PTD 2009 Judgments

2009 P T D (Trib.) 1865

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Member (Judicial)/Chairman

Appeal No. 68/ST/IB of 2007, decided on 14th January, 2008.

Sales Tax Act (VII of 1990)---

----SS. 73, 37 & 25---Certain transactions not admissible---Registered person adjusted input tax on purchase of soda ash but failed to produce the Bank draft/instruments despite notices under Ss. 25 and 37 of the Sales Tax Act, 1990, as proof of payment under S. 73 of the Sales Tax Act, 1990---Ex parte order in original was passed and appeal against such order was also dismissed by the First Appellate Authority---Appellant pointed out that a show-cause notice was issued which was duly replied at the time of last hearing of the case at the adjudicating stage, therefore, for about one year and five months the case was not taken up---Appellant stated that on visit of Collectorate, he was informed that appeal had already been dismissed and he was directed to deposit the outstanding amount---Validity---Admittedly the case was adjourned on 20-3-2004 and again taken up on 28-8-2005 when no body appeared on behalf of the appellant---Nothing was available on record to suggest that the appellant was duly served notices about the date of hearing and he wilfully absented---Appellant had not been provided adequate opportunity to plead the case at the adjudication stage---First Appellate Authority had not properly appreciated this point therefore, the appeal was accepted and the order was set aside---Case was remanded to the adjudication authority to adjudicate the same afresh after affording proper opportunity to the parties.

Danish Ali Qazi for Appellants.

Sajjad Ali, Auditor for Respondent.

Date of hearing: 14th January, 2008.

2009 P T D (Trib.) 1899

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ramzan, Member (Technical)

Appeal No.133/ST/IB of 2008, decided on 5th December, 2008.

Sales Tax Act (VII of 1990)---

----Ss.7, 23, 46 & 73---Appeal to. Appellate Tribunal---Determination of tax liability---Appellant/Corporation had assailed through appeal the vires of order passed by the Collector of Customs and contended that as per record it was manufacturing and supplying two grades/types of sodium silicate with different contents/consumption of soda ash and had also charged different prices showing value addition higher than other manufacturer of identical goods in the jurisdiction of the department---Appellant had also claimed adjustment after receipt of invoices and had made payments through Bank cheques without any violation of S.7(iii) & 73 of the Sales Tax Act, 1990---Appellant had produced evidence in support of its contention---Perusal of invoice had also confirmed that appellant had supplied Sodium Silicate in a tanker and the quantity of Sodium Silicate in drums---Department had also admitted in writing that the value addition (7.38%) made by the appellant was higher than the value addition of 3.5% worked out in case of other corporation---Department had also admitted that no case for the violation of S.73 of the Sales Tax Act, 1990 had been instituted against the suppliers of soda ash to the appellant which had led to the conclusion that appellant had made payment of over Rs.50,000 through Bank cheques---However, tax profile of the appellant produced by the department, had shown that the input tax as well as output tax had not been correctly shown with reference to sales tax charged/paid on supplies/purchases---Appellant had not been able to rebut that documentary evidence---Impugned order in circumstances, was set aside and case was remanded to the Adjudicating Authority for de novo consideration in the light of findings of a fresh audit of the record of appellant and passing of a speaking order after affording opportunity of hearing to both the parties.

Danish Ali Qazi, Advocate along with Mr. Sikandar Nawaz, for Appellants.

Syed Mir Ghais Ali Shah, Senior Auditor for Respondent.

Date of hearing: 4th December, 2008.

2009 P T D (Trib.) 1926

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir and Mehr Muhammad Arif Sargana, Judicial Members

C. A. No.155/LB of 2009, decided on 29th June, 2009.

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

----Ss.25 (1)(5)(6), 32(1), 32A(1)(a) & 156(1)(14)(14A)---Sales Tax Act (VII of 1990), S.3---Income Tax Ordinance (XLIX of 2001), S.148---Customs General Order, 12/2002 dated 15-06-2002, para. 44---Value of imported and exported goods---Post clearance audit---Clearance of "copper tube" imported from China---Department did not accept the declared value and alleged that importer and their authorized Clearing Agent with the connivance of Customs Staff got the value assessed on lower side while the much higher value evidence useable under S.25(5) and (6) of the Customs Act, 1969 was available in the computer database at or about the same time---Such act on the part of importer and their authorized Clearing Agent and Customs staff came within the purview of mis-declaration in terms of Ss.32(1), 32A(1)(a), (c) and (e) of the Customs Act, 1969, punishable under Ss.156(1)(14) and (14A) of the Customs Act, 1969---Differential amount of duty and taxes was recoverable under S.32(2) of the Customs Act, 1969 read with S.3 of the Sales Tax Act, 1990 and S.148 of the Income Tax Ordinance, 2001---Validity---Import processing authorities were not authorized to carry out post clearance audit and issue show-cause notices in terms of para-44 of Customs General Order 12/2002 dated 15-06-2002 as the same was binding upon the departmental authorities---Once the consignment was out of charge, it became past and closed transaction, so far as its value was concerned---If in applying the provisions of subsection (5) of S.25 of the Customs Act, 1969, there were two or more transaction values of identical goods that met all the requirements of subsection (5) and clauses (b), (d), (e) & (f) of subsection (13) of S.25 of the Customs Act, 1969, the customs value of the imported goods shall be the lowest transaction value and not the higher transaction value in term of Cl.(d) of subsection (5) of S.25 of the Customs Act, 1969---Original assessment was made on the basis of evidence, and as such applying the evidence of higher value at subsequent stage was unjustified and illegal--Evidence of higher value was also available with the department when the earlier assessment was made, which showed that the original assessment was rightly made by the assessing authorities 41 terms of S.25 (5)(d) of the Customs Act, 1969---Charge of collusion thus was not substantiated---None of the Assessing Officers was made party in the show-cause notice---No action against any customs officer was taken; officials/officers, who made original assessment, were still doing their job and just an explanation was called for---Such fact proved that department itself had accepted the assessment made by them---Appellant produced hundreds of GDs pertaining to customs ports of all over the country showing import of same goods at much lower value than the one assessed in the case of appellant---Show-cause notice and other documents showed that none of import documents was alleged to be false or forged---GDs were filed on the basis of import documents by the Custom House agents and in absence of allegation regarding falsity of the said documents, there was no justification for taking penal action against them---Appellant was singled out and no action against any other importer at any customs station, where the assessment was made much lower at the value assessed in case of appellant which tantamount to discrimination with the appellant---Appeals were accepted and the Order-in-Original as well as Order-in-Appeal were set aside by the Appellate Tribunal.?

