 of the Income Tax Ordinance, 2001---Assessee contended that he was merely a franchisee and not an agent of the company and as such his relationship with the company/deducting agent was not that of a commission agent---Appeal was allowed by the First Appellate Authority and Taxation Officer was directed to issue refund---Validity---According to the agreement, assessee was also appointed sub-dealer for the business---Definition of "Franchised dealer" showed that even a franchisee' had a similar role as that of anagent' in its wider perspective---Fact as to whether the return filed under S.114 of the Income Tax Ordinance, 2001 was a valid return or not and the fact that S.120 of the Income Tax Ordinance, 2001 stipulated that only such return was to be taken to be an assessment which needed to be reexamined---Emphasis in S.120 of the Income Tax Ordinance, 2001 was on the "furnishing of a complete return of income"---Whether return filed under S.114 of the Income Tax Ordinance, 2001 was a complete and correct return of income needed to be examined---Matter needed to be re-examined in detail with original scheme and spirit of law by the framer of Universal Self-Assessment Scheme and procedure adopted accordingly---Order of First Appellate Authority was set aside and case was remanded for re-adjudication on the basis of guidelines given by the Appellate Tribunal.

Black's Dictionary ref.

Shahabuddin Ousto, D.R. for Appellant.

Ameeruddin Shaikh for Respondent.

Date of hearing: 26th April, 2008.

2008 P T D 1770

[Income Tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos.381-KB to 383-KB of 2006, decided on 20th October, 2007.

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

----S.156---Rectification of mistake---Discriminatory treatment---Mistake floating on the surface of record---Application for rectification .of assessment on the ground that less rate of tax be applied as had been applied in the parallel cases instead of 4% applied in the case of assessee---Assessee contended that since no action was taken on the applications filed for rectification, assessment order would be deemed to have been rectified and the taxpayer was entitled for credit of excess tax paid---Department pleaded that since the rate of tax of non-resident aircraft lessors was assessed in the ,parallel case, the same was agreed between the assessee and the Central Board of Revenue, on the other hand, no such agreement had been executed between the taxpayer and the Central Board of Revenue---Contention of taxpayer to apply the same rates as applied in the cases of parallel lessor was without a standing and could not be termed to be a mistake apparent from record attracting rectification under the provision of S.156 of the Income Tax Ordinance, 1979 as the mistake was not floating on the surface of the record----Validity---Application filed by the assessee was within time and the mistake pointed out was apparent from the record---Taxation Officer had not only violated the principles of natural justice and equity but it was also obligatory upon the Taxation Officer to either accept the applications or .reject the same---By keeping the same pending, the Taxation Officer could only get the time limitation expired as there was no dispute to the effect that the assessee had filed application and the same remained pending claiming refund after the expiry of the period for rectification of the order---Due to lapse on part of Taxation Officer, the provisions of S.156 of the Income Tax Ordinance, 1979 had become applicable and the mistake pointed out in the assessment order shall be, deemed to have been rectified---Since applications were not rejected within the mandatory period, the order shall be deemed to be rectified for the reason that when the law requires something to be done in a particular manner and within a statutory period, it had to be done in that particular manner and within that particular period---First Appellate Authority had rightly upheld that assessments for all the years shall be deemed to have been rectified and had rightly annulled the order of Taxation Officer---Order of First Appellate Authority was upheld and all the appeals of the department were dismissed by the Appellate Tribunal.

1998 PTD (Trib.) 3866; 1998 PTD 3488 (Trib.); 1971 PTD 411 (Allahabad H.C.); 1983 PTD 246; 1988 PTD 3748 (Trib.) and 1983 PTD 221 rel.

(b) Administration of justice---

----While adjudicating the legal issues, matter of law is to be decided first and then the facts are to be considered.

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

----S.156-Rectification of mistake---Mistake of fact and law---Mistake of facts as well as law can be rectified under S.156 of the Income Tax Ordinance, 1979.

1998 PTD (Trib.) 3866; 1998 PTD 3488 (Trib.); 1971 PTD 411 (Allahabad H.C.); 1983 PTD 246; 1988 PTD 3748 (Trib.) and 1983 PTD 221 rel.

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

----S.156---Rectification of mistake---Discriminatory treatment---Issue in respect of incorrect treatment accorded in the case of assessee in the presence of direction/clarification of Finance Division, Government of Pakistan, was a mistake being a discriminatory treatment accorded, the assessee which, at a late stage, came to its knowledge and such mistake should have been rectified by the Taxation Officer within a statutory time available under the law.

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

---S.156---Rectification of mistake---Limitation---Taxation Officer had neither refused nor rejected the application that remained pending for four years, the mistake which was apparent from the record shall be deemed to had been rectified.

Fahimul Haq, D.R. for Appellant.

Salman Pasha and Nadeem Dawoodi for Respondents.

Date of hearing: 26th September, 2007.

2008 P T D 1809

[Income Tax Appellate Tribunal of Pakistan]

Before Khalid Waheed Ahmed, Chairman, Munsif Khan Minhas, Judicial Member and

Istataat Ali, Accountant Member

M.A. (R) Nos.69/IB, 60/IB to 65/IB of 2004 in I.T.A.No.2142/IB of 1995-96, I.T.As. Nos.114/IB and 115/IB of 2002, I.T.As. Nos.849/IB to 852/IB of 1998-99 and I.T.As. Nos.438/IB to 441/IB of 2007 and I.T.A No.446/IB of 2007, decided on 3rd June, 2008.

Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----Ss. 2(f) & 4---Income Tax Ordinance (XLIX of 2001), S.221---Companies Ordinance (XLVII of 1984), S.2(4)---Rectification of mistake---Scope---Assessee company was engaged in the manufacture and sale of commercial explosives, majority shares of which were owned by Government of Pakistan---Issue agitated in the case was about the chargeability of Workers' Welfare Fund which was levied by the Assessing Officer and confirmed by Commissioner (Appeals) as well as the Appellate Tribunal---Assessee moved miscellaneous applications in respect of Tribunal's order claiming that Workers' Welfare Fund was not chargeable---Validity---Held, mistake pointed out by the assessee was apparent and floating on the surface of record as Tribunal had observed in its order that "Corporation" had not been defined in any Act which observation was factually not correct-'Corporation', 'Company'-Definitions---Workers' Welfare Fund was not chargeable on the income of the assessee--Principles.

1999 PTD 4147; PLD 1996 Quetta 21; PLD 1973 Notes 1; PLD 1976 Kar. 1257; Word and Phrases, 'Volume 9A, pages 415, 416 and 439; Black's Law Dictionary; Corpus Juris Secundum (C.J.S.); Halsbury's Laws of India Volume 27; Indian Company Law -- Jehangir M. J. Sethan, 11th Edition, (2005), Volume 1; Hand book of Legal Terms and Phrases Judicially defined (by M. Ilyas Khan); Halsbury's Laws of England, Volume 9(2) (p.630); S.P. Mittal v. Union of India AIR 1983 SC 1; Board of Trustees, Ayurvedic and Unani Tibia College v. State of Delhi AIR 1962 SC 458 :Corporation Corporate Offences Dr. Sanjeev Kumar p.3 para 13; Shalimar Recording and Broadcasting Company v. DCIT, Circle-13, Islamabad (and vice versa) in I.T.As. Nos.915 to 918, 354, 355, 331, 1259 to 1261(IB) of 1998-99; Commissioner of Income Tax v. National Food Laboratories 1992 SCMR 687 = 1992 PTD 570; 2007 PTD(Trib.) 2358 and Black Law Dictionary 8th Edition ref.

Tahir Razzaq, F.C.A/AR for Applicant.

Mir Alam Khan, D.R. for Respondent.

2008 P T D (Trib.) 1873

[Income Tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehan, Judicial Member and Mazhar Farooq Sherazi, Accountant Member

I.T.As. Nos. 576/LB to 578/LB of 2008, decided on 8th August, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss.170(4) & 115(4)---Refund---Application for issuance of refund was rejected by an order under S.170(4) of the Income Tax Ordinance, 2001 on the ground that originally statement under S.115(4) of the Income Tax Ordinance, 2001 for a complete discharge of liability was filed and subsequently returns were filed by revising earlier statutory statements---First Appellate Authority directed to accept the return and proceed in accordance with law---Validity---Revising of entire assessment was not permissible under S.170(4) of the Income Tax Ordinance, 2001---Proper course for department was to initiate, under proper provisions of law, to amend any assessment as S.170(4) of the Income Tax Ordinance, 2001 did not empower any such type of proceedings as had been undertaken by the Taxation Officer which were beyond his jurisdiction---Order was cancelled being void, illegal ab initio by the Appellate Tribunal---Refund applications were not hit by such illegal order which was to take its legal course---Order passed by the First Appellate Authority was maintained and departmental appeals having no substance were dismissed.

Ashraf Ahmed Ali, D.R. for Appellant.

Siraj-ud-Din Khalid, for Respondent.

2008 P T D (Trib.) 1884

[Income Tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairperson and Istataat Ali, Accountant Member

I.T.As. Nos.523(IB) and 524(IB) of 2006, decided on 20th June, 2008.

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

----Ss.221 & 234(4)---Income Tax Ordinance (XXXI of 1979), Ss.156 & 59-A---Rectification of mistake---Limitation---Assessment was finalized under S.59-A, of the Income Tax Ordinance, 1979 as on 30-6-2001---Limitation for rectification under S.156 of the Income Tax Ordinance, 1979 had expired on 30-6-2005---Such assessment was rectified as on 29-11-2005, under S.221 of the Income Tax Ordinance, 2001---Validity---Extended limitation of five years as provided in S.221 (4) of the Income Tax Ordinance, 2001 shall not apply to the assessments made under the Income Tax Ordinance, 1979---Rectification of any assessment made under Income Tax Ordinance, 1979 could be made within the limitation of four years as provided in S.156(4) of the Income Tax Ordinance, 1979---Provision of S.239(4) of the Income Tax Ordinance, 2001 will have an overriding effect and the proceedings saved under these provisions will continue to be completed accordingly under the Income Tax Ordinance, 1979---Rectification order was contradictory to the substantive provisions of law contained in S.239(4) of the Income Tax Ordinance, 2001---Rectification orders were annulled by the Appellate Tribunal in circumstances.

2005 PTD 14; 2006 PTD 734; 2003 PTD 2109 and (2008) 97 Tax 453 (Trib.) ref.

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

----Ss.239(4) & 221(4)---Income Tax Ordinance (XXXI of 1979), S.156---Saving---Conflict of provisions---Under the provisions of S.239(4) of the Income Tax Ordinance, 2001, any proceedings under the Income Tax Ordinance, 1979 pending on the commencement of Income Tax Ordinance, 2001 before any Income Tax Authority shall be continued and disposed of under the Income Tax Ordinance, 1979 in the manner as Income Tax Ordinance, 2001 had not come into force---Conflict/contradiction existed between the provisions of Ss.221(4) and 239(4) of the Income Tax Ordinance, 2001---Section 239(4) of the Income Tax Ordinance, 2001 clearly provides that all the proceedings pending under the Income Tax Ordinance, 1979 shall be completed under that Income Tax Ordinance, 1979---For making any rectification, limitation of four years was provided under S.156(4) of the Income Tax Ordinance, 1979---If any rectification was intended to be made with respect to any assessment made under the Income Tax Ordinance, 1979, the provisions of S.156(4) of the Income Tax Ordinance, 1979 shall apply where it was provided that no rectification shall be made after expiration of four years from the date of order sought to be amended---Provisions of S.239(4) of the Income Tax Ordinance, 2001 read with S.156(4) of the Income Tax Ordinance, 1979 were in clear conflict with the provisions of S.221(4) of the Income Tax Ordinance, 2001---Applicability of provisions of Income Tax Ordinance, 1979 in respect of pending assessments was saved under S.239(4) of the Income Tax Ordinance, 2001---Saving clause had an overriding effect and no other provisions contained in or inserted in the Income Tax Ordinance, 2001 could overrule the same---If any provision of Income Tax Ordinance, 2001 was in conflict with S.239(4) of the Income Tax Ordinance, 2001, it would automatically abate and would not have any binding effect.

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

----Ss.221(1A) & 221(4)---Income Tax Ordinance (XXXI of 1979), S.156---Rectification of mistake---Limitation---Provision of S.221(4) of the Income Tax Ordinance, 2001 in respect of rectification under S.221(1A) of the Income Tax Ordinance, 2001 did not represent the intention of legislature---Said provisions could not be applied in respect of any rectification intended to be made with regard to any order made under the Income Tax Ordinance, 1979.

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

----S. 221---Income Tax Ordinance (XXXI of 1979), S.65(1)(b)---Rectification of mistake--Application: of higher rate of tax through rectification---Validity---Section 65(i)(b) of the Income Tax Ordinance, 1979 provides that when lower rate of tax was charged on income of any assessee, the assessment should be reopened and a written order should be passed through which proper tax should be charged according to law---Rectification could not be made in the circumstances---Assessing Officer should have reopened the assessment under S.65 of the Income Tax Ordinance, 1979 and should have accordingly proceeded to charge proper rate of tax on assessee's income---Action under S.221 of the Income Tax Ordinance, 2001 was legally not correct---Case was not fit for rectification and the proceedings taken under S.221 of the Income Tax Ordinance, 2001 were contrary to law and were legally not maintainable---Order of rectification under S.221 of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal in circumstances.

2006 PTD 2001 rel.

Hafiz Muhammad Idrees and Aurangzaib, ITP/ARs for Appellant.

Mir Alam Khan, D.R. for Respondent.

2008 P T D (Trib.) 1910

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos.384/KB to 387/KB of 2006, decided on 20th October, 2007.

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

----Ss.156(3) & 62---Convention for Avoidance of Double Taxation between Islamic Republic of Pakistan and Romania, Art.3---Rectification of mistake---Rate of tax---Discriminatory treatment---Limitation---Rectification application on the ground that in the parallel cases, the less rates of tax had been applied; assessment order passed may be rectified by applying less rate of tax as applied in the parallel cases instead of rate of tax applied in the case of assessee---Finance Division informed that "the Government had implemented in letter and spirit the aviation policy which inter alia provides equal treatment between national carrier and the private airlines for taxation purposes given suggestions relating to tax issues could be considered at the time of next budget and matter could be taken up with taxation authorities at an appropriate time"---Assessee pleaded that since no action was taken on the applications filed for rectification under the provisions of S.156(3) of the Income-Tax Ordinance, 1979, the assessment orders would be deemed to have been rectified, therefore assessee was entitled for credit of excess tax paid and refund in this respect be issued---Validity---Assessee had approached the Taxation Officer by filing rectification applications within a statutory period of time but Taxation Officer had not taken up those applications for decision within the limitation period provided under the law---Mistake of facts as well as law could be rectified under S.156 of the Income-Tax Ordinance 1979---Incorrect treatment accorded to the assessee, in the presence of direction/clarification of Finance Division, was a mistake being a discriminatory treatment accorded, the assessee which, at a later stage, came to the knowledge of the assessee---Such mistake should have been rectified by the Taxation Officer within a statutory time available under the law---Taxation Officer had neither refused nor rejected the said applications that remained pending for four years---Mistake which was apparent from the record now shall be deemed to have been rectified.

1998 PTD (Trib.) 3866; 1998 PTD (Trib.) 3488; 1971 PTD 411; 1983 PTD 246; 1988 PTD (Trib.) 3748 and 1983 PTD 221 rel.

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

----S.156---Rectification of mistake---Obligatory upon the Taxation Officer either to accept the application or reject the same.

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

----S.156---Rectification of mistake---Non-rejection of rectification application within mandatory period---Effect---Due to lapse on the part of Taxation Officer, the provisions of subsection (3) read with subsection (1) of S.156 of the Income-Tax Ordinance, 1979 had become applicable and the mistakes pointed out in the assessment order shall be deemed to have been rectified---Since applications were not rejected within the mandatory period, the order shall be deemed to be rectified for the reason that when the law requires something to be done in a particular manner and within a statutory period, it had to be done in that particular manner and within statutory period--Taxation Officer had failed to act in accordance with law and had violated the provisions of subsection (3) read with subsection (1) of S.156 of the Income-Tax Ordinance, 1979---First Appellate Authority had rightly held that assessments shall be deemed to have rectified under the provisions of law and had rightly annulled the order of Taxation Officer---Order of First Appellate Authority was not interfered with by the Appellate Tribunal and all the appeals of the Department were dismissed.

Fahimul Haq, D.R. for Appellant.

Salman Pasha and Nadeem Dawoodi for Respondent.

2008 P T D (Trib.) 1942

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos.7221/LB to 7225/LB of 2005, decided on 26th May, 2008.

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

----Ss.156(3), 62 & Second Sched., Part-I, Cl. (118-D)---Rectification of mistake---Limitation---Direction of High Court---Extension of limitation period---Department pleaded that Taxation Officer was right in rejecting the rectification application as the High Court directed to decide the rectification application within two months from the date of its order and on such direction period of limitation provided under S. 156 (3) of the Income-Tax Ordinance, 1979 stood extended---Validity---Direction of High Court was twofold: It had been directed to decide the application within two months on one hand but the direction was not unbridled on the other hand---Such direction was qualified with the word "in accordance with law" which specially meant that the disposal or decision must remain within the admitted and allowed contours of the law---Since period provided for taking action and passing order on applications stood expired, no resort could be had to pass order on the subject application, which stood already acted upon by operation of law and within stipulated time---Time provided by law for adjudicating the application having once expired shall not be extended---When law provided a thing to be done in a particular manner, the same must be done in that manner and if it is not done in the manner so provided, the same shall be nullity in the eyes of law---Taxation Officer having failed to pass order in the manner and within the time frame provided under the law, rejecting the rectification application was not tenable in the eyes of law---Both the authorities below were incorrect in holding that due to direction of High Court, the statutory limitation provided for action under S. 156(1) of the Income-Tax Ordinance, 1979 stood extended by two months---Orders of both the authorities below were vacated by the appellate Tribunal and rectification sought through applications were deemed to have been granted.

Nagina Silk Mills, Lyalpur v. C.I.T. PLD 1963 SC 322; C.I.T. v. Hakim Ali Zardari 2006 PTD 271 and I.T.As. Nos.4847/LB to 4851/LB of 2005 ref.

2002 PTD 750; 2002 PTD 1470; PLD 1966 SC 738; 1991 MLD 25; 1991 MLD 889 and 2007 PTD 67 rel.

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

----S.156(3)---Rectification of mistake---Limitation---Principles---If an assessee brings a mistake to the notice of any tax authority, it casts a responsibility on such authority to pass an order on such application before the expiration of the financial year next following the date in which such mistake was brought to his notice---Provision is substantive and mandatory in nature for the reason that it is couched in a negative language and provides a consequence which clearly states that in case of failure on the part of such authority, to pass order on such application, "the mistake shall be deemed to have been rectified"---Consequence of non-passing of order within the stipulated time, the mistake brought to his notice, shall be deemed to have been granted by operation of law---Rectification application pointing out mistake was admittedly filed, Taxation Officer is legally bound to pass order thereon in terms of S.156(1) of the Income-Tax Ordinance, 1979---No such order having been passed till the due date, mistakes sought to be rectified shall be deemed to have been rectified on the operation of period of limitation provided in S.156(3) of the Income-Tax Ordinance, 1979.

Shahbaz Butt for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

Date of hearing: 22nd May, 2008.

2008 P T D (Trib.) 2006

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.2270/LB of 2006, decided on 5th August, 2008.

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

----Ss. 184, 182, 122, & 39---Penalty for concealment of income---Interest income---Statement-for export proceeds was filed---Assessee was confronted for non-disclosure of interest income---Return declaring interest income with tax deduction at source was filed---Assessment framed was not contested in appeal but when penalty was imposed on concealment for submitting inaccurate particulars, the illegality of imposition of penalty was challenged---Assessee contented that no concealment or submission of inaccurate particulars had taken place as matter of late filing of return had been made liable to concealing or submitting inaccurate particulars which was not legally correct---Penalty could have been imposed for late filing---Total amount of bank interest had been assessed under S. 39 of the Income Tax Ordinance, 2001 by adding to it the imputable income calculated on work back-basis on the tax deducted from export realization, which was illegal and levying penalty on the basis of such illegal order would also result into illegal imposition of penalty---Validity---Assessee after confronting on not declaring the bank profit had immediately filed the Income Tax Return where tax had already been deducted at source meaning thereby that no loss of revenue took place as amount of tax was already with the taxation authorities awaiting its adjustment---Taxation Officer had failed to prove that such act of appellate-assessee amounted to concealment or submission of inaccurate particulars; secondly, it was a case of late filing of Return for which the penalty had to be imposed under S. 182 of the Income Tax Ordinance, 2001 and not for the acts as specified in S. 184 of the Income Tax Ordinance, 2001---Order passed under S.184 of the Income Tax Ordinance, 2001 was patently illegal, void ab initio which was annulled by the Appellate Tribunal.

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

---S.122---Amendment of assessment---Notice captioned as under S.122(1) of the Income Tax Ordinance, 2001, omitting a statutory notice under subsection (9) of S. 122 of the Income Tax Ordinance, 2001, debars amending or further amending any assessment without a proper opportunity of being heard.

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

----Ss.122 & 154(4)---Amendment of assessment---Order passed under S.122(1) of the Income Tax Ordinance, 2001 was out of jurisdiction as the Assessing Officer expressed his intention to amend the completed assessment under S. 154 (4) of the Income Tax Ordinance, 2001 which did not fall within the scope of S. 122 of the Income Tax Ordinance, 2001.

(d) Income tax---

----Proceedings in respect of complete discharge of tax liability are quite distinct from the normal law proceedings.

Siraj-ud-Din Khalid, Advocate/A.R. for Appellant.

Ashraf Ahmad Ali, D.R. for Respondent.

2008 P T D 1988

[Islamabad High Court]

Before Muhammad Munir Peracha and Dr. Sajid Qureshi, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE, ISLAMABAD

Versus

Messrs DEWAN SALMAN FIBRE LIMITED, HATTAR

Case No. I.T.R. No. 57 of 2007, decided on 22nd July, 2008.

Income Tax Ordinance (XXXI of 1979)--‑

----S. 156---Rectification of mistake---Scope---"Mistake apparent from the record" would not cover a "mistake" committed at time when the law was not clear---If two interpretations were possible when the original assessment was made and the Assessing Officer adopted one of those interpretations, it cannot be said that "mistake was apparent from the record"---Assessing Officer could not have invoked S.156(2), Income Tax Ordinance, 1979 in circumstances.

1992 SCMR 687 = 1992 PTD 570; Commissioner of Income Tax, Karachi v. Messrs Shadman Cotton Mills Ltd. Karachi through Director 2008 PTD 253 and 1998 PTD (Trib.) 1379 ref.

Ms. Shahina Akbar for Petitioner.

Date of hearing: 2nd July, 2008.

JUDGMENT

MUHAMMAD MUNIR PERACHA, J.---The respondent assessee, a Limited Company, derives income from manufacture and sale of polyester fibre. In the assessment year 1995-96, it filed a return of income with audited accounts. For the above mentioned period, the statement under section 143-B was also filed along with the return. In this statement, interest income has been declared at Rs.3,48,91,250 and tax deduction at Rs.34,89,125. Assessment was finalized under section 62 of the Income Tax Ordinance 1979, whereby tax was not charged at the normal rate by the Assessing Officer on the interest income of the respondent company and the deducted tax Rs.34,89,125 was taken as final discharge of the tax liability. However, the Assessing Officer gave a notice under section 156(2) of the Ordinance to show cause as to why its case should not be rectified under section 156(2). After hearing representative of the assessee, the Assessing Officer came to the conclusion that the interest income of Rs. 3,48,91,250 is liable to income tax at the normal rate. The assessee challenged the order of the Deputy Commissioner Income Tax through an appeal filed before the Commissioner of Income Tax (Appeals). Learned Commissioner Income Tax (Appeals) vide order dated 16-10-2002 allowed the appeal filed by the assessee holding that section 156(2) of the Ordinance could not have been invoked in the case. The order of the Deputy Commissioner Income Tax was annulled and the original order passed under section 62 was resorted. The Commissioner of Income Tax challenged the above said order dated 16-10-2002 through an appeal filed before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide order dated 16-9-2006 dismissed the appeal.

1. The Commissioner Income Tax has approached this Court through the present reference.

2. We have heard the learned counsel for the petitioner Ms. Shaheena Akbar, Advocate.

3. According to her, the following questions of law arise from the order of Income Tax Tribunal:--‑

"(1) Whether on the facts and in the circumstances of the case, the learned ITAT was justified to hold that incorrect application of rate of tax is not mistake apparent on the surface of the record, rectifiable under section 156 of the Repealed Ordinance?

(2) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in annulling order passed under section 156 of the Repealed Ordinance on the ground that being a debatable issue the provision of section 156 of the Repealed Ordinance was not attracted notwithstanding the fact that mistake regarding incorrect application of tax rate was a mistake of fact as well as mistake of law which falls within the purview of section 156 of the (Repealed) Income Tax Ordinance, 1979?

(3) Without prejudice to questions Nos.1 and 2 whether annulling of order passed under section 156 of the Repealed Ordinance by the ITAT does not tantamount to restricting the scope of section 156 of the Repealed Ordinance in contravention of various judicial pronouncement of superior Courts?"

1. Section 156 of the Income Tax Ordinance 1979 reads as:-‑

"Rectification of mistakes.---(1) Any income tax authority or the Appellate Tribunal may amend any order passed by it to rectify any mistake apparent from the record on its own motion or on such mistake being brought to its notice by any other income tax authority or by the assessee.

(2) No order under subsection (1), which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall be made unless the parties affected thereby have been given a reasonable opportunity of being heard.

(3) Where any such mistake is brought to the notice of any income tax authority by the assessee and no order under subsection (1) is 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 have been rectified and all the provisions of this Ordinance shall have effect accordingly.

(4) No order under subsection (1) shall be made after the expiration of four years from the date of the order sought to be amended."

1. The question involved is whether order dated 7-1-1997 passed by the Deputy Commissioner Income Tax under section 62 of the Ordinance suffered from "mistake apparent from the record". The Phrase "mistake apparent from the record" has been examined in a number of judgments. The Supreme Court of Pakistan in case reported as "Commissioner of Income Tax, Companies II, Karachi v. National Food Laboratories 1992 SCMR 687 = 1992 PTD 570". At page 261 of the report declared the law as under:-

Section 35 of the repealed Income Tax Act, 1922, hereinafter referred to as "The Act" confers a power to rectify any mistake in the order which is apparent from the record. Such power can be exercised Suo Motu or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Where an officer exercising power under section 35 enters into the controversy, investigations into the matter, reassesses the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to `rectification' of the order. Any mistake which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising power under section 35. In this regard reference can be made to Shaikh Muhammad Iftikharul Haq v. Income Tax Officer, Bahawalpur, (1966) 13 Tax 203(S.C. Pak) = PLD 1966 SC 524 and Pakistan River Steamer Limited v. Commissioner of Income Tax, (1971) 23 Tax 236 (H.C. Dacca) 1971 PTD 204. In the present case the mistake pointed out by the petitioner was not of a nature to attract section 35 and, therefore, the High Court has correctly answered the first question in the negative."

1. In a recent judgment of the Honourable Supreme Court in case reported as "Commissioner of Income Tax, Karachi v. Messrs Shadman Cotton Mills Ltd. Karachi through Director" (2008 PTD 253), it was held by the Honourable Supreme Court of Pakistan in Para-7 at page 259 of the report:--‑

"Having heard learned Member (Legal) and examined the above provisions, we have not been able to find out any substance in this petition. The perusal of the orders of the Assessing Authority, Commissioner Income Tax (Appeals) and the order of Income Tax Appellate Tribunal as well as the order passed by the High Court would make it clear that exercise undertaken by the Assessing Officer under section 156 of the Ordinance was not simply in respect of a mistake apparent on the face of the record within the contemplation of section 156(ibid), rather it was re-assessment of the tax liability of the assessee on the basis of existing record. The expression "mistake apparent on record" means the error or mistake so manifest and clear which, if is permitted to remain on record, may have material effect' on the case. But an error of fact or law, which having direct nexus with the question of determination of rights of parties affecting their substantial rights or causing prejudice to their interest, is not a mistake apparent on the record to be rectified under section 156(ibid). The mistake must be of the nature, which is floating on the surface of record and must not involve, elaborate discussion or detailed probe or process of determination."

1. Section 80B of the Income Tax Ordinance provides:-‑

"Tax on income of certain persons from dividends and bank profits, etc.---(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where any amount referred to in subsection (2) is received by or accrues or arises or is deemed to accrue or arise to an individual, unregistered firm, association of persons, Hindu undivided family or artificial juridical person referred to in clause (32) of section 2, the whole of such amount shall be deemed to be income of such person and tax thereon shall be charged at the rates specified in the First Schedule.

(2) The amount referred to in subsection (1) shall be the following, namely:

(a) dividend on which tax is deductible under subsection (6A) of section 50;

(b) Interest or profit on which tax is deducible under sub-section (2A) of section 50;

(bb) the amount received on encashment of bearer certificates on which tax is deductible under subsection (5B) of section 50;

(c) Interest or profit on which tax is deductible under sub-section (7D) of section 50; and

(d) Prizes and winning on which tax is deductible or collectable under subsection (7C) of section 50.

(3) Nothing contained in this Ordinance shall be so construed as to authorise any allowance or deduction against the income as determined under subsection (1) or any refund of tax deducted or collection under section 50 or set off of any loss under any provision of this Ordinance.

(4) Whether the assessee has no income other than the income referred to as subsection (1) in respect of which tax has been deducted or collected, the tax deducted or collected under section 50 shall be deemed to be the final discharge of the tax liability of the assessee under this Ordinance and he shall not be required to file the return of total income under section 55.

(5) In a case to which subsection (4) applies, an order under section 59A shall be deemed to have been made in respect of income referred to in subsection (1)."

1. It appears that before the decision of a case by Income Tax Appellate Tribunal reported as 1998 PTD (Trib) 1379, a debate was going on whether a company is covered by the provisions contained in section 80B of the Income- Tax Ordinance. It was finally settled in this judgment that the company is not covered by the provisions contained in section 80B of the Income Tax Ordinance, 1979. Notice issued by the Deputy Commissioner Income Tax itself shows that it was issued on the basis of the judgment of Income tax Appellate Tribunal dated 19-10-1998. Before the judgment reported in 1998 PTD 1379, two different interpretations were being made by different Income Tax Authorities on section 80B of the Ordinance.

2. In our view, "mistake apparent from the record" would not cover a "mistake" committed at time when the law was not clear. If two interpretations of law were possible when the original assessment order was made and the Assessing Officer adopted one of those interpretations, it cannot be said that the mistakes is apparent from the record.

3. In view of what has been said above, we are of the considered view that the Assessing Officer could not have invoked section 156(2) of the Income Tax Ordinance, 1979, therefore, we answer questions Nos.1 and 2 in positive and question No.3 in negative.

M.B.A./C-17/ISL Order accordingly.

2008 P T D 1988

[Islamabad High Court]

Before Muhammad Munir Peracha and Dr. Sajid Qureshi, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE, ISLAMABAD

Versus

Messrs DEWAN SALMAN FIBRE LIMITED, HATTAR

Case No. I.T.R. No. 57 of 2007, decided on 22nd July, 2008.

Income Tax Ordinance (XXXI of 1979)--‑

----S. 156---Rectification of mistake---Scope---"Mistake apparent from the record" would not cover a "mistake" committed at time when the law was not clear---If two interpretations were possible when the original assessment was made and the Assessing Officer adopted one of those interpretations, it cannot be said that "mistake was apparent from the record"---Assessing Officer could not have invoked S.156(2), Income Tax Ordinance, 1979 in circumstances.

1992 SCMR 687 = 1992 PTD 570; Commissioner of Income Tax, Karachi v. Messrs Shadman Cotton Mills Ltd. Karachi through Director 2008 PTD 253 and 1998 PTD (Trib.) 1379 ref.

Ms. Shahina Akbar for Petitioner.

Date of hearing: 2nd July, 2008.

JUDGMENT

MUHAMMAD MUNIR PERACHA, J.---The respondent assessee, a Limited Company, derives income from manufacture and sale of polyester fibre. In the assessment year 1995-96, it filed a return of income with audited accounts. For the above mentioned period, the statement under section 143-B was also filed along with the return. In this statement, interest income has been declared at Rs.3,48,91,250 and tax deduction at Rs.34,89,125. Assessment was finalized under section 62 of the Income Tax Ordinance 1979, whereby tax was not charged at the normal rate by the Assessing Officer on the interest income of the respondent company and the deducted tax Rs.34,89,125 was taken as final discharge of the tax liability. However, the Assessing Officer gave a notice under section 156(2) of the Ordinance to show cause as to why its case should not be rectified under section 156(2). After hearing representative of the assessee, the Assessing Officer came to the conclusion that the interest income of Rs. 3,48,91,250 is liable to income tax at the normal rate. The assessee challenged the order of the Deputy Commissioner Income Tax through an appeal filed before the Commissioner of Income Tax (Appeals). Learned Commissioner Income Tax (Appeals) vide order dated 16-10-2002 allowed the appeal filed by the assessee holding that section 156(2) of the Ordinance could not have been invoked in the case. The order of the Deputy Commissioner Income Tax was annulled and the original order passed under section 62 was resorted. The Commissioner of Income Tax challenged the above said order dated 16-10-2002 through an appeal filed before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide order dated 16-9-2006 dismissed the appeal.

1. The Commissioner Income Tax has approached this Court through the present reference.

2. We have heard the learned counsel for the petitioner Ms. Shaheena Akbar, Advocate.

3. According to her, the following questions of law arise from the order of Income Tax Tribunal:--‑

"(1) Whether on the facts and in the circumstances of the case, the learned ITAT was justified to hold that incorrect application of rate of tax is not mistake apparent on the surface of the record, rectifiable under section 156 of the Repealed Ordinance?

(2) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in annulling order passed under section 156 of the Repealed Ordinance on the ground that being a debatable issue the provision of section 156 of the Repealed Ordinance was not attracted notwithstanding the fact that mistake regarding incorrect application of tax rate was a mistake of fact as well as mistake of law which falls within the purview of section 156 of the (Repealed) Income Tax Ordinance, 1979?

(3) Without prejudice to questions Nos.1 and 2 whether annulling of order passed under section 156 of the Repealed Ordinance by the ITAT does not tantamount to restricting the scope of section 156 of the Repealed Ordinance in contravention of various judicial pronouncement of superior Courts?"

1. Section 156 of the Income Tax Ordinance 1979 reads as:-‑

"Rectification of mistakes.---(1) Any income tax authority or the Appellate Tribunal may amend any order passed by it to rectify any mistake apparent from the record on its own motion or on such mistake being brought to its notice by any other income tax authority or by the assessee.

(2) No order under subsection (1), which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall be made unless the parties affected thereby have been given a reasonable opportunity of being heard.

(3) Where any such mistake is brought to the notice of any income tax authority by the assessee and no order under subsection (1) is 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 have been rectified and all the provisions of this Ordinance shall have effect accordingly.

(4) No order under subsection (1) shall be made after the expiration of four years from the date of the order sought to be amended."

1. The question involved is whether order dated 7-1-1997 passed by the Deputy Commissioner Income Tax under section 62 of the Ordinance suffered from "mistake apparent from the record". The Phrase "mistake apparent from the record" has been examined in a number of judgments. The Supreme Court of Pakistan in case reported as "Commissioner of Income Tax, Companies II, Karachi v. National Food Laboratories 1992 SCMR 687 = 1992 PTD 570". At page 261 of the report declared the law as under:-

Section 35 of the repealed Income Tax Act, 1922, hereinafter referred to as "The Act" confers a power to rectify any mistake in the order which is apparent from the record. Such power can be exercised Suo Motu or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Where an officer exercising power under section 35 enters into the controversy, investigations into the matter, reassesses the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to `rectification' of the order. Any mistake which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising power under section 35. In this regard reference can be made to Shaikh Muhammad Iftikharul Haq v. Income Tax Officer, Bahawalpur, (1966) 13 Tax 203(S.C. Pak) = PLD 1966 SC 524 and Pakistan River Steamer Limited v. Commissioner of Income Tax, (1971) 23 Tax 236 (H.C. Dacca) 1971 PTD 204. In the present case the mistake pointed out by the petitioner was not of a nature to attract section 35 and, therefore, the High Court has correctly answered the first question in the negative."

1. In a recent judgment of the Honourable Supreme Court in case reported as "Commissioner of Income Tax, Karachi v. Messrs Shadman Cotton Mills Ltd. Karachi through Director" (2008 PTD 253), it was held by the Honourable Supreme Court of Pakistan in Para-7 at page 259 of the report:--‑

"Having heard learned Member (Legal) and examined the above provisions, we have not been able to find out any substance in this petition. The perusal of the orders of the Assessing Authority, Commissioner Income Tax (Appeals) and the order of Income Tax Appellate Tribunal as well as the order passed by the High Court would make it clear that exercise undertaken by the Assessing Officer under section 156 of the Ordinance was not simply in respect of a mistake apparent on the face of the record within the contemplation of section 156(ibid), rather it was re-assessment of the tax liability of the assessee on the basis of existing record. The expression "mistake apparent on record" means the error or mistake so manifest and clear which, if is permitted to remain on record, may have material effect' on the case. But an error of fact or law, which having direct nexus with the question of determination of rights of parties affecting their substantial rights or causing prejudice to their interest, is not a mistake apparent on the record to be rectified under section 156(ibid). The mistake must be of the nature, which is floating on the surface of record and must not involve, elaborate discussion or detailed probe or process of determination."