Messrs Pak Suzuki Motors Company Ltd. v. Collector of Customs Karachi 2006 PTD 2237; Akhtar Hussain through Attorney v. Collector of Customs (Appraisement) Customs House Karachi and 3 others 2002 PTD 2090; Syed Muhammad Razi v. Collector of Customs (Appraisement) Customs House Karachi and 2 others 2003 PTD 2821; Messrs Sunny Traders through Proprietor v. Federation of Pakistan through Secretary, (Revenue Division-FBR), Islamabad and 4 others 2009 PTD 281; 2005 PTD (Trib.) 10; 2005 PTD (Trib.) 196 and 2006 PTD 2742 rel.

Writ Petition No. 8400 of 2008, Writ Petitions Nos.15767 of 2008 and 15822 of 2008; Munsif Ali v. Ameer and 3 others PLD 1971 SC 124; Messrs Kamran Industries v. Collector Customs (Exports), Karachi and 4 others PLD 1996 Kar. 68; Messrs S.T. Enterprises through Proprietor v. Federation of Pakistan through Secretary (Revenue Division-FBR), Islamabad and 4 others 2008 PTD 467 and 2002 PTD 889 ref.

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

----Ss. 32 & 2(a)---Untrue statement, error, etc.---Final assessment---Issuance of show-cause notice---Validity---In cases of final assessment no show-cause notice could be issued unless the earlier assessment order was set aside by re-opening the case by the competent authority because the assessing officer was also an Adjudicating Authority in terms of S.2(a) of the Customs Act, 1969.?

2002 PTD 889 rel.

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

----S.32(3-A)---Untrue statement, error, etc.---Verified documents---Imposition of penalty---Validity---Import was made against letters of credit and mostly the entire documents were duly verified by the Chamber of Commerce of the exporting country and Diplomatic Mission for Pakistan abroad---Department was at liberty to get these documents verified, if they doubted the same, but they did not do so---Such fact proved that the department did not doubt the authenticity of the documents---No justification was available for imposition of penalty, in cases of post clearance audit in term of S.32(3-A) of the Customs Act, 1969, more particularly, when there was no charge of presentation of false and fake documents or making un-true statement in the show-cause notice.?

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

----S.25---Value of imported and exported goods---Exemption from payment of duty and taxes---Evidence of import made under exemption from payment of duty and taxes could not be made basis for enhancing the value of the goods imported on payment of duty and taxes at statutory rate.?

Mian Abdul Ghaffar for Appellant.

Sultan Mehmood along with Amjad Bokhari and Ehteshamul Haq for Respondents.

Date of hearing: 29th June, 2009.

2009 P T D (Trib.) 1993

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Sales Tax Appeal No.K-479 of 2007, decided on 4th August, 2009.

Sales Tax Act (VII of 1990)---

----Ss.3, 4, 10(2), 29 & 46---Sales Tax Rules, 2004, Rr.28 & 29---S.R.O. 555(I)/2006, dated 5-6-2006---Appeal to Appellate Tribunal---Refund claim---Appellant who was manufacturer of zero-rated supplies and a registered person under the Sales Tax Act, 1990, filed refund claim as per procedure provided under. S.R.O. 555(I)/2006 dated 5-6-2006--On submission of said refund claim the refund receipt issued by the department had confirmed that the claim was complete in all respect; and same was loaded in the Computer System---In proof of proper and complete filing of refund claim a unique identification number was issued to the appellant as provided under R.29 of Sales Tax Rules, 2004---Refund claim was filed on the strength of evidence of input tax, the original Sales Tax Invoices---No further enquiry or audit was required for verification of genuineness of said invoices, as no information was conveyed by the functionaries of department to the appellant within the period of limitation provided under S.10(2) of Sales Tax Act, 1990---However, department not only failed to comply with its obligations under Rr.28 & 29 of Sales Tax Rules, 2004 and S.10(2) of Sales Tax Act, 1990, but also under R.31 of S.R.O. 555(I)/2006 dated 5-6-2006---No scrutiny was made by the department on the facts and grounds submitted by the appellant---Show-cause notice was issued under Ss.2(14), 4, 7, 8(1) & 25 of Sales Tax Act, 1990 and the two forums below had passed void orders on irrelevant and unwarranted provisions of law---Refund case of appellant was declined due to negligence of the functionaries of the department---By the alleged show-cause notice the field forces of the department made interpretation of relevant provisions of Sales Tax law according to .their convenience to cover their own neglect, intention and inaction to flout the clear cut mandate given by the legislature in S.10 of Sales Tax Act, 1990---Adjudication and appellate proceedings in the present case, two forums below were adjudged to be illegal and improper as they patently suffered from various legal infirmities---Impugned orders were set aside and appeal was allowed, with direction to department for refund of the money unlawfully detained by the respondent.

2007 SCMR 818; PLD 1970 SC 158; PLD 1970 SC 173; 1998 SCMR 2268; 2007 SCMR 855 and Muhammad Saleem's case 1994 SCMR 2213 ref.

Afzal Awan for Appellant.

Nemo for Respondent.

2009 P T D (Trib.) 291

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mahmood, Member (Judicial) and Saeed Akhtar, Member (Technical)

S.T.A. No.385/LB of 2003, decided on 14th July, 2008.

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

----S. 2(46)(e)---Value of supply---Valuation Committee, constitution of---Collector of Customs according to Cl. (e) of subsection (46) of S.2 of the Sales Tax Act, 1990, was authorized by law to constitute a valuation committee for the determination of correct value of supplies when there was sufficient reason to believe that the value of supply had not been correctly declared in the invoice.

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

---S.2(46)(e)---Value of supply---Pesticides suppliers---Addition, determination of---Value addition determined @ 16% of the value plus packing charges could not be generally applied for all the suppliers of pesticides as the valuation committee at the time was not competent to determine such value addition---Order on the point was set aside by the .Appellate Tribunal and the case was remanded to the Adjudicating Officer for re-determination of correct value of supply strictly in accordance with the provisions of S.2(46)(e) of the Sales Tax Act, 1990 as the value addition of 16% plus packing charges determined for all types of suppliers of pesticides was not in accordance with the law and sales tax authorities were directed to calculate the tax liability in the light of value determined by the valuation committee.

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

---S.73---Certain transaction not admissible---Business account---Bank account---Term "business account" had reference to the account maintained by the appellant and not the Bank account of the appellant; however, in both the cases the payment had to be made through banking instrument and not through cash.

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

----S.73---Certain transaction not admissible---Payment through cash or cheque---Determination of---Order was set aside by the Appellate Tribunal for determining whether the payment was made through cheque as claimed by the appellant/registered person or the payment against the supplies were made in cash as claimed by the auditor---Sales tax record of the appellant may also be examined carefully to find out the source of amount used for making payment in cash and then to determine whether the payment was made from the cash genuinely generated by the appellant in accordance with law---However, if payment was made by cheque then this must have been done from the account of the appellant maintained in the Bank and in that case there would be no violation of law---Adjudicating Officer was directed to decide the issue after determination of the fact whether the payment was made by cheque or through cash payment.