1. Section 80B of the Income Tax Ordinance provides:-‑

"Tax on income of certain persons from dividends and bank profits, etc.---(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where any amount referred to in subsection (2) is received by or accrues or arises or is deemed to accrue or arise to an individual, unregistered firm, association of persons, Hindu undivided family or artificial juridical person referred to in clause (32) of section 2, the whole of such amount shall be deemed to be income of such person and tax thereon shall be charged at the rates specified in the First Schedule.

(2) The amount referred to in subsection (1) shall be the following, namely:

(a) dividend on which tax is deductible under subsection (6A) of section 50;

(b) Interest or profit on which tax is deducible under sub-section (2A) of section 50;

(bb) the amount received on encashment of bearer certificates on which tax is deductible under subsection (5B) of section 50;

(c) Interest or profit on which tax is deductible under sub-section (7D) of section 50; and

(d) Prizes and winning on which tax is deductible or collectable under subsection (7C) of section 50.

(3) Nothing contained in this Ordinance shall be so construed as to authorise any allowance or deduction against the income as determined under subsection (1) or any refund of tax deducted or collection under section 50 or set off of any loss under any provision of this Ordinance.

(4) Whether the assessee has no income other than the income referred to as subsection (1) in respect of which tax has been deducted or collected, the tax deducted or collected under section 50 shall be deemed to be the final discharge of the tax liability of the assessee under this Ordinance and he shall not be required to file the return of total income under section 55.

(5) In a case to which subsection (4) applies, an order under section 59A shall be deemed to have been made in respect of income referred to in subsection (1)."

1. It appears that before the decision of a case by Income Tax Appellate Tribunal reported as 1998 PTD (Trib) 1379, a debate was going on whether a company is covered by the provisions contained in section 80B of the Income- Tax Ordinance. It was finally settled in this judgment that the company is not covered by the provisions contained in section 80B of the Income Tax Ordinance, 1979. Notice issued by the Deputy Commissioner Income Tax itself shows that it was issued on the basis of the judgment of Income tax Appellate Tribunal dated 19-10-1998. Before the judgment reported in 1998 PTD 1379, two different interpretations were being made by different Income Tax Authorities on section 80B of the Ordinance.

2. In our view, "mistake apparent from the record" would not cover a "mistake" committed at time when the law was not clear. If two interpretations of law were possible when the original assessment order was made and the Assessing Officer adopted one of those interpretations, it cannot be said that the mistakes is apparent from the record.

3. In view of what has been said above, we are of the considered view that the Assessing Officer could not have invoked section 156(2) of the Income Tax Ordinance, 1979, therefore, we answer questions Nos.1 and 2 in positive and question No.3 in negative.

M.B.A./C-17/ISL Order accordingly.

2008 P T D 2025

[Islamabad High Court]

Before Muhammad Munir Peracha and Dr. Sajid Qureshi, JJ

Messrs ABBASI ENTERPRISES through Proprietor and another

Versus

COLLECTOR OF SALES TAX, PESHAWAR through Collector and 3 others

Tax Reference Application No.5 of 2008, decided on 28th July, 2008.

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

----S. 36(3)---Recovery of tax not levied or short levied or erroneously refunded---Limitation---Provision of S.36(3), Safes Tax Act, 1990 is mandatory in nature and no order under S.36 can be passed after the period prescribed under S.36(3) of the Act---Order of extension can be passed by the Collector even after the expiry of the original ninety days at any time before 180 days of the show cause notice.

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

----Art. 254---Provision of Art.254, Constitution has no applicability when the ordinary laws are being examined.

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

----Ss. 3, 41, 35, 33 & 47---Reference to High Court---Taxable supply---Burden of proof---Scope----Burden of proving that the taxable supply has been made by a registered person in the course or furtherance of any taxable activity carried on by him is on the department---Where, however, admittedly the goods, subject matter of reference were entered in stock register of the assessee and the case of assessee was that the goods were destroyed, for being unfit for further consumption, the burden to prove that the goods were destroyed, would be on the assessee---Finding of the Appellate Tribunal that the assessee had failed to prove the facts of destruction being a finding of fact, could not be interfered with in a reference by the High Court.

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

----S. 34(1) [unamended by Finance Act, 2005]---Additional tax---Period relevant in the case was July 2003 to June, 2004, therefore unamended section 34(1) of Sales Tax Act, 1990 would be applicable---Imposition of additional tax under S.34 was not mandatory and there was discretion left with the authorities to allow any concession---Each and every case had to be decided on its own merits as to whether the evasion of payment of tax was wilful or mala fide, decision of which would have impact on the question of recovery of additional tax---Where the non-payment of sales tax within tax period was neither wilfull nor it could be construed to be mala fide evasion of payment duty, recovery of additional tax as a penalty or otherwise was not justified in law.

D.G. Khan Cement Company Limited v. Federation of Pakistan and others 2004 SCMR 456 rel.

Writ Petition No.13331 of 2006 ref.

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

----Ss. 34, 33 & 47---Reference to High Court---Default---Payment of Sales Tax was not made on the ground that the goods were destroyed by the assessee--Finding recorded all along was that the destruction of the goods was not established---Default in payment of sales tax, in circumstances, had to be termed as "wilful" and assessee was liable to pay the additional tax under S.34, Sales Tax Act, 1990 and penalty under S.33 of the Act.

Farhat Nawaz Lodhi for Petitioners.

Zahid Idrees Mufti for Respondents.

Date of hearing: 24th June, 2008.

2008 P T D 82

[Karachi High Court]

Before Mrs. Qaiser Iqbal and Arshad Siraj, JJ

COMMISSIONER OF INCOME TAX

Versus

MAHMOOD ALI

I.T.R.A. No, 561 of 2006, decided on 28th September, 2007.

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

---Ss. 2(11), 22 & 27(2)---Sale of commercial plot by assessee purchased for investment purposes---Gain from sale of plot considered by Revenue to be adventure in nature of trade as business income assessable under S.22 of Income Tax Ordinance, 1979---Validity---Revenue had not brought on record any material to show that at the time of purchase of plot, intention of assessee was to achieve revenue gains---Such intention must be deduced from facts and circumstances of each case---Mere change of investment would not amount to adventure in nature of trade---In determining nature of transaction, regard had to be made to nature of property, length of its ownership and holding, actual conduct of assessee in respect thereof and other factors including absence of evidence of any trading activity of speculative nature---If disputed transaction was considered to be revenue gain, then provisions of S.2(11) of Income Tax Ordinance, 1979 read with S.22 thereof would be attracted---Gain on sale of immovable property, if considered to be in nature of capital gain, same would be outside purview of S.27 of Income Tax Ordinance, 1979, as for purposes of capital gain, immovable property was excluded from definition of "capital gain" under S.27(2) thereof---Disputed transaction was not in nature of adventure in trade.

(1966) 62 ITR 578; AIR 1959 SC 1252; Commissioner of Income Tax v. Habib Bank Limited (1985 SCMR 284; British Tax Encyclopaedia, Volume 5, (pages 1013-1014) and Californian Copper Syndicate v. Harris (1903-1911) 5 T.C. 159 rel.

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

----S. 74---Liability of legal representatives of deceased assessee---Scope---Such representatives, if brought on record within reasonable time frame, would be liable to pay tax imposed on deceased assessee---Recourse to S.74 of Income Tax Ordinance, 1979 in such case would be condition precedent.

Aqeel Ahmed Abbasi for Applicant.

Nemo for Respondent.

Date of hearing: 19th September, 2007.

2008 P T D 130

[Karachi High Court]

Before Muhammad Afzal Soomro, C.J. and Syed Mahmood Alam Rizvi, J

Messrs TELECARD LTD., KARACHI

Versus

TAXATION OFFICER (E&C-09) ENFORCEMENT AND COLLECTION DIVISION LARGE TAX PAYERS UNIT and another

Constitution Petition No.D-854 and C.M.A. No.2770 of 2007, decided on 14th November, 2007.

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

----Ss. 131(5), 183 & 190---Constitution of Pakistan (1973), Art. 199---Constitutional petition-Non-payment of outstanding tax by assessee---Pendency of appeal before Appellate Tribunal---Issuance of show-cause notice to assessee under 5.190 of Income Tax Ordinance, 2001 for. imposition of penalty under 5.183 thereof---Validity---Assessee had not filed before Tribunal any stay application under S.131(5) of the Income Tax Ordinance, 2001---Revenue had not committed any illegality in sending impugned notice to the assessee---High Court dismissed constitutional petition in circumstances.

Muhammad Arshad along with Manager for Petitioner.

Javed Farooq for Respondent No.1

2008 P T D 133

[Karachi High Court]

Before Sabihuddin Ahmed and S. Ali Aslam Jafri, JJ

NEW ELECTRONICS (PVT.) LTD. through Director

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and 2 others

C.Ps. Nos. D-2215, 1029, 1144, 1145 and 3127 of 1992, heard on 29th March, 2004.

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

---Ss. 25 & 25-B---Customs value of goods, determination of---Section 25-B of Customs Act 1969 had an overriding effect and operated as an exception to the general rule under S.25 of the Customs Act, 1969 which enabled the C.B.R. or an officer authorized by it to fix the value at such rates as it deemed fit and thus it conferred a substantial amount of discretion on the designated officer to determine the value of goods.

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

----Ss. 25 & 25-B---Constitution of Pakistan (1973), Art.199---Constitutional petition---Notification---Striking down notification---Any notification could be struck down only if it was demonstrated that it was either mala fide or entirely perverse bearing no nexus with the objects of Legislation---Mere fact that difference between the rates stated by the petitioners and those determined by the authorities varied between 11 to 25%, was not by itself sufficient to show that discretion was perversely exercised---Once the matter was taken out of the regime of S.25 of Customs Act, 1969 and brought under S.25-B of the said Act between 1988 and 1998, the actual value of goods apparently became inconsequential---Contention by petitioner that in any event the notification determining the value of goods could only have prospective effect and could not affect cases where firm orders had been placed or letters of credit had been established prior to the issuance of the notification, prima facie appeared attractive, but upon careful consideration, it was not tenable.

Collector of Customs and others v. New Electronics (Pvt.) Ltd. PLD 1994 SC 363; Al-Samraz Enterprises v. Federation of Pakistan 1986 SCMR 1917; Mian Nazir Sons v. Government of Pakistan 1992 SCMR 883; Abdul Waheed Abdul Majeed v. Government of Pakistan 1993 SCMR 17 and Molasses Trading Company v. Federation of Pakistan 1993 SCMR 1905 ref.

(c) Taxation---

----Courts in taxation matters had been conceding a great deal of latitude to the taxing authorities and interference was called for only in cases of evident perversity.

Naveed Merchant for Petitioners (in C.Ps. D. Nos.1029, 2215 and 3127 of 1992).

Mustafa Lakhani for Petitioners (C.Ps. D. Nos. 1144 and 1145 of 1992).

Nadeem Azhar, D.A.-G. and Javed Farooqui for Respondents.

Date of hearing: 29th March, 2004.

2008 P T D 182

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

COMMISSIONER OF INCOME TAX (ZONE-D)

Versus

ABDUL MATEEN

I. T. R. As. Nos. 343 to 397 of 2006, decided on 19th October, 2007.

(a) Interpretation of statutes---

----Interpretation leading to absurd consequences should be avoided as far as possible.

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

----Ss. 9, 10, 62, 66-A, First Sched.; Part-I para. A (f), Part-II para.C & Part-IV para. 2-B---Income tax rebate---Partners of registered firm---Super tax, levy of---Assessing Officer finalized assessments under S.62 of Income Tax Ordinance, 1979, and allowed rebate claimed by assessees---Additional Commissioner Income Tax initiated proceedings under S.66-A of Income Tax Ordinance, 1979 as in his opinion assessees were not entitled to rebate under proviso (f) to paragraph A of Part-I to First Schedule of Income Tax Ordinance, 1979---Plea raised by authorities was that para. A(f) of Part-I of First Schedule to Income Tax Ordinance, 1979, did not apply to assessees as the firm of which they were partners did not fall within the ambit of para. C of Part-II of First Schedule---Validity---Provisions of S.10 of Income Tax Ordinance, 1979, would apply to all persons who fell within the chargeability of super tax and it was not necessary for them to actually pay tax for failing within the ambit of charging section---Both Para, C of Part-II and para. 2B of Part-IV were part of First Schedule to Income Tax Ordinance, 1979, and therefore, in accordance with provisions of S.10 of the Ordinance, no super tax, though chargeable, was payable by them under First Schedule---Presence of non obstante clause in Part-IV had actually strengthened the case of assessee as it acknowledged the same---For non obstante clause assessee would have been liable to pay super tax under para C of Part-II of First Schedule to Income Tax Ordinance, 1979---Despite exemption provided to assessee under para. 2B of Part-IV of First Schedule, the firm in which assessees were partners fell within the ambit of para. C of Part-II of First Schedule and therefore, fell under the ambit of proviso (f), thus plea raised by authorities was rejected---Exemption had presupposed a liability and unless super tax was payable by the firm of which assessees were partners there was no need to exempt the firm from levy of super tax by insertion of para. 2B of Part-IV of First Schedule to Income Tax Ordinance, 1979---Judgment passed by Income Tax Appellate Tribunal was unexceptionable and no interference was called for from High Court---Reference was disposed of accordingly.

Messrs Alnoor Sugar Mills Ltd. v. Commissioner of Income Tax Central Zone Karachi, 2002 PTD 728; Irum Ghee Mills Ltd v. Income Tax Appellate Tribunal 1998 PTD 3835; Commissioner of Income Tax, Companies-1, Karachi v. Messrs National Investment Trust Ltd., Karachi 2003 PTD 589; A.V. Fernandez v. State of Kerala AIR 1957 SC 657; Ittefaq Foundry v. Federation of Pakistan PLD 1990 Lab. 121 and CIT v. Younus Brothers 1983 PTD 389 ref.

Al-Samrez v. Federation of Pakistan 1986 SCMR 1917 rel.

Aqeel Ahmed Abbasi for Applicant.

Dr. Farough Naseem along with Irfan Saadat for Respondent.

2008 P T D 246

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Faisal Arab, J

INDUS BATTERY INDUSTRIES (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petition No.D-2326 of 2006, heard on 11th October, 2007.

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

---Ss. 25-C & 155-H---Freedom of Information Ordinance (XCVI of 2002), Ss.3, 8 & 15---Under-invoicing of imported goods, detection of---Information regarding description quantity, quality, port of export, country of origin and value of imported goods declared by importer---Right to such information of a person interested in making an offer under S.25-C of Customs Act, 1969---Non-disclosure of such information to such interested person by Customs Authorities claiming immunity under S.155-H of the Customs Act, 1969---Validity---Object of S.25-C of Customs Act, 1969 was to facilitate detection of under-invoicing in order to prevent evasion of customs duties and charges---Immunity from making such disclosure claimed by Customs Authorities, if permitted, would defeat such object of S.25-C of the Act---Such information to be gathered by such interested .person would not fall within any of immunities provided under Ss.8 & 15 of Freedom of Information Ordinance, 2002---Duty of Customs Authorities to disclose such information to such interested person as same would help in preventing under-invoicing-Principles.

Section 155-H of the Customs Act, 1969 bars the Customs Authorities from divulging information about the imported goods to a third person. The object of section 25-C of the Customs Act, 1969 is to facilitate detection of under-invoicing so as to prevent evasion of customs duties and charges This object cannot be achieved if the Customs Authorities claim immunity under section. 155-H of the Customs Act, 1969, which if permitted would defeat the very purpose of section 25-C of the Customs Act, 1969. The information as to description of the imported consignment, the quantity, the quality, the country of origin, the port of export and the value declared for such goods is necessary to make offer under section 25-C. If these material particulars are not disclosed to a local buyer, he would not be able to make his offer under section 25-C which would have facilitated detection of under-invoicing, if any committed. Divulging requisite information to a person interested in making an offer under section 25-C is therefore necessary to achieve the objects of section 25-C of the Customs Act, 1969. On the contrary withholding such information by claiming immunity from disclosure under section 155-H of the Customs Act, 1969 would thwart the detection of under-invoicing thereby causing loss to the exchequer.

Access to information is sine qua non of constitutional democracy. The public has a right to know everything that is done by the public functionaries. The responsibility of public functionaries to disclose their acts works both against corruption and oppression. Though this right has its limitations but every routine business of the public functionary cannot be covered with the veil of secrecy or privilege. Only where disclosures would cause greater harm than good that the disclosures are to be disallowed. Therefore, as a rule, information should be disclosed and only as an exception privilege should be claimed on justifiable grounds permissible under the law. Freedom of Information Ordinance, 2002, regulates this right to information, which emanates from the freedom of expression. The object of this Ordinance as evinced from its preamble, is to provide for transparency and freedom of information in order to ensure that citizens have access to public records and the Government is more accountable to its citizens. Under section 3 of the Freedom of Information Ordinance, 2002, the provisions of the said Ordinance are to be so interpreted as to facilitate prompt disclosure of information at minimal cost. Furthermore section 3 also contains a non obstante clause which provides that notwithstanding anything contained in any other law, no person is to be denied information from any official record. The only limitations to this right are the immunities described in sections 8 and 15 of the said Ordinance.

When an immunity is claimed from making disclosures, the courts have to tilt towards permitting disclosures in order to balance the public right to know against the interest of an individual, unless of course the disclosures are likely to expose personal privacy of an individual. No doubt, where there are two competing interests involved, the court would perform balancing act by weighing both the interests and decide where the balance tilts. In a democratic and free societies even the consumers of a product are given the right to be informed about its quality, quantity, purity, potency, standards and constituents, so that consumers could make informed choices.

The documents from which necessary details of imported consignment are to be gathered by a person interested in making an offer under section 25-C of the Customs Act, 1969 do not fall within any of the immunities provided under sections 8 and 15 of the Freedom of Information Ordinance, 2002. Furthermore, as section 3 of the Freedom of Information Ordinance, 2002 contains non obstante clause "notwithstanding anything contained in any other law", no immunity can be claimed on the basis of section 155-H of the Customs Act, 1969 as the provisions of the Freedom of Information Ordinance, 2002 have overriding effect over the provisions of section 155-H of the Customs Act, 1969.

The Customs Authorities are bound to disclose information regarding description, quantity, quality, the port of export, the country of origin and the value of the imported consignment declared by the importer to any person, who is interested in making an offer under section 25-C of the Customs Act, 1969. The disclosure of such information would certainly help in preventing under-invoicing, which is the very object of section 25-C of the Customs Act, 1969. In fact, all such information should be made available on the web site of the Customs Authorities.

Kashif Naseem v. Federation of Pakistan and others 2007 PTD 2250 ref.

(b) Freedom of Information Ordinance (XCVI of 2002)---

----Ss. 3, 8, 14, 15, 16 & 17---Application for obtaining information regarding public record---Immunity from making such disclosure claimed by authority---Duty of court---Right of citizen to have access to such information had its limitations, but every routine business of public functionary could not be covered with veil of secrecy of privilege---Where disclosure would cause greater harm than good, then disclosure could be disallowed---Where two competing interests were involved, then court would perform balancing act by weighing both interests and decide where balance tilted---Principles.

Access to information is sine qua non of constitutional democracy. The public has a right to know everything that is done by the pubic functionaries. The responsibility of public functionaries to disclose their acts works both against corruption and oppression. Though this right has its limitations but every routine business of the public functionary cannot be covered with the veil of secrecy or privilege. Only where disclosures would cause greater harm than good that the disclosures are to be disallowed. Therefore, as a rule, information should be disclosed and only as an exception privilege should be claimed on justifiable grounds permissible under the law. Freedom of Information Ordinance, 2002, regulates this right to information, which emanates from the freedom of expression. The object of this Ordinance as evinced from its preamble, is to provide for transparency and freedom of information in order to ensure that citizens have access to public records and the Government is more accountable to its citizens. Under section 3 of the Freedom of Information Ordinance, 2002, the provisions of the said Ordinance are to be so interpreted as to facilitate prompt disclosure of information at minimal cost. Furthermore section 3 also contains a non obstante clause which provides that notwithstanding anything contained in any other law, no person is to be denied information from any official record. The only limitations to this right are the immunities described in sections 8 and 15 of the said Ordinance.

When an immunity is claimed from making disclosures, the courts have to tilt towards permitting disclosures in order to balance the public right to know against the interest of an individual unless of course the disclosures are likely to expose personal privacy of an individual. No doubt where there are two competing interests involved, the court would perform balancing act by weighing both the interests and decide where the balance tilts. In a democratic and free societies even the consumers of a product are given the right to be informed about its quality, quantity, purity, potency, standards and constituents, so that consumers could make informed choices.

Haseeb Jamali for Petitioner.

Rizwan Ahmed Siddiqi, D.A.-G., Aqeel Ahmad Abbasi and Ghulam Ahmed Khan for Respondents.

Date of hearing: 11th October, 2007.

2008 P T D 318

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

COLLECTOR OF SALES TAX

Versus

CYNAMID PAKISTAN LTD. and others

Sales Tax Reference Application No. 239 of 2006, heard on 17th August, 2007.

Sales Tax Act (VII of 1990)---

----Ss.7 & 47---Reference to High Court---Entitlement to claim input tax adjustment---Questions which had been proposed by the Collector of Sales Tax and Federal Excise for opinion of the High Court, were; that whether under facts and circumstances of the case, Customs, Excise and Sales Tax Appellate Tribunal was justified in holding that "assessee would be entitled to claim input adjustment in accordance with law" without mentioning specifically the provisions of law either under S.7 or S.59 of Sales Tax Act, 1990; and that whether or not the Appellate Tribunal was justified in ignoring the specific directions of the High Court regarding fresh findings on the issue of entitlement of input tax adjustment under S.7 of Sales Tax Act, 1990---Important aspect of the case regarding the applicability or otherwise of S.7 of Sales Tax Act, 1990 was clearly attended to and answered by the Tribunal in favour of the assessee---Order of the Tribunal was not to be read independently; but w to be read as a whole which had clarified the issue---Both questions being misconceived, appeal was dismissed.

Syed Mohsin Imam for Applicant.

Aziz A. Shaikh for Respondents.

2008 P T D 339

[Karachi High Court]

Before Rahmat Hussain Jafferi and Muhammad Afzal Soomro, JJ

Mrs. MUMTAZ MAQSOOD

Versus

SECRETARY, REVENUE DIVISION and another

Constitutional Petition No.D-167 of 2006, heard on 20th August, 2007.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8, 13 & 66---Constitution of Pakistan (1973), Art.199---Constitutional petition---Payment of reward in respect of tax recovered---Petitioner had sought direction to the authorities to pay to the petitioner amount of Rs.13,00,017 being the amount payable to petitioner as reward in respect of tax recovered by the authorities---Case being pending adjudication before the Appellate Tribunal, only 25% of the said amount which came to Rs. 3,26,017, could be paid provisionally.

Kunwar Mukhtar Ahmed for Petitioner.

Mohsin Imam for Respondent.

Rizwan Ahmed Siddiqui, D.A.-G.

2008 P T D 345

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

JOHNSON AND JOHNSON PAK (PVT.) LTD.

Versus

PAKISTAN and others

C.P.D. No.157 of 1993, heard on 24th August, 2004.

(a) Drugs Act (XXXI of 1976)---

----S. 3(g)-Word "suture"---Meaning.

"Suture" in terms of ordinary dictionary meaning is defined as stitch that joins the edges of a wound. It is used for sewing up wounds through a surgical process and might therefore .fall under the broad definition of drugs under the Drugs Act, 1976 meant for restoration of organic functions as medicines to be consumed for treatment of preventing disease.

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

----First Sched. PCT Heading 30.03 & 30.05---Drugs Act (XXXI of 1976), S.3(g)---`Suture'---Determination of classification---PCT Heading 30.05 having specifically referred to suture material, thus, same could not be treated as medicaments under PCT Heading 30.03---Once item in question was shown to be falling in one category, then same could not be treated to fall in another category on analogy of a different statute---Principles.

Glaxo Laboratories Pakistan v. Federation of Pakistan PLD 1992 SC 455 ref.

(c) Administration of justice---

----Courts have not always approved departure from consistent past practice---Such principle would be applied only when both interpretations of relevant rule were possible and that department had been consistently following a particular one---Administrative department could not ignore a legal provision and choose to follow a consistently wrong practice.

Radhaka Corporation v. Collector of Customs 1989 SCMR 353 rel.

(d) Notification---

----Notification could not be given retrospective effect, unless expressly provided so therein.

S.I.H. Zaidi for Petitioner.

Muhammad Akram Zuberi for Respondent.

Sajjad Ali Shah for standing counsel.

Date of hearing: 24th August, 2004.

2008 P T D 356

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE, HYDERABAD

Versus

Messrs BAWANY SUGAR MILLS BADIN

Special Sales Tax Appeal No. 537 of 2004, heard on 29th August, 2006.

Sales Tax Act (VII of 1990)---

----S.47---Appeal to High Court---Maintainability---Appeal, in present case, was filed in the name of Collector of Customs, Sales Tax and Central Excise, but under the signature of Office Superintendent (Law)---Subsequently when appellant realized that appeal could be filed by Collector only and none else, an application seeking permission to get the memo of appeal signed by the Collector, was submitted which was allowed with all just exceptions and without prejudice to the rights of the opposite party---Validity---Appeal could be filed by the Collector only and none else and that even if the memo of appeal was signed subsequently by the Collector after expiry of limitation period, appeal would still be not maintainable in law---Appeal filed by appellant was dismissed being not maintainable.

2006 SCMR 129 rel

Muhammad Salim Thepdawala for Respondent.

2008 P T D 364

[Karachi High Court]

Before Sabihuddin Ahmad and Arif Hussain Khilji, JJ

B.P. INDUSTRIES (PVT.) LTD.

Versus

PAKISTAN and others

Constitutional Petitions Nos. 3020 of 1992, 1533, 2783 of 1993 and 1940 of 1996, heard on 9th September, 2004.

(a) Administrator of Justice---

----Party having failed to avail an opportunity of hearing could blame nobody, but himself---Principles.

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

----S.223---Importer's right to be heard by Central Board of Revenue before issuing directions td its Officers---Scope---Board not legally bound to hear importers in such case---Principles.

C.B.R. does not normally hear importer or the potential importers before issuing directions under section 223 of the Customs Act, 1969.

No doubt, the well-settled principles of natural justice require that no action detrimental to the interest of a person can be taken without hearing the affected parties. Section 223 of the Customs Act, 1969 does enable the C.B.R. to issue orders and directions, which are required to be followed by the Officer of Customs. Nevertheless it makes an important exception by stipulating that no such instructions shall be given to interfere with the direction of Officers in exercise of their quasi-judicial function.

Indeed valuation of imported goods in a particular consignment for the purpose of levy of customs duty is ex facie a quasi-judicial function and the orders passed are subject to the incidents of appeal and revision. While deciding an appeal, the concerned Officer acts in quasi-judicial capacity and is not liable to follow directions issued under S.223 of the Customs Act, 1969.

From the above, it is clear that the C.B.R is not required to hear the importer.

M. A. Rehman v. Federation of Pakistan PLD 1988 SC 695 and Central Insurance v. Central Board of Revenue 1993 PTD 766 rel.

(c) Administration of Justice---

---No action detrimental to the interest of a person could be taken without hearing him.

(d) Constitution of Pakistan (1973)---

----Art. 1997--Constitution petition---Order impugned in revision alleged to be passed without hearing petitioner---Revisional Authority had upheld impugned order after duly hearing the petitioner-Effect-Petitioner's claim founded upon principles of natural justice would lose all its force.

Collector Sahiwal v. Muhammad Akhtar 1971 SCMR 681 and Government of Pakistan v. Indo-Pakistan Corporation PLD 1979 SC 723 and Collector of Customs v. New Electronics PLD 1994 SC 363 ref.

I. H. Zaidi for Petitioner.

Shakeel Ahmad, Raja Muhammad Iqbal and S. Ziauddin Nasir, Standing Counsel for Respondents.

Date of hearing: 9th September, 2004.

2008 P T D 373

[Karachi High Court]

Before Sabihuddin Ahmad and Arif Hussain Khilji, JJ

INDUS MOTORS COMPANY LTD.

Versus

FEDERATION OF PAKISTAN and others

C. Ps. Nos. 3278 to 3281 of 1993, heard on 18th August, 2004.

Customs Act (IV of 1969)---

----Ss. 18 & 31-A---Sales Tax Act (VII of 1990), S. 6(1)(1-A)---S.R.O. 882(I)/92, dated 12-9-1992---Import of goods in terms of S.R.O. 882(I)/92, dated 12-9-1992 exempting same from payment of customs duty and sales tax leviable thereon---Arrival of imported goods in year, 1992 after insertion of S.31-A in Customs Act, 1969 in year, 1988---Effect---Doctrine of promissory estoppel stood effectively eclipsed after insertion of S.31-A in Customs Act, 1969---Benefit of exemption from customs duty, thus, could not be claimed---Importer could not claim---Importer could not claim benefit of exemption from sales tax on yardstick of "past and closed transaction" as there was nothing to show that bill of entry was filed prior to withdrawal of relevant exemption vide S.R.O. 882(I)/92, dated 12-9-1992.

Al-Samrez Enterprises v. Federation of Pakistan 1986 SCMR 1917; Molasses Trading and Export v. Federation of Pakistan 1993 SCMR 1905 and M.Y. Electronics Industries v. Government of Pakistan 1998 SCMR 1404 ref.

I.H. Zaidi for Petitioner.

Nadeem Azhar, Deputy Attorney-General for Respondents.

Date of hearing: 18th August, 2004.

2008 P T D 406

[Karachi High Court]

Before Mrs. Yasmeen Abbasey and Syed Mehmood Alam Rizvi, JJ

Messrs PAKLAND CEMENT LIMITED

Versus

COLLECTOR CUSTOMS AND CENTRAL EXCISE (ADJUDICATION)-III, KARACHI and another

Spl. C.E.A. Nos. 29 of 2002 and 10 of 2006, decided on 16th January, 2008.

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

----Ss.2(27), 3 & 4(2)---Customs General Order 23 of 1969, dated 29-8-1969---Supply of ordinary cement on contracted price to Director-General Procurement Army---Authority permitted manufacturer to pay excise duty on contracted price subject to fulfilling conditions of Customs General Order 23 of 1969---Printing of contracted price on packages by manufacturer instead of normal retail price---Withdrawal of such permission and demand of differential amount of duty by Authority---Validity---Cement supplied to Army was of ordinary nature meant to be supplied in open market---Contractual formalities observed by manufacturer had no nexus with Customs. General Order 23 of 1969, which spoke of printing of normal price on packages regardless of contracted price---Manufacturer had not proved that any long-standing practice was being followed by Army for considering contracted price as retail price for levy of excise duty---Manufacturer could not be allowed to obviate from mandatory condition given by Authority for availing benefit of concessionary rate of duty---Manufacturer had not followed instructions contained in Customs General Order 23 of 1969, thus, Authority had rightly cancelled such permission---Price fixed for supply of cement to general public in such case would be considered as retail price being the highest one---Authority had rightly asked manufacturer to pay differential amount.

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

(b) Interpretation of statutes---

----Subsidiary legislation and Statute, conflict between---When no reconciliation was possible in case of such conflict, then subsidiary legislation must give way to statutory provision.

(c) Taxation---

----Mandatory direction given by department for availing benefit of concessionary rate of tax---Effect---Assessee, in order to avail such benefit could not obviate from such direction.

(d) Waiver---

----Statutory provision enacted in public interest relating to form of contract between company and public bodies created by or under a statute---Validity---Compliance with such provision could not be waived.

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

----S.36-C---Appeal to High Court---Plea of show-cause notice being time-barred not raised before Tribunal---Effect---Such plea would be deemed to have been waived.

Messrs Thatta Cement Company, Thatta v. Customs, Central Excise and Sales Tax Appellate Tribunal Karachi Bench, Karachi and 2 others 2003 PTD 1899; 2006 SCMR 425 and 2007 PTD 1618 rel.

Dr. Muhammad Farough Naseem and Sardar Ejaz Khan for Appellants.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 3rd December, 2007.

2008 P T D 459

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs AMAN & AMIN TRADING CO. through Proprietor

Versus

DEPUTY COLLECTOR OF CUSTOMS, APPRAISING INTELLIGENCE BRANCH, KARACHI

SPl. Cus. Ref. A. No.295 and C.M.A. No. 1374 of 2007, decided 28th September, 2007.

Customs Act (IV of 1969)---

----S.194-C(3)(4) [as amended by Finance Act (IV of 2007)] & S.196---Appeal to High Court---Valuation of disputed goods imported by appellant---Dismissal of appeal by Single Member of Tribunal for lack of jurisdiction---Validity---Plea that in view of. provisions of S.194-C(3)(4) of Customs Act, 1969 as amended by Finance Act, 2007 w.e.f. 1-7-2007, such matter could be heard by Single Member of Tribunal, who had no jurisdiction to proceed with matter at the time of passing impugned order---Validity---Such amendment had no retrospective applicability so as to rectify such jurisdictional defect in impugned order---By virtue of such amendment, Single Member of Tribunal had jurisdiction to proceed with appeal looking to controversy involved therein---High Court set aside impugned order and remanded case to Tribunal for re-hearing of appeal within specified time.

Junaid Ghaffar for Applicant.

Raja Muhammad Iqbal for Respondent.

2008 P T D 525

[Karachi High Court]

Before Munib Ahmad Khan and Dr. Rana Muhammad Shamim, JJ

COLLECTOR OF CUSTOMS (PREVENTIVE), KARACHI

Versus

GHULAM MUHAMMAD

Special Custom Reference Application No.281 of 2007, decided on 29th November, 2007.

Customs Act (IV of 1969)---

----Ss.168 & 211---Seizure of vehicle on charge of being smuggled---Registration of vehicle in record of Motor Vehicle Registration Department 14 years prior to its seizure---Registration Book of vehicle produced by applicant not found to be fake by Registration Department---Non-production of bill-of-entry or import documents of vehicle by applicant---Effect---Calling upon owner of vehicle to produce bill-of ­entry or other legal import documents at this stage would be nothing---Individual importer having imported goods for private or personal use would not fall within purview of S.211 of Customs Act, 1969---Registration Book produced by applicant was sufficient proof of his ownership---Burden to prove otherwise was on Customs Authorities, which they had failed to discharge---Impugned order-in-original was set aside in circumstances.

Raja Muhammad Iqbal for Applicant.

Rafi Kumboh for Respondent.

2008 P T D 558

[Karachi High Court]

Before Mrs. Yasmeen Abbasey and Farrukh Zia Shaikh, JJ

COLLECTOR OF CUSTOMS, APPRAISEMENT COLLECTORATE, KARACHI

Versus

Messrs NEW LIGHT HOUSE (PVT.) LTD, LAHORE

Special Customs Reference Application No. 371 of 2007, decided on 8th February, 2008.

Customs Act (IV of 1969)---

----Ss.19 & 19-A---Claim for refund of service charges---Entitlement---Assessee would be entitled to such claim after producing documentary evidence regarding non-passing on its levy to consumer.

I.C.I. Pakistan Ltd. v. Pakistan through Secretary to the Government of Pakistan, Ministry of Finance and 3 others 2005 PTD 719 and Pak Suzuki Motor Company Ltd. through SE. General Manager (I&LP), Karachi v. Secretary Revenue Division, Government of Pakistan through Member Customs, Islamabad and another 2007 PTD 501 rel.

Raja Muhammad Iqbal for Applicant.

Nemo for Respondent.

Date of hearing: 24th January, 2008.

2008 P T D 647

[Karachi High Court]

Before Athar Saeed and Anwar Zaheer Jamali, JJ

COMMISSIONER LEGAL DIVISION

Versus

CIVIL AVIATION AUTHORITY

I.T.R.A. No.584 of 2006, heard on 2nd July, 2007.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 12, 25, & 133---Reference to High Court---Allowable expense---Determination of---Commissioner of Income Tax in his reference, had sought opinion of the High Court regarding question, `whether Appellate Tribunal was justified in law to hold that provision made in the books of accounts of compensated absences was allowable expenses, even though it was not based on the demands in that regard'---Main contention of counsel for department was that expenditure claimed in respect of compensated absences was not an allowable expense as same was merely a provision and had not been paid---Validity---If the taxpayer followed the mercantile system of accountancy, then he was entitled to the deduction of the bonus provided during the year despite the fact that it was not paid during the year---Provision for gratuity being an ascertained liability was an allowable expense, even though not actually paid during the year---Judgment of the Income Tax Appellate Tribunal, was upheld.

Commissioner of Income Tax, Rawalpindi Zone, Rawalpindi v. K.K. & Co. Ltd. Peshawar 1980 PTD 210 and 1990 PTD 248 ref.

Aqeel Ahmed Abbasi for Appellant.

2008 P T D 742

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Qamaruddin Bohra, JJ

Messrs BABA AGENCIES through Proprietor

Versus

SECRETARY REVENIJE DIVISION FEDERAL BOARD OF REVENUE, ISLAMABAD and others

Constitution Petition No. D-294 of 2007, decided on 27th February, 2008.