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

----S.7---Determination of tax liability---Input tax adjustment---Auditors alleged that appellant had claimed input tax adjustment without having sales tax purchase invoices---Recoverable amount was adjudged along with additional tax and penalty @ 3% of the amount of tax involved---Appellant had not produced any evidence to the effect that input tax adjustment was claimed on the basis of value sales tax invoices---Appellant had not even produced duplicate invoices if the original invoices were not available---Appeal on the point was dismissed by Appellate Tribunal being without any merit.

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

---S.36---Recovery of tax not levied or short-levied or erroneously refunded---Order-in-original was passed after lapse of 201 days from the date of issuance of show-cause notice---Appellant contended that order was not sustainable in the eyes of law as the same was passed beyond the prescribed time limit laid down in law---Validity---Delay in passing of judgment by the Adjudicating Officer did not render the recovery of legitimate amount of taxes illegal--Recovery of due amount of tax could be made even if the order was passed with delay.

Messrs Kohinoor Textile Mills Ltd., Rawalpindi v. The Collector of Sales Tax and Central Excise, Rawalpindi Appeal No.267 of 2004 and Messrs Triple M. v. Collector of Sales Tax and Central Excise, Lahore (sic) rel.

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

---S.36---Recovery of tax not levied or short-levied, or erroneously refunded---Show-cause notice---Non-mentioning of section in the show-cause notice---Effect---Show-cause notice had clearly laid down the charges and also stated that the principal amount of sales tax was recoverable along with additional tax and penalty---No illegality had been committed when the charges were clearly laid down and detailed order-in-original was passed by the Adjudicating Officer.

Waqas Khalid A.R., for Appellant.

Ikhlaq Ahmad, Auditor for Respondent.

Date of hearing: 30th June, 2008.

2009 P T D (Trib.) 300

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.19/LB of 2003, decided on 8th January, 2003.

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

----S.2(46)(d)---Value of supply---Under valuation of taxable supplies. and suppression of taxable supply by shortage of stocks were confronted by issuing a show-cause notice claiming sales tax, additional tax and penalties---Adjudicating Officer found that amount recalculated was greater than the amount claimed in the show-cause notice which rendered the show-cause notice a nullity in the eyes of law---Validity---Claim of greater amount than claim in the show-cause notice rendered show-cause notice a nullity in the eye of law---During the adjudication if greater amount was found to be recoverable from a person then the Adjudication Officer was duty bound to issue notice to the person seeking explanation as to why this greater amount should not be recovered from him---Mere greater claim after recalculation did not render the show-cause notice a nullity in the eyes of law rather the law bestowed upon the adjudicating authority to claim such greater amount after giving notice to the concerned person---Order-in-Original was set aside by the Appellate Tribunal with the direction that Adjudicating Officer may issue a notice to the registered person for the amount recalculated by the department and after hearing the registered person decide the matter afresh.

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

----S.2(46)(d)---Customs Act (IV of 1969), S.25---Value of supply---Value of imported goods would be the value determined by the customs authorities under S.25 of the Customs Act, 1969.

Ms. Nya Batool, D.R. and Muhammad Afzal Malik, S.A. for Appellant.

Mudassar Shuja for Respondent.

Date of hearing: 7th January, 2008.

2009 P T D (Trib.) 307

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mahmood, Member (Judicial) and Saeed Akhtar, Member (Technical)

S.T.A. No.1201/LB of 2003, decided on 21st July, 2008.

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

----Ss. 2(46)(e), 33 & 34---Value of supply---Sugar mill---Value of molasses---After considering proposal placed on record by the representative of All Pakistan Sugar Mills Association in its separate note in the report of valuation committee and average of value of four other sugar mills, Appellate Tribunal directed that sales tax should be determined at the value of Rs.450 per M.T. for the period January, 1999 to December, 1999 and the value of Rs.850 per M.T. for the period January, 2000 to December, 2000---50% of additional tax and penalty was also remitted.

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

----Ss.33 & 34---Offences and penalties---Advances---Levy of penalty for non-payment of sales tax at the time of receipt of advances---Validity---Confusion in the trade and industry was noticed regarding chargeability of the sales tax at the time of receipt of advances---Default committed by the 'appellant was not wilful---Additional tax and penalty was not recoverable---Additional tax and penalty was recoverable only in cases of wilful default---Default committed by the appellant was not wilful as nothing had been placed on record holding that the appellant had wilfully committed the default of non-payment of sales tax at the time of receipt of advances---Penalty imposed was remitted by the Appellate Tribunal and the appellant was directed to be careful in future.

Maple Leaf Cement v. Federation of Pakistan 1999 PTD 3907; Civil Appeal Nos. 1288 of 2000 and 1866 of 1996 and C.A. No.1294/2001 in re: Additional Collector of Sales Tax, Lahore v. Emco Industries Ltd. ref.

Khalid Ishaq for Appellant.

Muhammad Amjad, Auditor for Respondent.

Date of hearing: 30th June, 2008.

2009 P T D (Trib.) 313

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Member (Judicial)

S.T.A. No.346/LB of 2004, decided on 10th January, 2008.

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

----Ss.2(37) & 45-A---Tax fraud---Recovery of refund---Jurisdiction--Department detected that registered person had received refund against the fake and flying units in violation of S.2(37) of the Sales Tax Act, 1990 and the registered person was called upon to explain as to why the said amount should not be recovered along with additional tax and penalties---Registered person pleaded that matter had been reopened by the department which was not within the competence of the Deputy Collector rather under S.45-A of the Sales Tax Act, 1990 the Federal Board of Revenue or the Collector was competent to reopen the matter---Validity---Contention of the appellant/registered person that only Central Board of Revenue or the Collector was competent to reopen the matter was not tenable for the reason that the refund was sanctioned to a person on provisional basis subject to subsequent audit and scrutiny---Such was not a matter of reopening of the past and closed transaction rather it was an exercise envisaged by Sales Tax Act, 1990 for scrutiny and auditing the refund sanctioned to the registered persons.

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

----Ss.36, 7 & 10---Recovery of tax not levied or short-levied or erroneously refunded---Determination of tax liability---Recovery of refund received against fake and flying invoices---Appellant contended that allegations of getting refund against fake and flying invoices was baseless because at the time of sanctioning of refund all the documents were examined by the department whereafter the refund was ordered---Validity---Supplier of the appellant was not involved in any manufacturing process, therefore, it was not in a position to supply any taxable goods---Invoices issued by the said unit were rightly rejected by the department---Appellant also failed to produce any tangible evidence to show that the raw material was actually transported from the supplier unit to the appellant's unit---According to S.7 of the Sales Tax Act, 1990 the valid invoice would be that invoice against which the actual supply of the material was witnessed---Refund only could be claimed against an amount which had been deposited by the supplier in the national exchequer and when no such amount was deposited by the supplier then the appellant was not entitled to get the refund---Record proved by overwhelming evidence that the supplier was adjudged to be a fake unit by the competent authority---All transactions made with such unit were sham transactions having no sanctity in the eyes of law---Order passed by both the lower forums did not suffer from any legal infirmity and were based upon a sound appreciation of record which were maintained by the Appellate Tribunal in circumstances.

Muhammad Akram Nizami for Appellant.

Saleem Akhtar, Superintendent for Respondent.

Date of hearing: 9th January, 2008.

2009 P T D (Trib.) 320

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial) and Saeed Akhtar, Member (Technical)

S.T.A. No.729/LB of 2004, decided on 16th September, 2008.

Central Excise Act (I of 1944)---

----Ss.4(2) & 3-B---Central Excise Rules, 1944, R.210---Determination of value for the purposes of duty---Levy of additional tax---Appellant was directed to pay short paid amount of central excise duty, sales tax and further tax along with additional duty under S.3-B of the Central Excise Act, 1944 upon the subsisting market retail price as against the retail price fixed by the appellant-Validity-Words used in S.4(2) of the Central Excise Act, 1944 were "should be sold the general bodies of the consumers" and not "is sold to the general bodies of the consumers"---Manufacturer was required to fix the retail price inclusive of all charges at which the goods should be sold---Manufacturer was not supposed to be responsible for any irresponsible act of the retailer---Condition levied upon the manufacturer in S.4(2) of the Central Excise Act, 1944 was that the retail price was legibly, prominently and indelibly printed or embossed on each article, packet, container, packages, wrapper or label as the case may be---No allegation was levelled that the manufacturer/appellant had not met these conditions---Department had persuaded the appellant to fix the retail price at the price at which it was being sold by the retailers, but the appellant had declined---Necessary measures could be taken by the appropriate authorities to combat the illegal profiteering but the central excise duty could not be charged at the will of the retailer---Show-cause notice and the orders were not in accordance with law---Appeal was accepted and additional demand was set aside by the Appellate Tribunal.

Messrs Riaz Bottlers v. C.B.R. 2000 PTD 353 ref.

Messrs Atlas Battery Limited, Karachi v. Superintendent, Central Excise and Land Customs, Circle-C, Karachi and others PLD 1984 SC 86 distinguished.

Sardar Ahmad Jamal Sukhera for Appellant.

Taqueer Zaman, S.I.O. for, Respondent.

Date of hearing: 10th September, 2008.

2009 P T D (Trib.) 330

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical)

S.T.A. No.295/LB of 2005, decided on 15th January, 2008.

Sales Tax Act (VII of 1990)---

----S.34---S.R.O. 1349(I)/99, dated 17-12-1999---S.R.O. 463(I)/2007, dated 9-6-2007---S.R.O. 999(I)/2007, dated 29-9-2007---Default surcharge---Amnesty---Levy of additional tax and penalty for late payment---Demand was challenged on the ground that such liability was discharged by depositing 25% of the additional tax and penalty in terms of amnesty S.R.O. 1349(I)/99, dated 17-12-1999---Department contended that appellant was not entitled to the benefit under S.R.O. 1349(I)/99, dated 17-12-1999 as entire principal liability was not discharged before 31-1-2000 i.e. cut-off date---Validity---Held, on the date of hearing as on 14-1-2008, Appellate Tribunal observed that government had waived off whole of the amount of default surcharge (additional tax) and penalties vide S.R.O. 463(I)/2007, dated 9-6-2007 as amended vide S.R.O. 999(I)/2007, dated 29-9-2007 payable by a person provided the principal amount was paid by 30-6-2007 or had already been paid at the time of issuance of such notification---In the present case, entire principal amount had been paid by 11-2-2000 and, as such, the demand of additional tax and penalty stood remitted in terms of such notification---Appeal was accepted by the Appellate Tribunal and order was set aside.

Tariq Najib Ch. for Appellant.

Sauood Imran, D.R. for Respondent.

Date of hearing: 14th January, 2008.

2009 P T D (Trib.) 350

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.1186/LB of 2002, decided on 15th December, 2007.

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

----Ss.36 & 10---S.R.O. 839(I)/98, dated 23-7-1998---S.R.O. 544 dated i2-6-1998--Recovery of tax not levied or short-levied or erroneously refunded---Refund Department detected that claim of refund of input tax paid to local vendors on purchase of components for agricultural tractors was erroneously sanctioned as the exemption of input tax was prospective in nature and issued notice for recovery of such refunded sales tax---Registered person contended that with the understanding with Central Board of Revenue the prices of the agricultural tractors were reduced due to availability of stock, therefore, such notification should be given retrospective effect---Validity---Dispute between parties was the grant of exemption between the dates of 12-6-1998 and 22-7-1998 as the exemption was re-allowed with effect from 23-7-1998---Benefit of S.R.O. No.839(I)/98 dated 23-7-1998 could not be extended retrospectively unless the S.R.O. itself provided so---Said S.R.O. clearly showed that it had to take effect from its date and thus ruled out its retrospectivity---Assessees failed to place on record any understanding with the Central Board of Revenue for granting exemption between 12-6-1998 to 22-7-1998---Such understanding could not be inferred from other circumstances---Order passed by the Adjudicating Officer was in accordance with law which was maintained by the Appellate Tribunal.

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

----Ss.45-A & 36---Power of the Federal Board of Revenue and Collector to call for records---Jurisdiction---Contention was that after granting refund only the Collector was competent to reopen the matter---Validity---Held, it was not a reopening of the matter rather the proceedings were initiated on the report of DRRA which audited the record---No bar existed in the Sales Tax Act, 1990 for conducting the post audit---Such contention was never raised before the lower forum therefore, could not be allowed to be agitated for the first time in the appeal---By not raising the point of jurisdiction the appellant had waived his right to assert the same subsequently.

Umer Arshad for Appellant.

Ms. Nyma Batool, D.R. and Rashid Mehmood, Auditor for Respondent.

Date of hearing: 3rd December, 2007.

2009 P T D (Trib.) 364

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mahmood, Member (Judicial) and Saeed Akhtar, Member (Technical)

Customs Appeals Nos.497 and 498/LB of 2007, decided on 26th July, 2008.