Customs Act (IV of 1969)---

----S. 32---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Deposit of documents by Clearing Agent on basis of information provided by exporter---Order-in-original imposing penalty on Clearing Agent on charge of misdeclaration for finding banned goods in container of exporter---Pendency of criminal case against Clearing Agent in Court of Special Judge---Constitutional petition by Clearing Agent raising plea that no charge of misdeclaration could be alleged against him---Validity---Constitutional petition against judgment of Customs authorities would. not be maintainable without impleading Federation of Pakistan for its being a necessary party---Allegations levelled against Clearing Agent would require evidence---Any observation in such matter would affect pendency of criminal case---Licence of Clearing Agent had not been cancelled or suspended by order-­in-original, which was operative with no effect to his business---High Court dismissed constitutional petition in limine.

Rahat Hussain v. Collector of Customs (Prev.) Custom House, Karachi and 2 others 2003 CLC 1860 ref.

Ammar Yasir for Petitioner.

Raja Muhammad Iqbal for Respondents.

Rizwan Ahmed Siddiqui, DAG.

2008 P T D 808

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

COMMISSIONER OF INCOME TAX, CENTRAL ZONE-A, KARACHI

Versus

Messrs CASH & CARRY SUPER MARKET LTD., KARACHI

I.T.R. No.466 of 1990, decided on 31st August, 2007.

Income Tax Ordinance (XXXI of 1979)---

----S.136(1)---Reference---Gross rate of profit---Applicability---Principle of consistency---Assessee was a retail departmental store dealing in innumerable goods---Income Tax Appellate Tribunal had accepted declared gross profit of assessee although it was not maintaining quantitative analysis, on the ground that it was not possible to maintain record of quantities bought and sold by a retail stores dealing in innumerable goods---In previous two assessments of the assessee, gross profit was accepted and authorities did not file any reference before High Court---Validity---Reasons assigned by Income Tax Appellate Tribunal were unexceptionable and in view of non-filing of reference applications against the order for previous years, the department had accepted order of the Tribunal---High Court keeping in view the previous history of the case of assessee, answered the question referred in affirmative---Reference was accepted in circumstances.

Nasrullah Awan for Applicant.

Munawar Hassan, holding brief on behalf of Faroagh Naseem for Respondent.

2008 P T D 812

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Farrukh Zia Shaikh, JJ

Messrs QAZI GULFRAZ through Proprietor

Versus

PRESIDENT OF PAKISTAN, PRESIDENT, SECRETARIAT, ISLAMABAD and 4 others

Constitutional Petition No. D-142 of 2007, decided on 8th February, 2008.

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

----Ss.9 & 10---Complaint---Delay of one year and nine months, condonation of---Ombudsman entertained complaint without considering point of delay---Neither complainant explained such delay while making submissions before Ombudsman nor did Ombudsman give any observation thereon in his order---Effect---Such delay could not be assumed to have been condoned.

(b) Limitation---

----Proceedings initiated by party at the time of his own choice without considering the time prescribed therefore by legislature---Validity---Law would favour the vigilant and not the idles.

2006 PTD 1396 ref.

Sardar Muhammad Younus for Appellant.

Sofia Saeed Shah and Raja Muhammad Iqbal for Respondents.

2008 P T D 950

[Karachi High Court]

Before Munib Ahmad Khan and Ghulam Dastagir Shahani, JJ

Messrs SHAFIQ TEXTILE MILLS LTD., KARACHI

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 others

Constitutional Petition No.D-131 of 2004, decided on 11th April, 2008.

Customs Act (IV of 1969)---

----S. 33---Constitution of Pakistan (1973), Art.199---S.R.O. 563(I)/88, dated 1-7-1988---Constitutional petition---Refund of excess duty---Limitation---Department while adjudicating the amount towards statutory provisions, had not taken the ground of limitation/laches rather had justified the absorption of duty paid---Before taking the issue in such contested position on merit, point of abnormal delay in the form of laches was to be seen first---Reference had been made by the petitioner on the notification S.R.O. 563(I)/88, dated 1-2-1988, while the first notice on record was sent after about 12 years and then the constitutional petition had been filed after about 3 years---No justification for the petitioner existed in such a situation, to exhume the dead issue---Constitutional petition suffering from laches, was dismissed.

Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others PLD 1998 SC 64 and Pakistan Post Office v. Settlement Commissioner and others 1987 SCMR 1119 rel.

Khalid Jawed Khan for Petitioner.

Ms. Soofia Saeed Shah, Standing Counsel for Respondents Nos.1 and 2.

Raja M. Iqbal for Respondents Nos.3 and 4.

2008 P T D 996

[Karachi High Court]

Before Munib Ahmad Khan and Ghulam Dastagir Shahani, JJ

COLLECTOR OF CUSTOMS, KARACHI

Versus

Messrs FAPORT INTERNATIONAL, SIALKOT

Customs Reference Application No.63 of 2007, decided on 11th March, 2008.

Customs Act (IV of 1969)---

----Ss. 25, 194-C & 196---Determination of valuation of goods---Jurisdiction of single member of Appellate Tribunal---Reference/appeal to High Court---Question of valuation of goods was involved in the case and under terms of S.194-C(3) of Customs Act, 1969 Single Member of Appellate Tribunal could not proceed with the issue of valuation of goods---Impugned order was passed on 11-12-2006, whereas amendment in S.194-C (3) of Customs Act, 1969 whereby single Member of Appellate Tribunal had been permitted to proceed with matter of valuation was put into effect from 1-7-2007---Said amendment having no retrospective applicability impugned order passed by single Member of Appellate Tribunal prior to amendment, was without jurisdiction and thus was set aside---Case was remanded to the Tribunal for de novo trial.

Raja Muhammad Iqbal for Applicant/Petitioner.

None for Respondent.

2008 P T D 1029

[Karachi. High Court]

Before Mrs. Yasmin Abbasey and Qamaruddin Bohra, JJ

Messrs A-ONE FEEDS through Managing Partner

Versus

DEPUTY COLLECTOR, ADJUDICATION-I, KARACHI and another

Special Customs Reference Application No.61 of 2007, decided on 11th April, 2008.

Customs Act (IV of 1969)---

----Ss. 9, 25, 59 & 196---Declaring P.C.T. heading---Rate of duty---Exemption from the levy of sales tax---Reference to High Court---Assessee imported a consignment of choline chloride 60%, declaring P.C.T. heading as 2309.9000 attracting customs duty at 25 % claiming exemption from levy of sales tax in terms of serial No.23 to VI Sched. of Sales Tax Act, 1990---Application moved by assessee for amendment in the declaration of P.C.T. heading and rate of duty as 2923.1000 attracting duty at 10% ad valorem, having concurrently been rejected by Deputy Collector and Appellate Tribunal, assessee had filed application for reference to High Court---Question whether the goods imported under the title of choline chloride 60% fell under P.C.T. heading 2923.1000 or 2309.9000 with reference to the components found in the subject consignment, was an academic question and that had been thoroughly discussed in the order in original-Question which had mainly argued by the counsel for assessee was a question of composition of consignment, which being a question of fact, could not be entertained at the reference stage---Assessee being a regular importer of choline chloride getting it cleared under P.C.T. Heading 2309.9000, which had not been rebutted by him at the trial stage, could not back out from his previous statements, just to take benefit of low rate of customs duty under P.C.T. Heading 2923.1000 without any justification---Reference was rejected.

Ammar Yasir for Applicant.

Raja Muhammad Iqbal for Respondent.

2008 P T D 1075

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Nadeem Azhar Siddiqi, JJ

MUHAMMAD IQBAL GHORI

Versus

COMMISSIONER OF INCOME TAX, KARACHI

I.T.R.As. Nos.357, 358 and 36'7 of 2007, decided on 5th April, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss.12 & 13---Income Tax Rules, 2001, R.9(3) & (5)(b)---Perquisite---Salary---Value and scope of perquisites---Running and maintenance expenses of a vehicle provided by the employer to the employee directly incurred by the employer come within definition of `perquisite' and will be included in the taxable income of the employee (assessee)---Principles.

I.T.A. No.490/KB of 2006 and Black's Law Dictionary Sixth Edition ref.

Aziz H. Nishtar for Applicant.

Jawaid Farooqi for Respondent.

2008 P T D 1087

[Karachi High Court]

Before Muhammad Athar Saeed and Muhammad Moosa K. Laghari, JJ

MOUNTAIN STATES MINERAL ENTERPRISES INC., through duly constituted attorney, Karachi

Versus

COMMISSIONER OF INCOME TAX, (APPEALS) ZONE-3, KARACHI

I.T.C. No.55 of 1990, decided on 24th February, 2007.

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

----S.136(1)---Advisory jurisdiction of High Court---Scope---High Court in exercise of its advisory jurisdiction can only give opinion on the questions of law, arising from order of Income Tax Appellate. Tribunal and those questions of law which were proposed in the application under S.136 (1) of Income Tax Ordinance, 1979, filed in the Tribunal for referring the same for opinion of High Court.

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

----S. 12(5)(a)---Avoidance of Double Taxation Agreement between Government of Pakistan and Government of USA, Art.III(1)---Income deemed to accrue in Pakistan---Exemption---Applicant was a non-resident company, which had provided service of updating the pre-investment feasibility to its client in Pakistan---Applicant claimed exemption under Art.III(1) of Avoidance of Double Taxation Agreement between Government of Pakistan and Government of USA, to its income received for providing service in Pakistan---Validity---Amount received by applicant fell within the definition of Industrial and Commercial Profits---Applicant having no permanent establishment in Pakistan, therefore, its income was exempted under the provisions of Avoidance of Double Taxation Agreement between Government of Pakistan and Government of USA---Income generated by applicant was not taxable in Pakistan---Appeal was allowed accordingly.

Commissioner Income Tax v. Messrs Unilever PLC UK. 2002 PTD 44 fol.

Abdul Ghaffar for Applicant.

Nasrullah Awan for Respondent.

2008 P T D 1216

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Qamaruddin Bohra, JJ

Messrs FACO TRADING through Attorney

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Islamabad and 2 others

C.P. No.2254 of 2006, decided on 25th March, 2008.

Customs Act (IV of 1969)---

----Ss. 25(1), 35, 81 & 194-A---Constitution of Pakistan (1973), Art.199---Constitution petition---Maintainability---Refund claim and duty draw back a mixed question of law and fact---Proper forum for---Subject consignment was to be assessed under which the point for consideration was of refund of differential amount deposited by petitioner for release of his consignment after provisional assessment under S.81 of the Customs Act, 1969 as according to petitioner by virtue of S.25(1) of Customs Act, 1969 the goods had to be assessed on the basis of transaction, and value and not otherwise---Proper forum for seeking relief of refund claim was the Customs Appellate Tribunal and before availing such relief constitutional petition before the High Court was not maintainable---Section 194-A of Customs Act, 1969 would be relevant for the purpose which prescribed that any person or the officer of customs aggrieved by any orders specified in S.194-A could appeal to Appellate Tribunal against such orders---With the omission of 1st Proviso to S.194-A of Customs Act, 1969, jurisdiction for payment of duty drawback lay with the Appellate Tribunal---To assess whether the importer or exporter was entitled to a duty drawback on a particular consignment proper enquiry was required which could not be held in constitutional petition as enquiry relating to duty drawback was a mixed question of law and fact---High Court was not a proper forum to examine and adjudicate upon a question as to whether petitioner was entitled to the refund of post dated cheques.

Ghulam Ahmed Khan for Petitioner.

Raja Muhammad Iqbal for Respondent No.2.

Haider Iqbal Wahniwal for Respondent No.3.

2008 P T D 1233

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Pir Ali Shah, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs SKY PAK INTERNATIONAL (PVT.)

I.T.R. No. 82 of 1993, decided on 25th April, 2008.

Income Tax Ordinance (XXXIX of 1979)---

---Ss. 108 & 55---Penalty for failure to file return of income by assessee---Contention of the assessees was that as it was first year of their business and they had sustained losses therefore, they were under the impression that in case of losses no return was to be filed---Validity---Held, S.55 of the Income Tax Ordinance, 1979 gave a discretion to the assessee that when his total income to which he was assessable for any' income year along with the return of wealth tax exceeds the maximum amount, which was not chargeable to tax, he shall furnish a return of his total income as the case may be for the said income year---If the total income did not exceed the maximum amount which was not chargeable to tax, the assessee had an option not to file the return for the respective year---Income Tax Appellate Tribunal, in view of such statutory relaxation, was justified in deleting the penalty imposed on the assessees---Reasonable and probable cause for exempting from the penalty was absence of deliberate intention of non-compliance by the assessee---Mala fide intention as alleged having not been proved, the reference was dismissed.

Commissioner of Income Tax, Assam v. Assam Automobile and Accessories Agency (1978) 111 ITR 411; Commissioner of Income Tax v. N. Khan and Brothers (1973) 92 ITR 338 (All); (197'7) 107 ITR 214; The State v. Sardar Ataullah Khan Mangal PLD 1967 SC 78 and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary, Min. Finance, Islamabad and 6 others PLD 1997 SC 582 ref.

Aqeel Ahmed Abbasi for Applicant.

Muhammad Fareed for Respondent.

Date of hearing: 9th April, 2008.

2008 P T D 1250

[Karachi High Court]

Before Munib Ahmad Khan and Ghulam Dastagir Shahani, JJ

Messrs NAJAM IMPEX, LAHORE through Sole Proprietor

Versus

ASSISTANT COLLECTOR OF CUSTOMS, KARACHI and 4 others

C.Ps.Nos.D-93, 360, 417, 773, 791, 902, 957, 1032, 1050, 1095, 1096, 1097 and 1389 of 2007, decided on 14th March, 2008.

Customs Act (IV of 1969)---

----Ss. 25, 25-A & 81---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Power to take over the imported goods---Provisional assessment of duty--Language of S.25 of the Customs Act, 1969 was mandatory which required the department to follow the prescribed procedure step by step for the purpose of determining the value of imported goods and if no result was coming out then it could avail the remedy under S.25-A of Customs Act, 1969 whereunder determination of the import value was to be made on the basis of transaction value, provided that condition provided in subsection (1)(a) of S.25-A was not available---If an importer was crossing subsection (1)(a) of S.25 of Customs Act, 1969 then other subsections of S.25 were to be followed---In the present case Customs Authorities had given the ruling without any reasoning nor they mentioned as to how they had reached that conclusion or to do that whether they had evidence of other imports of more value nor the affected persons had been given any opportunity to be heard---Ruling of the customs authorities, in circumstances, could not be sustained and assessment on its basis was set aside by High Court---Customs authorities were required to issue a notice to all petitioners within 15 days time and would determine the value of goods keeping in view strictly the step provided for its determination in S.25, Customs Act, 1969---Said process was directed to be done within two months and post dated cheques submitted by the petitioners towards the deferential amount would not be encashed by the department until final determination of the customs duty---Constitutional petitions were disposed of accordingly.

Rehan Umar v. Collector of Customs 2006 PTD 909; Khan Trade International v. Assistant Collector Customs 2006 PTD 2807 and Karachi Bulk Storage v. Collector of Customs 2004 PTD 2592 ref.

Salahuddin Ahmed along with Nadeem Ahmed and Rajender Chaberia for Petitioner.

Raja Muhammad Iqbal and Haider Shaikh for Respondent.

2008 P T D 1264

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Nadeem Azhar Siddiqi, JJ

MUHAMMAD YOUSAF

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI and another

Special Custom Reference Application No.56 of 2006, decided on 5th April, 2008.

Customs Act (IV of 1969)---

----Ss. 139, 142, 156(1) & 196---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Making declaration by owner of baggage regarding imported goods---Seizure of goods---Reference/appeal to High Court---Goods imported by appellant were seized and a show-cause notice was served on appellant with allegation that bringing of goods into the country as passenger's Baggage, was restricted under S.3(1) of Imports and Exports (Control) Act, 1950, except on production of import authorization---Submission of appellant was that he had disclosed the goods to the Examining Officer and had informed him that he had brought the goods for re-export---Appellant, in circumstances, had discharged his legal obligations as provided under S.139 of Customs Act,, 1969---If the officer was satisfied that the goods were not imported with the intention of consumption in Pakistan, he could, at the request of the passenger, detain such article for the purpose of being returned to importer/appellant on his leaving Pakistan---Adjudicating officer confiscated the goods on the plea that same were in commercial quality and the Appellate Tribunal, without any material available on record, found that goods were brought for consumption in Pakistan, whereas from seizure report it appeared that the Seizing Officer was satisfied that the goods were not imported with the intention of consumption in Pakistan---Provision of Ss. 139 & 142 of the Customs Act, 1969 had not been considered by both forums below---Adjudicating Officer as well as the Appellate Tribunal were bound to provide relief to appellant to which he was entitled under law and the goods could not be confiscated and the relief could not be denied on presumption---Judgment of Adjudicating Officer and the Appellate Tribunal, were set aside and case was remanded to the Adjudicating Officer to decide the same afresh in terms of Ss.139 & 142 of the Customs Act, 1969.

Muhammad Nadeem Qureshi for Appellant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 25th March, 2008.

2008 P T D 1274

[Karachi High Court]

Before Munib Ahmad Khan and Mrs. Yasmin Abbasey, JJ

Messrs ATTA CABLES (PVT.) LTD. through Authorized Director

Versus

ASSISTANT COLLECTOR OF CUSTOMS, KARACHI

Special Customs Reference Application Nos. 340 to 346 of 2007, decided on 4th April, 2008.

Customs Act (IV of 1969)---

----Ss. 25, 194-C & 196---Determination of value of goods---Jurisdiction of Single Member of Appellate Tribunal---Application for reference to High Court---Question of determination of value of goods involved in the case, at relevant time was to be decided by a Bench of two Members of the Appellate Tribunal as per requirement of law prevalent at the relevant time, but same was decided by single Member, which was an illegality---Counsel for department had not disputed said factual position and had not objected to suggestion of remand of case made by the counsel for the applicants---Applications were allowed, impugned orders were set aside and matters were remanded for decision of the issue afresh.

M. Junaid Ghaffar for the Applicants in Spl. Customs Reference Applications Nos.340 to 346 of 2007.

Raja Muhammad Iqbal for the Respondent in Spl. Customs Reference Application Nos.340, 341, 342, 343, 345 and 346 of 2007.

2008 P T D 1284

[Karachi High Court]

Before Munib Ahmad Khan and Ghulam Dastagir Shahani, JJ

SOBIA SOHAIL JAFRANI

Versus

COLLECTOR OF CUSTOMS, KARACHI and 2 others

Constitutional Petitions Nos.873 to 878 of 2007, decided on 14th March, 2008.

Customs-Act (IV of 1969)---

----Ss. 25 & 196---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Petitioner had submitted that facts of all the petitions were different only to the extent that the goods were released by the Valuation Department of the Customs Authority, but thereafter again notices were issued on the ground that the assessment had not been made properly and additional duty was demanded and that neither there was any provision of additional duty in law nor criteria for determination, to fix additional duty was provided---Counsel for parties consented that matters could be sent to the department for determination of the value in terms of S.25 of the Customs Act, 1969 and not in accordance with any price determined by any alleged ruling---Constitutional petitions were disposed of accordingly.

Ali Bin Adam Jafri for Petitioner.

Raja Muhammad Iqbal for the Respondent along with Aqeel Ahmed Abbasi for Respondent.

2008 P T D 1296

[Karachi High Court]

Before Munib Ahmad Khan and Ghulam Dastagir Shahani, JJ

MAROOF OIL COMPANY through Authorized Representative

Versus

COLLECTOR OF CUSTOMS, KARACHI and another

Customs Reference No.236 of 2006, decided on 11th March, 2008.

Customs Act (IV of 1969)---

----S. 196---Reference to High Court---Maintainability---Counsel for department had challenged maintainability of Reference on the ground that petitioner company had no privity of contract and it could not be considered as an aggrieved party within the meaning of S.196 of Customs Act, 1969 and that parties before the Appellate Tribunal were different and some other person was contesting the matter---Petitioner company having no link with the said other person, he could not be an aggrieved person within the meaning of S. 196 of Customs Act, 1969---Reference was dismissed in circumstances.

None is present for petitioner.

Raja Muhammad Iqbal for Respondents.

2008 P T D 1472

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Syed Mehmood Alam Rizvi, JJ

Messrs INDUS STEEL PIPE LTD.

Versus

COLLECTOR, CUSTOMS and another

Special Customs Reference No. 4 of 2006, decided on 29th January, 2008.

Customs Act (IV of 1969)---

----Ss. 32(1)(2), 86, 156(1)(62) & 196---Removing imported goods without payment of duty and taxes chargeable thereon---Payment of penalty---Appeal to High Court---Notice was issued to importer alleging that he, having removed imported consignment without payment of duty and taxes chargeable thereon, was to pay twice the amount under S.86 of the Customs Act, 1969 as per bond furnished by him at the time of importation---Grievance of importer was that despite payment of duty and taxes within the required time given in notice, he was held guilty under Ss.32(1)(2) and 86 of Customs Act, 1969 and was asked to pay additional customs duty in terms of S.83-A of Customs Act, 1969 for his failure to pay duty and taxes within prescribed time and manner---Importer was also held liable to pay additional sales tax---Held, in such circumstances it was clause (62) of S. 156(1) of Customs Act, 1969 which was applicable and not clause (90) of said Section-Under clause (62) of S.156(1) of Customs Act, 1969, if any person illegally would take away goods out of any warehouse without payment of duty, he would be liable to penalty not exceeding twenty five thousand rupees---Counsel for authorities was unable to rebut arguments advanced by counsel for importer---Importer's appeal was allowed by the High Court in circumstances.

Collector Customs Pesh. v. Messrs Paper International (Pvt.) Ltd. 2007 SCMR 195 ref.

Ch. Muhammad Iqbal for Appellant.

Shoukat Ali Qureshi for Respondent.

Soofia Saeed, learned Standing Counsel.

2008 P T D 1475

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Dr. Qammaruddin Bohra, JJ

ABDUL GHAFFAR BHUNDI through Attorney

Versus

FEDERATION OF, PAKISTAN through Secretary, Revenue Division, Islamabad and 2 others

C.P. No. D-504 of 2006, decided on 13th May, 2008.

Customs Act (IV of 1969)---

----Ss. 18, 19 & 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Levy of customs duty---Dispute between parties related to classification of goods and applicability of particular PCT Heading on the goods imported by the petitioner titled as Cement Bunker Truck---Petitioner had stated that vehicle in question fell under P.C.T. Heading 8705.9000 having customs duty at 10%, whereas according to the Department it fell under P.C.T. Heading 8704.2290 leviable with duty at 60%---Question involved in the matter appeared to be a question of fact which was outside the ambit of the High Court, but as act of the department was found to be illegal, High Court had jurisdiction to go into the factual aspect---Disputed consignment did not fall within the banned items--Even otherwise counsel for department except raising that plea had not been able to justify or explain. as to how vehicle in question fell within banned items---Petitioner had been able to establish the fact that even before that consignment and thereafter Department was clearing that very vehicle under P.C.T. Heading 8705.9000, whereas in that particular case he had been discriminated by the Department---High Court disapproved such action of the department and observed that department was not supposed to deviate from its past practice without any cogent reasoning---Constitutional petition was allowed accordingly.

Messrs Radaka Corporation and others v. Collector of Customs 1989 SCMR 353; 2002 PTD 955 and 2004 PTD 2516 ref.

Junaid Ghaffar for Petitioner.

Syed Tariq Ali for Respondent Nos. 1 and 2.

Raja Muhammad Iqbal for Respondent No.3.

2008 P T D 1487

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Nadeem Azhar Siddiqi, JJ

MANDVIWALLA ENTERTAINMENT (PVT.) LTD. through Chief Executive

Versus

COMMISSIONER OF INCOME-TAX, KARACHI

I.T.C. No. 271 of 2005, decided on 5th April, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss.13 (1)(a), 61, 62 & 143-B---Income Tax Ordinance (XLIX of 2001), S.133 (4)---Reference to High Court---Material for assessment, non-providing of---Effect---Determination by assessing officer---Scope---Assessing officer was not satisfied with income tax return filed by assessee---Notice under Ss.61 and 62 of Income Tax Ordinance, 1979, was issued to assessee and on his failure to provide required details and information, assessment was finalized by assessing officer---Assessment made by assessing officer was maintained by Commissioner Appeals as well as by Income Tax Appellate Tribunal---Validity---From the conduct of assessee it was clear that it had failed to furnish sufficient material in support of its case---In absence of any material to the contrary, assessment was rightly finalized by assessing officer---Income Tax Appellate Tribunal had recorded its findings of facts on the basis of material on record which did not give rise to any legal controversy---Income Tax Appellate Tribunal had neither ignored any material on record nor had misconstrued any provision of law---Forums below assigned reasons in support of assessment order---High Court did not find any illegality or perversity in orders passed by the forums below---Assessee could not blame others for his own fault and negligence---Reference was dismissed in circumstances.

Haider Naqvi for Applicant.

Jawaid Farooqi for Respondent.

2008 P T D 1517

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Farrukh Zia Shaikh, JJ

NIAZ MUHAMMAD through Attorney

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Islamabad and 2 others

Constitutional Petition No.D-1089, 1090, 1091, 1092, 1093, 1094, 1095, 1096, 1097, 1098, 1099, 1100, 1101, 1102, 1103, 1104, 1105, 1106, 1107, 1108, 1109, 1110, 1114, 1115, 1116, 1117, 1118, 1119, 1120, 1121, 1122, 1123, 1124, 1125, 1126, 1127, 1128, 1129, 1130, 1131, 1132, 1133, 1134, 1135, 1136, 1137, 1138, 1139, 1140, 1141, 1148, 1149, 1150, 11,51, 1152, 1153, 1154, 1155, 1156, 1157, 1158, 1159, 1160, 1161, 1162, 1163, 1164, 1165, 1166, 1167, 1168, 1174, 1175, 1176, 1177, 1178, 1179, 1180, 1181, 1182, 1183, 1184, 1185, 1186, 1187, 1188, 1189, 1190, 1191, 1192, 1193, 1194, 1195, 1196, 1197, 1198, 1199, 1200, 1201, 1202, 1203, 1208, 1209, 1210, 1211, 1212, 1213, 1214, 1215, 1216, 1217, 1218, 1219, 1220, 1221, 1223, 1224, 1225, 1226, 1227, 1228, 1229, 1230, 1231, 1232, 1233, 1238, 1239, 1240, 1241, 1242, 1243, 1244, 1245, 1246, 1247, 1248, 1249, 1250 and 1251 of 2006, decided on 2nd April, 2008.

(a) Interpretation of statutes---

----Substantive law and procedural law---Retrospective effect---Principles---Statutes dealing with substantive law are prospective and those dealing with procedural law are retrospective---In certain cases if procedural law affects vested right it operates prospectively and not retrospectively.

(b) Interpretation of statutes---

----Statutory rules and notifications---Comparison---In case of conflict between statutory rules and notifications, statutory rules prevail---lf statute conveys clear meaning, it is not necessary to introduce any other policy by way of administrative order diminishing efficacy of statute.

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

----Ss.31 (A) & 179 (1)---S.R.O. 696 (I)/2006, dated 1-7-2006---Import Policy Rules, 2005-06, R. 3 (4)---Constitution of Pakistan (1973), . Art.199---Constitutional petition---Date of import---Determination---Rate of duty---Applicability---Retrospective effect of S.R.O. 696 (I)/2006, dated 1-7-2006---Petitioners intended to clear vehicles in question on the basis of authority letter issued by importers in their favour---Plea raised by petitioners was that invoice of consignment, bill of lading, export permission certificate and goods declaration were prior in date to 1-7-2006, therefore, provisions of S.R.O. 696 (I)/2006, dated 1-7-2006, were not applicable retrospectively---Validity---Clearance of subject vehicles was examined after presentation of G.D. on 30-6-2006, and importers had qualified the scheme under Import Policy Rules, 2005-2006 because condition inserted in Policy Order 2005-2006 by amendment through S.R.O. 696 (I)/2006, dated 1-7-2006 would apply to vehicles arriving on or after 1-7-2006.and not retrospectively-Even otherwise S.R.O. 696(I)/2006, dated 1-7-2006, by virtue of its clause (2) was made effective on 1-7-2006---High Court directed the authorities to examine subject vehicles in terms of law prevailing at that particular point of time considering all aspects of date of invoice, bill of lading, export permission certificate and G.D. filed by importers and if there was no prohibition in law for import of subject vehicle then duty and taxes payable be assessed as soon as possible---High Court further directed the authorities to examine status of importers under R.3 (4) of Import Policy. Rules, 2005-06, and authority given by importers to petitioners---Petition was disposed of accordingly.

Ch. Muhammad Iqbal, Ch. Waseem Iqbal, Sohail Muzaffar and Ms. Fozia Rasheed for Petitioners.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 30th January, 2008.

2008 P T D 1539

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Qammaruddin Bohra, JJ

GLAXO LABORATORIES LTD., LAHORE

Versus

COLLECTOR CUSTOMS, CENTRAL EXCISE AND SALES TAX ADJUDICATION-1, KARACHI and 2 others

Spl. Customs Reference Application No.215 of 2006, decided on 13th May, 2008.

Customs Act (IV of 1969)---

----Ss.32(3) & 223---Notification S.R.O. 587(I)/1990, dated 7-6-1990---Misdeclaration---Time-barred show-cause notice---Exemption on import of goods---Authorities imposed penalty on importer on the ground that it had imported excess quantity than sanctioned---Plea raised by importer was that show-cause notice issued by authorities was hopelessly time-­barred---Validity---It was not the case of misdeclaration or making false statements by importer but it was a case of wrong interpretation of direction given by Central Board of Revenue from time to time---Show cause notice issued after six months from 7-3-1995 was hopelessly time-barred because addition made by Central Board of Revenue in its letter dated 7-6-1997 was not made effective on the date of issuance of that letter but clearance of goods was allowed in terms of final certificate issued in favour of importer---After allowing release of raw material imported by letter dated 7-3-1995 under S.R.O. 587(I)/90 upto 30-4-1995, with further addition of certain items by letter dated 7-6-1995 in continuation of final certificate issued by Central Board of Revenue on 19-8-1996---Adjudication proceedings initiated against importer were contrary to S.223 of Customs Act, 1969, which made directives given by Central Board of Revenue a binding effect on all its subordinate functionaries---Any subsequent proceedings initiated against importer by issuance of show-cause notice was without jurisdiction and was in complete defiance of directions given by Central Board of Revenue-Order passed by authorities against importer was set aside---Reference was allowed in circumstances.

Union Sport Playing Cards Company v. Collector of Customs and another 2002 MLD 130 and Messrs Lever Brothers Pakistan Ltd. v. Customs, Sales Tax and Central Excise Appellate Tribunal 2005 PTD 2462 ref.

Aziz A. Shaikh for Applicant.

Raja Muhammad Iqbal for Respondents.

2008 P T D 1553

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Dr. Rana Muhammad Shamim, JJ

Messrs JAMIL AKHTAR TRADING CO., through Proprietor

Versus

DEPUTY COLLECTOR OF CUSTOMS (APPRAISEMENT GROUP-III), KARACHI and 3 others

C.Ps. Nos.D-401 to 430 of 2008, decided on 28th May, 2008.

Customs Act (IV of 1969)---

----Ss. 25 & 81---Constitution of Pakistan (1973), Art. 199---Constitutional Petition---Customs value of goods---Determination---Petitioner being aggrieved with the valuation advice given by the Director of Customs (Valuation), had filed petition praying that the price fixed by Director Customs (Valuation) be declared as illegal and that authorities be directed to assess the value in terms of S.25 of the Customs Act, 1969---Secretary Customs Valuation and Audit vide letter had requested the Director General (Valuation) to proceed with the representation moved by the Traders Association on the same subject matter---Petitioner had further pointed out that after issuance of show-cause notice, he had also filed a representation before competent authority of Customs, but that too had not been disposed of---Effect---Concerned Authorities should dispose of representation of petitioner within specified period; in view of joint acceptance of all the parties, concerned authorities should dispose of representation after giving opportunity of hearing to parties.

Mian Abdul Ghaffar for Petitioners.

Aqeel Ahmed Abbasi for Respondent No.4.

Raja Muhammad Iqbal for Respondent No.3.

Haider Iqbal Wahniwal.

2008 PTD 1587

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Dr. Qammaruddin Bohra, JJ

Messrs CLOVER PAKISTAN LTD. through General-Manager Finance

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and another

C.P. No.D-827 of 2006, decided on 16th May, 2008.

Customs Act (IV of 1969)---

----S. 81---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Provisional assessment of duty---Declared transaction value of the goods imported was not accepted by the Collector of Customs, however, after provisional assessment of goods, under S.81 of Customs Act, 1969, by imposing a loading on the transaction value, goods were released subject to furnishing Bank guarantees for differential amount, till the finalization of the assessment---Importer furnished Bank guarantees, but even after expiry of stipulated period of six months with extended period of 90 days totalling to 270 days, assessment had not been finalized by the Customs Department; and without finalization of the assessment, a notice of encashment of Bank guarantees furnished by the importer had been issued by the Assistant Collector of Customs---Before final assessment of duty on the basis of market survey, no notice was issued to the importer for providing him a chance to clarify his point of view---As the provisional assessment was not finalized by the Customs Department within the stipulated period of 270 days, any action taken by Customs Department of encashment of Bank guarantees furnished by the importer for the differential amount for the release of goods, was illegal---Importer was entitled to the refund of said amount.

Collector of Customs (Appraisement), Karachi v. Messrs Auto Mobile Corporation, Karachi 2005 PTD 2116; Messrs Hassan Trading Company, through Manzoor Hussain v. Central Board of Revenue, Government of Pakistan, Islamabad through Chairman and 2 others 2004 PTD 1979; Messrs Farooq Woollen Mills v. Collector of Customs, Customs Dry Port, Sambrial and 2 others 2004 PTD 795; Quetta Textile Mills Ltd. v. Federation of Pakistan and 2 others 1999 CLC 755 and Messrs Sajjad Nabi Dar and Co. v. The Commissioner of Income Tax, Rawalpindi Zone, Rawalpindi PLD 1977 SC 437 ref.

Abdul Ghaffar Khan for Petitioner.

Raja Muhammad Iqbal for Respondents.

2008 PTD 1610

[Karachi High Court]

Before Dr. Rana M. Shamim and Arshad Noor Khan, JJ

GHANDHARA NISSAN LTD., KARACHI

Versus

COLLECTOR OF CUSTOMS (APPG), KARACHI and another

Special Customs Appeals Nos.61 and 62 of 2002, decided on 1st July, 2008.

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

----Ss. 32(2)(b) & 156(1)(14)---Misdeclaration---Concealment of con­cession/rebate allowed by the principal to the importer---No proof had either been brought on the record of the Appellate Tribunal or before the High Court to show that the concession/rebate of 2.5% was declared by the importer, as such, importers had completely failed to prove that 2.5% concession extended to them by their principals was included in the statement submitted before Preshipment Inspection Company---Importers had also produced the statement submitted before Preshipment Inspection Company as Annexure which was also silent about 2.5% concession extended to them by their principals---Importers, therefore, wilfully, deliberately and knowingly concealed the concession, as such department was within its rights to claim the same.

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

----Ss. 32(1)(2) & 196---Misdeclaration---Appeal to High Court---Point of limitation under the provisions of Customs Act, 1969 is a point to probe and investigation in the factual aspect of the matter regarding misdeclaration or the statement filed by the party as such the said question could not be examined being question of fact under S.196 of Customs Act, 1969.

Pakistan State Oil Ltd. v. Collector of Customs E&ST (Adjudication-II) and others 2006 SCMR 425 fol.

Messrs S. Abdullah, and Company v. Collector of Customs (Appraisement) Karachi and others PLD 1992 Kar. 258; Ghulam Nabi v. Central Board of Revenue through Chairman and others PLD 1997 Quetta 22; Messrs China Yunnan Corporation v. Collector of Central Excise and others 2001 PTD 661; Baba Khan v. Collector Customs, Quetta and others 2000 SCMR 678; Pakistan State Oil Ltd. v. Collector of Customs E&ST (Adjudication-II) and others 2006 SCMR 425 and Messrs Adamjee Insurance Co. Ltd. v. Collector of Customs, Sales Tax and Central Excise (Adjudication) Karachi 2007 PTD 2 ref.

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

----Ss.32 & 79---Misdeclaration---Importers produced dutiable slip corresponding to S.79 Customs Act, 1969 before the Customs department wherein the material fact of concession of 2.5% rabate/concession was concealed so as to avoid duty as required under S.32(1)(2) of the Customs Act, 1969---Effect---Held, if any person in connection with any matter of Customs makes any declaration or statement which was untrue in material particulars, he was, guilty of an offence under S.32 of the Customs Act, 1969.

Baba Khan v. Collector Customs, Quetta and others 2000 SCMR 678 fol.

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

----Ss. 25 & 32---Customs value of goods---Determination of---For the purpose of levy of customs duty, the value of any imported goods is taken to be the normal price, i.e. the price which the goods would fetch on the specified date on a sale in open market between a buyer and a seller independent of each other and same yardstick is applied for the purpose of assessing the value of any exported goods under S.25, Customs Act, 1969---Assessment of value, therefore, could not be deemed to be without any basis or made capriciously or in fanciful manner having no regard for prevailing export price---Court would see, prima facie, whether determination of value would commensurate with market rate or there was unreasonable difference between the declared value and the fixed by the authorized agency---Where the importer did not allege that the department had assessed the value of the consignment arbitrarily, which was much against the actual prevailing market price of the consignment in question, High Court declined interference.

Messrs S. Abdullah and Company v. Collector of Customs (Appraisement) Karachi and others PLD 1992 Kar. 258 and Ghulam Nabi v. Central Board of Revenue through Chairman and others in PLD 1997 Quetta 22 fol.

Aziz A. Shaikh for Appellants.