Customs Act (IV of 1969)---

----S.32(3A)---S.R.O. 436(I)/2001---Untrue statement, error, etc.---Deletion programme---Report of Engineering Development Board regarding short fall in achieving the indigenization---Show-cause notice was issued on the basis of information communicated by the Central Board of Revenue wherein the findings of Engineering Development Board regarding short fall in achieving the indigenization by the appellant was mentioned and demand was created---Appellant contended that evidence available with the department, Central Board of Revenue or the Engineering Development Board had not been shown and a case had been made out on the basis of letter of Central Board of Revenue in which information forwarded by the Engineering Development Board was communicated to the Collectorate---Evidence was required to be shown/furnished to appellant to enable him to defend the charges levelled in the show-cause notice---Validity---Charges levelled were based on information provided by the Engineering Development Board to the Central Board of Revenue which was communicated by the Central Board of Revenue to Collectorate of Customs and actual survey report containing discrepancies was not communicated to the Customs Department---Verification of information provided by the Engineering Development Board through Central Board of Revenue to Collectorate of Customs was not possible in absence of scrutiny of relevant record of the appellant---Appellant had full right to ask for the evidence which formed basis for the issuance of show-cause notice---There was need for scrutiny of relevant record before arriving at conclusion and demanding huge amount of duties and taxes from appellant---Relevant evidence regarding discrepancies had not been communicated to appellant to enable him to defend the charges---Order in appeal was set aside by the Appellate Tribunal and case was remanded to Collector (Appeals) for de novo consideration and fresh decision after affording opportunity of hearing to both the parties and scrutiny of relevant evidence collected by the Engineering Development Board, Central Board of Revenue and the Collectorate of Customs.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Appellant.

Amir Haider, Appraiser for Respondent.

Date of hearing: 1st July, 2008.

2009 P T D (Trib.) 371

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial)

No.ST-329/PB of 2008, decided on 3rd November, 2008.

Sales Tax Act (VII of 1990)---

----Ss.10 (2), 2(14), 4,7,8(1), 10 & 26---Sales Tax Rules, 2006---Excess amount to be refunded---Refund was rejected on the ground that invoice summary had not been submitted by the supplier of the appellant/ taxpayer---On examination, invoices stood verified and objection raised with regard to non-filing of summary invoice showed that certain objections were raised in vacuum---Department once again asked the quarter concerned for verification of documents. in question, so that the ambiguity in the light of objections raised was removed so as to make him firm in standing before Appellate Tribunal---Validity---Contention on the part of department would reflect nothing but one thing that either RTO or concerned staff had prevailed upon the traditional slackness by rolling the stones down-earth and that way one should not left to fall a prey to such a doldrums, particularly when once Assistant Collector had made proper verification of the documents in question and had verified the said invoice(s) by having furnished the requisite report---When performance of respective regional offices were so poor, want of co-ordination and latitudinarian type of sense of responsibility and discharge of duty, then how could one think of an overall positive results, such was an eye opener for the hierarchy of the department concerned, calling for immediate redressal---Order was set aside by the Appellate Tribunal and ordered to refund the amount in terms of claim by the appellant with the condition that department was at liberty to proceed against the appellant for return of refund claimed if same could be proved fake at any subsequent stage within the permissible period of time.

Danish Ali Qazi for Appellant.

Dost Muhammad Khan, Senior, Auditor for Respondents.

Dated of hearing: 3rd November, 2008.

2009 P T D (Trib.) 399

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.751/LB of 2003, decided on 15th December, 2007.

Sales Tax Act (VII of 1990)---

----S.73---Stamp Act (II of 1899), S.2(14)---Payment exceeding Rs.50,000 made to seller through Bank Credit Slip against supplies received by buyer during period from 1-7-2000 to 15-2-2001---Validity--Bank Credit Slip was used for depositing in Bank cash or banking instruments in account of depositor or any other account holder, thus, same was a receipt/evidence thereof---Buyer was required to make payment exceeding Rs.50,000 by crossed cheque, bank draft or pay order or any other banking instrument showing its transfer in favour of seller from business account of buyer---Payments of less than Rs.50,000 were required to be indicated in cash book and other books of account---Buyer while making payment exceeding Rs.50,000 against supplies received was required to withdraw amount from cash book, deposit in his business account in Bank and issue crossed cheque or arrange its payment through any other banking instrument (i.e. demand draft or pay order etc.) showing its transfer in favour of seller from business account of buyer in Bank---Source of such cash amount paid by buyer was not r known---Payment exceeding Rs.50,000 made through Bank Credit Slip would not meet requirements of S.73 of Sales Tax Act, 1990 in vogue during such period---Principles.

Mian Ashiq Hussain for Appellant.

Muhammad Akmal, Auditor for Respondent.

Date of hearing: 4th December, 2007.

2009 P T D (Trib.) 438

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Syed Kazim Raza Shamsi, Dr. Riaz Mahmood, Members (Judicial) and Hafiz Muhammad Anees, Member (Technical)

S.T.A. No.992/LB of 2002, decided on 15th December, 2007.

Sales Tax Act (VII of 1990)---

----S. 3---Customs Act (IV of 1969), S.19---S.R.O. No.987(I)/99, dated 30-8-1999---Import of machinery under S.R.O. No.987(I)/99, dated 30-8-1999 for manufacturing taxable goods in unit of assessee---Bill of Entry finding mention sales tax registration number of assessee---Demand of evaded tax along with additional tax and penalties from assessee by issuing him show-cause notice by Collector---Validity---Record showed that assessee was registered on 9-6-1999 as importer, exporter and wholesaler---Importer registered with sales tax department, if imported machinery for manufacturing taxable goods, would become entitled to claim benefit of S.R.O. No.987(I)/99, dated 30-8-1999---Collector from site inspection could verify installation of such machinery by assessee---If Collector, on basis of documentary evidence, was satisfied that assessee was in process of setting up a manufacturing unit for production of taxable goods, then assessee might be registered as manufacturer and might be allowed amendment in registration certificate having retrospective effect from 9-6-1999---Assessee had satisfied essential conditions at relevant time---Impugned show-cause notice was set aside in circumstances.

Muhammad Akram Nizami for Appellant.

Ms. Nyma Batool, D.R. and Muhammad Ramzan, Inspector for the Respondent.

Date of hearing: 10th December, 2007.

2009 P T D (Trib.) 458

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

Appeals C. Nos. 128 to 132, 134, 135 of 2004, 61 of 2003 and 79 of 2006, decided on 30th June, 2008.

Customs Act (IV of 1969)---

----Ss.2(s), 16, 156(1), 8, 70, 57 & 171---Imports and Exports (Control) Act, (XXXIX of 1950), S.3 (1)---Foreign Exchange Regulation Act (VII of 1947), S.8---Economic Reforms Act (XII of 1992), S. 2 (1)(b)---Foreign Exchange (Temporary Restrictions) Act, (IV of 1998), S.2---State Bank of Pakistan Notification No.1017(I)/1998---Smuggling---Recovery of foreign currency from passengers after completion of travelling formalities who wanted to take it out of Pakistan without any authorization---Customs authorities seized such recovered foreign currency under proper documentation for contravention of Ss.2(s) and 16 of the Customs Act, 1969, read with S. 3 (1) of the Imports and Exports (Control) Act, 1950 and S. 8 of the Foreign Exchange Regulation Act, 1947, punishable under S. 156(1), 8, 70 and 57 of the Customs Act, 1969---Collector (Adjudication) concluded that the appellants were not permitted by law to take foreign currency out of Pakistan---Seized foreign currency was ordered outright confiscation and penalty of Rs.100,000 was imposed under Ss. 156(1), 8 and 70 of the Customs Act, 1969---Appellant contended that seizure was made by the Airport Security Force, therefore, the seizure was illegal---Further, foreign currency was purchased from the Money Changers and produced certified copies of the receipts issued by the Money Changers---Department pleaded that since the foreign currency recovered from the appellants was purchased from the money changers and not from the authorized dealer, the appellants were not legally authorized to take the foreign currency out of Pakistan---Validity---Seizure was made by the customs authorities after completion of all legal formalities after detection of case by the staff of Airport Security Force---Action taken by the. customs authorities was perfectly in accordance with the law as seizure and all other subsequent actions were taken by the customs authorities---Since foreign currency was purchased from the money changers and not from the authorized dealers, the appellants were not authorized to take the foreign currency out of Pakistan---Appeals were dismissed by the. Appellate Tribunal being devoid of merit in circumstances.