Raja M. Iqbal for Respondents.

Badar Alam, D.A.-G. for Federation.

Date of hearing: 26th June, 2008.

2008 P T D 1659

[Karachi High Court]

Before Khawaja Naveed Ahmed, J

MUHAMMAD HASHIM

Versus

THE STATE

Special Criminal Revision No. 2 of 2008, decided on 3rd July, 2008.

Customs Act (IV of 1969)---

----Ss. 156(1)(14)(82) & 185-F---Criminal Procedure Code (V of 1898), S.561-A---Quashing of proceedings---Special criminal revision application---Deputy Attorney General stated that for the same offence, the case was challaned at three 'forums; Customs Court; Banking Court; and Commercial Court and that the right forum was the Commercial Court---Validity---No government revenue was involved in the case---Applicant had not cheated the government or had caused any loss to the government---Offence allegedly committed by applicant, had caused loss to the reputation of Pakistan business community for which he was challenged at a proper forum which would dispose of the matter on merits---Case relied upon by Deputy Attorney General, was against same applicant who was challaned in Banking Court for the same offence and the High Court had quashed the proceedings pending in the Banking Court---In view of the finding given by High Court against the same applicant in respect of same incident, proceedings pending before the Customs Court, were quashed-Proceedings in Commercial Court would continue and would be disposed of on merits.

Muhammad Hashim v. Presiding Officer Special Banking Court (Offence in Banks), Sindh at Karachi and 7 others 2006 PCr.LJ 1886 ref.

Syed Muhammad Kazim for Petitioner.

Imran Ahmed, DAG along with Mr. Khalid Nawaz Khan Marwat, Federal Counsel.

2008 P T D 1673

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Arshad Noor Khan, JJ

DIGRI SUGAR MILLS LTD., KARACHI

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE (ADJUDICATION), HYDERABAD and another

Sales Tax Reference No. 59 of 2007, decided on 26th June, 2008.

(a) Sales tax---

----Amendment made in Sales Tax Act, 1990 would be presumed to be in the notice of Sales Tax Department particularly performing on adjudication side.

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

----Ss. 2(25) & 3(1-A) (as omitted by Finance Act (II of 2004)---Taxation supply to a person liable to be registered---Liability of supplier to pay further tax under S.3(1-A) of Sales Tax Act, 1990---Scope---Person liable to be registered would be deemed by virtue of S. 2(25) of Sales Tax Act, 1990 to be a registered person not liable to pay further tax even before omission of S.3(1-A) thereof by Finance Act, 2004.

Ms. Danish Zuberi for Applicant.

Shaukat Ali Qureshi for Respondents.

Date of hearing: 8th May, 2008.

2008 P T D 1760

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Ghulam Dastagir A. Shahani, JJ

WANIA IMPEX through Proprietor

Versus

ASSISTANT COLLECTOR CUSTOMS and 4 others

C.P. No. D-1381 of 2004, decided on 30th June, 2008.

Customs Act (IV of 1969)---

----S. 25---Customs Rules, 2001, R.113(I)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of value of imported goods---Enforcement of value---After arrival of consignment of textile fabrics imported by petitioner/importer, same was presented for assessment---On examination, consignment was found exactly in accordance with the declaration made by importer with regard to quantity, quality and weight, but despite that Customs Authorities did not accept transactional value and evidence furnished by importer and arbitrarily enhanced the value without any basis---Validity---Under provisions of S.25(1) of Customs Act, 1969 Customs Value of imported goods would be the transactional value---Under Clause (1) of R.113 of Customs Rules, 2001, price actually paid or payable was the total payment made or to be made by the buyer to or for benefit of the. seller for the imported goods---Enhancement of value without any satisfactory evidence of any import of identical goods of the very period, when consignment in question was imported, was not in accordance with S.25 of Customs Act, 1969 which spoke about the assessment on the basis of transactional value---Action of Authorities resorting to the assessment on the basis of valuation advice in pursuance of provisions contained in subsection (7) of S.25 of the Customs Act, 1969 without resort to subsections (1) to (6) of S.25 of the Act, 1969, was illegal and without lawful authority---Authorities were directed by High Court to accept the transactional value declared by the importer in terms of S.25(1) of Customs Act, 1969; and if, after assessment, any excess amount of customs duty and taxes were recovered from the importer same would be returned to him within specified period.

Mian Abdul Ghaffar for Petitioner.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 19th March, 2008.

2008 P T D 1851

[Karachi High Court]

Before Arshad Noor Khan, J

Messrs RAZZAK STEEL (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance and others

Suit No.131 of 1996, decided on 15th August, 2008.

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

----Art. 62---Recovery of money---Bar of Art.62 of Limitation Act, 1908---Proof---Where there was no evidence available on record to show that taxes were recovered by authorities for the use of plaintiff, suit filed by plaintiff was not barred under Art. 62 of Limitation Act, 1908.

Municipal Board of Ghazipur v. Deokinandan Prasad AIR 1914 All. 338 rel.

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

----S.66, second proviso---Refund of excess duty---Limitation---Bar of S.66 of Sales Tax Act, 1990---Applicability---Plaintiff in Constitutional petition before High Court assailed recovery of excess sales tax, which petition was allowed and High Court declared that the authorities had recovered excess sales tax from plaintiff---Relying upon declaration by High Court, plaintiff-company filed suit against authorities for recovery of excess sales tax---Authorities resisted the suit on the ground that under S.66 of Sale Tax Act, 1990, suit was barred by limitation---Validity---Claim of plaintiff was refused by Appellate Tribunal on 15-2-1995, and suit was filed on 14-2-1996---As such the suit was filed within one year from the date of passing the orders by Appellate Tribunal as envisaged under second proviso to S.66 of Sales Tax Act, 1990, thus the suit was not barred---Judicial pronouncement by High Court fully empowered plaintiff to claim sales tax recovered forcibly by authorities---Recovery of sales tax in question by the authorities was illegal and authorities were liable to refund the same to plaintiff---Plaintiff in its plaint as well as in evidence had well worded that sales tax to the tune of Rs.33,808,969 was recovered from it by authorities which was not denied by authorities, therefore, plaintiff was entitled to refund of the amount so recovered---Suit was decreed in circumstances.

Moin Azhar Siddiqui for Plaintiff.

Nemo for Defendants Nos.1 to 3.

Muhammad Asif Mufti holding brief for M.G. Dastgir for Defendant No.4.

2008 P T D 1968

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Farrukh Zia G. Shaikh, JJ

Messrs SIKANDAR ENTERPRISES through Attorney

Versus

CUSTOMS, EXCISE AND SALES TAX TRIBUNAL, KARACHI and 3 others

Spl. Customs Appeal No.148 of 2001, decided on 2nd April, 2008.

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

----Ss. 25, 32 & 196---Determination of customs value of goods---Mis-­declaration---Order passed in appeal by Customs Appellate Tribunal, whereby on the charge of mis-declaration appellant was penalized for making payment of evaded amount,,. of duties and taxes along with additional tax---Appellant, who imported certain consignment of second hand clothes, had disposed of the consignment of second-hand clothes in the same year---After disposal of imported second-hand clothes in the very year to assess the value of goods on presumptive evidence, was beyond the scope of S.25 of Customs Act, 1969---Even otherwise after clearance of goods and removal of consignment from the customs area, Customs Authorities were functus officio to reopen the case again as it had become past and closed transaction---No specific provision had been quoted as to whether appellant had been guilty of offence falling under subsection (2)(3) of S.32 of Customs Act, 1969; it would thus be difficult to observe as to whether appellant had been guilty of mis-declaration.

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

----S. 32---Untrue statement---Limitation---If case would fall under S.32(2) of Customs Act, 1969, the period of limitation at the relevant time was three years and if it would come within the purview of S.32(3) of the Act, permissible period to adjudicate would be six months---Object of providing limitation period was to finalize the transaction within specific time.

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

----S. 180---Show-cause notice after confiscation of goods---Object of issuance of show-cause notice as prescribed in 5.180 of the Customs Act, 1969, was to intimate the concerned parties beside indicating them about the nature of contravention, and the penal action intended to be taken against them---Before taking any step, subsection (b) of S.180 of the Customs Act, 1969 provided an opportunity to the party to make representation in writing within such reasonable time as the appropriate officer could specify against the proposed action---Without issuing any proper notice under S.180 of the Customs Act, 1969 and examining the subject consignment or having a similar evidence that of subject consignment, assessment of goods, after their clearance would be deemed to be an arbitrary decision with no reasonable cause.

Salim Thepdawala for Appellant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 29th January, 2008.

2008 P T D 1

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs HIGHNOON LABORATORIES LTD., LAHORE

Versus

COLLECTOR OF SALES TAX (APPEALS), LAHORE and 2 others

Writ Petition No.5828 of 2007, decided on 15th June, 2007.

Sales Tax Act (VII of 1990)---

----S.45-B(4) [as omitted by Finance Act (III of 2006]---Constitution of Pakistan (1973), Art.199---Constitutional petition---Appeal to Appellate Authority---Prayer for temporary injunction qua recovery of demanded amount of tax---Refusal of Appellate Authority to grant such prayer due to omission of subsection (4) of S.45-B of Sales Tax Act, 1990 by Finance Act, 2006---Validity---Appeal was continuity of original proceedings, which would attain finality only upon adjudication of matter by last forum set-up under law---Appellate Authority having powers to grant main relief by setting aside, varying, altering or annulling order appealed against could also grant interim relief by suspending, varying or modifying order appealed against---Where appellant established prima facie case, irreparable loss and valance of convenience in his favour, then Appellate Authority could grant him injunctive relief subject to furnishing of adequate security---High Court set aside impugned order and granted stay order to appellant subject to deposit of 25% of principal amount of tax---Principles.

Commissioner Khairpur Division, Khairpur and another v. Ali Sher Sarki PLD 1971 SC 241; Umer Farooq Syed v. Commissioner of Income/Wealth Tax, Lahore and 2 others 1991 PTD 872; Messrs Adeem Hosiery Dying v. Assistant Collector of Sales Tax 2002 PTD 1616 and Central Board of Revenue and others v. Chanda Motors 1993 SCMR 39 ref.

1996 SCMR 645 and Syed Imran Raza Zaidi, Superintending Engineer, Public Health Engineering Circle-I, Gujranwala v. Government of Punjab through SGA&I Department, Punjab Secretariat, Lahore 1996 SCMR 643 rel.

Ashtar Ausaf Ali for Petitioner.

Muhammad Nawaz Cheema for Respondent.

Date of hearing: 15th June, 2007.

2008 P T D 60

[Lahore High Court]

Before Nasim Sikandar, J

Messrs SUPER ASIA MUHAMMAD DIN SONS (PVT.) LTD. through Chief Executive

Versus

COLLECTOR OF SALES TAX, GUJRANWALA and another

Writ Petition No.13331 of 2006; decided on 7th November, 2007.

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

----Ss.36, proviso [as added by Finance Ordinance (XXI of 2000) and amended by Finance Act (I of 2003)]---Finance Act (III of 2006) S.45(2) [as added by Finance Act (III of 2006)]---Initiation of proceedings for recovery of tax not levied or short levied or erroneously refunded---Limitation---Period of 45 days prescribed for completion of adjudication proceedings by Finance Ordinance, 2000 and enhanced to 90 days by Finance Act, 2006---Not directory, but mandatory---Principles.

The claim of the Revenue that the prescribed limitation of 45 days for completion of adjudication proceedings as provided through Finance Ordinance, 2000 and enhanced to 90 days by Finance Act, 2006 is merely directory cannot be accepted. Where inaction on the part of a public functionary within the prescribed time is likely to affect the rights of a citizen, the prescription of time is deemed directory. However, where a public functionary is empowered to create liability against a citizen only within the prescribed time, it is mandatory. The acceptance of contention of the revenue in that regard will make a provision of law redundant and nugatory. Redundancy or superfluity of an Act of Parliament and a provision of law cannot be readily accepted. All the more so when the prescribed limit is beneficial for the citizen and restricts the executive power to touch the pocket of a taxpayer thereby creating certainty, then after its expiry, even if there was a good case for creation of liability, he will not be dragged in.

Nagina Silk Mill, Lyallpur v. The Income Tax Officer and the Income Tax Appellate Tribunal, Pakistan PLD 1963 SC 322 rel.

Nagina Silk Mill, Lyallpur v. The Income-Tax Officer and the Income Tax Appellate Tribunal, Pakistan PLD 1963 SC 322 distinguished.

(b) Taxation---

----Provision of law prescribing time limit for revenue to create liability against taxpayer would be deemed to be mandatory---Principles.

Where inaction on the part of a public functionary within the prescribed time is likely to affect the rights of a citizen, the prescription of time is deemed directly. However, where a public functionary is empowered to create liability against a citizen only within the prescribed time, it is mandatory. When the prescribed limit is beneficial for the citizen and restricts the executive power to touch the pocket of a taxpayer thereby creating certainty, then after its expiry, even if there was a good case for creation of liability, he will not be dragged in.

(c) Interpretation of statutes---

----Redundancy or superfluity of an Act of Parliament and a provision of law cannot be readily accepted.

Waqar Azim for Petitioner.

Izharul Haq for Respondents.

Date of hearing: 18th September, 2007.

2008 P T D 103

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Haji SULTAN AHMED

Versus

CHAIRMAN, CENTRAL BOARD OF REVENUE, ISLAMABAD and 5 others

Writ Petitions Nos.7781, 7823, 8155, 8176, 8397, 8563, 8790 to 8795, 8841 to 8844, 8876 to 8880, 8889 to 8901, 8917 to 8920, 8927, 8956, 8957, 8977, 8978, 8992 to 9000, 9002, 8929, 9032, 9068, 9069, 9101 to 9105, 9120 to 9153, 9210 to 9212, 9230, 9242, 10025, 10091 to 10093, 10137, 10145 to 10147, 10151 to 10159, 10173, 10174, 10179 to 10194, 10204, 10209, 10210, 10309, 10363, 11125, 11135, 11136, 11214, 11215, 11228, 11229, 11254 to 11257 and 11296 of 2007, decided on-23rd November, 2007.

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

----Ss. 3 & 2(41)(46)---Scope of tax---Mandatory conditions to create charge of sales tax under Sales Tax Act, 1990---Modes to ascertain value of supply---Principles.

A bare perusal of the first part of S.3, Sales Tax Act, 1990 confirms that charge, payment and levy of sales tax is contingent upon the taxable supplies made in furtherance of taxable activity. To create the charge of sales tax under the Act, it is mandatory that two conditions must be fulfilled, namely the transaction of sale must constitute taxable activity and this must be a taxable supply. Three (3) expressions used in subsection (1) are:--

(i) Taxable Supply.

(ii) Taxable Activity.

(iii) Value.

These expressions are defined in the Act, in subsections (35), (41) and (46) of section. 2.

Any activity carried on in the form of business, trade and manufacture, which is carried on by any person and involves in whole or In part, supply of goods to another person, whether or not for any pecuniary profit, or for any other consideration or otherwise. Taxable activity clearly envisages the supply of goods to any other person. To create the charge of sales tax both the factors i.e. transaction of sale must constitute a taxable activity' and it should betaxable supply', must co-exist independently. If one factor is missing, the tax cannot be levied. The transaction must first qualify to be supply' to constitutetaxable supply' to constitute supply' the transaction must bein furtherance of business' and the `business' is to be construed as the activity recurring for profit motive and must be in the nature of trade, commerce or manufacture.

Liability to pay tax under section 3 (charging section) arises only when a taxable supply is made by a registered person in furtherance of taxable activity. The law requires that tax must be levied or charged in clear, unambiguous and specific terms. Tax cannot be levied on presumption or on importing something which the legislature has not provided therein. Thus to create incidence of tax, the Revenue is duty bound to establish that a transaction falls within the scope and ambit of taxable supply' and ataxable activity' is involved in. it. Additionally the sales tax, under the Act, has to be charged on the value of the supply.

`Value of supply' as it is defined in subsection (46) of section 2, can be ascertained in seven (7) different modes namely: consideration of money inclusive of duties but excluding the amount of tax which the supplier receives from the recipient for the supply; the discounted price excluding the amount of tax in the case of trade discounts; the open market price in the cases where it is difficult to ascertain value of supply in view of special nature of transaction; value according to section 25 of the Customs Act, in the cases of imported goods inclusive of customs duties and Federal excise duty; the value determined by Valuation Committee (comprising representatives of trade and sales tax department) where value has not been correctly declared in invoice; price of goods which goods fetch on sale in open market in cases of goods other than taxable goods which are supplied to registered person for processing and in case of a taxable supply, with reference to retail tax, the price of taxable goods excluding the amount of retail tax or such other price which the Board may, by Notification in the official Gazette, specify.

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

----S.2(35)(46), proviso 3 & S.71---Sales Tax (Special Procedure) Rules, 2007, Chap. XI---S.R.No.678(I)/2007, dated 6-7-2007---Constitution of Pakistan (1973), Art.199---Constitutional petition---Vires of Chap. XI as contained in S.R.O.678(1)/2007, dated 6-7-2007 issued by the Federal Government---Determination of sales tax as final charge by steel melter, steel reroller and composite units of steel melting and re-rolling having single electricity meter at the rate of Rs.4.75 per unit of electricity consumed for production of steel billets, ingots and mild steel products---Validity---Held, determination of the value on basis of consumption of electricity does not find mentioned in S.2(46), Sale Tax Act, 1990 and proviso to S.2(46) of the Act is not attracted in the present case---Chapter XI of Sales Tax (Special Procedure) Rules, 2007 as contained in S.R.O.678(I)/2007 dated 6-7-2007 issued by the Federal Government is in direct conflict with the charging provisions of Sales Tax Act, 1990 and is illegal and void for such inconsistency which was declared to be ultra vires, issued without any lawful authority and with no legal effect---Petitioners are/shall be liable to pay the Sales Tax at the rate of 15% on the basis of taxable supply, made in course or furtherance of any taxable activity carried out by them under S.3(1) of the Sales Tax Act, 1990---Present judgment, however, shall not affect the tax already paid or recovered under the impugned Rules, being past and closed transaction---Principles.

Determination of the value on the basis of consumption of electricity does not find mention in section 2(46) of the Sales Tax Act. The Revenue, however, has based the impugned value of the supply, on, proviso to clause (g) to S.2(46) where the Board has been authorized to fix the value of any imported goods or taxable supply or classes of supplies, through a notification in the official Gazette. This proviso is not attracted to the present case. Firstly the scope of the proviso is restricted to the ambit of main section, which, in the present case, is clause (g) which deals with retail tax. The assesses are not retailers and tax imposed on them is also not a retail tax. Secondly, the value according to this proviso can be fixed by the Board, while the impugned S.R.O. has been issued by the Federal Government and in this way the value, which is fixed by the Federal Government cannot be considered as the one under proviso to clause (g) of section 2(46) of the Act.

Adverting to impugned S.R.O. (S.R.O. 678(I)/2007 dated 6-7-2007) where a mechanism has been provided under Chapter XI for charge and collection of sales tax, at rate of Rs.4.75 per unit of electricity consumed in the Units. Rules 58H to 58M Sales Taxes (Special Procedure) Rules, 2007 prescribe mode and manner of issuance of sales tax invoices, submission of sales tax returns, maintenance of specified record and penal consequences of non-payment of tax. It is reflected from the perusal of S.R.O. that it has been issued by the Federal Government, in the exercise of its powers under section 71, of the Sales Tax Act, 1990, read with clauses (9) and (46) of section 2, sections 3 and 4, subsection (2) of section 6, section 7, section 7A, clause (b) of subsection (1) of section 8, clause (a) of subsection (2) of section 13, subsections (2A) and (3) of section 22, sections 23 and 60 thereof. Section 71 of the Act empowers Federal Government to issue a notification in the official Gazette and prescribe special procedure for scope and payment of tax, registration, bookkeeping, invoicing requirements and returns etc. with reference to such supplies as are given in the notification. Similarly section 2(9) and (46) laid down the respective due date for filing of return and to give the value of supply at which the tax is to be discharged. Section 3 and section 4 are provisions, which relate to the levy of sales tax respectively. Section 6 relates to time and manner of payment of tax while section 7 relates to the determination of tax liability. Section 7A relates to levy and collection of tax on specified goods on value addition. Section 8 relates to tax credit not allowed under the Act. Section 13 relates to exemption from tax whereas section 22 pertains to record. Section 23 relates to tax invoice and section 60 refers to powers to deliver certain goods without payment of tax.

Section 71(1) of the Sales Tax Act, 1990 empowers Federal Government to prescribe special procedure for scope and payment of tax, registration, bookkeeping etc. by notifying the same in official Gazette. This power is to the extent of prescribing procedure and such power is subordinate to charging section (section 3 of the Act). Rules made under section 71, cannot take place of charging section. Rule making power conferred by the statute, is subordinate to the substantial provision of law. Rules made under section 71, cannot enlarge the scope of statutory provision.

The Act provides the charge, levy and payment of sales tax @ 15 per cent of the value of taxable supplies. The taxable supply within the contemplation of subsection (35) of section 2 involves in whole or in part the supply of goods. To create the incidence of sales tax, taxable activity is condition precedent which envisages the supply of goods to another person. The collection of tax through adopting impugned procedure under S.R.O. 678(I)/2007, the element of charging tax on taxable supplies made in furtherance of taxable activity, has been done away with. Rules under section 71, Sales Tax Act, 1990 can be made and framed incidental to the substantive provision of law and can be rnade to deal with the details, following the parent statute but the fundamental intent of the Act cannot be changed. The impugned rules are in direct conflict with the charging provision of the Act, therefore, these are illegal and void for such inconsistency.

The Revenue has also justified charging of tax through impugned rules by resorting to section 3(2)(b) of Sales Tax Act, 1990. Although subsection (2) begins with non obstante clause but clause (b) referred to, by the department, is of no help to Revenue, as careful perusal of this subsection demonstrates that it empowers Federal Government to impose lower or higher rates or rates as may be specified in the notification in respect of supply stipulated in subsection (1) of section 3 of the Sales Tax Act, 1990. The provisions of subsection 2(b) of section 3, relate to imposition of higher or lower rate of tax. It governs "rate" and does not alter the chargeability of sales tax on the basis of taxable supply in furtherance of taxable activity.

The Revenue has thirdly tried to justify the legality of impugned rules, relying upon subsection (6) of section 3. Subsection (6) again confirms to levy and collection of such amount of tax, in lieu of tax under section 3(1), and its payment in a mode, manner and time as Federal Government or the Federal Board of Revenue may deem fit. Here again it is the amount of tax and manner of its payment, which the Board or the Federal Government can notify but mode and manner of payment is one prescribed within the ambit of section 3(1). The yardstick to charge and levy sales tax is the sale constituting a taxable activity for a taxable supply. Any other mode or manner deviating from this yardstick, is not presently permissible under the Act. However, this is permitted under item 52 of the Fourth Schedule to the Constitution of Islamic Republic of Pakistan, 1973 and unless the act is amended, the same is not permitted herein.

The Revenue has worked out the electricity consumed on various products at a uniform formula i.e. 800 units for production of one metric ton of steel. The Revenue has ignored the material fact that a product of a lesser gauge consumes more electricity for its production as against the product of thick gauge. The impact of price variation and fluctuation of rates, has also been ignored.

Any payment of duty or tax cannot work as estoppel. Constitutional petition cannot be defeated on such plea as cause of action is recurring as each transaction gives fresh cause. Further the tax can be levied under the authority of law and mere convenience of tax collector in recovering tax liability, is no ground to deviate from substantive provision of law. The department, instead of streamlining the system for recovery of the tax, has adopted indirect method for impugned levy, by changing the statutory yardstick. Such procedure is not constitutionally permissible. Revenue, however, can consider consumption of electricity in manufacture of steel products, to detect tax fraud but it cannot be used to create charge of tax liability.

The impugned Rules contained in Chapter XI of the S. R.O. 687(I)/2007 dated 13-6-2007 issued by the Federal Government are declared ultra vires, issued without any lawful authority and with no legal effect. The petitioners are/shall be liable to pay the sales tax at the rate of 15% on the basis of taxable supply, made in the course or furtherance of any taxable activity carried out by them under section 3(1) of the Act, 1990. This judgment, however, shall not affect the tax already paid or recovered under the impugned Rules, being past and closed transaction.

Messrs Usmani Associates Sub Proprietary Firm v. C.B.R. and another 2001 PTD 2982; Collector of Customs, Central Excise and Sales Tax, Karachi West v. Novartis Pakistan Ltd. 2202 PTD 976; Khawaja Ahmad Hassan (Supra); Collector of Sales Tax v. Superior Textile Mills Ltd. 2001 PTD 1486 PLD 2001 SC 600 and Pakistan Tobacco Company Ltd. and another v. Federation of Pakistan through Ministry of Commerce Islamabad and 3 others 1999 SCMR 382 rel.

Walter John Brooks v. Nee Barwich alias Mabel Esther Brooks and another AIR 1926 Sindh 58: Emperor v. Ram Sarup AIR 1938 Oudh 80; Province of Bengal v. Sm. Hingul Kumari Law AI.R 1946 Cal. 217; Mullins v. Treasurer of Surry (1885) QBD 170; Life Insurance Corporation of India v. United Commercial Bank, Karachi PLD 1962 Kar. 837; Commissioner of Income Tax v. Messrs West Punjab Factories Limited, Okara PLD 1966 Lah. 236; Aruj Textile Mills Ltd. v. Federation of Pakistan through Secretary Ministry of Finance 1998 PTD 3855; Maulvi Muhammad Hassan v. Collector Nasirabad and others PLD 1982 Quetta 1; Messrs Al-Halal Motors Stores and others v. Collector of Sales and Central Excise (East) Karachi and others 2004 PTD 868; B.P. Biscuit Factory Limited Karachi v. Wealth Tax Officer and another 1996 SCMR 1470; Maple Leaf Cement Factory Ltd. v. Federation of Pakistan and others 1999 PTD 3907; Messrs Usmani Associates Sub Proprietary Firm v. C.B.R. and another 2001 PTD 2982; Commissioner of Sales Tax and others v. Hunza Central Asian Textile and Woolen Mills Ltd. and others 1999 SCMR 526; Amin Textile Mills and others v. Federation of Pakistan and others 2002 CLC 1714; Excise and Taxation Officer, Karachi and another v. Burmah Sheel Storage and Distribution Company of Pakistan Ltd. and 5 others 1993 SCMR 338; Collector of Customs, Central Excise and Sales Tax, Karachi West v. Novartis Pakistan Ltd. 2002 PTD 976; Hashwani Sales and Services Ltd. v. Karachi Building Control Authority and 15 others PLD 1986 Kar. 393; Pir Sabir Shah v. Shad Muhammad Khan, Member Provincial Assembly N.-W.F.P. PLD 1995 SC 66; Messrs State Cement Corporation of Pakistan Ltd. v. Collector of Customs, Karachi and another 1998 SCMR 2207; Central Board of Revenue and 3 others v. Seven Bottling Company (Pvt.) Ltd. 1996 SCMR 700; Seven up Bottling Company (Pvt.) Ltd. v. Lahore Development Authority 2003 CLC 513; Pakistan Tobacco Company Ltd. and another v. Federation of Pakistan through Ministry of Commerce, Islamabad and 3 others" 1999 SCMR 382; Ittefaq Foundry v. Federation of Pakistan PLD 1990 Lah. 121; Collector of Sales Tax and others v. Superior Textile Mills Ltd. and others 2001 PTD 1486 = PLD 2001 SC 600; Crescent Re-rolling Mills, Lahore v. Assistant Collector of Sales Tax GST 2005 CL 73; Messrs Universal Merchants v. Commissioner of Karachi and 2 others 1980 CLC 704; Messrs Friends Sons v. Deputy Collector, Central Excise and Sales Tax and others TLD 1989 Lah. 337; Jamshed Waheed v. Government of Punjab through Secretary Excise and Taxation, Lahore and 5 others PLD 2001 Lah. 395; Messrs 'Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 6 others PLD 1997 SC 582; Deputy Collector, Central Excise and Land Customs, Lahore v. Tyrex Pakistan Limited PLD 1992 SC 364; Muslim Commercial Bank Ltd. v. Muhammad Nasirn 2001 SCMR 1191; Ghulam Hassan v. Jamshaid Ali and other 2001 SCMR 1001; Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Nadi Industries (Pvt.) Ltd. 2002 PTD 2457; Bengal Immunity Co. Ltd. v. State of Bihar and others AIR 1955 SC 661; Messrs Tanzeb Textile Industries, Faisalabad v. CIT Faisalabad Zone Faisalabad 2003 PTD 1; Islamic Republic of Pakistan through Secretary Ministry of Interior and Kashmir Affairs, Islamabad v. Abdul Wali Khan, MNA, Former President of Defunct National Awami Party PLD 1976 SC 57; Makhdoomzada Syed Hassan Mahmood v. City Co-operative Bank Ltd. Hyderabad and 2 others PLD 1980 Kar. 37; Gujrat Punjab Bus Limited v. Province of Punjab and others PLD 1957 Lahore 345; Messrs Sheikh Abdur Rehim, Allah Ditta v. Federation of Pakistan and others PLD 1988 SC 670; Muhammad Mubeen us Islam v. Federation of Pakistan, through Ministry of Defence and others PLD 2006 SC 602; Collector of Customs, Lahore v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Lahore Improvement Trust, Lahore through its Chairman v. The Custodian Evacuee Property, West Pakistan, Lahore and 4 others PLD 1971 SC 811 and Federation of Pakistan through Secretary, Ministry of Finance and others v. Haji Muhammad Sadiq and others 2007 PTD 67 ref.

(c) Interpretation of statutes---

--Framing of rules---Rule making power conferred by a statute, is subordinate to the substantial provision of law---Principle---Rules can be made and framed incidental to the substantive provision of law and can be made to deal with the details, following the present statute but the fundamental intent of the Act cannot be changed---Rules cannot enlarge the scope of statutory provision.

(d) Taxation---

----Tax can be levied under the authority of law and mere convenience of tax collector in recovering tax liability, is no ground to deviate from substantive provision of law.

Ali Akbar Bhindar, Mian Mahmood Rashid, Muhammad Shahzad Shaukat, Mian Ashiq Hussain and Azhar Mahmood for Petitioners.

Izhar ul Haq Sheikh, Ahmer Bilal Soofi, Shahid Jamil Khan and Ms. Kaousar Parveen for the Revenue.

Akhtar Ali and Shahnasha Shomail Piracha for Steel Melters Association.

Khurshid Alam Ramay for Lessco.

Dates of hearing: 25th to 28th September, 1st, 2nd, 8th, 11th, 18th, 19th, 22nd, 25th, 26th, 29th to 31st October, 19th at 2001, and 20th November, 2007.

2008 P T D 313

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

J.D. W. SUGAR MILLS LTD. through Executive Director, Finance---Petitioner

Versus

GOVERNMENT OF PAKISTAN through Secretary Finance and 9 others---Respondents

S.T.R. No. 132 of 2007, decided on 17th January, 2007.

Sales Tax Act (VII of 1990)---

----Ss.46, 47 & 48---Appeal to High Court---Maintainability---Recovery notice---Appellate Tribunal had found that appeal against recovery notice was not maintainable---Said order of the Tribunal had been challenged in appeal before the High Court---Scope---Tribunal had rightly found that neither appeal before the Tribunal against recovery notice was competent nor the order of the Tribunal rejecting appeal was further assailable before the High Court under S.47 of Sales Tax Act, 1990---After recording of the order-in-original, a demand stood created against assessee and issuance of a notice of recovery wascertainly in continuation of the order-in-original---There being an order-in-original, the recovery notice was mere a step in furtherance thereof, which was not open to challenge before the Tribunal---Order of the Tribunal regarding non-maintainability of appeal against recovery notice, was approved and since no question of law could be said to have arisen out of the order to be considered by the High Court under S.47 of Sales Tax Act, 1990, appeal was dismissed by the High Court.

Ijaz Ahmed Awan for Petitioner.

Izharul Haq Sheikh for Revenue.

2008 P T D 337

[Lahore High Court]

Before Kh. Farooq Saeed, J

Messrs GUL INDUSTRIAL CONCERN through Managing Director

Versus

COLLECTOR OF CUSTOM'S COLLECTORATE, AT CUSTOM'S CUSTOMS HOUSE LAHORE and another

Writ Petition No.12009 of 2007, heard on 10th January, 2008.

Customs Act (IV of 1969)---

----S.25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of imported goods---Petitioner imported goods and sought its clearance through G.D.---Department on the basis of Customs computerized data assessed and released the consignment by determining the transaction value under S.25(5) of Customs Act, 1969 after payment of adjudged customs duty and other taxes---Subsequently Directorate of Customs Valuation and P.C.A. vide its letter in question with respect to suo motu post importation check findings referred the matter for assessment purposes---Validity---Letter referred by the petitioner was only a communication of an information from Directorate of Valuation and P.C.A. addressed to Collector of Customs which spoke of a post importation check carried out by Directorate---That check was with regard to under-invoicing in, the import of filters on the basis of declared value in the original invoice and the evidential invoice---Such was the stage of initial inquiry by the Department---Letter in question was an internal communication and same had neither been sent to the petitioner nor was addressed to it---Filing of constitutional petition on the basis of such a letter was not correct---Constitutional petition, in circumstances was premature and there was no order in the field causing any prejudice to the petitioner---Constitutional petition being premature was dismissed.

Mian Abid Ahmad for Appellant.

Rana Abdul Hamid Addl. A.-G. for Respondent.

Date of hearing: 10th January, 2008.

2008 P T D 362

[Lahore High Court]

Before Kh. Farooq Saeed, J

Messrs ALM TRADERS through Manager

Versus

COLLECTOR OF CUSTOMS, COLLECTORATE and another

Writ Petition No. 11998 of 2007, heard on 10th January, 2008.

Customs Act (IV of 1969)---

----Ss.18, 25, 27 & 32---Constitution of Pakistan (1973), Art.199---Constitutional petition---Making untrue statement with regard to imported goods---Petitioner/importer challenged the contravention report by the Customs Appraiser---Petitioner who filed its goods declaration vide G.D., had claimed that he had imported old and used computer system, parts and accessories, its value was declared and was offered for fist examination under first appraisement---Petitioner also offered payment of duty under Ss.18 & 27 of Customs Act, 1969---Department, however, ignored its request and prepared a contravention report against said G.D.---Validity---Department had directly initiated proceedings which should have been started at a later stage after determination of criminal intent on the part of the petitioner Provisions of S.32 of Customs Act, 1969 would come into operation when the circumstances would establish that importer was intentionally concealing facts of its import . and was not bringing on record itemized details for proper appraisement---In the present case, an offer was made by the petitioner being that it unaware of the complete details, was willing for proper appraisement of the goods and was also ready to pay taxes---Said offer had been treated as an act of concealing the value of the goods---Petitioner having requested for normal appraisement in normal circum­stances, which had been treated as an attempt to defraud the Department, same required indulgence of the High Court---Constitutional petition was allowed in the manner that contravention-report against G.D., was set aside and Customs Authorities were directed to appraise the value under S.25 of the Customs Act, 1969.

Mian Abid Ahmad for Appellant.

Rana Abdul Hamid, Addl. A.-G. for Respondents.

Date of hearing: 10th January, 2008.

2008 P T D 394

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, J

BROTHERS SUGAR MILLS LTD

Versus

FEDERATION OF PAKISTAN and others

C.A. No. 333 of 2001, decided on 21st September, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 2(46) & 47---Reference to High Court---Retrospective benefit of fixed value of locally produced sugar---Notification in question had conferred beneficial rights on assessee for the past period---Said notification had expressly conferred on appellants/assessees the retrospective benefit of fixed value of locally produced sugar---Such retrospective conferment of benefit, had created vested rights in the appellants, which were rightly acknowledged and affirmed by the Court.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 ref.

Ijaz Ahmad Awan for Petitioner.

Sh. Izhar ul Haq for Respondents.

2008 P T D 509

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs CHENAB LIMITED through Director

Versus

COLLECTOR OF SALES TAX, FAISALABAD and another

Writ Petition No.198 of 2008, heard on 24th January, 2008.

Sales Tax Act (VII of 1990)---

----Ss.45-A, 66 & 67---Constitution of Pakistan (1973), Art.199--Constitutional petition---Withholding of refund money---Petitioner was released refund under Refund Rules, 2002, but part of claim of petitioner/assessee was withheld by Authorities saying that it was due to the difference between the declared weight of goods exported and the actual weight---Matter was referred to C.B.R. which confirmed the refund claim of petitioner, but despite that A.C. (Refund) issued a show-cause notice to petitioner saying that refund claim of petitioner was not admissible---Petitioner filed appeal against said order, which was accepted by Collector (Appeals) and impugned order was set aside---Order passed in appeal had attained finality as no further appeal was filed against the same; but despite that Authorities denied claim of petitioner and again issued notice to petitioner---Matter in issue had been decided by the Collector (Appeals) in clear and unequivocal terms which had been confirmed by C.B.R. with a clear instruction that reference by the Collectorate was unwarranted and the order in appeal having attained finality, there was no ground for delay in implementation of the refund request of the petitioner---High Court directed that refund be issued to the petitioner' after looking into the actual facts with regard to calculation of the amount of refund.

PTCL 2007 CL 498 ref.

Sultan Ahmad Tanveer for Petitioner.

Muhammad Nawaz Waseer for Respondent.

Date of hearing: 24th January, 2008.