Government of Pakistan v. Mahmood Ahmad Qureshi Civil Appeal No.1582 of 2001 and Criminal Appeals Nos. 519 to 527 of 2005 rel.

Athar Minallah and Mian Abdul Ghaffar for Appellant.

Syed Aun Muhammad and Malik Itaat Hussain for Respondent.

Date of hearing: 16th June, 2008.

2009 P T D (Trib.) 476

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mahmood, Member (Judicial-I) and Zafar Iqbal, Member (Technical-I)

Sales Tax Appeal No. H-188 of 2006, decided on 31st March, 2008.

Sales Tax Act (VII of 1990)---

----Ss. 25, 32, 36 & 38---General Clauses Act (X of 1897), S.24-A---Notice of demand of tax along with additional tax and penalty issued by Assistant Collector (Adjudication) on basis of charges framed as a consequence of special audit report---Validity---Authority had not denied assessee's statement made in his affidavits that audit of his company had not been performed by Chartered Accountants, but had been done by their clerks as none of Chartered Accountants had ever visited company or examined their books of accounts---Order of special audit passed at the back of assessee was not lawful exercise of jurisdiction---Show-cause notice was vague and lacking legal requirements and proper proof---Additional tax and penalty could not be proposed against assessee in absence of his wilful and contumacious default in payment of tax---Impugned order was set aside in circumstances.

Asstt: Collector v. Khyber Elec. Lamps 2001 $CMR 838; D.G. Khan Cement v. Collector of Customs 2003 PTD 1275; Caltex v. Collector 2005 PTD 480; Atlas Tyres v. Addl. Collector 2003 PTD 1593; State Cement v. Collector 2002 MLD 180; Kashmir Sugar v. Collector PTCL 2001 CL 558; Federation of Pakistan v. Ibrahim Textile 1992 SCMR 1898; Rose Color v. Chairman C.B.R. 2003 PTD 1947; PLD 1964 SC (sic); 2002 MLD 296; 1987 CLC 1246; 1988 CLC 22; 1988 SCMR 1563; 1959 ITR 388 (SC of India); (1967) 15 Taxation 103; 1978 PTD 8 SC Ind. ; (1979) 120 ITR 576;1988 PTD (Trib.) 117; 1988 PTD (Trib.) 117; 1990 PTD (Trib.) 705; 1995 PTD (Trib.) 1100; 1988 PTD 135; I.T.As. Nos. 2376, 2377 & 2378/KB of 1984-85, dated 25-5-1989; I.T.A. No.1058/KB of 1994-95 and I.T.A. No.434/KB of 1995-96; 2002 PTD 102; 2004 SCMR 456; 2002 PTD (Trib.) 300; 2005 PTD 1984; 2005 PTD 1978; 2005 PTD 1953; 2003 PTD 1445 and 2004 PTD 2771 ref.

1998 SCMR 2268; 1998 SCMR 2419 and 1999 SCMR 1071 rel.

Muhammad Nasim for Appellant.

Muhammad Rafique for Respondent.

2009 P T D (Trib.) 494

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Zafar ul Majeed, Member (Technical))

Appeal C.A. No.189/LB and Cus. 162/LB of 2007, decided on 13th August, 2008.

Customs Act (IV of 1969)---

----Ss.16 & 156(1)9---Import Policy Order (2006-07), Appendix-C, S.No.6---Pakistan Customs Tariff, Chapter-XVI---S.R.O. 574(I)/2005, dated 6-6-2005---Power to prohibit or restrict import and export of goods---Non-importable items---Gears---Appellant contended that gears were classifiable under Heading 85.03 as part of the electric motors of Heading 85.01, which had been released by the customs, and were importable in used condition---Expert opined that gears in question were integral part of the motors and had no other independent mechanical function---Admittedly, gears were in old and used condition and the appellant was ready for their release even against redemption fine---Validity---Admittedly, gears were independently classifiable under Heading No.8483 which was included in the list of goods not importable vide Appendix-C of the Import Policy Order, 2007---Gears were proved to be integral part of accompanying electric motors ,they should have been classified under Heading 85.03 and released along with the motors--Since electric motors had already been released and were out of customs control, it was not possible to prove this aspect at this stage---Giving the benefit of doubt, release of gears in question was allowed by the Appellate Tribunal against redemption fine equal to 30% of their customs value in addition to payment of duty and taxes leviable thereon.

Mian Abdul Ghaffar for Appellant.

Zahid Pervez, D.S. for Respondent.

Date of hearing: 4th August, 2008.

2009 P T D (Trib.) 500

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member (Technical-I) and Dr. Riaz Mahmood, Member (Judicial-I)

Sales Tax Appeal No.275 of 2007, decided on 7th April, 2008.

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

----S.36---Show-cause notice not finding mention of subsection of S.36 of Sales Tax Act, 1990 under which same was issued---Absence of allegation of collusion or deliberate act in such notice---Validity---Such notice was defective for want of necessary particulars---Said notice and subsequent proceedings including order-in-original passed on its basis was vacated in circumstances.

Khyber Lamp's case 2001 SCMR 238 and Caltex Oil's 2005 PTD 580 rel.

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

----S.3(1-A)---Initiation of action by Adjudicating Authority without contravention report or upon contravention report given by officer below the rank of. Collector---Validity---Such action and subsequent orders based thereupon would be coram non judice and void.

Abida Rashid v. Secretary PLD 1995 Kai. 587; Rashid Ahmed v. The State PLD 1972 SC 271 and Abdul Razzak v. Muhammad Sharif PLD 1997 Lah. 1 rel.

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

----Ss.2(25), 3(1-A) [as omitted by Finance Act (II of 2004)], 33(2)(cc), - 19 (as omitted by Finance Act (II of 2004) & 36---Sales of taxable goods by registered supplier to unregistered person without payment of further tax as required under S.3(1-A) of Sales Tax Act, 1990---Registered supplier's liability to pay further and additional tax and penalty for such default---Scope---Unverifiability of sales or purchases was neither a precondition nor a justification to warrant application of S.3(1-A) of Sales Tax ''Act, 1990---Such sales would be deemed a registered person as person liable to be registered, if not actually registered, would be construed as registered person by virtue of cumulative effect of Ss.2(25) & 19 of Sales Tax Act, 1990---Section 3(1-A) of the Act was aimed at penalizing a registered person for dealing with an unregistered person---Fraud was not on part of registered supplier, but same would lie either with the department for not bringing into net unregistered person or unregistered person itself for not volunteering to register---Registered supplier could not be blamed and then taxed for default of other persons for which he was not responsible---Imposition of additional tax and penalty on registered supplier would not be justified as there was no wilful default or mala fide on his behalf---Legislature by repealing unreasonably harsh provision of S.3(1-A) of Sales Tax Act, 1990 through 'Finance Act, `2004 had set at rest entire controversy---Such repeal being remedial and curative in character would apply retroactively to all pending assessments and appeals---Principles.

Pace International v. Secretary 2006 PTD 340; C.B.R. v. Pace International PTCL 2005 CL 841; SS Oil Mills Ltd. v. Secretary GST 2005 CL 592; CST v. Hilal Tanneries PLD 1976 Lah. 655; Nagina Silk Mills v. ITO PLD 1963 SC 322; (963) VIII Taxation 79, Federation of Pakistan v. Ibrahim Textile Mills Ltd. 1992 SCMR 1898; Idly Bank Export Finance v. Commissioner of Inland Revenue (1993) 3 WIR 153 (Privy Council); Messrs Matiari Sugar Mills Ltd. and others v. Federation of Pakistan 2003 PTD 773; Mirpukhas Sugar Mills Ltd. and others C.Ps. Nos.D-123 of 2001; Rani v. CWT 1993 PTD 206; 1997 PTD (Trib.) 2209; Mustafa Prestressed Pipes v. CIT 1990 PTD 974; (1988) 58 Taxation 176 (Trib.); 1995 PTD (Trib.) 580; B.S. Industries v. Deputy Registrar PLD 1969 Dacca 451; Fayayz H. Qadri v. Administrator Lahore PLD 1972 Lah. 316; Shahzad Ahmed Corporation v. FOP 2005 PTD 23; Zeb Traders v. FOP 2004 PTD 369; N.P. Water Proof v. FOP 2004 PTD 2952 and Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996; Assistant Collector (Customs) v. Khyber Electric Lamps 2001 SCMR 838; D.G. Khan Cement Co. Ltd. v. Collector of Customs, Sales Tax and Central Excise 2003 PTD 1797; Atlas Tyre v. Additional Collector (Adjudication) 2003 PTD 1593; Caltex Oil v. Collector, Central Excise 2005 PTD 480; Mirpurkhas Sugar Mills and others v. FOP CPs and Nos. D-123 of 2001 and others (unreported), Bilal and Co. v. The Appellate Tribunal, 2004 PTD 557; Waqas and Co. v. Customs, Central Excise and Sales Tax Appellate Tribunal 2003 PTD 2100, Phalia Sugar Mills Ltd. v. Collector Sales Tax. Writ Petition No.21776 of 2001, C.A. No.54 of 2002, dated 7-5-2003, Fatima Sugar Mills Ltd. v. Collector GST 2003 CL 13 Matiari Sugar Mills Ltd. and others, dated 1-3-2006; Government of Pakistan v. Muhammad Ashraf PLD 1993 SC 176; Elahi Cotton v. FOP PLD 1997 SC 582; Northern Bottling Co. v. FOP 2004 PTD 2267; CST v. Messrs Kruddsons Ltd. PLD 1974 SC 180; CIT v. Olympia 1987 PTD 739; CIT v. Shahnawaz Ltd. 1993 SCMR 73; Dawood Cotton Mills v. CIT 2000 PTD 285; 1990 PTD (Trib.) 1042; (1962) 46 ITR 1; (1974) 94 ITR 1; 1993 PTD (Trib.) 960/964; (1978) 114 ITR 19; 1993 SCMR 662; D.G. Khan Cement Company Ltd. and others v. FOP 2004 SCMR 456; Nestle Milk Pak Ltd. v. Additional Collector (Adjudication) Multan 2002 PTD (Trib.) 300; CST Faisalabad v. Messrs Coca Cola Beverages Pakistan Ltd. Faisalabad 2005 PD 1984; CST v. Kashif Enterprises, Faisalabad 2005 PTD 1978; CST Faisalabad v. Messrs Farooq Traders Jhawarian 2005 PTD 1953; Messrs Millat Tractors Ltd. v. CST Lahore 2005 PTD 1445; Ghandhara Nissan Diesel Ltd. v. Sales Tax Department and others 2004 PTD 2771; 2001 SCMR 838; Federal of Pakistan v. Messrs Ibrahim Textile Mills 1992 SCMR 1898 and 1998 PTD 1014 ref.

Fatima Sugar Mills Ltd. v. Collector GST 2003 CL 13; Matiari Sugar Mills Ltd. v. FOP. 2003 PTD 773; Avenbee (Private) Ltd. v. ITAT 2002 PTD 407; CST v. Krudsons PLD 1974 SC 180; CIT v. Olympia 1987 PTD 739; CIT v. Shahnawaz Ltd. 1993 SCMR 73; Dawood Cotton Mills v. CIT 2000 PTD 285 rel.

(d) Interpretation of statutes---

----Intention of legislature---Parliamentary debates being an acceptable mode to discover intention of legislature---Principles.

Budget speeches are reckoned to be an accepted mode for discovering the intention of the legislature. Although parliamentary debates may be inadmissible for constructing a provision of a statute, but the speech made by the mover of the bill, explaining the reason for introducing the bill, can be referred for the purposes of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted.

K.P. Varghese v. ITO (1981) 131 ITR 597(SC) and Ellahi Cotton v. FPO PLD 1997 SC 582 fol.

(e) Interpretation of statutes---

----Fiscal statute---Remedial amending legislation would be retrospective in application to all pending proceedings, assessments and appeals.

CST v. Krudsons PLD 1974 SC 180; CIT v. Olympia 1987 PTD 739; CTI v. Shahnawaz Ltd. 1993 SCMR 73; Dawood Cotton Mills v. CIT 2000 PTD 285, rel.

Muhammad Naseem for Appellant.

D.R. for Respondent.

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2009 P T D (Trib.) 1161

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial)

S.T.A. No.298/LB of 2006, decided on 5th June, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 33(9)(c) & 25---Offences and penalties---Access to record, documents, etc. ---Levy of penalty of Rs.50,000 for failure to produce tax record for audit---Appellant contended that he had not received any notice for production of record for audit proposes---Audit of appellant unit had already been completed and produced "Audit Completion Certificate"---Department accepted the genuineness of the certificate and did not raise any objection regarding its issuance and validity---On the basis of such `Audit Completion Certificate' appellant contended that no audit was required to be conducted prior to such audit---Department also failed to produce any record showing proper service of notice upon the appellant for production of record or for hearing of the appellant---No justification, existed for imposing any penalty on the appellant---Appeal was accepted by the Appellate Tribunal and order in original and order in appeal were set aside.