2008 P T D 578

[Lahore High Court]

Before Fazal-e-Miran Chauhan and Khawaja Farooq Saeed, JJ

Messrs HANIF STRAW BOARD FACTORY through Proprietor

Versus

ADDITIONAL COLLECTOR (ADJUDICATION), CUSTOMS, CENTRAL EXCISE AND SALES TAX, GUJRANWALA and 2 others

S.T.Rs. Nos.68 of 2006 and 13 of 2007, decided on 18th December, 2007.

Sales Tax Act (VII of 1990)---

----Ss.11, 36 & 47---Reference to High Court---Default in payment of Sales Tax---Assessee was issued show-cause notice wherein it was pointed out that it had defaulted in payment of taxes---Said show-cause notice, however, lacked bifurcation of amount for the various years---Assessee challenged the show-cause notice on the grounds that; it was time-barred; that department had further committed default by passing an order beyond prescribed limit under law; and that the Tribunal had failed to appreciate that the amount short paid belonged to other assessee, who had another unit in the premises and was willing to pay the same---Claims of assessee were ignored and amount was considered as defaulted and embargo in terms of stoppage of clearance of goods from business premises was placed---Claim of assessee continued to be the same namely that apparent direction in the show-cause notice for earlier two years was time-barred besides notice was late by four years---Since the amount was not bifurcated even at the subsequent stage, Additional Collector's action to correct the illegality was not proper---Original show-cause notice having remained unlawful, no superstructure could be built on a notice which was illegal and void on the face of it---Department having made the order beyond a period of 45 days prescribed by law, the entire proceedings had become time-barred, which had to be set aside---Illegalities were so apparent that one could not agree with the counsel for department with respect to the status of show-cause notice---Decision being time-barred was set aside and reference application was disposed of accordingly.

Waqar Azim for Appellant.

Afzaal Ahmad Hashmi for Respondent.

Date of hearing: 18th December, 2007.

2008 P T D 773

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX, ISLAMABAD

Versus

FAYYAZ AHMAD

Tax References Nos.87, 39, 70, 71, 72, 84 and 85 of 2006, heard on 11th March, 2008.

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

----S.122(4-A) [as inserted by Finance Act (I of 2003)] & (5-A)---General Clauses Act (X of 1897), S.6---Income Tax Ordinance (XXXI of 1979), Ss.65 & 66-A-7-Assessment finalized under S.65, of Income Tax Ordinance, 1979---Reopening of such assessment after promulgation of Income Tax Ordinance, 2001---Limitation---New legislation could extend a limitation, which had already expired prior to operation of new law---Where limitation in respect of matter under earlier law had not expired on date of operation of new law, such matter would be governed by S.6 of General Clauses Act, 1897---Limitation of five years provided under S.65 of Income Tax Ordinance, 1979 would remain unchanged while applying thereto provision of S.122 of Income Tax Ordinance, 2001---Provision of S.122 of Income Tax Ordinance, 2001 did not speak of limitation provided in S.66-A of Income Tax Ordinance, 1979---Provision of S.122 of Income Tax Ordinance, 2001 for being not retrospective in operation would not apply to assessment years of assessee assessed under Income Tax Ordinance, 1979 for being closed and finalized transactions---Principles.

Messrs Kashmir Edible Oil v. Federation of Pakistan 2005 PTD 1621 and Fauji Oil Terminal v. Commissioner of Income Tax 2006 PTD 734 rel.

(b) General Clause Act (X of 1897)---

----S.6---Expiry of a limitation provided under repealed law prior to operation of new law---Effect stated.

No legislation can extend a limitation, which has already expired prior to the operation of the new law, while if, on date of operation of new legislation, the limitation has not expired in respect of earlier laws, the matter would be governed by S.6 of General Clauses Act, 1897. Thus, there is no need for further emphasis through another amendment.

Muhammad Arshad Majeed for Appellant.

Date of hearing: 11th March, 2008.

2008 P T D 823

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX, ZONE-C, LAHORE

Versus

MUHAMMAD ALAMGIR

W.T.As. Nos.175 to 177 of 2005, 5 to 11, 25, 26, 79 to 84, 152 to 162, 164 to 169, 189, 190, 398, 411 to 414, 480 to 483, 803, 804 and 899 to 902 of 2006, decided on 14th February, 2008.

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

----S.45-A---Protection against mistakes---Scope---If during proceedings, proper jurisdiction has been acquired and notice has also been properly served for obtaining reply of assessee but the same is not on prescribed pro forma provided in rules etc. or it has, by omission, mentioned some wrong provision while the text gives correct picture, it would not vitiate an assessment on the face of it---Smaller mistakes which might be made even after proper exercise of jurisdiction, are protected under S.45-A of Wealth Tax Act, 1963---Where there is question of non-observance of mandatory provision or notice was for the purpose of acquiring jurisdiction, the provision of S.45-A of Wealth Tax Act, 1963, can never be applied.

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

----Ss.3 [as amended by Wealth Tax (Amendment) Ordinance (XXI of 2000)], 16, (5), 45-A & 27---Assessing Officer---Wrong designation---Contention of authorities was that tax was charged by "Taxation Officer" who although was not mentioned in S.3 of Wealth Tax Act, 1963 to charge wealth tax but had jurisdiction to assess and no prejudice was caused to assessee---Validity---Held, there was no need of appointing fresh authorities, up to 30-6-2001, as the whole law as well as the officers appointed earlier under Wealth Tax Act, 1963, continued to enjoy their appointment and jurisdiction made and assigned earlier, change during such period, if any, was administrative---In such situation if Wealth Tax Officer was made "Taxation Officer" in addition to his earlier assignments, mere use of one of the two or both of the connotations, would not vitiate assessment, and provision of S.45-A of Wealth Tax Act, 1963, was fully applicable---Mere mentioning of another connotation in addition to Wealth Tax Officer or Deputy Commissioner of Wealth Tax or appropriate authority having mentioned wrong nomenclature though otherwise had full jurisdiction to assess the wealth of an assessee, did not cause any substantial harm to the assessee---Such was not a case of assessment under one enactment and demand under other law---Such was only a clerical error which was not of substantial nature---Assessments having been framed by Wealth Tax Officer who had powers to decide cases of income tax as well as a Taxation Officer under Income Tax Ordinance, 1979, or in some cases Income Tax. Ordinance, 2001, there was no substantial prejudice caused to the tax payers---Assessing Officer under Wealth Tax Act, 1963, therefore, had full jurisdiction and had rightly made the assessment after acquiring proper jurisdiction---Appeals having been decided by Income Tax Appellate Tribunal on legal issue ignoring factual controversy, High Court remanded the cases to Assessing Officer and directed the Assessing Officer to proceed in cases after issuing fresh notices to the assessees---Question was answered in negative.

Mrs. Tehmina Doltana v. Hafiz Naeem-ud-Din 1997 PTD 821 and 1999 PTD (Trib.) 4026 ref.

Muhammad Ilyas Khan, Khadim Hussain Zahid, Sajjad Ali Jafri, Shahid Jamil Khan, Jan Muhammad Chaudhary, Ahmad Rauf and Amjad Hussain Malik for Appellant.

Shahbaz Butt, Dr. Ilyas Zafar, Siraj-ud-Din Khalid, Iqbal Hashmi and Ch. Anwar-ul-Haq for Respondent.

Date of hearing: 29th January, 2008.

2008 P T D 838

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

Messrs AL-RAI FLOUR MILLS, LAHORE

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE-I, LAHORE

W.T.As. Nos.38, 144 of 2003, 9 to 12, 62 to 66 of 2004, 10, 28, 33, 34, 35, 37, 38 and 161 to 167 of 2005, decided on 14th February, 2008.

(a) Interpretation of statutes---

----Fiscal statutes---Explanation to a section is always retrospective so far as it explains the original provision.

(b) Interpretation of statutes---

----Fiscal statutes---Charging provisions---Two interpretations---Scope---Method of interpretation of charging provisions in fiscal statute is that where two interpretations are equally possible, then issue is to be resolved in favour of tax payer and not in favour of the revenue.

(c) Interpretation of statutes---

----Fiscal statutes---Tax charging---Principle---Tax cannot be charged by implication and there is no equity about tax---In taxing statutes one has to look at what is clearly said---One can only look fairly at the language used and there is no room for intendment.

Cape Brandy Syndicate v. Inland Revenue Commissioners 1921 1 KB 69; 1972 1985 ITR 121; Atlas Cycle Industry Limited v. State of Haryana and others (1974) 97 ITR 246; Commissioner of Income Tax Karnatka-I v. Academy of General Education Manipal (1984) 150 ITR page 135 and Commissioner of Income Tax, West Bengal-VII Calcutta v. Doon Foundation (1985) 154 ITR page 208 rel.

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

----S.2(1)(5)(ii)---Terms "held" and "for the purpose of"---Meaning---Term "held" pre-supposes perpetual right to possess and subsequent language i.e. "for the purpose of" means the basic object for the said holding---Subsequent words are ejusdem generis to the term "held" and hence are to be read as a whole---Term "held for the purpose of" conveys that the object should be the one which is of perpetual and regular nature---Some change in working or if it is let out for some period, would not affect the main object.

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

----Ss. 2(1)(5)(ii), 3 & 27---Term "held for the purpose of"---Applicability---Assessee was aggrieved of assessment of his manufacturing unit which was let out against rent/lease and the authorities held that unit for the purpose of letting out, therefore, tax was accordingly charged---Validity---Asset of the assessee did not bear the purpose of letting out---If, for some span of time the asset was rented out, it would not remain within the charge created by definition of "asset" under S.2(1)(5)(ii) of Wealth Tax Act, 1963, and explanation provided therein---In such a case Court had to give benefit of doubt to assessee and the case could have been decided in favour of tax payer---Term "held for the purpose of" could not be extended to apply where for some time the property had been let out while the original purpose remained self use---Letting out was not the actual use but the purpose which was subject to charge under the provision---High Court decided that temporary let out of property was not subject to charge under wealth tax---Reference application was decided in favour of assessee.

B. P Biscuit Factory Ltd; Karachi v. Wealth Tax Officer, II Circle, Karachi and another 1981 PTD 217; Ibrahim Brothers Limited's case PLD 1985 Kar. 407 and Messrs Homes Limited v. Commissioner of Income Tax Zone V, Karachi 1989 PTD 1044 ref.

B.P. Biscuit Factory's case 1996 SCMR 1470 fol.

Muhammad Ilyas Khan, Shahid Jamil Khan, Khadim Hussain Zahid, Miss Yasmin Nighat and Shahbaz Butt (in W.T.As. Nos.37 and 38 of 2005 only) for Appellant.

Shahbaz Butt, Sardar Ahmad Jamal Sukhera for Respondent.

Date of hearing: 16th January, 2008.

2008 P T D 877

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

Messrs RIAZ BOTTLERS (PVT.) LIMITED, LAHORE

Versus

COMMISSIONER OF INCOME TAX, COMPANIES ZONE-I, LAHORE

P.T.Rs. Nos.56 to.59 of 2005 and C.T.R. No.3 of 2007, decided on 14th February, 2008.

(a) Income-tax---

----Res judicata---Principle---Applicability---Principle of res judicata does not apply to income tax proceedings---Each year is independent and even some times facts in the same year may be helpful in supporting one issue but may not be equally helpful on some other issue.

The Commissioner of Sales Tax, Central Zone `B', Karachi v. Messrs Captain Chemical Industries Ltd. 1991 PTD 678 rel.

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

----Ss.62 & 136(2)---Direct reference-Question of law---Assessee assailed notice under S.62 of Income Tax Ordinance, 1979---Assessing Officer in his order had thoroughly discussed issue of market sample and discount distributors, margin, low fill allowance---Claims of incentives, payment of wages of temporary workers paid through cash, salary, wages, selling and advertisement, dispensing units, purchase of deep freezer etc. etc. were indicators of the quality of accounts of assessee---Income Tax Appellate Tribunal concluded that there was a proper notice under S.62 of Income Tax Ordinance, 1979, and that adds back had rightly been made---Income Tax Appellate Tribunal was of the view that questions proposed by 'assessee were mostly not referable---Validity---Income Tax Appellate Tribunal had confirmed treatment after due consideration of facts of the case---Acceptance of trading account of assessee did not create a good impression in favour of tax payer's and credibility of his accounts---As the findings of fact at the subordinate stage had not satisfactorily been controverted, there was no question of emergence of a question of law from the judgment of Income Tax Appellate Tribunal---Notice under S.62 of Income Tax Ordinance, 1979, was issued and the same was particular in respect of additions---Some misapplication of mind while making adds back existed but the mistakes were a matter of rectification and did not give rise to a question of law---Questions proposed by assessee did not arise out of the order of Income Tax Appellate Tribunal hence dismissed---Question referred by Income Tax Appellate Tribunal was answered in affirmative---Reference was disposed of accordingly.

Mughal Technical Industries (Pvt.) Ltd. v. C.I.T., Central Zone, Lah. 1996 PTD 263; Messrs Shahroom International (Pvt.) Ltd. Lahore v. Deputy Commissioner of Income Tax Circle-5, Companies Zone-I, Lah. and 2 others 2006 PTD 2654 and Mrs. Rani v. Commissioner of Wealth Tax, Lahore 1993 PTD 206 ref.

Ch. Anwar ul Haq for Appellant.

Sajjad Ali Jaffari for Respondent.

Date of hearing: 14th January, 2008.

2008 P T D 894

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COLLECTOR OF CENTRAL EXCISE AND SALES TAX, LAHORE

Versus

Messrs ABDULLAH SUGAR MILLS LTD.

S.T. Appeal No.189 of 2002, decided on 14th December, 2006.

Sales Tax Act (VII of 1990)---

---Ss.7, 11 & 47---Reference to High Court---Determination of tax liability---Issues raised in the appeals, were recently considered by a Division Bench of the High Court---High Court on consideration of different S.R.Os. issued by the Central Board of Revenue fixing price of sugar, had concluded that notification had expressly conferred beneficial rights on assessee for a past period and the only question involved was whether the department was competent to do so---Such question was examined and answered by the Supreme Court in the case 1992 SCMR 1632 wherein it was observed that nothing being to prevent the Revenue from conferring an advantage or benefit retrospectively on its assessee, a beneficial notification could lawfully have a retrospective effect---Appeal filed by registered person/the taxpayer was allowed and dismissed the departmental appeal.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 ref.

Ijaz Ahmad Awan for Appellant.

A. Karim Malik for Respondent.

Date of hearing: 14th December, 2006.

2008 P T D 905

[Lahore High Court]

Before Kh. Farooq Saeed, J

FASTLINE (PVT.) LTD.

Versus

COLLECTOR CUSTOMS and others

Writ Petition No.909 of 2008, decided on 6th February, 2008.

Customs Act (IV of 1969)---

----Ss.25-D & 81---Constitution of Pakistan (1973), Art.199---Constitutional jurisdiction---Scope---Assessment---Plea of petitioner/ assessee was that since assessment was without confrontation, and no appeal lay against provisional order under S.81 of the Customs Act, 1969, constitutional petition should be admitted---Counsel for authorities, on the other hand, had argued that in the presence of S.25-D of Customs Act, 1969, constitutional petition could not be entertained by the High Court---Argument of authorities that any enactment could deprive a person of his right of invoking constitutional jurisdiction of High Court, was misconceived---Constitutional jurisdiction of the High Court in terms of Art.199 of the Constitution, could not be withdrawn by making an amendment in the Customs Act, 1969---Since no notice had been served on the assessee before assessment, Assistant Collector Customs, was directed to reassess the same within two weeks of the service of present order---Assessing Officer was directed to confront the base of his estimate to assessee before deciding customs duty chargeable on the product.

Collector of Customs (Valuation) and another v. Karachi Bulk Storage and Terminal Ltd. 2007 SCMR 1357 and Collector of Customs Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International, Faisalabad 2007 PTD 2623 ref.

Jawad Hassan and Syed Imran Ali for Petitioner.

Khawar Ikram Bhatti and Izhar-ul-Haq, Legal Advisors for Respondents.

2008 P T D 925

[Lahore High Court]

Before Syed Najam-ul-Hassan Kazmi, J

FAISALABAD TEXTILE CORPORATION (PVT.) LTD. through Chief Executive

Versus

INSPECTING ADDITIONAL COMMISSIONER OF INCOME TAX, WEALTH TAX COMPANIES RANGE-IV, FAISALABAD and 2 others

Writ Petition No.1927 of 1999, heard on 2nd April, 1999.

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

----Ss. 63, 80-CC, 134 & 156---Constitution of Pakistan (1973), Art.199---Constitutional petition---Export income assessed under S.63 of Income Tax Ordinance, 1979 instead of S.80-CC thereof---Dismissal of appeals by Appellate Authority and Tribunal filed against order-in­-original---Dismissal of rectification application by Tribunal for non-filing of export documents by assessee to claim assessment under S.80-CC of Income "Tax Ordinance, 1979---Validity---Plea raised and argued by assessee before Tribunal was that export income was covered by S.80 of Income Tax Ordinance, 1979, which could not be assessed under S.63 thereof---Order-in-original indicated that photocopies of relevant export documents were produced before Assessing Officer---Assessee had raised such plea, but Tribunal, while rejecting appeal, had not attended to or decided same---Order of Tribunal in appeal did not indicate that such plea was turned down on alleged plea of non-filing of export record by assessee---Tribunal, while deciding rectification application, had not considered such main grievance of assessee---Assessee did point out an error on the face of record, but Tribunal had proceeded to dismiss rectification application mechanically---Disposal of rectification application in such manner could not be treated to be lawful decision thereof---High Court set aside impugned order and directed 'Tribunal to decide rectification application after considering such plea raised by assessee.

(b) Administration of justice---

----No person can be given chance to derive benefit from his own mis­deeds.

Shahbaz Butt for Petitioner.

Mian Subah Sadiq Klasson for Respondent.

Date of hearing: 2nd April, 1999.

2008 P T D 940

[Lahore High Court]

Before Kh. Farooq Saeed, J

INDUS JUTE MILLS (PVT.) LTD. through Chief Executive

Versus

COMMISSIONER OF INCOME TAX, ENFORCEMENT DIVISION-I, LAHORE

Writ Petition No.334 of 2008, decided on 4th February, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss.153(6) & 159---Constitution of Pakistan (1973), Art.199---Constitutional petition---Refusal to grant exemption certificate---Petitioner which was a manufacturing and export unit, had challenged in constitutional petition, Authorities' action to refuse to grant exemption certificate---Petitioner/assessee had contended that it had suffered a loss of Rs.15,24,55,563, upto the tax year 2006 and that loss was so huge that assessee was not likely to be charged tax for relevant year or for the coming many years---Validity---High Court being conscious of the fact that impugned order of Commissioner through which exemption certificate had been refused was appealable, but since said remedy of appeal was not efficacious and expeditious and the department's attitude of refusal ignoring all the facts, being against the accrued rights to the petitioner, it was that exemption certificate be issued---Such direction, however, was only for one time exemption certificate for export of the consignment which was pending; for subsequent proceedings, Department would verify the facts and after satisfaction would release exemption certificate as per law and rules.

Ch. Anwar-ul-Haq for Petitioner.

Shahid Jamil for Respondent.

2008 P T D 965

[Lahore High Court]

Before Sayed Zahid Hussain, C.J. and Ali Akbar Qureshi, JJ

COMMISSIONER OF INCOME TAX, FAISALABAD ZONE, FAISALABAD and another

Versus

AKHLAQ CLOTH HOUSE, FAISALABAD and another

I.C.A. No.296 of 2004 in Writ Petition No.17565 of 2003, heard on 20th February, 2008.

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

----S. 32---Establishment of Office of Wafaqi Mohtasib (Ombudsman) Order (I of 1983), Art.32---Law Reforms Ordinance (XII of 1972), S.3---Intera-Court Appeal---Personal hearing by the President---Scope---Representation against order of Federal Tax Ombudsman were accepted by the President---High Court set aside the order passed on representation on the ground that the same was decided and accepted by the President without affording opportunity of personal hearing to parties concerned---Validity---Where person/party concerned had notice/opportunity of filing comments/reply to the representation, the decision of the President could not be annulled simply for the reason that personal/oral hearing was not afforded---Where, however, the person/party concerned had no notice/opportunity of filing comments or reply and decision was made without affording such opportunity, the representation needed to be reconsidered and decided after notice and affording opportunity of filing reply/comments to the same---Respondents having had the opportunity of filing reply to the representation which was decided through a speaking order, no interference was warranted with the order in exercise of Constitutional jurisdiction---Division Bench of High Court set aside the order passed by Single Judge of High Court---Intra-court appeal was allowed in circumstances.

Federation of Pakistan through Secretary, Establishment Division Government of Pakistan, Islamabad v. Muhammad Tariq Pirzada and 2 others 1999 SCMR 2744; Federation of Pakistan through Secretary, Establishment Division, Government of Pakistan, Islamabad v. Muhammad Tariq Pirzada and others 1999 SCMR 2189; H.W.R.WADE & C.F.FORSYTH in Administrative Law at page 537 Seventh Edition and University of Dacca through its Vice-Chancellor and another v. Zakir Ahmed PLD 1965 SC 90 ref.

Federation of Pakistan through Secretary Education, Islamabad v. Professor Dr. Anwar and 2 others 2006 SCMR 382 rel.

Qamar Zaman Qureshi, Deputy Attorney-General for Pakistan for Appellants.

Sirajuddin Khalid Khan for Respondent No.1.

Date of hearing: 20th February, 2008.

2008 P T D 981

[Lahore High Court]

Before Syed Hamid Ali Shah and S. Ali Hassan Rizvi, JJ

Messrs JOYLA SADAT COTTON INDUSTRIES

Versus

COLLECTOR OF CUSTOMS

S.T.As. Nos.22 and 23 of 2006, heard on 1st April, 2008.

Sales Tax Act (VII of 1990)---

----Ss. 36 & 47---Refund of Sales Tax---Recovery of refunded Sales Tax---Appeal to High Court---On application of assessee, Sales Tax refund was sanctioned in his favour vide original order dated 5-7-2001---Assistant' Collector made a contravention case against the assessee and initiated proceedings after issuing show-cause notice to the assessee---Said show-cause notice was issued on 7-7-2004-Action against assessee, in circumstances, was initiated after lapse of three years and two days---Provisions of S.36(2) of Sales Tax Act, 1990, provided for a show-cause notice to be served within three years of relevant date in cases where the tax had erroneously been refunded---Present matter involved the controversy, which was governed under provisions of S.36(2) of Sales Tax Act, 1990---Such action had to be taken within the period prescribed by law---When a period was provided by special statute, then any proceedings or actions taken under the provisions of special statute, had to be taken within the stipulated period---Reopening the case of assessee after the expiry of prescribed period of limitation was not justified in law.

Commissioner of Income Tax, Companies, Zone-IV, Karachi v. Hakim Ali Zardari 2006 PTD 271; Commissioner of Income Tax, Central Zone, Lahore v. Capt. (Retd.) Gohar Ayub Khan 1995 PTD 1074; Commissioner of Income Tax v. National Refinery Ltd. 2003 PTD 2020; Chanar Sugar Mills Ltd. and others v. Collector (Sales Tax) and others 2005 PTD 2139 and Assistant Collector of Customs AFU, Airport, Lahore v. Messrs Tripple-M (Pvt.) Ltd. 'through Managing Director and 4 others 2006 PTD 769 ref.

Muhammad Anwar for Appellant.

Syed Khalid Javed Bukhari for Respondent.

Muhammad Farooq Custom Inspector.

Date of hearing: 1st April, 2008.

2008 PTD 1136

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX

Versus

Dr. KHALID JAVED CHAUDHARY

P.T.R. No.205 of 2007, decided on 1st April, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S.122--- Income Tax Ordinance (XXXI of 1979), Ss. 12(18) & 59(A)---Gift---Book---Assessment was finalized under the provisions of S.59(A) of Income Tax Ordinance, 1979--Assessing officer by invoking provisions of S. 122 of Income Tax Ordinance, 2001 amended the assessment and imposed tax on account of gift received by assessee---Appeal filed by assessee was accepted on the ground that the amount shown in books was not in shape of sum claimed or shown as loan and was just a book entry--- Income Tax Appellate Tribunal maintained the decision of Appellate Authority---Validity---When assessee had claimed the amount to be as a transfer entry and had shown it accordingly, no one else including Revenue Department had any discretion to treat it otherwise---Provisions of S.122 of Income Tax Ordinance, 2001 were inapplicable on assessments concluded under Income Tax Ordinance, 1979 (since repealed)--- Income Tax Appellate Tribunal had also taken due care of illegal exercise of jurisdiction under S. 122 of Income Tax Ordinance, 2001 which had also attained finality against the department Reference was dismissed in circumstances.

Messrs Micropak (Pvt.) Ltd., Lahore v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1180; Colibrative Heavy Industries (Pvt.) Ltd., Lahore v. C.I.T./W.T., Coys Zone-II Lahore 2005 PTD 2525 and Kashmir Edible Oil Ltd: v. Federation of Pakistan and others 2005 PTD 1621 ref.

Khadim Hussain Zahid for Appellant.

2008 P T D 1203

[Lahore High Court]

Before Syed Hamid Ali Shah and Malik Saeed Ejaz, JJ

COLLECTOR OF CUSTOMS, CENTRAL EXCISE AND SALES TAX, MULTAN

Versus

Messrs DATA STEEL PIPE INDUSTRIES (PVT.) LTD., RAHIM YAR KHAN and another

Sales Tax Act Nos.10 to 16, 18, 19 and 84 of 2006, decided on 7th April, 2008.

Sales Tax Act (VII of 1996)---

----S. 47---Limitation Act, (IX of 1908), Ss.29(2) & 5---Appeal to High Court---Limitation---Appeal against judgment of Appellate Authority which was to be filed within 60 days of service of notice of order passed by Appellate Tribunal under S.46 of Sales Tax Act, 1990, was filed beyond said period---No departure from the express provision of Sales Tax Act, 1990 providing limitation for filing appeal, was permissible--Period of limitation prescribed by said special statute could not be condoned as section 29(2) of Limitation Act, 1908 envisaged that provisions of S.5 of the Limitation Act, 1908 were not applicable to special statutes---Appeal filed beyond prescribed period of limitation could not be entertained and proposed question could not be answered-.--When law required something to be done in a particular manner, then same must be done in that manner or may not be done at all.

Ahmad Raza for Appellant.

Mudassar Shuja ud Din for Respondent.

2008 P T D 1227

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

COMMISSIONER OF INCOME/WEALTH TAX

Versus

Messrs RAVI PLASTIC INDUSTRIES (PVT.) LTD.

I.T.As. Nos. 49, 268, 806 of 2000, 104, 105,242, 246,294, 295, 296, 577, 601, 679 of 1999 and P.T.R. No.82 of 2002, decided on 10th April, 2008.

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

----Ss.50 (4), 52 & 52-A---Deduction or payment of tax---Scope---Every person who is responsible for making a payment to another person on supply of goods or for services rendered, has to deduct tax from such payment at the rate specified in the First Schedule and deposit the same in government treasury---Parameter for such deduction being that there must be a relationship of payer and recipient among two persons; and that the relationship should be on account of supply of goods or for services rendered to, or on account of execution of a contract.

(b) Interpretation of statutes---

----Fiscal statute---Only the language of law, in its natural meaning is applicable.

"Cape Brandy Syndicate v. Inland Revenue Commissioner" 1921 K.B. 69 rel.

(c) Interpretation of statutes---

----Fiscal statute---In case of doubt, the controversy is to be resolved in favour of tax payer and not the revenue.

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

----Ss.50 (4), 52 & 136---Appeal---Purchases---Proof---Deduction at source---Terms "sale" and "supply"---Assessing officer found assessee liable for tax under S.52 of Income Tax Ordinance, 1979, on the ground that he had not fulfilled requirements of S.50 (4) of the Income Tax Ordinance, 1979 regarding deduction of tax at source on account. of purchases made by him during the course of business---Such order of assessing officer was set aside by Income Tax Appellate Tribunal---Validity---Provision of S.52 of Income Tax Ordinance, 1979, was not a charging provision and it had nothing to do with income or profit of a person, which was subject to charge under Income Tax Ordinance, 1979---Withholding agent was neither a beneficiary in any form in such exercise nor had been allowed incentive for performance of such duty on behalf of the tax functionaries---`Sale', in Income Tax law, was of a wider connotation and would include a window purchase and sale of each and every item in daily consumption and of use---Goods purchased by persons for daily consumption and used for household, cooking or otherwise were part of term "sale"---Such purchase could not be called as supply---Such was an ordinary transaction of sale or purchase of goods, which did not involve any step of supply of goods in any form whatsoever---Supply was an action of perpetual and regular relationship, in which an item was supplied on demand, which was with specification, description and in most of the cases quantified besides it involved relationship of demand and supply---High Court declined to interfere with the decision of Income Tax Appellate Tribunal---Appeal was dismissed in circumstances.

(e) Interpretation of statutes---

----Fiscal statute---Explanation given in a provision of statute---Scope---If any explanation increases application of the provision, the same to the extent of enhancement becomes redundant.

Shahid Jamil Khan for Appellant.

Siraj ud Din Khalid, Shahbaz Butt, Ijaz Ahmad Awan and M.M. Akram for Respondent.

Date of hearing: 14th February, 2008.

2008 P T D 1239

[Lahore High Court]

Before Syed Hamid Ali Shah and S. Ali Hassan Rizvi, JJ

Ch. MAQBOOL AHMED

Versus

CUSTOMS, FEDERAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, and 3 others

Customs Reference Applications Nos. 4 and 7 of 2007, decided on 1st April, 2008.

Customs Act (IV of 1969)---

----S.196---Notifications S.R.O. No.1374(I)/98, dated 17-12-1998 & S.R.O. No.179(I)/2006, dated 2-3-2006---Reference to High Court---Smuggled vehicle---Non-tampered chassis---Mixed question of fact and law---Effect--Vehicles in question were confiscated on the ground that those were smuggled vehicles--Plea raised by applicants was that chassis of the vehicles were not tampered with, therefore, instead of confiscation, vehicles should have been released after payment of duties and taxes---Validity---Questions involved were mixed questions of fact and law, which could not be determined in proceedings under S.196 of Customs Act, 1969---Applicants had been plying the vehicles illegally and had manoeuvred to change their chassis number---Applicants had either done the same by themselves or by the person from whom they purchased the vehicles; in the former case applicants were guilty of tax fraud while in the latter case they were guilty of negligence as they did not take due care at the time of purchase of vehicles---Option of fine in lieu of confiscation was not available to applicants, therefore, the same could not be extended---Vehicles which were smuggled with tampered chassis frame were not only source of loss to national exchequer but were security threat as well---High Court declined to validate the acts which were immoral, detrimental to security and resulted into loss to national exchequer---Reference was dismissed in circumstances.

Abu Bakar Siddique and others v. Collector of Customs, Lahore and another 2004 PTD 2187 and Messrs Imtiaz Ahmad v. Collector Customs, Peshawar 2007 PTD 789 distinguished.

Malik Muhammad Tariq Rajwana for Petitioner.

Syed Khalid Javede Bokhari, Advocate.

Ahmad Raza, for Respondent No.7.

2008 P T D 1243

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

COMMISSIONER OF INCOME/WEALTH TAX

Versus

KHURSHID AHMED

P.T.R Nos. 12 to 16 of 2004, decided on 10th April, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 50(4) & 80-C---Deduction at source---Contractual services---Categories---Tax imposed by assessing officer on assessee was set aside by Income Tax Appellate Tribunal on the ground that contractual receipts did not fall under the provision of S.80-C of Income Tax Ordinance, 1979---Validity---Three categories for deduction of tax under S.50 (4) of Income Tax Ordinance, 1979, were (a) on supply of goods, (b) services rendered or (c) execution of contract---All three categories were separate from each other and disjunction provided by law among each one of them was clear and beyond any doubt---Rendering of services had been provided exception under S.80-C of Income Tax Ordinance, 1979, even if the same were in execution of a contract---Various principles of interpretation of fiscal statute like application of law in its natural meaning and favour to taxpayer in case of doubt provided guidelines---Presumption of assessing officer against assessee was without any support of argument---All services, be that of any form, were held to be chargeable under general tax provision and not as full and final discharge---Such principle included professionals like doctors, engineers, lawyers, chartered accountants, architects, barbers, dry-cleaners, dhobi services, motor mechanics, tailoring shops etc.---High Court declined to interfere in the order passed by Income Tax Appellate Tribunal---Reference was dismissed in circumstances.

Khadim Hussain Zahid for Appellant.

Siraj-ud-Din Khalid, Shahbaz Butt, Ijaz Ahmad Awan and M.M. Akram for Respondents.

Date of hearing: 14th February, 2008.

2008 P T D 1267

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

CHISHTIA SUGAR MILLS LIMITED

Versus

APPELLATE TRIBUNAL SALES TAX, LAHORE and others

Sales Tax Appeal No.180 of 2002, decided on 13th December 2006.

Sales Tax Act (VII of 1990)---

----Ss. 3(1)(1-A), 3-B, 47 & 66---Levy of Sales Tax--Refund claim---Reference to High Court---Remand of case---Supreme Court vide its judgment, remitted the matter to concerned Collectors pending between the parties in identical situation---No serious apposition to the idea that a similar direction could be made in the present appeal existed---Two impugned orders recorded by the Tribunal in the cross appeals, were accordingly set aside and cases were remitted to the concerned Collectors of Sales Tax for disposal after providing appellants/registered persons with an opportunity of hearing in terms of judgment of Supreme Court.

Tandlianwala Sugar Mills Limited and others v. Federation of Pakistan through Secretary, Ministry of Finance, Revenue and Economic Affairs, Islamabad and others 2001 PTD 2094 ref.

Ijaz Ahmed Awan for Appellant.

A. Karim Malik for Respondents.

Date of hearing: 13th December, 2006.

2008 P T D 1276

[Lahore High Court]

Before Sayed Zahid Hussain, C J

Messrs FORTE TILES through Proprietor

Versus

NATIONAL TARIFF COMMISSION through Secretary, Islamabad and 2 others

Writ Petition No.20 of 2007, decided on 9th April, 2008.

Anti-Dumping Duties Ordinance (LXV of 2000)---

---Ss. 23, 27, 37, 49, 54, 55 & 56---Constitution of Pakistan (1973), Art.199---Constitutional petition---Imposition of anti-dumping duty---Petitioners imported the ceramics porcelain tiles and filed bill of entries prior to the notification dated 30-11-2006 whereby, provisional anti-dumping duties on dumped imports of tiles was imposed---Validity---Provisions of S.56, Anti-Dumping Duties Ordinance, 2000 provided that provisional measures and definitive anti-dumping duties could only be applied to products which entered into Pakistan for consumption on or after the date of publication of notice of affirmative preliminary or final determination in an investigation, save as provided under Ss.49, 54 & 55 of Anti-Dumping Duties Ordinance, 2000---Combined reading of Ss.49, 54 & 55 of Anti-Dumping Duties Ordinance, 2000, made it abundantly clear that products which entered into Pakistan for consumption on or before the date of publication of notice could be subjected to. duty---Disputed duty, in circumstances could not be levied/imposed on the products which entered into Pakistan before 30-11-2006, when the notification was issued---Petitioner submitted application to Authority with the request that duties upon the tiles under consideration could not be charged being imported prior to the issuance of notification dated 30-11-2006, and the Authority was illegally charging the anti-dumping duties upon the tiles--Authorities without considering the material irregularities pointed out to them by number of petitioners, issued the impugned notification---Constitutional petition was allowed holding that impugned notification issued on 30-11-2006 was not applicable upon the transactions of imports made by the petitioner.

Shafqat Mehmood Chohan for Petitioner.

Muhammad Akram Sheikh and Muhammad Kamran Shoaib for Respondents.

Mazhar Bangash with Sheraz Ahmad, Legal Officer NTC.

2008 P T D 1289

[Lahore High Court]

Before Sh. Azmat Saeed and Umar Ata Bandial, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHORE

Versus

Messrs PATTOKI SUGAR MILLS LTD.

C. A. No.343 of 2001, decided on 21st September, 2006.

Sales Tax Act (VII of 1990)---

---Ss. 2(46) & 47---S.R.O. 751(I) 2000, dated 21-10-2000---Conferring retrospective benefit of fixed value of locally produced sugar---Notification in question had expressly conferred on assessee retrospective benefit of fixed value of locally produced sugar through a lawful and valid exercise of delegated legislative power---Such retrospective conferment of a benefit had created vested rights in the assessees, which were rightly acknowledged and affirmed.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 rel.

Ijaz Ahmad Awan for Appellant.

Sh. Izhar-ul-Haq for Respondent.

2008 P T D 1297

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COLLECTOR, SALES TAX AND CENTRAL EXCISE

Versus

Messrs BROTHERS SUGAR MILLS LTD. and others

Customs Appeals Nos. 162 to 170 of 2001, decided on 7th March, 2005.

Central Excise Rules, 1944---

----R. 10(1)(2)(3)---Show-cause notice---Validity---Show-cause notices were issued to the companies asking each of them to show-cause against imposition of the central excise duty, additional duty and penalty on its sugar exports---Said show-cause notices issued to the companies were vague, unspecific and too general to fall within any of the sub-rules of R.10 of Central Excise Rules, 1944; lacked in essential ingredients and did not meet the mandatory preconditions meant for the attraction of R.10 of Central Excise Rules, 1944---Mere allegation of non-payment of the central excise duty was not an adequate reason to invoke R.10 of Central Excise Rules, 1944 for charging or imposing the central excise duty on a citizen---In absence of any specific allegation in terms of the provisions of R.10(1)(2)(3) of Central Excise Rules, 1944, show-cause notices could not be presumed to fall within the scope of a particular provision of law to attract a particular period of limitation---Impugned show-cause notices served upon the companies by the Revenue, were held illegal, without lawful authority and beyond the period of limitation by High Court in appeal.

Messrs Atlas Tyres (Pvt.) Limited, Sheikhupura v. Additional Collector (Adjudication), Collectorate of Central Excise, Lahore and another 2003 PTD 1593; Messrs Zamindara Paper & Board Mills (Pvt.) Ltd. v. Collector, Central Excise and Sales Tax 2003 PTD 1257 and Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and others 2001 SCMR 838 rel.

Aftab Hussain for Appellant.

Ijaz Ahmad Awan for Respondent.

Date of hearing: 7th March, 2005.

2008 P T D 1346

[Lahore High Court]

Before Syed Hamid Ali Shah and Malik Saeed Ejaz, JJ

COLLECTOR OF CUSTOMS, CENTRAL EXCISE AND SALES TAX, MULTAN

Versus

SAEED AHMAD and 3 others

Customs Appeal No.10 of 2004 and C.M. No.3-C of 2004, decided on 9th April, 2008.

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

----S. 196---Limitation Act (IX of 1908), S.5---Appeal---Condonation of delay---Principles---Special statute---Provisions of S.5 of Limitation Act, 1908, had no application to appeals filed under special statute, where different periods of limitation were prescribed---Application under S.5 of Limitation Act, 1908, was not maintainable---Delay was not condoned in circumstances.

Allah Ditta v. Farooq Ahmad and 3 others PLD 1979 Lah. 917; Bashir Ahmad and others v. United Bank Limited Lahore and another 2004 CLD 472; Sheikh Muhammad Kashif v. Askari Leasing Limited through Manager/Chief Executive of Branch/Recovery Officer 2004 CLD 1645; Ali Muhammad and another v. Fazal Hussain and others 1983 SCMR 1239 and Allah Dino and another v. Muhammad Shah and others 2001 SCMR 286 rel.

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

----Ss. 194(B) & 196---Appeal---Limitation---Smuggled vehicle---Vehicle in question was intercepted and seized by authorities being smuggled without payment of duties---Vehicle was ordered to be confiscated by authorities but Customs, Excise and Sales Tax Appellate Tribunal, directed to restore the vehicle back to respondent---Validity---Appeal was not filed by authorities within the prescribed period of limitation and application for condonation of delay had also been dismissed being not maintainable---High Court observed that there was no evidence that duties and taxes with regard to vehicle in question had been paid and there was no record of vehicle with registration authority---Database of imported vehicles reflected that record of vehicle in question had not been found, nor the same was available---Allowing such vehicle to ply on roads was a security threat, thus authority was at liberty to initiate a fresh action, permissible under law after collecting appropriate evidence to the effect that no duties had been paid and registration of the vehicle was fake---Appeal was dispose of accordingly.

Syed Khalid Javed Bukhari for Appellant.

Azeem ul Haq Pirzada for Respondent No.2.

Ch. Zulfiqar Ali Sindhu for other Respondents.

2008 P T D 1365

[Lahore High Court]

Before Kh. Farooq Saeed, J

F.A. CORPORATION through Proprietor

Versus

DIRECTOR GENERAL, CUSTOMS INTELLIGENCE AND INVESTIGATION and 3 others

Writ Petitions Nos.1451 to 1455 2008, heard on 16th April, 2008.

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

----Ss. 3-A, 3-B, 3-C, 3-D, 4, 6 & 3(g)---S.R.O. No. 486(I)/2007 dated 9-6-2007---Appointment of the Director-General of Intelligence and Investigation for Customs and Central Excise---Director-General Intelligence of Customs and Central Excise, by all means and by any standard was an officer of customs department so approved by law for which the specific notification, that assigned powers was S.R.O. No.486(I) of 2007, dated 9-6-2007---Strong information with regard to mis-declaration, undervaluation and incorrect description of the goods being available exercise of jurisdiction with the regular appraising department and request of the joint inspection was valid, genuine and lawful---Principles.

Mazhar Iqbal v. Collector of Customs (Preventive), Karachi and 2 others 2004 PTD 2994 and Shahzad Ahmed v. Federation of Pakistan through Secretary, Ministry of Finance, Government of Pakistan, Islamabad and 2 others 2005 PTD 23 distinguished.

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

---Ss. 17, 15 & 32---Misstatement, understatement and misdeclaration of imported goods---Powers of Directorate of Intelligence and Investigation---Scope---Where there is no doubt to the extent of misstatement, understatement and misdeclaration of goods; law provides ample and wide powers to Directorate of Intelligence and Investigation to stop the clearance of any consignment even if the same was out of charge---Directorate of Intelligence and Investigation, has full powers to investigate even after the process of appraisement by the Customs Collectorate if it has reasons to believe that the goods are rnisdeclared---Principles.

Mazhar Iqbal v. Collector of Customs (Preventive), Karachi and 2 others 2004 PTD 2994 and Shahzad Ahmed v. Federation of Pakistan through Secretary, Ministry of Finance, Government of Pakistan, Islamabad and 2 others 2005 PTD 23 distinguished.

Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37 fol.

(c) Precedent---

----Law enunciated in one judgment applies on the other case only if in the said case the facts and circumstances are the same.

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

----Ss. 3-A, 3-B, 3-C, 3-D, 4, 6 & 3(g)----Constitution of Pakistan (1973), Art.199----S.R.O. No. 486(I)/2007 dated 9-6-2007---Constitutional jurisdiction of High Court---Scope---Misstatement, understatement and misdeclaration of imported goods---Petitioner having failed to prove that action by Directorate of Intelligence and Investigation was without jurisdiction in the matter, High Court would not show indulgence by way of exercising constitutional jurisdiction.

Shahzad Mazhar for Appellant.

Ch. Muhammad Zafar Iqbal and Sultan Mehmood vice Sh. Izhar-ul-Haq with Muhammad Rauf, Senior Intelligence Officer.

2008 P T D 1401

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

Messrs ELLCOT SPINNING MILLS LTD.

P.T.Rs. Nos.20 of 2001, 384, 394, 397, 222, 112, 283 of 2004, 15, 199, 189 to 191, 193, 168 of 2002, 395, 188, 170 of 2003 and I.T.As. Nos. 433, 435, 253, 434, 418 of 1999, 213, 214, 489, 267, 724, 725, 586 to 588, 385, 386, 389, 643, 644, 699, 700 of 2000, decided on 10th April, 2008.

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

----Ss. 50(4) & 80-C---Machinery installed in plant---Obtaining of finance by assessee from Modarba Finance Company through sale of machinery and lease-back arrangement---Deduction of withholding tax on such transaction by Modarba Company---Validity---Possession of machinery remained with assessee, but in paper same was transferred and leased back to assessee---Person not liable to deduction of tax under S.50(4) of Income Tax Ordinance, 1979 could not be brought to charge under S.80-C thereof---Such sale and lease back was not a contract with government or supply of service, thus, provision of S.50(4) of Income Tax Ordinance, 1979 would not apply thereto---Such transaction was not covered by S.80-C of Income Tax Ordinance, 1979---When a person supplied something and payer of amount while making payment deducted tax on such supply, then deduction would be in full and final discharge under S. 80-C(2)(a)(i) of Income Tax Ordinance, 1979---Machinery fastened to earth being an immovable property could not be called as goods---Necessary ingredient in sale and supply transactions was transfer of possession, which was not existent in, present case---Such arrangement was neither a sale nor supply as there was neither a relationship of buyer and seller nor demand and supply---Amendment of S.50(4)(b)(i) of Income Tax Ordinance, 1979 made through Finance Ordinance, 1998 excluded from purview of S.50(4) thereof such purchase and lease back arrangement---Such amendment was curative as well as remedial, thus, would apply to pending cases---Principles.

Sundaram Finance Ltd. v. State of Kerala and another 17 STC 489 (SC); 2002 PTD (Trib.) 2210; Kawther Grain (Pvt.) Ltd. v. Deputy Commissioner of Income Tax/Wealth Tax, Circle-I, Companies Zone, Gujranwala: 1999 PTD 4028; Law Terms and Phrases Published by PLD Publishers; Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73; Messrs Army Welfare Sugar Mills Ltd. v. Federation 1992 SCMR 1652/1673; Anoud Power Generation v. Federation PLD 2001 SC 340 and Government of Pakistan v. Village Devt. Organization 2005 SCMR 492 rel.

(b) Interpretation of statutes---

----Particular connotation not defined in original law---Effect---Adopting of ordinary dictionary meanings in such case would always be safe.

(c) Words and phrases---

----"Sale"---Definition.

Hand Book of Legal Terms and Phrases Judicially Defined by M. Ilyas Khan Advocate J.C.J.I. (U.S.A.); PLD 1984 Lah. 345; PLD 1964 Dac. 640; DLR 1964 Dac. 45; Fateh Muhd v. Suba Khan 1988 CLC 1520; A. Sattar v. Mst. Sardar Begum 1992 SCMR 417 and International Body Builders v. Sales Tax Officer 1979 PTD 488 ref.

(d) Words and phrases ---

----"Supply"---Definition.

Blacks Law Dictionary Compiled by the Publishers Staff Editorial p.1439; Words & Phrases Vol. III of 1996, published by Kashmir Law Times, 19-Temple Road, Lahore; The Law Lexicon with Legal Maxims and Words & Phrases; Clayton v. Bridgeport Mach Co. Tex Civ App. 38. S.W. 2d 787, 789 and AIR 1954 Pat. 14 (D.B.) ref.

(e) Words and phrases ---

----"Goods"---Definition.

South Bihar Sugar Mills Ltd. and another v. Union of India and another AIR 1968 SC 922 ref.

(f) Interpretation of statutes---

----Remedial and curative legislation---Such legislation would always be retrospective in effect, unless made prospective by law in clear and unambiguous terms---Principles.

Hand Book of Legal Law Terms and Phrases published by PLD Publishers; Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73; Messrs Army Welfare Sugar Mills Ltd. v. Federation 1992 SCMR 1652/1673; Anoud Power Generation v. Federation PLD2001 SC 340 and Government of Pakistan v. Village Devt. Organization 2005 Tax Review 75 SC rel.

(g) Income-tax---

----"Pending case"---Connotation---"Pending" would mean and include at any stage of proceedings starting from Assessing Officer to Supreme Court.

Khadim Hussain Zahid for Appellant.

Siraj-ud-Din Khalid, Shahbaz Butt, Ijaz Ahmad Awan and M.M. Akram for Respondents.

Date of hearing: 14th February, 2008.

2008 P T D 1420

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, ZONE-C (LEGAL), LAHORE

Versus

Messrs IDREES CLOTH HOUSE, LAHORE

P.T.Rs. Nos 629, 816, 734, 684, 773, 289, 290, 334 to 339, 348, 459, 469 to 471, 511 to 513, 498, 499, 464, 466 to 468, 505 to 507, 581, 593 to 596, 374, 375, 123, 202, 206, 221, 222, 251, 252, 415, 418, 625 to 628, 630 to 633, 635 to 640, 643, 644, 707 to 710, 777 to 780, 347, 359, 617, 618, 889 to 8971, 861 to 864, 841, 849, 880, 881, 495, 496, 500, 715, 805 to 808, 831, 853, 854, 886 to 888, 519, 520, 582 to 584, 592, 679, 461, 127, 168 to 173, 189, 419 to 421, 357, 364 to 366, 580, 465, 629, 453, 642, 837, 882 to 885, 372, 405, 406, 531 to 534, 540, 549 to 551, 612 to 614, 661 to 663, 698A, 674, 868 to 870, 174 to 176, 793, 817, 818, 821, 823, 824, 830, 832, 833, 23 to 25, 34 to 37, 78, 102, 114, 151 to 154, 166, 167, 838, 142, 843, 844, 852, 855 to 860, 177 to 179, 183, 184, 244, 248 to 250, 294, 358", 391, 392, 462, 463 of 2007, 147, 262, 263 of 2005, 208, 241, 242, 355, 356, 360, 413, 461, 460, 386, 118 of 2006, 14 to 16, 1 to 5, 9 to 11 of 2008, decided on 10th April, 2008.

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

---Ss. 2(66), 122 [as amended by S. R. O. No.633(I)/2002, dated 14-9-2002] and S.122(5-A) (as inserted by Finance Act (I of 2003 w.e.f. 1-7-2003]---Income Tax Ordinance (XXXI of 1979), Ss.65 & 66-A---Re­opening/revision/amendment of assessment finalized by Deputy Commissioner of Income Tax before 1-7-2003 under Income Tax Ordinance, 1979---Issuance of show-cause notice to assessee under S.122(5-A) of Income Tax Ordinance, 2001---Validity---Notice issued in respect of assessment finalized earlier on basis of provision of S.122 of Ordinance, 2001 as amended by S.R.O. 633(I)/2002 would be void and illegal---Income Tax Ordinance, 2001 would apply to assessee in respect of tax year, but not to assessment and assessee---Provision of S.122(5A) of Income Tax Ordinance, 2001 not specifically made retrospective, but same being substantive in nature could only apply prospectively---Phrase "or issued under Ss. 59, 59-A, 62, 63 & 65 of the Income Tax. Ordinance, 1979" as added in S.122(5-A) of Income Tax Ordinance, 2001 by Finance Act, 2003 w.e.f. 1-7-2003, could not have implied the effect of retrospectivity, thus, its application on assessment finalized under Income Tax Ordinance, 1979 would be illegal---Assessment order . framed by DCIT could not be amended or modified under S.122(5) or (5-A) of Income Tax Ordinance, 2001---Provision of S.122 of Income Tax Ordinance, 2001 would apply only to assessment order finalized by Commissioner of Income Tax for tax year and not to assessment order made by Deputy Commissioner of Income Tax for assessment years 2002-2003 and earlier---Distinction between provisions of S.122 of Income Tax Ordinance, 2001 and Ss. 59, 59-A, 62 and 65 of Income Tax Ordinance, 1979 stated.

Commissioner of Income Tax, Zone-C, Lahore and others v. Messrs Kashmir Edible Oils Ltd. and others 2006 SCMR 109; Kisan Yousaf Textile Mills Faisalabad v. Commissioner of Income Tax 2005 PTD 1621; Allied Motors v. C.I.D. Lahore 2004 PTD 1173; Commissioner Sindh Employees Social Securities Institution and another v. Messrs E.M. Oil Mills and Industries Limited and 2 others 2002 SCMR 39; Fawad Textile Mills Ltd. Lahore v. Pakistan through Secretary, Ministry of Finance and 3 others: 2005 PTD 14; Income Tax Officer, Central Circle II, Karachi and another v. Cement Agencies Ltd: PLD 1969 SC 322 and Messrs Cargill Pakistan Seeds (Pvt.) Ltd. through Chief Executive v. Customs, Excise and Sales Tax Appellate Tribunal through Assistant Registrar, Lahore 2004 PTD 26 ref.

Commissioner, Sindh Employees Social Security Institution and another v. Messrs E.M. Oil Mills and Industries Ltd. and 2 others 2002 SCMR 39; Monnoo Industries Ltd. v. Commissioner Income Tax 2001 PTD 1525; Fauji Oil Terminal v. CIT 2006 PTD 734; Allied Motors Ltd. v. Commissioner Income Tax and another 2004 PTD 1173; Messrs Bahria Oil Mills, Vehari, v. Commissioner of Income Tax, Zone, Multan 2006 PTD 2421 and CIT Central Zone, Lahore v. National Security Insurance C. Ltd. Lah. 2001 PTD 814; Messrs Kashmir Edible Oil Ltd. V. Federation of Pakistan 2005 PTD 1621 and Commissioner of Income Tax, Zone-C, Lahore and others v. Messrs Kashmir Edible Oils Ltd. and others 2006 SCMR 109 rel.

(b) Interpretation of statutes---

----Retrospective effect of a statute---Scope---Unless statute itself provided in unequivocal and clear terms, its provision creating a charge or otherwise dealing with a substantive right, could not be made retrospective.

Messrs Innovative Trading Company Limited v. Appellate Tribunal and 2 others; 2004 PTD 38; Messrs Calibrative Heavy Industries (Pvt.) Ltd. v. CIT/WT Cays Zone-II, Lahore 2005 PTD 2525; Federation of Pakistan v. Haji Muhammad Sadiq and others 2007 PTD 67 and Commissioner Sindh Employees Social Securities Institution and another v. Messrs E.M. Oil Mills and Industries Ltd. S.I.T.E. Karachi and 2 others 2002 SCMR 39 rel.

(c) Interpretation of statutes---

----Fiscal statute---For levy of tax, only language used in Taxing Act would be looked at, and nothing else---Principles.

In a Taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied and one can only look fairly at the language used.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 KB 69 fol.

Muhammad Ilyas Khan, Shahid Jamil Khan, Sajjad Ali Jafri, Khadim Hussain Zahid, Muhammad Iqbal Vehniwal and Faiz-ur-Rehman for Appellants.

Siraj-ud-Din Khalid, Shahbaz Butt, Mian Ashiq Hussain, Rana Muhammad Afzal, Javed Iqbal Qazi, Naveed Andrabi, Muhammad Iqbal Hashmi, Monim Sultan, Ch. Mumtaz-ul-Hassan, Ijaz Ahmad Awan, Sajid Ijaz Hotiana and Ch. Anwar-ul-Haq, for Respondents.

Dates of hearing: 28th and 29th January, 2008.

2008 P T D 1461

[Lahore High Court]

Before Nasim Sikandar and Fazal-e-Miran Chauhan, JJ

YOUSAF SUGAR MILLS LTD.

Versus

GOVERNMENT OF PAKISTAN and others

Sales Tax Reference No. 80 of 2007, decided on 28th November, 2007.

Sales Tax (VII of 1990)---

----S.47---S.R.O. No.463(I)/2007, dated 9-6-2007---Reference to High Court---Counsel for applicant had submitted that whole of the amount of . sales tax had already been paid and it was only the penal amount which was subject-matter of the appeal sought to be filed---Maintainability of application was objected to on the ground that it was not framed in accordance with the provisions of S.47 of the Sales Tax Act, 1990---Defects or default pointed out by counsel for Revenue, were mere ministerial in nature, which did not have any bearing on the merits of the case or the questions which had been proposed---Payment of principal amount of the sales tax was not challenged---Request of the applicant for disposal of appeal in the light of exemption under S.R.O., was allowed.

Ijaz Ahmad Awan for Petitioner.

Muhammad Nawaz Cheema for Respondent.

Date of hearing: 28th November, 2007.

2008 P T D 1478

[Lahore High Court]

Before Umar Ata Bandial, J

FAZAL ILLAHI & 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 & 81---Customs Rules, 2001, R.109---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods and provisional assessment duty---Goods imported by the petitioner/importer were released under a provisional assessment whereby in addition to payment of liability based on declared value of imported goods, Authorities under S.81 of the Customs Act, 1969 obtained post dated cheque and indemnity bond from the importer for the difference in liability on account of higher value of imported goods claimed by the Authorities---Submission of Authorities was that provisional assessment based upon the higher value claimed by Authorities stood finalized on the failure of the importer to establish his declared price---Validity---Provisions of S.25(4) of the Customs Act, 1969 cast a duty on the taxing officer to demand proof or documents from an importer in respect of which corroboration or clarification was required---Such duty was reinforced by the provisions of R.109 of the Customs Rules, 2001---No such demand was made by the Authorities to the importer---No material was confronted to the importer to substantiate the higher value claimed by the Authorities---Importer could not be penalized for default committed by Authority---In absence of material on record showing demand of Authorities for evidence from the importer and a consequential speaking order affirming the impugned version of price on the basis of evidentiary material in accordance with S.25 of the Customs Act, 1969, importer ought not to be saddled with an attributed value to sustain liability---If that were done, same 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 ref.

Mian Abdul Ghaffar for Petitioner.

Izhar-ul-Haque Sheikh for Respondent.

2008 PTD 1481

[Lahore High Court]

Before Jawwad S. Khawaja, J

Messrs SHAFIQUE & COMPANY through Proprietor

Versus

ASSISTANT COLLECTOR, CUSTOMS and 2 others

Writ Petition No. 22067 of 2001, decided on 28th January, 2002.

Customs Act (IV of 1969)---

----S. 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Enhancement of the valuation of imported consignment---Counsel for department had contended that there were no legal basis for the enhancement of the valuation of the imported consignment without proper contravention case followed by adjudication proceedings after notice to the petitioner/ importer and that that importer was a contributory in the case, as he had voluntarily made payment of higher value assessed by the Department without protest---Validity---Even if it was conceded that importer had m 'de payment voluntarily, he could, at any time, assert his right to be assessed in accordance with legal requirements---Any mistaken belief as to the amount payable would not preclude importer from asserting such le -al right---Constitutional petition was allowed in circumstances.

Muhammad Shan Gull for Petitioner.

A. Karim Malik for Respondents.

Sardar Manzoor Ahmed, Deputy Superintendent Customs, Samrial.

2008 P T D 1482

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

Messrs TRADECOM PAKISTAN (PVT.) LTD. Through Executive Deputy Director (Finance)

Versus

DEPUTY COLLECTOR CUSTOMS, CFS DRY PORT and another

Customs Reference No. 6 of 2007, decided on 20th May, 2008.

Customs Act (IV of 1969)---

----Ss.80 & 196---Notifications S.R.O. 447(I)/04, dated 12-6-2004 & C.G.O. 12/02---Imported value---Assessment---Vehicle in question was imported by diplomat who sold it to the petitioner---Grievance of petitioner was that customs authorities wrongly assessed the imported value of the vehicle for the purposes of charging of duties and taxes---Validity---Declared value' of vehicle being supported by all necessary documents, there was neither any occasion nor any justification for the authorities to reject the same---In case of sale of an exempted vehicle by foreign diplomat/mission within three years of import, duty and other taxes were to be charged at the imported value---No legal justification was available for the Revenue either to enhance imported value or to seek payment of duty and taxes on the rate prevailing at the time of assessment---High Court directed the authorities to release the vehicle after charging 100% duties and taxes on the value declared and accepted in foreign currency at the time of importing of the vehicle in terms of notification S.R.O. 447(I)/2004, dated 12-2-2004---Reference was allowed accordingly.

Syed Waqar Ashraf v. Secretary to the Government of Pakistan Ministry for Finance, Economic Affairs, Statistics and Revenue (Revenue Division) Lahore and 3 others Writ Petition No. 17292 of 2005 fol.

Mian Abdul Ghaffar for Petitioner.

Izhar ul Haq Sheikh for Revenue.

2008 P T D 1494

[Lahore High Court]

Before Kh. Farooq Saeed, J

Messrs TOYO INTERNATIONAL MOTORCYCLE through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, (Revenue Division) Central Board of Revenue, Islamabad and 3 others

Writ Petition Nos. 2415/07, 605/07, 544/07, 834/07, 1001/07, 1002/07, 1046/07, 1206/07, 1212/07, 1443/07, 1523/07, 1602/07, 2331/07, 2350/07, 2561/07, 2619/07, 2751/07, 3263/07, 3294/07, 3622/07, 3623/07, 3879/07, 4112/07, 4547/07, 5011/08, 9664/06, 9665/06, 9666/06, 4617/07, 5507/07, 7505/07, 7431/07, 1655/07, 7762/07, 7763/07, 5497/07, 8119/07, 8187/07, 4261/07, 7764/07, 9867/07, 1554/07, 1161/07, 11238/07, 11645/07, 11646/07, 11575/06, 12733/06, 13516/06, 4385/07, 11873/07, 11874/07, 11875/07, 11876/07, 12256/07, 12257/07, 12258/07, 12259/07, 12260/07, 12261/07, 12262/07, 12263/07, 12264/07, 12156/07, 12194/07, 12195/07, 12196/07, 12197/07, 12/08, 13/08, 14/08, 15/08, 16/08, 17/08, 500/08, 501/08, 502/08, 483/08, 1059/08, 1058/08, 758/08, 759/08, 11327/07, 10285/07, 11811/07, 7765/07, 1261/08, 818/08, 1774/08, 1775/08, 1776/08, 1777/08, 1778/08, 2381/08, 2382/08, 2383/08, 2675/07, 3477/08, 4660/08, 4189/08, 4894/08, 3191/08, 4745/08, 4701/08, 4702/08, 4703/08, 4700/08, 3792/08, 4370/08, 3695/08, 3103/08, 5346/08 and 5536/2007, decided on 23rd May, 2008.

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

----Ss. 25 & 25-A---Determination of customs value of imported goods---Procedure---Authority as provided in S.25-A of Customs Act, 1969, while determining value of a particular item would have to follow procedure provided in S.25 thereof in sequence mentioned therein---Salient features of S.25-A of Customs Act, 1969 stated.

(b) Interpretation of statutes---

----Fiscal statutes---Methods of interpretation stated.

The settled principles of interpretation of fiscal laws are that firstly, the law should be interpreted as it is and the intention of legislature should be gathered from the plain reading of the language of law.

The second method of interpretation of fiscal statute is that if the construction of the language is not clear and there is a possibility of two interpretations, in such situation the interpretation is made in favour of the subject and not in favour of the Revenue.

Messrs Volkervam (Pakistan) Ltd. v. Sindh Employees' Social Security Institution and another PLD 1985 Kar. 37 and Arif Hussain Shah v. Operative Director, Administration, Electric Equipment Manufacturing Co. Ltd. and another PLD 1979 Lah. 603 ref.

Mr. J. Rowlet in Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B. 69; Messrs Hirgina and Co. (Pak.) v. Commissioner of Sales Tax Central Karachi 1971 SCMR 128; The Commissioner of Agri Income Tax East Bengal v. BWM Abdul Rehman 1973 SCMR 447 and Collector of Customs (Karachi) v. Messrs Abdul Majeed Khan 1977 SCMR 371 rel.

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

---Ss. 25 & 25-A---Preparation of value advice of imported goods---Mandatory to follow procedure provided in S.25 of Customs Act, 1969 while preparing such advice--Principles.

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

----S. 25-A---Word' "any person" as used in S.25-A of Customs Act, 1969---Connotation---Prefix "any" before "person" had enlarged its scope---Such person could be an individual firm, company, local manufacturer, importer, non-importer or a third person aggrieved for any reasons---Principles.

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

----Art. 129(g)---Evidence available with a party, withholding of---Effect---Presumption would be that such party had some motive behind such withholding and that had the same been brought on record it would have not favoured him.

Muhammad Sadiq v. Federation of Pakistan through Chairman, Pakistan Railways Board 1991 MLD 1 ref.

2002 PCR (Kar.) 1718 rel.

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

----Art. 199---Constitutional petition---Alternate remedy, availability of---Effect---Such remedy would not debar High Court from invoking its constitutional jurisdiction.

General Manager Pak Arab Fertilizers Ltd. Khanewal Road Multan v. Muhammad Ayub 2005 SCMR 843; Mst. Kaniz Fatima through Legal Heirs v. Muhammad Aslam and 27 others 2001 SCMR 1493; Muhammad Sharif v. Additional District Judge and others 2007 SCMR 49; West Pakistan Tanks Terminal (Pvt.) Ltd. v. Collector (Appraisement) 2007 SCMR 1318; Muhammad Hanif through Attorney and others v. Karachi Building Control Authority through Chief Executive and another 2007 CLC 315; Muhammad Arshad and other v. Returning Officer and others 2006 YLR 388; Mst. Kaniz Fatima through Legal Heirs v. Muhammad Aslam and 27 others 2001 SCMR 1493; Amir Sardar v. The State and 3 others 2007 PCr.LJ 985 and Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another 2005 PTD 123 ref.

Collector of Customs (Valuation) and another v. Karachi Bulk Storage and Terminal Ltd., 2007 PTD 1858; Gatron (Industries) Limited v. Government of Pakistan and others 1999 SCMR 1072 and Messrs Chenab Cement Product (Pvt.) Ltd. and others v. Banking Tribunal, Lahore and others PLD 1996 Lah. 672 rel.

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

---Ss. 25 & 25-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Valuation advice of imported goods---Such advice prepared on deductive value method and in total disregard of sequential order provided in S.25 of Customs Act, 1969---Validity---Sequential order provided in S.25 of the Act was a mandatory requirement---Advice issued disregarding sequential order had been prepared and issued in illegal exercise of jurisdiction---Constitutional petition was accepted in circumstances.

C.P.No.D-93 of 2007, Writ Petition No.476 of 2008 and Rehan Umar v. Collector of Customs, Karachi and 2 others 2006 PTD 909 rel.

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

----S.25---Provision of S.25 of Customs Act, 1969---General Agreement on Trade and Tariff signed by Pakistan in 2001---Purpose stated.

A. Karim Malik, Mian Abdul Ghaffar, Omer Arshad Hakeem Qureshi, Afzaal Ahmad Hashmi, Hafeez Saeed Akhtar, Javed Iqbal Bhatti, Ch. Liaqat Ali Sindhu, Zafar Iqbal Chohan, Qzair Karamat Bhandari, Mian Abid Ahmad, Malik Muhammad Jehangir and Saqib Gardner for Petitioners.

Nadeem-ud-Din Malik, Deputy Attorney General for Respondent.

Muhammad Nawaz Waseer, Federal Counsel.

Ahmer Bilal Sufi for respondent-Director Customs Valuation and PCA Customs House, Karachi.

Izharul Haque Sheikh, Muhammad Nawaz Cheema, Ch. Muhammad Zafar Iqbal, Zahoor Ali Nasir Tagha, Afzaal Ahmad Hashmi, Irteza Ali Naqvi, Ehsan Ullah Cheema, Khawar Ikram Bhatti, and Kausar Parveen for Customs Department.

Dates of hearing: 15th, 18th and 21st April, 2008.

2008 P T D 1525

[Lahore High Court]

Before Syed Hamid Ali Shah and Malik Saeed Ejaz, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX MULTAN ZONE, MULTAN

Versus

CHAUDHRY TRADING COMPANY, MULTAN

Tax Reference No.10 of 2004, decided on 14th April, 2008.

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

----Ss. 62 & 66-A---Assessment finalized by Assessing Officer upheld in appeal by Commissioner (Appeals)---Re-assessment after cancellation of such assessment by Inspecting Additional Commissioner (I.A.C.)---Validity---Applicability of gross profit rate remained in issue before Commissioner (Appeals)---Inspecting Additional Commissioner by virtue of provisions of S.55-A(1A)(b) of Income Tax Ordinance, 1979 was not competent to re-open such assessment, which had merged into appellate order---Impugned order being illegal was cancelled in circumstances.

Glaxo Laboratories Ltd. v. Inspecting Assistant Commissioner of Income Tax and another 1992 PTD 932 fol.

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

----S.66-A(1A)---Applicability of provision of S.66-A(1A) of Income Tax Ordinance, 1979---Scope.

Ch. Muhammad Asghar Saroha for Petitioner.

Sardar Riaz Karim for Respondent.

2008 P T D 1531

[Lahore High Court]

Before Nasim Sikandar, J

KHALID MEHMOOD

Versus

ADDITIONAL COLLECTOR OF SALES TAX, FAISALABAD and another

Writ Petition No. 10061 of 2005, decided on 2nd June, 2008.

Sales Tax Act (VII of 1990)---

----Ss. 45-B(1) [as amended by Finance Act (VII of 2005), w.e.f. 29-6-2005) & 46(1)(a)]---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Maintainability---Order-in-original passed by Additional Collector as adjudicating authority---Appeal against impugned order at relevant time lay to Tribunal and not to the Collector (Appeals)---Before enforcement of Finance Act, 2005 w.e.f. 29-6-2005, appeal would be to Collector (Appeals), where order-in-original was passed by an officer below in rank of Additional Collector, while orders recorded by Collectors or Additional Collectors were assailable before Tribunal---After enforcement of Finance Act, 2005, all orders recorded by an adjudication authority mentioned in S.45 of Sales Tax Act, 1990 became assailable before Collector (Appeals)---Appeal against order of Collector for not being notified as an adjudicating authority under S.45 of Sales Tax Act, 1990 would lie to Tribunal---Petitioner against impugned order having at the relevant time, an effective remedy of appeal under S.46 of Sales Tax Act, 1990, constitutional petition was dismissed by High Court for being not maintainable.

Laser Parasix Deplies Clinic, Lahore v. Customs, Central Excise and Sales Tax Appellate Tribunal, Lahore Bench 2002 PTD 549 ref.

Nadeem Ahmad Sheikh for Petitioner.

Sarfraz Ahmad Cheema for Respondent-Revenue

2008 P T D 1547

[Lahore High Court]

Before Kh. Farooq Saeed, J

Syed ABID HUSSAIN SHAH

Versus

FEDERAL GOVERNMENT OF PAKISTAN, ISLAMABAD through Secretary, Finance Ministry of Finance, Islamabad and 2 others

Writ Petition Nos. 7179, 7259, 7260 and 7261 of 2007, decided on 20th June, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 153(6A), (6B), 53(2) & Second Schedule, Part IV---S.R.O. 847(I)/2007 dated 22-8-2007---Vires of S.R.O. 847(I)/2007 dated 22-8-2007---Held, notification is in excess of the jurisdiction of the Federal Board of Revenue, as the amendment by said notification has reduced the extent of the exemption provided under S.153(6A) of the Income Tax Ordinance, 2001---Federal Board of Revenue, under the garb of amendment in Part-IV of Second Schedule to the Income Tax Ordinance, 2001, had proceeded in a manner that it has brought the same to full and final discharge to certain manufacturers under S.153(6), which were earlier excluded---Federal Board of Revenue, therefore, has exercised a power, which is available with the legislature only---S.R.O. 847(I)/2007 dated 22-8-2007 is ultra vires the powers available to Federal Board of Revenue.

Writ Petition No. 7918 of 2007 fol.

Ch. Riaz Ahmad Vazdani (Advocate) v. Federation of Pakistan, Pakistan Atomic Energy Commission and others 1990 CLC 1406 ref.

Shahbaz Butt for Petitioner.

Sajjad Ali Jafari, for Respondents.

Muhammad Nawaz Waseem, Federal Counsel.

Dates of hearing: 7th and 9th May, 2008.

2008 PTD 1551

[Lahore High Court]

Before Malik Muhammad Qayyum, J

Messrs KING TRADERS

Versus

DEPUTY COLLECTOR OF CUSTOMS and 2 others

Writ Petition No. 10942 of 2000, decided on 15th September, 2000.

Customs Act (IV of 1969)---

----Ss. 25 & 33---Constitution of Pakistan (1973), Art.199---Constitutional Petition---Determination of customs value of goods---Short levy of duties---Refund of amount---Once the assessed duty and charges had been paid and it was subsequently found that the duty had been short levied, Customs Authority should have followed the minimum requirement of the principles of natural justice i.e. issuance of notice to the importer---Same had not been done in the case---Importer, in circumstances, should file an application for refund of the amount in dispute---Such an application, should be decided without delay and strictly in accordance with law.

Messrs Khyber Electric Lamps v. Assistant Collector Customs and 2 others 1996 CLC 1365 ref.

Mian Abdul Ghaffar for Petitioner.

Khan Muhammad for Respondent.

Date of hearing: 15th September, 2000.

2008 P T D 1563

[Lahore High Court]

Before Kh. Farooq Saeed, J

Messrs T.A. INDUSTRIES through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Finance Ministry of Finance, Government of Pakistan, Islamabad and 4 others

Writ Petitions Nos.7918, 7252, 7253, 7256, 7257, 7258, 7394, 7396 and 10483 of 2007, decided on 20th June, 2008.

(a) Interpretation of Statutes---

----Fiscal statute---Fiscal laws are to be interpreted and applied in their natural meanings---In case of doubt about charging provision, beneficiary is the assessee and in case of an exemption provision the benefit goes to State---Where, however, the language of law is clear and without any ambiguity, the principle of interpretation, in case of doubt, is not relevant.

Dawood Hercules Chemicals Ltd. v. Collector of Sales Tax, Lahore 2007 PTD 1161 and Messrs Sterling Engineering Corporation v. The Collector of Customs, Karachi and another PLD 1986 Kar. 211 ref.

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

---Ss. 153(6-A), (6-B) 53 & Second Sched., Part IV, Cls. (46-A), (46-B)---General Clauses Act (X of 1897), S.24A---S.R.O. 847(I)/2007 dated 22-8-2007---Constitution of Pakistan (1973), Art.199---Constitutional petition---Payments for goods and services---Refusal to grant exemption certificate---Interpretation, scope and application of S.153(6-A), Income Tax Ordinance, 2001 and effect of S.R.O. 847(I)/2007, dated 22-08-2007 elaborated---Refusal to grant exemption certificate was a result of misreading and non-reading of the relevant provision of law which was against the settled principle that every word and sentence used by the legislature had to be given meaning and significance and thus was illegal and of no legal effect---S.R.O. 847(I)/2007, dated 22-8-2007 also being without any lawful authority was void and of no legal effect---Directions given in the present case shall apply in respect of all constitutional petitions being on the basis of similar and same circumstances.

The provision of law in terms of section 153(6A) of the Income Tax Ordinance, 2001 leaves no doubt that it is in respect of manufacturers' only. The termany' used before manufacturer' further enlarges its scope and the same meansall'. Phrase "any person being a manufacturer" leaves no doubt that all the manufacturers can avail the benefit of this provision. Section 153(6B), which has been inserted by the Finance Act, 2007, in fact has not curtailed or reduced or superseded earlier provisions. It is an independent provision of law and its language makes clear that it is applicable only on the `persons', who are dealing in goods. It does not have any reference to manufacturers in any form whatsoever. For all practical purposes, it has enhanced the scope of the provision of section 153(6A). It has further excluded, in addition to manufacturers, the local traders, who though are not manufacturers but are doing the business of sale as individual or an association of persons. This is an addition through this. .new clause in the said facility and the same has not curtailed the powers available in the earlier section.?

The issue became complicated when Central Board of Revenue, through a Notification dated 22nd August, 2007, under S.R.O.847(I)/ 2007, inserted clauses, in terms of clauses (46A) & (46B) in Part-IV of Second Sched. clause (46A) says that the provisions of subsection (6B) of section 153 shall not apply to any payment received by a manufacturer of iron and steel products relating to sale of goods manufactured by him. This Notification in addition of the provision is for the reason of some misconception in the minds of Central Board of Revenue. Section 153(6B) does not deal with manufacturers at all. There is, therefore, no question of providing any exemption to manufacturers of iron and steel from the charge created under section 153(6). The Central Board of Revenue could provide such benefit if earlier there was a charge thereon, However, since exemption has already been given by the provision i.e. section 153(6A), which is dealing with all the manufacturers clearly and unequivocally, further exemption to only iron and steel manufacturers is like bringing to charge the other manufacturers, which is beyond the jurisdiction of Federal Board of Revenue. It is a clear case of misunderstanding of the provisions of law. Similarly clause (46B) speaks of non-application of section 153(6B) on manufacturers if they are individual or Association of persons while it has nothing to do with manufacturers. Both the provisions of subsections of section 153 are separate and independent and are not interconnected at all. Moreover, the earlier deals with manufacturers' and the later deals withtraders'. There was, therefore, no need of issuance of notification like the one referred above. Since the said notification has been issued by misunderstanding, it shall not have any effect being without any lawful authority. This is where reference to section 53(2) shall be of help.?

Section 53(2) Income Tax Ordinance, 2001 grants power to the Federal Government to issue Notification in the official Gazette and make amendments in the Second Schedule by adding any clause or condition therein or omitting any clause or condition therein or to make any changes in any clause or conditions therein, as Government thinks fit. Thus Federal Government does have the power to amend the Second Schedule by addition or omission and thus is delegated with the legislation power to the said extent. The purpose of this delegation is to reduce the rigours of law by way of addition in the Second Schedule wherever need arises. Similarly, the Federal Board of Revenue is entitled to omit any clause or condition that has provided exemption in the Second Schedule. For all practical purposes, the Federal Government does have the power to issue or withdraw an exemption in the Second Schedule. Through notification under the garb of providing an exemption in the Second Schedule, the Federal Board of Revenue in its understanding has reduced the effect of the provision of section 153(6A) while practically it has curtailed the effects of section 153(6A) and has increased the application of section 153(6). Section 153(6A) makes the provision of section 153(6) inapplicable to all the manufacturers while clause (46A) makes it applicable only to manufacturers of iron and steel products. Thus the power exercised was not within the lawful authority available to the Federal Government. Again, through clause (46B) the Federal Government has made the provision of section 153(6B) as inapplicable in respect of individual or association of persons being manufacturer of such goods while said section does not deal with manufacturers at all. This Notification, therefore, is based upon misunderstanding and misapplication of the relevant provisions of law.

Maxim: "Delegatus non potest delegare", means "when a power is conferred on a particular person then that person could neither transfer its exercise to another person nor could exercise it without application of his mind to facts and circumstances of that case---Such person has to exercise that power with application of his independent mind to the facts and circumstances of that case regardless of any extraneous/dictative influence".?

The direction in S.24-A, General Clauses Act, 1897 is binding on all the authorities. Seen from the angle that whether the authority available to the Commissioner of Income Tax while rejecting the application for issuance of exemption certificate as well as issuance of the S.R.O. No.847(I)/2007 has been exercised 'reasonably', `fairly', 'justly' and for the advancement of the purpose of the enactment, the answer shall readily be an empathetic "No". Neither section 153(6A) speaks of any discrimination amongst the manufacturers nor in section 153(6B), any reference of subsection (6A) of section 153 is appearing. Both the sections have separately made the provision of subsection (6) of section 153 inapplicable firstly on suppliers who have manufactured the said goods and to sellers of goods if they are individuals or an Association of persons, respectively.?

The power available with the Federal Government is to add any clause or condition or omit any clause or condition in the Second Schedule but that obviously cannot be allowed if the same is in conflict with the main provision. The deduction under the provision of section 153(6) has been made as a final discharge, which means the assessee shall neither be required to pay any tax in addition to the amount deducted in his case nor he shall be exposed to the rigours of audit and assessment etc. In its subsequent subsections i.e. 6A & 6B, respectively, exemption from this final discharge has been given. In subsection (6A), subsection (6) has been made inapplicable by saying that the provisions of subsection (6) relating to the payment on account of supply of goods in respect of a person, who is manufacturer of such goods, shall not apply. This exception from subsection (6), 'above, is, therefore, applicable to any person, who is a manufacturer and supplier of any item. Regarding subsection (6B) here again, reference is to subsection (6) and not to subsection (6A). In the second line the provision reads "so far as they relate to payments on account of sale of goods" wherefrom the phrase `manufacturer' is being read by the departmental official is not understandable. This new additional clause, in addition to subsection (6A), makes subsection (6) inapplicable to individuals and association of persons, who are in the business of local purchase and sale of goods of any kind. The contention that subsequent legislation supersedes earlier, if accepted,' would mean that only the last clause of last section would apply. This obviously cannot be the intention of law makers. Subsequent legislation on the same subject would, by necessary implication, repeal the earlier law to the extent of mutual inconsistency or repugnancy. The fact of the matter is that sections 153(6A) and 153(6B) are two separate and independent provisions being in respect of manufacturer and trader and there is no mutual inconsistency in the two provisions.?

The refusal to grant exemption certificate for the reasons mentioned in the letter is a result of misreading and non-reading of the concerned provisions of law. This action is against the settled principle that every word and sentence used by legislature has to be given meaning and significance, hence the same was held to be as illegal and of no legal effect. The Notification, through an S.R.O. also being without any lawful authority, was held to be void and of no legal effect. The, above direction shall apply in respect of all the writ petitions being on the basis of similar and same circumstances.?

Shahbaz Ahmad Butt, Javed Iqbal Qazi and Qari Habib-ur-Rehman Zubairi for Petitioners.

Shahid Jamil, for Respondent-Department.

Muhammad Nawaz Waseem, Federal Counsel.

Jan Muhammad Chaudhry, Advocate.

Dates of hearing: 7th and 9th May, 2008.

2008 P T D 1584

[Lahore High Court]

Before Abdul Shakoor Paracha, J

AMIR SADIQ

Versus

DEPUTY DIRECTOR, SALES TAX AND FEDERAL EXCISE and 2 others

Writ Petition No.2227 of 2008, decided on 15th April, 2008.

Sales Tax Act (VII of 1990)---

----Ss.33(5)(13), 37-A & 37-B(1)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Quashing of F.I.R.---Petitioner/ accused was alleged to have, committed fraud of billions of rupees causing huge loss to the government exchequer---In adjudication proceedings petitioner filed an appeal before the Tribunal and the Tribunal vide its order remanded the case without vacating the show-cause notice and cancelling the contravention report---Existence of the show-cause notice and the contravention report confirmed that liability of the petitioner due to commission of tax fraud stood alive---Criminal proceedings could proceed side by side---F.I.R. could not be quashed, firstly because accused/petitioner had alternate remedies under Cr.P.C. i.e. to appear before Investigating Officer to prove his innocence; and to approach the competent higher authorities---Other remedies were also available to the accused who claimed to be innocent and who could seek relief without going through the entire length of trial---Constitutional petition was dismissed.

Col. Shah Sadiq v. Muhammad Ashiq and others 2006 SCMR 276 ref.

Talib Haider Rizvi for Petitioner.

Muhammad Nawaz Cheema for Respondent.

2008 P T D 1592

[Lahore High Court]

Before Nasim Sikandar, J

Messrs AL-MADINA TRADERS through Proprietor

Versus

ASSISTANT COLLECTOR (IMPORTS) and others

Writ Petition No.10767 of 2007, decided on 10th April, 2008.

Customs Act (IV of 1969)---

----S. 194-A---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Petitioner approached the Appellate Tribunal for issuance of detailed judgment which was declined observing that one of the Members of the Tribunal had retired in the meanwhile; and other having been transferred, detailed judgment could not legally be passed by the existing Bench---Constitutional petition filed by the petitioner was accepted---Appeal filed by the petitioner would be deemed to be pending before the Tribunal to be decided in accordance with law after allowing an opportunity of hearing to the parties.

Pakistan State Oil Company Ltd. v. Collector of Customs 2005 PTD 709 rel.

Mian Abdul Ghaffar for Petitioner.

Kousar Parveen for Respondent-Revenue.

2008 P T D 1594

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs SUN TRADERS through Proprietor

Versus

DEPUTY COLLECTOR CUSTOMS, FAISALABAD and 4 others

Writ Petition No. 2026 of 2008, decided on 13th March, 2008.

Customs Act (IV of 1969)---

----Ss. 25, 25-A(3), 25-D & 81---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Provisional assessment of duty---Petitioner/importer, imported `Polypropylene Film' and sought its clearance---Detail of the description of goods in Column No.35 being different and ambiguous, Department sought. the laboratory examination of the goods---Customs Laboratory, reported that orientation of Polypropylene films could not be determined at the level of that laboratory, but same could be determined elsewhere for further classification---Nothing with absolute certainty, had so far been decided by the Authorities with regard to the valuation of the imported goods---Customs Test Laboratory had opined that the laboratory had no adequate facility to determine orientation of polypropylene film---Director General of Customs Valuation, in its letter advised Collector to finalize assessment on the basis of test reports to be obtained through some prominent laboratory---Law required that when a valuation was determined by the Collector of Customs or Director of Customs valuation etc. a review petition lay before the Director General under S.25-D of Customs Act, 1969 and an application lay to the Director. General under S.25-A(3) of Customs Act, 1969, in case of conflict in the customs valuation determined under subsection (1) of S.25-A of Customs Act, 1969---Petitioner had already moved various applications, but with no result---Director General of Customs Valuation was directed to proceed with the applications filed by the petitioner---Petitioner was paying demurrage and detention charges, further delay would be detrimental to the interest of the petitioner and also to Revenue---High Court directed that pending applications of the petitioner be decided as expeditiously as possible---Case of the petitioner, till the finalization of the valuation by the Director General, would fall under S.81 of the Customs Act, 1969---Department was directed to proceed in the matter under provisions of S.81 of Customs Act, 1969 for the provisional release of the goods.

Rehan Umer v. Collectorate of Customs and 2 others 2006 PTD 909 ref.

Mian Abdul Ghaffar for Petitioner.

Muhammad Nawaz Cheema for Respondents.

2008 P T D 1693

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

COLLECTOR SALES TAX AND CENTRAL EXCISE, RAWALPINDI

Versus

Messrs WAH NOBEL CHEMICAL LTD., WAH CANTT.

Tax Appeal No.109 of 2002, decided on 28th March, 2008.

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

----S. 3---Scope of tax---Sales tax cannot be levied on the packing charges being a part of the price covered by the manufacturer/assessee on the packaged goods.

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

----Ss. 3 & 2(12)--Scope of tax---`Scrap' is chargeable under Sales Tax Act, 1990 being waste of the manufacturing process and having nexus with the main business---Scrap is a "goods" and is acquired in furtherance of business being a product retrieved on use of the same raw material on which input tax has been paid---[Collector, Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd. 2002 PTD 976; "Messrs Habib Sugar Mils Ltd. through Law Officer v. Additional Collector, Sales Tax, Customs House, Site Hyderabad and 2 others 2007 PTD 171 dissented from].

Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd. Karachi and others 2007 PTD 1902 fol.

Collector, Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd. 2002 PTD 976; "Messrs Habib Sugar Mils Ltd. through Law Officer v. Additional Collector, Sales Tax, Customs House, Site Hyderabad and 2 others 2007 PTD 171 dissented from.

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

----Ss. 2(33) & 3---`Supply'--Definition of wide import---Term "supply" includes sale, lease or other "disposition of goods in furtherance of business---If any of the ingredients mentioned in definition of supply are missing, it will not become a "supply" and for that matter a "taxable supply"---Principles.

Collector Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd. 2002 PTD 976 and State of Gujrat v. Raipur Manufacturing Co. Ltd. AIR 1967 SC 1066 ref.

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

----S. 3(1)(a)---Transportation and handling---Chargeability to sales tax--Scope---Term "in furtherance of business" occurring in S.3(1)(a) Sales Tax Act, 1990---Connotation---Anything which is directly connected with products being supplied by the assessee as well as by-products and then sold would be "in furtherance of business"---Transportation and handling being not in "furtherance of business", sales tax was not chargeable on the same---Such "service" is neither a "goods" nor can be called a 'disposal'-Principles.

The terms "in furtherance of business" and the business separately would not cover providing of additional facility like transportation charges paid or handling charges. Furtherance is a term which is used in the present form, would restrict only to the activities attached to the main track and the aspects directly connected thereof. As for example in the present case the assessee inter alia has been supplying formaldehyde and bonding material to its buyer. Anything which is directly connected with this product as well as by-products and then sold would be in furtherance of the business.

"Furtherance" means continuity with the main activities having direct nexus but would not include activities which do not have attachment or are not a part of the main process. The reason being that the term is to be read as a whole which is `in furtherance of the business'. Obviously the business of the assessee is not transportation or handling, or packing. It is manufacturing of certain products like glasreen, formaldehyde based resins used as a bonding agent in the Chipboard, Plywood and Flush door and such like other manufacturing industries. Therefore, there is no reason to agree that transportation or handling is in furtherance of business and that sales tax is chargeable on these items.

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.

While interpreting a fiscal statute if there is any doubt, the same should be decided in favour of the taxpayer.

Nothing can be intended, no presumption can be attached, nothing can be read into which is not provided. Besides, even if one considers it to be as a doubtful situation it again cannot go in favour of Revenue.

The providing of handling charges as well as transportation as such is not in furtherance of the business'. Assessee is providing an additional service which is neither agoods' nor a profit making venture. Further one would not need much discussion to say that a service is not covered within the definition of supply on the face of it. Here again the above method of interpretation goes to favour the taxpayer. The definition clearly says that it is on disposal of goods while aservice' is neither a `goods' nor it can be called a disposal.

The claim of the assessee that there is no charge on transportation under Sales Tax Act stands accepted.

Chambers English Dictionary; Black's Law Dictionary Fifth Edition; AIR (1921) 1 K.B. 64; Commissioner of Income Tax v. Messrs Lever Brothers Pakistan Ltd 1990 PTD 389-B and Messrs Jugotekstil Impex, 61001, Lubijana Yugosalavia v. Messrs Shams Textile Mills Ltd. 1990 MLD 857 para. 13 ref.

(e) Words and phrases---

----"Furtherance"---Meaning.

Chambers English Dictionary and Black's Law Dictionary Fifth Edition ref.

(f) Interpretation of statutes---

----Fiscal statute---Principles for interpretation.

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.

While interpreting a fiscal statute if there is any doubt, the same should be decided in favour of the taxpayer.

Nothing can be intended, no presumption can be attached, nothing can be read into which is not provided. Besides even if one considers it to be as doubtful situation it again cannot go in favour of Revenue.

Rizwan Akhtar Awan for Appellant.

Saleem Zulifqar Khan for Respondent.

Date of hearing: 17th March, 2008.

2008 P T D 1715

[Lahore High Court]

Before Nasim Sikandar and Kh. Farooq Saeed, JJ

Messrs AL-HABIB FLOUR MILLS

Versus

COMMISSIONER OF INCOME TAX, MEDIUM TAXD4YERS UNIT, RAWALPINDI

Tax Reference No.48 of 2006, heard o, 27th May, 2008.

(a) Interpretation of statutes---

----Remedial and curative legislations, especially when they removed an ambiguity or provided a relief to cure an ill, would apply to all pending cases.

Commissioner of Income Tax v. Shahnaz Ltd. and others 1993 SCMR 73; Dreamland Cinema Multan v. Commissioner of Income Tax, Lahore PLD 1997 Lah. 292 and Dawood Cotton Mills v. Commissioner of Income Tax 2000 PTD 285 ref.

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

----S.80-D---General Clauses Act (X of 1897), S.6---Charge created on turn over of individual and association of persons for year 2000-2001 withdrawn by amendment brought in S.80-D of Income Tax Ordinance, 1979 through Finance Ordinance, 2001---Effect---Charging provision in a fiscal law, unless repealed, would remain effective---Where legislature repealed a provision or decided not to charge tax on or before a specific date, then same would not become a curative or a remedial law---Such withdrawal of charge neither would amount to cure or provide a remedy against some ill nor could same be given retrospective operation in absence of any such intention shown by legislature---Principles.

(c) Interpretation of statutes---

----Fiscal statute---Repeal of charging provision---Effect---Where legislature repealed a provision or decided not to charge tax on or before a specific date, then same would not become a curative or a remedial law---Repeal of a provision of law would not affect right or liability accrued before its repeal---Such provision, unless repealed, would remain operative and effective---Principles.

Hafiz Muhammad Idrees for Applicant/Petitioner.

Ms. Shahina Akbar for Respondent.

Date of hearing: 27th May, 2008.

2008 P T D 1742

[Lahore High Court]

Before Kh. Farooq Saeed, J

Messrs RASHID ARMS COMPANY through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division and 3 others

Writ Petition Nos. 8483 and 8484 of 2008, heard on 21st July, 2008.

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

----Ss. 25 & 25-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods on basis of valuation advice---Competent Authority---Grievance of the petitioner was that valuation advice under S.25-A of Customs Act, 1969 having been issued by an Authority which was non-existent in the said Section, same was without jurisdiction---Petitioner had argued that such and similar valuation advices issued by the Authorities, not mentioned in S.25-A of the Customs Act, 1969 had already been held to be as ultra vires to the provisions of Customs Act, 1969 by the High Court in a number of such petitions---Authority which had issued impugned valuation ruling was Deputy Director, but S.25-A of the Customs Act, 1969 did not grant or delegate powers to a Deputy Director to issue such a direction---Such valuation ruling could be issued by the Collector of Customs on his own motion or Director of Customs Valuation on reference made to him by any person---Deputy Director not figuring any where in S.25-A of the Customs Act, 1969, constitutional petition was allowed in the manner that the value determined on the basis of an illegal valuation ruling was cancelled---Customs Authorities would revalue the consignment ignoring the same by resorting to S.25 of Customs Act, 1969.

(b) Interpretation of statutes---

----Legislation---Legislation was always for the public-at-large with the spirit of the welfare of State as well as its citizens--Progressive changes in law were made to match the circumstances with progress and the development in the society.

Mian Abdul Ghaffar for Petitioner.

Ehsan Ullah Cheema for Respondent.

Date of hearing: 21st July, 2008.

2008 P T D 1781

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs RIAZ BOTTLERS (PVT.) LTD. through Tax Manager

Versus

COMMISSIONER OF INCOME TAX and another

Writ Petition No.8804 of 2008, decided on 5th August, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S.127---Power of Commissioner (Appeals) to grant interim relief---Scope---Commissioner (Appeals) does have a clear and unequivocal inherent power to grant interim relief depending upon the circumstances of each case.

Umer Farooq Syed v. Commissioner of Wealth Tax and others 1991 PTD 8727 fol.

Mst. Inayat Begum v. CIT and others 1985 PTD 375 ref.

Ch. Anwaar-ul-Haq for Petitioner.

Shahid Jamil Khan for Respondents.

2008 P T D 1802

[Lahore High Court]

Before Ali Akbar Qureshi, J

Messrs FAZAL DIN & SONS (PVT.) LTD. through share-holder and Chief Executive

Versus

TAXATION OFFICER

Writ Petitions Nos.6845, 6605, 6731 and 6732 of 2008, decided on 24th June, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(1)(5)---Constitution of Pakistan (1973), Art.199---Constitu­tional petition---Contention of the assessee was that department had issued notices for re-assessment without observing the provisions of S.122(5) read with S.122(1) of the Income Tax Ordinance, 2001---Validity---Counsel for Revenue undertook before High Court to get the notice issued from the department under the relevant provisions of the Ordinance and High Court further directed that concerned authority shall afford fair and reasonable opportunity to the petitioner---Grievance of the petitioner having been redressed, constitutional petitions were disposed of accordingly.

Siraj-ud-Din Khalid for Petitioner.

Shahid Jamil Khan for Respondent.

2008 P T D 1882

[Lahore High Court]

Before Maulvi Anwarul Haq and Saif-ur-Rehman, JJ

Messrs ISLAM TRADING COMPANY through Proprietor

Versus

COLLECTOR OF CUSTOMS, DRY PORT, SAMBRIAL, SIALKOT and 2 others

Inter-Court Appeal No.241 in Writ Petition No.8388 of 2008, heard on 5th August, 2008.

Customs Act (IV of 1969)---

----Ss. 25 & 30---Law Reforms Ordinance (XII of 1972), S.3---Intra-Court Appeal-Determination of customs value of goods---Appellant/assessee, contended that he was justified in assuming that as per the amount intimated vide letter, the Department had reduced the amount of payable duty and that on the basis of said assumption, appellant did not avail the right. of appeal and impugned demand was without lawful authority---Authorities, on the other hand contended that no ground existed for making the said assumption as even the letter in question had duly narrated the actual amount assessed and claimed by the Department---Appellant was fully aware of the contents of the assessment order and it proceeded to challenge the same before the Federal Tax Ombudsman---Validity---Notice had clearly narrated the amounts that were found to be due as differential duty against both consignments---Record admittedly showed that the assessment was not challenged in any other manner and no competent Authority or Court reduced the same---Appellant, in circumstances, could not say that .it was misled in the matter of filing of appeal---Appeal was dismissed.

Shehzada Mazhar for Appellant.

Afzaal Ahmed Hashmi for Respondents Nos.1 to 3.

Date of hearing: 5th August, 2008.

2008 P T D 1897

[Lahore High Court]

Before Syed Hamid Ali Shah and Malik Saeed Ejaz, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX MULTAN ZONE, MULTAN

Versus

REHMAN ENTERPRISES

T.R. Nos.12, 17, 18, 33 to 41 of 2008, 6 of 2006 and 5, 6 and 7 of 2007, decided on 8th April, 2008.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 153(1)(b), 170 & First Sched., Part (IV), Division III, Clause 2(a)---C.B.R. Circular No.11 of 1991---Refund of income tax---"Services"---Carriage contractor---Grievance of income tax authorities was that Appellate Authority was not justified in directing them to issue refund to assessees, who were carriage contractors---Validity---Carriage contractors were providing services for their principal company, therefore, their returns were to be adjudged from such angle only---Carriage contractors were covered under First Schedule, Part (IV), Division III, Clause 2(a) of Income Tax Ordinance, 2001, and the same had sufficiently conveyed intention of legislature that carriage contractors would fall within the purview of "services" as envisaged in S.153(1)(b) of Income Tax Ordinance, 2001---Order of appellate authority was rightly upheld by Income Tax Appellate Tribunal---Provisions of Circular No.11 of 1991, had no application to matters falling under Income Tax Ordinance, 2001, and word "providing" service had rightly been interpreted by Income Tax Appellate Tribunal---High Court declined to interfere with the orders passed by two forums below---Reference was rejected in circumstances.

Syed Khalid Javaid Bukhari for Applicant.

Date of hearing: 8th April, 2008.

2008 P T D 1916

[Lahore High Court]

Before Khawaja Farooq Saeed, J

SHAMS-UD-DIN

Versus

THE STATE through DIRECTOR, DIRECTORATE OF INTELLIGENCE AND INVESTIGATION-F.B.R., LAHORE and 2 others

Writ Petition No.9602 of 2008, heard on 5th August, 2008.

Customs Act (IV of 1969)---

---Ss. 156(90) & 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Assessment of duty---Adjudication officer ordered outright confiscation of goods---Order was partly allowed in appeal in the manner that the goods were allowed to be released on payment of 30% fine in lieu of confiscation in addition to payment of assessed duty, taxes etc.---Word "propriety" in this context has reference to the propriety of the order in the light of the law which was applicable and was not intended to grant general and unlimited jurisdiction to the revising authority to set aside any ground whatsoever---Where the declared value had not been appraised properly and the market factors made it clear unequivocally that the declared and appraised value were still ridiculously low, department could exercise its jurisdiction---Appraisement could not be called as legal if the same had been done mala fide with the intention of depriving the revenue of its well deserved share---If such factor is proved beyond doubt that the value of raw-material of the product is higher than the price of the manufactured item it is definitely improper---Onerous duty of the department is to determine the value of goods by adopting the methods provided under S.25, Customs Act, 1969---High Court confirmed the exercise of jurisdiction by the Collector but repelled the view that subsequent appraisement could be made on the basis of the valuation ruling---Constitutional petition was disposed of accordingly.

Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore 2002 CLC 705 and Shahzad Zahir Shah and 6 other v. Muhammad Usman Ghani and 3 others 2005 YLR 1394 ref.

Umar Ahmad Khan for Petitioner.

Khawar Ikram Bhatti for Respondents.

Date of hearing: 5th August, 2008.

2008 P T D 1928

[Lahore High Court]

Before Syed Hamid Ali Shah and Malik Saeed Ejaz, JJ

KHAWAR SHABBIR

Versus

MEMBERS JUDICIAL/TECHNICAL, CUSTOMS EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE and 3 others

Custom Reference No.9 of 2007, decided on 16th April, 2008.

Customs Act (IV of 1969)---

----Ss. 2(s), 116, 178 & 196---Notification S.R.O. 255 (I)/2007, dated 17-3-2007---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1) & (3)---Provincial Motor Vehicles Ordinance (XIX of 1965), S.33---Smuggled vehicle---Confiscation or redemption fine---Principle---Motor registration---Incorrect particulars---Vehicle owned by applicant was confiscated by customs authorities on the ground that it was smuggled vehicle with cut and welded chassis number-Validity---Confiscated vehicle had nothing of original vehicle except for chassis frame number, which, after cut, was welded---Vehicle had no soul, it had only a body, which comprised of a frame, compartment of seating and driving and engine, thus adjudication of all parts, as a whole was to be undertaken---Adjudication, when culminated into confiscation, vehicle as a whole was confiscated---Seating compartment, body frame and engine in car in question, were components of a car, which was of year 1994 model car and not one which petitioner had purchased in auction---Appellate authority committed illegality in considering just one part of chassis frame (where number was engraved) as vehicle and treating engine, seating compartment and body frame as parts---Smuggled vehicles with tampered chassis were not only loss to National Exchequer but were security threat as well---Applicant had been plying the vehicle in contravention of provisions of Ss.3 (1) and (3) of Imports and Exports (Control) Act, 1950---Applicant did not intimate Provincial Registration Authority that particulars contained in registration certificate, no longer remained accurate and thus offended provisions of S.33 of Provincial Motor Vehicles Ordinance, 1965---Customs authorities could not take any action with regard to violation of provisions of Provincial Motor Vehicle Ordinance, 1965---Smuggled vehicles with non-tampered chassis frame and auto parts imported as used or in second hand condition, brought into Pakistan through specified routes, mentioned at serial (d) and (g) in table annexed to notification S.R.O. 255(I)/2007, dated, 17-3-2007, could be released on payment of fine in lieu of confiscation, at rates specified in column (3) of the table---Vehicle of applicant as per clause (a) of notification S.R.O. 255(I)/2007, dated, 17-3-2007, was not subject to release against redemption fine---No option to pay fine in lieu of confiscation, was available to applicant and held rightly so by the authorities while passing order in original---.No infirmity or illegality was seen in the order passed by Customs, Federal Excise and Sales Tax Appellate Tribunal, restoring order in original passed by the authorities--Reference was rejected in circumstances.

Collector of Customs and another v. Zeeshan Haider Civil Petition No.1217 of 2003 and Mr. Muhammad Amjad s/o Haji Gos Buksh, Nawan Shehr Multan v. Superintended Customs Anti-Smuggling Squad, Multan and others distinguished.

Muhammad Ameer Bhatti for Petitioner.

Ahmad Raza for Respondents.

2008 P T D 1940

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Dr. ZAFAR HAIDER

Versus

INCOME TAX APPELLATE TRIBUNAL through Chairperson and 2 others

Writ Petition No.1495 of 2008, heard on 7th May, 2008.

Income Tax Ordinance (XXXI of 1979)---

----S.156---Constitution of Pakistan (1973), Art.199---Constitutional petition---Practice and procedure---Rectification of mistake---Grievance of assessee was that his rectification application was dismissed by Income Tax Appellate Tribunal without deciding three grounds raised by him---Validity---On all judicial forums, there was honoris duty to discuss and dispose of what had been argued---Pleadings in terms of three grounds with special reference to ex parte assessment were not adjudicated by Income Tax Appellate Tribunal---High Court, in exercise of constitutional jurisdiction, directed Income Tax Appellate Tribunal to decide the grounds which were omitted at the time of original decision and remanded the appeal to the Tribunal ---Petition was allowed accordingly.

Commissioner of Income Tax, Companies II, Karachi v. National Food Laboratories" 1992 SCMR 687 = 1992 PTD 570 ref.

Siraj-ud-Din Khalid for Petitioner.

Jan Muhammad Chaudhary for Respondent.

Date of hearing: 7th May, 2008.

2008 PTD 1958

[Lahore High Court]

Before Nasim Sikandar, J

Messrs ADAM SUGAR MILLS LIMITED through Director

Versus

CUSTOMS, FEDERAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE and 3 others

Writ Petition No.7005 of 2007, decided on 15th September, 2008.

Customs Act (IV of 1969)---

----Ss. 194-A, 194-B & 194-C---Constitution of Pakistan (1973), Art.199---Constitutional petition---Dismissal of appeal on technical ground of default in appearance--Petitioner had challenged two orders of Appellate Tribunal, first through which Tribunal had dismissed the appeal filed by the petitioner for non-prosecution, while by way of second order application for restoration of appeal was dismissed---Counsel for Revenue had pleaded that since petitioner had failed to put in appearance, the Tribunal had all the legal justification to dismiss its appeal for non-prosecution---Counsel for petitioner, however denied the factum of service---Provisions of S.194-B of Customs Act, 1969, were clear that the Appellate Tribunal was required to give an opportunity of being heard to the parties to an appeal and to pass such orders as it would think fit confirming, modifying or annulling the decision or order appealed against or could remand the case to the Authority passing the order impugned before it---Substantive provisions of S.194-B of Customs Act, 1969 could not be interpreted in any other manner except that the Tribunal was competent to confirm, modify, annul as well as to remand an order appealed against, which was possible only after stating reasons therefor---Disposal of appeal for non-prosecution was not discernible from the substantive provisions of S.194-B of Customs Act, 1969---Impugned order for dismissal of the appeal for non-prosecution as also the second order refusing to restore the appeal, were set aside by High Court; consequently, the appeal filed by the petitioner would be deemed to be pending before the Tribunal to be disposed of after giving both the parties an opportunity of being heard.

Walayat Flour Mills, Lyallpur v. Commissioner of Income-Tax, Rawalpindi 1973 PTD 530 and S. Chenniappa Mudalier v. Commissioner of Income Tax (1964) 10 Taxation 220 ref.

Ahsan Mehmood for Petitioner.

Ms. Kausar Parveen for the Revenue.

2008 P T D 1960

[Lahore High Court]

Before Ali Akbar Qureshi, J

Messrs BILAL IKRAM

Versus

FEDERAL BOARD OF REVENUE through Chairman, Islamabad and 2 others

Writ Petition No.5786 of 2008, decided on 22nd September, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S. 177(4)--CBR Circular No.1 of 2004 dated 24-7-2004---Constitution of Pakistan (1973), Art.199---Constitutional petition---Universal Self-Assessment Scheme---Assessee had filed its return of income under Universal Self-assessment Scheme and had paid tax due---Department selected the case of assessee for audit in terms of S.177(4) of Income Tax Ordinance, 2001 and issued notice---Assessee, in terms of CBR Circular No.1 of 2004 dated 24-7-2004 had revised its income tax return by increasing 20% higher tax as compared to the tax payable on the original return but the department, instead of accepting the revised return of assesses, selected the case for audit under S.177(4) of the Income Tax Ordinance, 2001---Contention of the assessee was that the assessee having complied with the terms of CBR Circular No. 1 of 2004, department was bound to accept the revised return---Validity---Held, department having failed to rebut the contentions raised by the assessee, constitutional petition of the assessee was to be allowed by High Court and thus notice in question was declared to be illegal, unlawful and without lawful authority.

Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others (2006) 94 Tax 317 and Messrs Iftikhar Brothers, Civil Quarters Road, Sheikhupura v. Central Board of Revenue through Chairman, Islamabad and another 2006 PTD 2452 ref.

Muhammad Ajmal Khan and Zulfiqar Khan for Petitioner.

Sajjad Hussain Jafari for Respondents.

2008 P T D 1973

[Lahore High Court]

Before Khawaja Farooq Saeed, J

XEN SHAHPUR DIVISION

Versus

COLLECTOR SALES TAX (APPEALS) COLLECTORATE OF CUSTOMS FEDERAL EXCISE AND SALES TAX, FAISALABAD and 2 others

Writ Petition No.8532 of 2008, decided on 30th July, 2008.

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

----Art. 165-A---Sales Tax Act (VII of 1990), Ss.3 & 36---Tax is chargeable on a corporation, a company or any other body or institution, from a business or trade or any income arising from such trade even if it is owned and controlled by Federal or Provincial Government, regardless of ultimate destination of such income---Lifting of statutory veil is no longer permissible and the distinct juridical personality of the incorporate or statutory body was recognized notwithstanding the control, distinction and functioning of such bodies.

Karachi Development Authority v. Central Board of Revenue (C.B.R) 2005 PTD 2131; Shaukat Ali v. Commissioner, Lahore Division and others PLD 1963 (W.P.) Lah. 127 and Mian Muhammad Abdullah v. District Judge, Sahiwal and 6 others PLD 1985 Lah. 467 ref.

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

---Ss. 47 & 36---Constitution of Pakistan (1973), Art.199---Constitutional petition---Maintainability---Petitioner having failed to avail the regular remedy in the terms of `Reference' under Sales Tax Act, 1990 before the High Court, and issue raised pertaining to jurisdiction, constitutional jurisdiction had rightly been invoked.

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

---S. 36---Constitution of Pakistan (1973), Art.199---Constitutional petition---Notice for recovery of tax not levied or short levied or erroneously refunded---Limitation---Provision of S.36(2), Sales Tax Act, 1990 provided jurisdiction for issuance of a notice only for three years prior to the date of such issuance; going beyond the said mandatory limit shall amount defeating the intention of legislature which could not be allowed---Addition of period prior to said cut of date in the notice for recovery was therefore, exercise of a jurisdiction beyond the mandate of law and provided full room for exercise of jurisdiction by High Court under Art.199 of the Constitution---Notice beyond the said period was declared to be illegal---High Court partly allowed the constitutional petition in the manner that the charge created in principle was held to be as lawful while the period of the same was reduced to the extent of the period fixed under S.36(2) of the Sales Tax Act, 1990---Principles.

W.P. No.13331 of 2006 fol.

(d) Interpretation of statutes---

----Fiscal Statute---Fiscal law is to be applied with full authority and in its natural meanings--One has to look merely at what is clearly said and there is no room for any intendment---Neither there is equity about a tax nor presumption as to tax---Nothing is to be read in, nothing is to be implied---One can only look fairly at the language used.

Ch. Muhammad Sadiq, Addl. A.-G. Petitioner.

Muhammad Nawaz Cheema for Respondents.

2008 P T D 1982

[Lahore High Court]

Before Syed Hamid Ali Shah and Ali Akbar Qureshi, JJ

COMMISSIONER OF INCOME TAX, ZONE-C, LAHORE

Versus

Messrs MARGALLA TEXTILE MILLS LTD., LAHORE

P.T.R. No.416 of 2007, heard 27th March, 2008.

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

----Ss. 50 & 52---Liability of person failing to deduct or pay tax---Deduction of tax at source---Scope and application of Ss.50 & 52, Income Tax Ordinance, 1979.

Plain language of section 50(4) of the Income Tax Ordinance, 1979 reflects that the advance tax, at the time of making of payment at a specified rate, is liable to deduction, by a person responsible for making payment to another, on account of supply of goods, services rendered or execution of the contract. His failure to deduct or collect or failure to pay tax so collected or short collection of tax entail penal consequence of declaring him, deemed assessee. Reading sections 50 and 52, together it appears that withholding tax agent, has not been authorized to take upon him the responsibility to ascertain that recipient is tax payer and in that capacity, might have paid the tax. It is for the authorities of the income tax department to examine the case of such assessee and satisfy themselves as to whether the recipient subjected to advance tax has already paid the tax liable to collection under section 50(4). This exercise can be done, by obtaining necessary orders from the concerned Commissioner, who, on his satisfaction that advance tax stands already paid, can give appropriate directions under section 50(4)(b). The person responsible for payment, till such time such order/direction is accorded, will not make payment without deducting advance tax. Withholding agent, is neither vested with any power to ascertain that tax by recipient has been paid, nor absolved of his responsibility of deducting or collecting advance tax. Collection/deduction cannot be avoided on assumptions.

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

----Ss. 50, 52, 86 & 156---Deduction of tax at source---Liability of person failing to deduct or pay tax---Scope---Assessee in default---Determination---Principles---Where the recipient had discharged his liability, after inclusion of the payment from the assessee in default in the total income and such amount had already suffered the incidence of tax, the payer could not be held to be an `assessee in default' and the department could not demand further tax from the payer by recourse to the provisions contained in S.52, Income Tax Ordinance, 1979---Additional tax under S.86 of the Ordinance would however, remain chargeable from the payer for his failure to deduct tax, while making payment as had been provided in S.52, Income Tax Ordinance, 1979---If, however, a liability under S.52 had been created against the assessee in default and it was proved by him with evidence that certain payments made by him had already suffered the incidence of tax in the hands of the recipient, he may approach the assessing officer for rectification as stipulated under S. 156, Income Tax Ordinance, 1979---Principles.

2001 PTD (Trib.) 2605; Continental Chemicals (Private) Ltd. v. Pakistan and others 2001 PTD 570; (1982) 137 ITR 230; (1983) 140 ITR 818, 832 and (1989) 176 ITR 282 ref.

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

----Ss. 50, 52 & 76---Deduction of tax at source---Liability of person failing to deduct or pay tax at source---Scope---Assessee in default---Determination---Assessee/payer cannot be held an assessee in default, for non-deduction from a tax payer, before whom an exemption certificate is produced or an order of an authority in hierarchy of Income Tax department is produced---Recipient, who has not produced the certificate, his payment shall be amenable to deduction of advance tax---Recipient, who has himself paid the taxes, the withholding against cannot be held as defaulter to the extent of non-deduction, however, he is subject to penalty under S.86, Income Tax Ordinance, 1979.

2001 PTD (Trib.) 2605; Continental Chemicals (Private) Ltd. v. Pakistan and others 2001 PTD 570; (1982) 137 ITR 230; (1983) 140 ITR 818, 832 and (1989) 176 ITR 282 ref.

Khadim Hussain Zaidi for Appellant.

Nemo of Respondent.

Date of hearing: 27th March, 2008.

2008 PTD 1993

[Lahore High Court]

Before Syed Hamid Ali Shah and S. Ali Hassan Rizvi, JJ

Messrs ASIA GHEE MILLS (PVT.) LTD. through Manager (Accounts)

Versus

ASSISTANT COLLECTOR (AUDIT), SALES TAX & FEDERAL EXCISE, MULTAN and 2 others

S.T.R. No.3 of 2008, decided on 2nd April, 2008.

Sales Tax Act (VII of 1990)---

----Ss. 3-B, 30, 47 & 72---Reference to High Court---Collection of excess tax---Responsibilities and primary functions of Collector (Appeals) or quasi-judicial functionaries---Obeying and following orders of Federal Board of Revenue---Collector (Appeals) or other quasi-judicial functionaries had different responsibilities; their primary function was to determine judicially 'the valuable right of the Revenue on the one hand and the tax payer on the other---While performing such functions, said functionaries were required to decide the matter impartially and justly, they were not bound to obey and follow the instructions and orders of Federal Board of Revenue---In the present case Auditors had only pointed out that excess funds had been claimed and they had not adjudicated upon the matter---Functionaries while performing quasi-judicial duties were not required to follow the instructions of Federal Board of Revenue.

Messrs Leghari Beverages (Pvt.) Ltd., Rahim Yar Khan and others v. Additional Collector Customs, Sales Tax & Central Excise, Multan and others 2005 PTD (Trib.) 1571 and Crescent Re-Polling Mills, Lahore v. Assistant Collector of Sales Tax, Lahore 2005 PTD 2436 ref.

Mian Abdul Ghaffar for Petitioner.

2008 PTD 1998

[Lahore High Court]

Before Kh. Farooq Saeed, J

Messrs ROYAL EDU CARE through Proprietor

Versus

ASSISTANT COMMISSIONER OF INCOME TAX/TAXATION OFFICER, LAHORE

Writ Petition No.8974 of 2008, heard on 30th July, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 136 & 66---Reference/appeal---Limitation---Legislative amend­ments of Ss.136 & 66, Income Tax Ordinance, 1979---Impact---Intention of law (as amended) was that there was no "Appeal" provided under S.136, Income Tax Ordinance, 1979 w.e.f. 2000 and the same had been replaced by "Reference"---When in the earlier round there was a continuation of the proceedings in terms of "appeal" or "reference" the limitation provided in S.66 of the Income 'Tax Ordinance, 1979 for setting aside an order could. not be applied---Where, while mentioning the term "appeal" words filed under 5.136, Income Tax Ordinance, 1979 having also been mentioned, one should not have any doubt in his mind that it was either appeal' orreference' filed under S.136 which provided an exception for ignoring the limitation provided under S.66(1)(c) of the Income Tax Ordinance, 1979---Principles.

The legislature has not amended the law advisedly. The provisions of section 136 of Income Tax Ordinance, 1979 were earlier amended in 1997 when the "reference" under the subsection was converted into "Appeal". The corresponding additions were made in connecting sections including 66(1)(c) of the Ordinance. Later when the legislature in its wisdom again converted the appeal under section 136 to Reference' through Finance Ordinance, 2000, corresponding word in other sections with special reference to section 66(I)(c) was not amended. This omission has created anomaly. The intention of the law, however, is very clear. There is no appeal provided under section 136 w.e.f. 2000 and the same has been replaced byReference'.

Redundancy or superfluity cannot be attributed to the legislature. No word in law is inserted without purpose. It is only an ignorance on the part of the people who hurriedly pushed amendments in law for short term purposes without realizing, the long term effects. When there is no appeal' provided under section 136 keeping the wordAppeal' in section 66(1)(c) is nothing but negligence on the part of the draftsman and it cannot be understood to be the intention of the legislature. When in 1997, the said section had provided an appeal against the order of Income Tax Appellate Tribunal, the word `Appeal' filed were added in the corresponding S.66(1), as a result of which the limitation provided for reassessment on a remand order became inapplicable. The same should have been replaced by the words "Reference filed" after the amendment in section 136 by providing reference to High Court as against the appeal to High Court. Therefore, omission of the Draftsman is to be ignored in the presence of the facts.

When in the earlier round there was a continuation of the proceedings in terms of Appeal or Reference' the limitation provided in section 66 for a set aside order could not be applied. The connotationAppeal filed' would become redundant, if the same was not understood to be as Reference' filed under the peculiar circumstances. Further since while mentioning the termAppeal' words filed under section 136 have also been mentioned, one should not have any doubt in mind that it is either appeal or reference filed under section 136 which provides an exception for ignoring the limitation provided under section 66(1)(c).

Muhammad Inayatullah Cheema v. Sardar Ali Raza Masood Qazilbash 2002 PTD 1195 and Mst. Inayat Begum v. Commissioner of Income Tax, Zone-B, Lahore 1985 PTD 375 ref.

Latif Ahmad Qureshi for Petitioner.

Jan Muhammad Chaudhary for Respondent.

Date of hearing: 30th July, 2008.

2008 P T D 270

[Peshawar High Court]

Before Raj Muhammad Khan and Shah Jahan Khan, JJ

C.I.T./W.T. COMPANIES ZONE, PESHAWAR

Versus

SARHAD DEVELOPMENT AUTHORITY, PESHAWAR

S.A.O. No.33 of 2000, decided on 12th December, 2006.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 2(16), 22 & 27(2)(a)(ii)---Sarhad Development Authority Act (XI of 1973), S.4---Lease money and interest received by Sarhad Development Authority from leaseholders of industrial plots---Assessing Officer treated receipt of lease money and interest as business activity of assessee taxable under S.22 of Income Tax Ordinance, 1979---Plea of assessee was that industrial plots owned by Provincial Government were not sold, but were only leased out by assessee; that land of such plots being capital asset and receipt on account of lease money thereof being of nature of capital gains was exempt under S.27(2)(a)(ii) of Income Tax Ordinance, 1979---Validity---Disposal of industrial plots by assessee on lease would not tantamount to outright sale---Income from simple lease would be considered as having been derived from business of leasing of plots instead of sale thereof---Entire premium received 'in lump sum by assessee as lease money might not be subjected to tax in the year of its receipt, but to be spread over to number of years of leasing period and charged to tax with money relatable to each assessment year---Principles.

K.S. Krishna Rao v. Commissioner of Income Tax, Andra Pardesh 1991 PTD 286 (SC) ref.

Eid Muhammad Khattak for Petitioner.

Imtiaz Ali for Respondent.

Date of hearing: 12th December, 2006.

2008 P T D 1394

[Peshawar High Court]

Before Saeed Maroof Khan and Zia-ud-Din Khattak, JJ

BACHA-UD-DIN

Versus

GOVERNMENT through Collector Customs, Peshawar and 6 others

Writ Petition No.1169 of 2007, decided on 17th January, 2008.

Customs Act (IV of 1969)---

----Ss.201, 16, 168 & 169---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Criminal Procedure Code (V of 1898), Ss. 523 & 550---Constitution of Pakistan (1973), Art. i99-Constitutional petition---Confiscation of vehicle---Sale of vehicle through auction---Vehicle in question, on suspicion of having been involved in the commission of offence, was detained and confiscated---Petitioner, who claimed legal import of vehicle, requested for its release on payment of duty and taxes, which was accepted and release of vehicle was ordered on payment of redemption fine and duty and taxes leviable---Customs Department, during that period, had already auctioned the vehicle, which offended the petitioner who filed constitutional petition---Petitioner had alleged that vehicle was auctioned in undue haste and that no notice was given to the petitioner before said auction---Customs Department denied said allegations and urged that a notice under S.201 of Customs Act, 1969 was given to petitioner through. registered post---Evidences on record had established that notice under S.201 of the Customs Act, 1969 was given to the petitioner regarding sale/auction of vehicle---Customs Department, in circumstances, could not be held to have violated any provisions of Customs Act, 1969---Constitutional petition was dismissed, however as petitioner was allowed to redeem the vehicle on payment of redemption fine, in addition to duty and taxes leviable thereon, he was entitled to receive the sale proceeds from the department in accordance with law.

Petitioner in person.

Zubair Shah, Assistant Collector, Customs (Auctions)/Respondent No.4 as well as Muhammad Jamil, Law Officer, Customs Department in person.

2008 P T D 1638

[Peshawar High Court]

Before Muhammad Qaim Jan Khan and Jehanzaib Rahim, JJ

TILA MUHAMMAD and others

Versus

ASSISTANT COLLECTOR CUSTOMS and 4 another

Writ Petition No. 690 of 2007, decided on 4th May, 2007.

Customs Act (IV of 1969)---

---Ss. 156(1)(8)(89) & 157---Constitution of Pakistan (1973), Art.199---Constitutional. petition---Illeged export---Confiscation of trucks---Show-cause notice was issued to petitioners on allegation that they being proprietors of International Customs Agency, managed illegal export---Petitioners duly submitted replies to said show-cause notice---Additional Collector Customs, by impugned order, confiscated Trucks of petitioners under S. 157 of Customs Act, 1969 and penalties of Rs.2,00,000 each were also imposed---Appeal filed by the petitioners against such confiscation and imposition of penalties was sub judice---Said appeal was pending before Collector Appeals Customs, who had also issued stay order, which was turned down by the Assistant Collector State Warehouse for no obvious reason---Assistant Collector State Warehouse and Additional Collector Customs were directed by High Court to stop the auction proceedings in respect of confiscated Trucks; and if the auction proceedings had taken place, they were further directed not to dispose of the Trucks till the disposal of appeal pending before the Collector Appeals Customs--Collector Customs was directed to dispose of the appeal within specified period.

Issac Ali Qazi for Petitioners.

2008 P T D 169

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Abdul Hameed Dogar, Khalil-ur-Rehman Ramday, Muhammad Nawaz Abbasi and Mian Shakirullah Jan, JJ

COMMISSIONER OF INCOME TAX, PESHAWAR

Versus

Messrs GUL COOKING OIL AND VEGETABLE GHEE (PVT.) LTD. and 6 others

Civil Review Petition No.63 of 2003, decided on 5th March, 2007.

(On review of the judgment of this Court, dated 25-4-2003 passed in Civil Appeal No. 1578 of 2000).

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

----Art.188---Supreme Court Rules, 1980, O.XXVI, R.1---Invocation of review jurisdiction of Supreme Court---Scope---"Error on the face of record"---Where an error of law or fact is discovered in the order itself, such an error falls within the category of "error apparent on the face of the record"---Failure of the court to take into consideration the material facts or statutory provisions which, if so considered, would have material effect on the fate of the case, would also amount to an "error on the face of record".

The power of review is conferred upon Supreme Court Under Article 188 of the Constitution read with Order XXVI, Rule 1 of Supreme Court Rules, 1980 and Supreme Court may, subject to law and practice, review its judgment or order if an error of law or fact, having material effect on the case on merits, is found apparent on the face of record or if 'such a material question of fact or of law bearing effect on the decision, has been overlooked. The review jurisdiction of Supreme Court is certainly invocable in a case in which an error either of fact or law is manifest and is found floating on the surface of the record. The Court may not hesitate to review an order passed on erroneous assumption of material facts or misconstruction of law which has a substantial effect on the fate of case and is considered a wrong order.

Where an error of law or fact is discovered in. the order itself, such an error falls within the category of error apparent on the face of record. The failure of the Court to take into consideration the material facts or statutory provisions which, if so considered, would have material effect on the fate of the case, would also amount to an error on the face of record.

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

----Ss.50(5), 56, 61, 63, 80DD & 2(21)(24)---Constitution of Pakistan (1973), Arts.247 & 188---Review of Supreme Court judgment---Assessee, a private limited company was running business in Tribal Areas where Income Tax Ordinance, 1979 was not applicable within the meaning of Art.247(3) of the Constitution---Exemption from payment of income tax---Scope---Held, decision of the question as to whether assessee was liable to the payment of income tax or not depends on the determination of fact whether the company having established its office only in tribal area, was carrying its business only in non-taxable areas or the income was also being derived from taxable area---Such being a pure question of fact, could not be decided by raising a presumption only on the basis of location of the manufacturing unit or the registered office of the company in the non-taxable area---Immunity from payment of income tax cannot be claimed without establishing the fact that taxable income was not being derived from the area where the Income Tax Ordinance, 1979 is applicable---Such essential aspects of the case having been overlooked in the judgment which has caused serious prejudice to the case of department on merits, Supreme Court reviewed its judgment and in consequence thereto the department was declared to be competent to proceed in the matter in accordance with law---Principles.

Provisions of sections 50(5), 56, 61, 63 & 2(21)(24) in the Income Tax Ordinance, 1979 authorize the Assessing Officer to issue notice to file return, require a person to attend his office, and produce or cause to be produced any evidence including the accounts and documents to ascertain the tax liability and similarly an assessee is entitled to produce evidence in rebuttal. In the light of the legal position, the decision of the question as to whether assessee company was liable to the payment of income tax or not depends on the determination of fact whether the company having established its office in Tribal Area was carrying its business only in non-taxable area or the income was also being derived from taxable area. This being a pure question of fact, could not be decided by raising a presumption only on the basis of location of the manufacturing unit or the registered office of company in non-taxable area. The Collector of Customs, as provided under section 80(DD) of the Income Tax Ordinance, 1979, was obliged to collect the advance income tax on imported edible oil on the basis of its value in terms of section 50(5) of the Ordinance and without ascertaining the liability of payment of income tax by way of holding a proper factual inquiry, no presumption in respect of non-taxability of the income of the company, could be raised under the law, therefore, the issue of notices to the assessee-company under sections 56 and 61 of the Ordinance was quite in accordance with law.

Exemption under the law from payment of income tax is available to a person or company carrying its business in tribal areas and income tax cannot be collected from such person or company by the tax collecting authorities of the Government unless the law relating to the collection of income tax is extended to the tribal areas by virtue of Article 247 of the Constitution. However, the question whether a company or a person derives income from business being carried out in taxable or non-taxable area, is a pure question of fact which cannot be decided without holding proper inquiry for determination of controversial facts regarding the tax liability. The business of a person or Company may or may not be confined to a particular place or area rather it may be expanded beyond the local limits of the area in which Income Tax Ordinance is not applicable and thus if the income tax is derived from the sale of products, which are manufactured in the factory situated in non-taxable area, both from taxable and non-taxable area, the question relating to the tax liability of such a business concern cannot be determined only on the basis of location of factory or its registered office rather the requirement of law in such case is to hold a proper inquiry and ascertain the correct factual position for determination of tax liability. The exemption from payment of tax is certainly available on the business being carried in tribal area in which income tax law is not applicable but the real question for determination in such a case would be whether a company with its manufacturing unit and registered office in non-taxable area, if is also carrying business in taxable area, is exempted from payment of income tax on its income as a whole or only on the income being derived from non-taxable area.

In the present case the careful examination of the record would suggest that no material was brought before the High Court or the Supreme Court on the basis of which a positive opinion could be formed about the business activities of the company and its tax liability for the purpose of exemption of income tax. It is apparent on record that this essential aspect of the case escaped the notice of Supreme Court and instead the question of taxability was decided only on the basis of consideration that the registered office of the company was situated in tribal areas in which the Income Tax Ordinance, 1979, was not applicable.

The controversial question as to whether the company was carrying business only in the tribal area or it was also operating in the settled area and was liable to pay income tax, requiring determination, has not been attended. It is thus manifest on the record that this essential aspect of the case was overlooked in the judgment, which has caused serious prejudice to the case of department on merits. In this view of the matter, thereof, review of the judgment in the present case is fully justified as it is crystal clear that immunity from payment of income tax could not be claimed without establishing the fact that taxable income was not being derived from the area where the Income Tax Ordinance, 1979 was applicable.

Review petition thus succeeds and in consequence thereto the Income Tax Department is competent to proceed in the matter in accordance with law.

Malik Muhammad Nawaz, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Petitioner.

M. Sardar Khan, Senior Advocate Supreme Court, Mumtaz Ahmed, Member (Legal) and M.S. Khattak, Advocate-on-Record for Respondents.

Date of hearing: 5th March, 2007.

2008 P T D 202

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C. J., Nasir-ul-Mulk, Ch. Ijaz Ahmed and Syed Jamshed Ali, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, LAHORE

Versus

SURRAYA ZAFAR and 941 others

C. As. Nos.1704 to 1905, 2427 to 2625 of 2006 and 33 to 38, 54 to 568, 647 to 653, 725 to 771, 821, 822; 829, 830, 964 and 965 of 2007, decided on 18th October, 2007.

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

----Ss.17-A(1)(b), 14(1)(2) & 15---Time limit for completion of assessment and reassessment--Held, to a return submitted under S.14(1) or 14(2), Wealth Tax Act, 1963 four years limitation applies for making an order of assessment---Limitation for making an order of assessment on a return under S.15 or revised return thereunder, is two years from the date of return but by virtue of the "clause" whichever is later, it may extend beyond' four years in a given case---Assessment orders on the returns filed under S.14(1) or 14(2) of Wealth Tax Act, 1963 passed after four years are liable to be set aside---Principles.

W.T.As. Nos.417/LB to 419/LB etc.; 2004 PTD (Trib.) 388; 2004 PTD (Trib.) 1014; Understanding of the Statutes by S.M. Zafars; Interpretation of Statutes by Bindra; Commissioner of Income Tax/ Wealth Tax, Lahore v. Muhammad Shafiq 2007 PTD 20; W.T.As. Nos.217/LB to 219/LB 2006 PTD (Trio.) 987, in W.T.As 1667/LB to 1674/LB-2004-PTD Tribunal 1014 and W.T.As. Nos.236/LB to 242/LB etc. 2005 PTD (Trib.) 517 ref.

(b) Interpretation of statutes---

----Every word in a statute is to be assigned some meaning and of course all provisions, ostensibly conflicting, have to be reconciled.

Muhammad Iqbal Vehniwal, Advocate Supreme Court for Appellants (in C.As. Nos.55 to 134, 306 to 317 of 2007).

Ahmer Bilal Sufi, Advocate Supreme Court for Appellants (in C.As. Nos.1837 to 1905, 1704 to 1718, 1722 to 1738 of 2006).

Malik Muhammad Nawaz, Advocate Supreme Court for Appellants (in C.A. No.830 of 2007).

Raja Abdul Ghafoor, Advocate Supreme Court for Appellants (in C.As. Nos.964, 965 of 2007).

Malik Amjad Hussain, Advocate Supreme Court for Appellants (in C.As. 543 to 568 of 2007).

Muhammad Ilyas Khan, Advocate Supreme Court for Appellants (in C.As. 1704 to 1905, 2427 to 2625 of 2006, 33 to 38 of 2007).

Syed Najum-ul-Hassan Kazmi, Advocate Supreme Court for Respondents (in C.As. Nos.1939, 1849, 1854, 1855, 1843, 1844, 1860, 1863, 1867 and 1870 of 2006).

Asghar Ahmad Kharal, Advocate Supreme Court for Respondents (in C.As. Nos. 1802, 1798 of 2006 and C.A. No.408 of 2007).

Syed Mansoor Ali Shah, Advocate Supreme Court, Iqbal Ahmed Cheema, R.I.P., Siraj-ud-Din Khalid, Advocate Supreme Court, Muhammad Iqbal Hashmi for Respondents (in C.As. 54, 380, 381 of 2007, 2499, 2529, 2507 and 2508 of 2006).

Muhammad Naeem Shah, Advocate Supreme Court for Respondents (in C.As. Nos.1771 to 1786, 1755 of 2006, 94, 398, 399, 400 and 401 of 2007).

Dr. Ilyas Zafar, Advocate Supreme Court for Respondents (in C.As. Nos.181, 279, 192, 265, 295 and 296 of 2007, 2561 and 2562 of 2006).

Muhammad Iqbal Hashmi, Advocate Supreme Court for Respondents (in C.As. Nos.436 to 438, 456 to 461, 427 to 429, 422 to 425, 413, 726 to 728, 732, 733 and 546 of 2007, 1795, 1748, 1760 of 2006).

Siraj-ud-Din Khalid, Advocate Supreme Court for Respondents (in C.As. Nos.1709, 711, 1738, 1742, 1754, 1801, 1806, 1851, 1902, 1795, 1799, 1746 and 1747 of 2006, 422 of 2007).

Syed Naveed Andrabi, Advocate Supreme Court and Faiz-ur-Rehman, Advocate on Record for Respondents (in C.As. Nos.2453, 2488, 2556, 1815, 2651 of 2006, 141, 142, 226, 268, 269 and 518 of 2007).

Respondent in person (in C.A. 448 and 528 of 2007).

Date of hearing: 18th September, 2007.

2008 P T D 253

[Supreme Court of Pakistan]

Present: Rana Bhagwandas and Muhammad Nawaz Abbasi, JJ

COMMISSIONER OF INCOME TAX, KARACHI

Versus

Messrs SHADMAN COTTON MILLS LTD., KARACHI through Director

Civil Petition No.503-K of 2006, decided on 22nd August, 2007.

(On appeal from the judgment of High Court of Sindh, dated 18-8-2006 passed in I.T.R. No.D-425 of 1999).

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

----S. 156(1)---Expression "mistake apparent on record" as used in S.156(1) of Income Tax Ordinance, 1979---Connotation stated.

The expression "mistake apparent on record" means the error or mistake so manifest and clear which, if is permitted to remain on record, may have material effect on the case. But an error of fact or law, which having direct nexus with the question of determination of rights of parties affecting their substantial rights or causing prejudice to their interest, is not a mistake apparent on the record to be rectified under S.156 of Income Tax Ordinance, 1979. The mistake must be of the nature, which is floating on the surface of record and must not involve, an elaborate discussion or detailed probe or process of determination.

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

----Ss. 66-A & 156---Revision of assessment order or rectification of mistake therein---Powers of Revenue and Appellate Tribunal---Distinction stated.

The plain reading of sections 66-A and 156 of Income Tax Ordinance, 1979 would show that jurisdiction under section 156 is very limited, because under this section, Income Tax Authorities are authorized to amend an order to the extent of rectifying the mistake appearing on the face of the record, and notwithstanding the fact that order passed under this section. has the effect of enhancing the tax liability or reducing the same must be within the scope and domain of law and must not be passed with the intent and purpose to increase the tax liability of the assessee, and further such an order must be passed after giving reasonable opportunity of hearing to the concerned parties. The Tax Authorities or the Tribunal, as the case may be, cannot exercise jurisdiction under section 156(1) of the Income-Tax Ordinance, 1979 in respect of an order, which, due to some legal or factual defect, has to be examined by the next authority in exercise of powers under section 66-A of the Ordinance or appellate jurisdiction as the case may be. Similarly Assessing Officer does not enjoy the power of review to recall its earlier order under section 156(1) of the Ordinance; rather he has limited power of rectifying the mistake on the face of the order without any material change. The tax liability of an assessee in the process of rectification cannot be altered on the basis of a consideration, which was not part of the original proceedings and the concept of rectification of mistake to correct the error committed in the assessment order, which is found floating on the surface of the record, may not be beyond the assessment already made, therefore, the question as to whether certain expenses can or cannot be deducted for the purpose of assessment of the income is a material question, which cannot be brought within the purview of section 156(1) of the Ordinance for the purpose of rectification of the order of assessment, rather in such a case the proper course for the concerned party is to invoke the provision of section 66-A of the Ordinance or avail any other remedy provided under the law. The intention of law-maker was not to provide a regular or an alternate remedy under section 156 of the Ordinance to re-open the assessment after it is finalized. The scope of section 156(1) of the Ordinance cannot be enlarged to all errors of law and facts committed in the assessment.

1992 PTD 570; (1959) 36 ITR 350; 1999 PTD 570 SC (Pak) and 1998 PTD 147 ref.

Mumtaz A. Sheikh, Member Legal, Central Board of Revenue for Petitioner.

Nemo for Respondent.

Date of hearing: 22nd August, 2007.

2008 P T D 858

[Supreme Court of Pakistan]

Before Saiyed Saeed Ashhad and Syed Zawwar Hussain Jaffery, JJ

COLLECTOR SALES TAX AND FEDERAL EXCISE L.T.U.

Versus

Messrs QASIM INTERNATIONAL CONTAINER TERMINAL PAKISTAN LTD.

Civil Petition No.588-K of 2006, decided on 3rd March, 2008.

(On appeal from the judgment dated 27-9-2006 passed by High Court of Sindh, Karachi in Special Sales Tax Reference Application No.81. of 2006).

Sales Tax Act (VII of 1990)---

----S.3(1-A)---Sindh Sales Tax Ordinance (VIII of 2000), S.3---Constitution of Pakistan (1973), Art.185(3)---Levy and payment of further sales tax---Counsel for petitioner had contended that the High Court had erred in holding that the provisions of S.3(1-A) of the Sales Tax Act, 1990, as it existed in 2001, would not be available to the government for charging/levying further tax and such could have been done only if S.3 of Sindh Sales Tax Ordinance, 2000 had specifically included provision of S.3(1-A) of Sales Tax Act, 1990---Counsel had further submitted that High Court had fallen in error in holding that the view/observation made by it was supported by five previous decisions; and submitted that all of them were distinguishable and not applicable to the facts and circumstances in the present case---Contentions advanced required thorough examination---Leave to appeal was granted for examination of said questions and any other allied or connected issue which could be found necessary to be considered at the time of final hearing.

Aqeel Ahmed Abbasi, Advocate Supreme Court and Akhlaq Ahmed Siddiqui, Advocate-on-Record for Petitioner.

Nemo for represented.

2008 P T D 1157

[Supreme Court of Pakistan]

Present: Abdul Hameed Dogar, C.J. and Muhammad Nawaz Abbasi, J

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONES, PESHAWAR

Versus

Messrs RIVER SIDE CHEMICALS (PVT.) LTD. GADOON

Civil Petition Nos. 827-829 of 2007, decided on 19th December, 2007.

(On appeal from the judgment dated 12-6-2007 passed by Peshawar High Court, Peshawar in T.R. No.159 of 2003).

Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Part I, Cls. (122-C) & (118-C)---Exemption, grant of---Conditions---Grant of concession in the nature of exemption from payment of duties must be given strict interpretation and the person getting such benefit must satisfy all conditions for such exemption but once the required conditions are complied with, the exemption available to a person under the law cannot be taken away by the concerned authorities in their discretion.

Federation of Pakistan v. Zaman Cotton Mills 2001 SCMR 563 distinguished.

Mumtaz A. Sheikh, Member F.B.R. for Petitioner.

Nemo for Respondent.

Date of hearing: 19th December, 2007.

2008 P T D 1459

[Supreme Court of Pakistan]

Before Iftikhar Muhammad Chaudhry, C.J. Tassaduq Hussain Jillani and Karamat Nazir Bhandari, JJ.

COLLECTOR OF SALES TAX, LAHORE and others

Versus

HASEEB WAQAS SUGAR MILLS (PVT.) LTD. and others

C.P. No.2689-L of 2002, decided on 7th July, 2005.

(On appeal from the judgment of the Lahore High Court dated 26-6-2002 passed in Writ Petition No.4303 of 2002).

Sales Tax Act (VII of 1990)---

----Ss. 7 & 30---Constitution of Pakistan (1973), Art. 185(3)---Determination of tax liability---Counsel for parties had stated that High Court vide judgment passed in appeals to examine the identical issue having remanded a number of cases to concerned Collector of Sales Tax, setting aside impugned judgment, same order be passed in the petition for leave to appeal---In view of earlier decision of High Court, petition for leave to appeal was converted into appeal and allowed---Impugned order was set aside and case was remanded to the Collector of Sales Tax for disposed.

A. Karim Malik, Sr. Advocate Supreme Court, Aslam Chaudhry, Advocate-on-Record and Mumtaz Ahmad, Member (Legal) C.B.R. for Petitioner.

Shahid Karim, Advocate Supreme Court and Mehmud-ul-Islam, Advocate-on-Record for Respondents.

2008 P T D 1729

[Supreme Court of Pakistan]

Present: Faqir Muhammad Khokhar, Mian Hamid Farooq and Sheikh Hakim Ali, JJ

DEPUTY COLLECTOR CUSTOMS

Versus

Messrs TRADECOM PAKISTAN (PVT.) LTD. through Executive Deputy Director and another

Civil Petition No.696 of 2008, decided on 19th June, 2008.

(On appeal from the judgment, dated 20-5-2008 passed by the Lahore High Court, Lahore in Customs Reference No.6 of 2007).

Customs Act (IV of 1969)---

----Ss. 19 & 25---S.R.O.447-(I)/04, dated 12-6-2004---Constitution of Pakistan (1973), Art.185(3)---Determination of value of imported car---Exemption---Foreign Embassy imported a car after exemption by the Central Board of Revenue from payment of customs duties and taxes, however, the notional value of 27,000 US $ was shown in the bill of entry of the car---Car having been sold within three years of its import, in terms of Notification No. S.R.O. 447(I)/04 dated 12-6-2004, same was liable to 100% of duties and taxes leviable at the prevailing rate and duties and taxes of value determined in foreign currency at the time of importation---Customs Authority determined the value of the car at the rate of 74,244 Euro, prevailing at the time of importation---Respondent challenged the same on the ground that the Customs Department having itself accepted the bill of entry showing the value of the car as 27,000 US $, there could be no question of re-determination of its value---Leave to appeal was granted to consider said dispute and other submissions of the counsel---Since short questions of law were involved, appeal would be set down for hearing on the present record within specified period.

Sh. Izhar-ul-Haq, Advocate Supreme Court with Ch. Akhtar Ali, Advocate-on-Record for Petitioner.

Mian Abdul Ghaffar, Advocate Supreme Court for Respondent.

2008 P T D 2003

[Supreme Court of Pakistan]

Present: Muhammad Nawaz Abbasi and Ghulam Rabbani, JJ

FAZAL-UR-REHMAN HANIF

Versus

STATION HOUSE OFFICER, TALUKA POLICE STATION, MIRPURKHAS and 3 others

Civil Petitions Nos.893-K and 894-K of 2003, decided on 16th April, 2007.

(On appeal from the judgment dated 7-10-2003 passed by High Court of Sindh at Karachi in Constitutional Petition No.D-961 of 1993 and Special Customs Appeal No.61 of 1998).

Customs Act (IV of 1969)---

----Ss. 6, 156(1)(8)(89), 168(2), 171 & 180---Constitution of Pakistan (1973), Art.185(3)---Three thousand tolas of gold belonging to petitioner having been recovered from vehicle driven by the petitioner, case under S.156(1)(8)(89) of Customs Act, 1969 was registered against 'him and recovered gold with vehicle was confiscated and penalty was also imposed on the petitioner---Appeal filed before Customs Appellate Tribunal and Special Customs Appeal filed by the petitioner had been dismissed by the High Court---Contentions of the petitioner were; that Traffic Police Inspector having not been notified as Customs Officer under S.6 of the Customs Act, 1969, he was not empowered to search the vehicle and make seizure of gold; that no notices under Ss.168(2), 171 & 180 of Customs Act, 1969 had been given which were mandatory requirement of law, the action on the part of Police and Customs Authorities including the adjudication proceedings, were illegal and that neither the recovered gold was proved to have been smuggled nor said questions of law were properly considered by the High Court in appeal and in constitutional petition---Contentions raised by the petitioner had sufficient force to be considered; leave to appeal was granted to consider the contentions of the petitioner.

Sohail Muzaffar, Advocate Supreme Court and Akhlaq Ahmed Siddiqui, Advocate-on-Record for Petitioner.

A.S.K. Ghori Advocate-on-Record for Respondents Nos.3 and 4 (in Civil Petitions Nos.893-K and 894/K of 2003).

Akhtar Ali Mehmood, D.A.G. on Court notice.

Date of hearing: 16th April, 2007.

2008 P T D 2019

[Supreme Court of Pakistan]

Present: Abdul Hameed Dogar, C.J., Ijaz-ul-Hassan and Ch. Ejaz Yousaf, JJ

Messrs BEST BUY COMPUTERS, LAHORE and another

Versus

DIRECTOR, INTELLIGENCE & INVESTIGATION (CUSTOMS & EXCISE), LAHORE and others

Civil Petitions Nos.1339 and 1340 of 2004, decided on 2nd April, 2008.

(On appeal from the judgment dated 21-4-2004 in Custom Appeals Nos.19 and 20 of 2004 passed by the Lahore High Court, Lahore).

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

----S.50(5)---Notification S.R.O. No.539(I)/91, dated 30-6-1991---Constitution of Pakistan (1973), Art. 185(3)---Advance income tax at import stage---Exemption---Petitioners were assembling computers out of computer parts imported by them and claimed exemption on the plea that they were manufacturers---Authorities withdrew the exemption on the ground that petitioners were registered as commercial importer/exporter, therefore, they were not entitled to avail benefit of exemption---Validity---Petitioners had themselves admitted that imported goods were used in assembling of computers which could not be termed or classified to be goods imported for setting up an industrial undertaking, nor it be categorized as plant, machinery, fixtures, fittings or any other equipment within the purview of clause(iv) of Notification S.R.O. No.593(I)/91, dated, 30-6-1991---Reasons weighed with High Court in rejecting appeals filed by petitioners fully conform "to the requirement of law and did not call for interference by Supreme Court---Leave to appeal was refused.

(b) Discretion---

----III-gotten gains---Scope---Discretionary relief cannot be granted to help retention of ill-gotten gain by a party even if order of Tribunal may be defective due to any technical reason.

Raunaq Ali v. Chief Settlement Commissioner PLD 1973 SC 236; The Chief Settlement Commissioner, Lahore v. Raja Muhammad Paul Khan and others PLD 1975 SC 331; Province of the Punjab through Secretary Health Department v. Dr. S. Muhammad Zafar Bukhari PLD 1997 SC 351; Ahmad Sher Khan and another v. Additional Commissioner (Revenue)/Settlement Commissioner (Lands) Sargodha 1998 SCMR 408; Messrs Vulcan Company (Pvt.) Ltd. v. Collector of Customs, Karachi and others PLD 2000 SC 825; Abdul Haque Indhar and others v. Province of Sindh through Secy. Forest fisheries and Livestock Department, Karachi and others 2000 SCMR 907; Muhammad Sharif through L.Rs. and others v. Sultan Hamayun and others 2003 SCMR 1221; Muhammad Shoaib and others v. Government of N.-W.F.P. through the Collector, D.I. Khan and others 2005 SCMR 85 and Executive District Officer Schools and Literacy, District Dir Lower and others v. Qamar Dost Khan and others 2006 SCMR 1630 rel.

Raja Abdul Ghafoor, Advocate-on-Record for Petitioners (in both cases).

M. Bilal, Senior Advocate Supreme Court, Sh. Izhar-ul-Haq, Advocate Supreme Court and Mumtaz A. Sheikh, Member (Legal) (in both cases).

Date of hearing: 2nd April, 2008.

2008 P T D 1861

[Supreme Court (AJ&K)]

Present: Muhammad Reaz Akhtar Chaudhry, C.J. and Khawaja Shahad Ahmad, J

COMMISISONER OF INCOME TAX

Versus

AZAD KASHMIR LOGGING & SAW MILLS CORP.

Civil Appeal No.29 of 2006, decided on 25th November, 2006.

(On appeal from the order of the High Court, dated 6-4-2005, in Reference Application No.130-A of 2004).

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

----S. 133---Reference to High Court---Reference application under law could only be heard by a Division Bench of the High Court and a Single Judge of the High Court was not competent to hear and dispose of the Reference application.

(b) Administration of justice---

----Cases in the appellate courts must be decided on merits and the pending lis should not ordinarily be adjudicated upon on technical grounds or through a short order.

(c) Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974)---

----S. 42---Powers of the Supreme Court---Scope---Supreme Court was vested with powers to pass any order in the interest of justice as superior courts were Judges of their own jurisdiction.

Bostan Chaudhry for Appellant.

Azad Khan Tareen for Respondent.