Muhammad Farooq Sheikh for Appellant.

Ashiq Hussain Duggal, Superintendent, for Respondent.

Date of hearing: 16th May, 2006.

2009 P T D (Trib.) 1176

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.617/LB of 2000, decided on 10th December, 2007.

Sales Tax Act (VII of 1990)---

----Ss.33, 34, 36, 2(9), 3, 6 & 26----S.R.O. 463(I)/2007, dated 9-6-2007 as amended vide S.R.O.999(I)/2007, dated 20-9-2007---S.R.O.520(I)/99, dated 30-4-1999---Offences and penalties---Amnesty---Levy of additional tax due to late payment and penalty on account of violations of Ss.2(9), 3, 6, 26 read with Ss.33, 34 & 36 of the Sales Tax Act, 1990---Validity---Department confirmed that principal amount was deposited by the appellant and contended that it was not a case of tax fraud, therefore, additional tax and penalty as provided in S.R.O. 463(I)/2007, dated 9-6-2007 as amended vide S.R.O. 999(I)/2007, dated 20-9-2007 may be waived---Case of the appellant was covered under the said S.R.Os. as the principal amount was not outstanding as confirmed by the department---Appeal to the extent of remission of additional tax which was still being demanded and penalty imposed was accepted by the Appellate Tribunal--Amount of additional tax already deposited by availing some earlier amnesty or even otherwise was not refundable being a closed transaction---Order-in-original was modified accordingly.

Khalid Ishaq for Appellant.

Akhlaq Ahmad for Respondent.

Date of hearing: 6th December, 2007.

2009 P T D (Trib.) 1222

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.390/LB of 2005, decided on 6th June, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 33(2)(cc), 3, 6, 11(2) & 26---Constitution of Pakistan (1973), Art.13---S.R.O. 1349(I)/1999, dated 17-12-1999-Offences and penalties---Levy of penalty for late payment of sales tax along with additional tax---Appellant contended that imposition of fine/penalty amounts to double jeopardy which was prohibited under the provisions of law as enshrined in Article 13 of the Constitution as the principal amount liability along with additional tax had already been cleared---Validity---Appellant failed in its legal obligation to deposit the self-assessed sales tax along with monthly sales tax return and contravened the provisions of Ss.3, 6 and 26 of the Sales Tax Act, 1990---However, sales tax liability was discharged after the due date along with additional tax under S.34 of the Sales Tax Act, 1990--Penalty was imposed under S.33 of the Sales Tax Act, 1990---No question of double jeopardy thus arose as the additional tax was imposed under S.34 of the Sales Tax Act, 1990 for non-payment of sales tax already recovered from the buyers as an agent of the Government and putting the tax to its own use by the registered person which attracted the provisions of S.34 of the Sales Tax Act, 1990---Additional tax was leviable and it was correctly deposited by the registered person on the delayed payment of principal amount of sales tax---Penalty under S.33 of the Sales Tax Act, 1990 was imposed on violation of provisions of Sales Tax Act, 1990---Amnesty Notification S.R.O.1349(I)/1999, dated 17-12-1999 covered cases where principal amount had already been deposited and the registered person had been allowed exemption of 75 per cent of additional tax and penalty on payment of 25 per cent of the principal amount and penalty---Full amount of additional tax having already been deposited, Appellate Tribunal allowed remission of penalty in circumstances---Order-in-­original was set aside by the Appellate Tribunal and appeal against imposition of penalty was accepted.

Sarfraz Hussain for Appellant.

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

Date of hearing: 27-2-2006.

2009 P T D (Trib.) 1263

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.42/LB of 2007, decided on 4th June, 2008.

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

----Ss.36(3), 2(27), 3, 4, 6, 22 & 26---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Show-cause notice was issued on the ground that sales tax was paid on whole sale cash price instead of retail price printed on carton and alleged that short amount paid was recoverable along with additional tax---Taxpayer contended that order passed was barred by time as it should have been passed within 45 days and if that period was to be extended it could be for 45 days and further 90 days with some cogent reasons but the show-cause notice was issued on 30-8-2001 and adjudicating order had been passed on 30-6-2005, which was beyond the limitation prescribed under the law--Validity---At the relevant time adjudication order was to be passed within 45 days which was extendable for another 90 days on some cogent reasons but order had been passed with the delay of about four years---No evidence was produced regarding the default that it was deliberate either before the Appellate Tribunal or before the lower forum---Inordinate delay had not been occasioned due to any default of the taxpayer---Provisions of S.36(3) of the Sales Tax Act, 1990 were mandatory in nature and not directory---Record showed that show-cause notice was issued on 30-8-2001 and the adjudication order was passed on 30-6-2005 which showed that it was beyond the stipulated limitation prescribed under the law---Adjudication order as well as the order-in-­appeal were not sustainable in law---On the question of limitation, appeal was accepted and the order was set aside by the Appellate Tribunal.

Assistant Collector of Customs v. Khyber Electric Lamps Mfg. Co. Peshawar 2001 SCMR 838 rel.

Messrs Shafique Book Centre, Rahim Yar Khan v. Collector (Appeal), Multan A, Sales Tax Appeal No.1603/LB of 2003 and Collector of Sales Tax and other v. Messrs Super Asia Muhammad Din and Sons and Messrs Hanif Straw Board of Factory and others (sic) ref.

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

----S. 36(1)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation of five years---Appellant contended that to avail benefit of provision of S.36(1) of the Sales Tax Act, 1990 i.e. five years limitation for issuance of show-cause notice, it was necessary to impute certain allegations of deliberate tax fraud, erroneous refund and collusion---None of these allegations were detailed in the show-cause notice which rendered it illegal and barred by tine---Validity---According to appellant show-cause notice had been issued under S.36(2) of the Sales Tax Act, 1990 which described the limitation as three years and the show-cause notice had been issued beyond the limitation---From bare reading of show-cause notice, it could be inferred that the sales tax had been short levied and this act was deliberate---It need not be specifically mentioned in the show-cruise notice that act was deliberate to bring this in the ambit of S.36(1) of the Sales Tax Act, 1990.

2003 PTD 1797 and 2005 PTD 1378 distinguished.

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

----S.36(2)---Recovery of tax not levied or short-levied or erroneously refunded---Contents of show-cause notice---Appellant contended that the contents of the show-cause notice were defective and ambiguous as the particulars of the parties which traded with the appellant had not been given therein, the details of the goods traded had not been mentioned and section of law under which he had been charged had not been given---Validity---Bare reading of show-cause notice revealed that the amount of alleged short levied amount had been given--Was not necessary to give the particulars of the parties as the invoices also showed the nature of the goods traded---Show-cause notice did not suffer from any infirmity in circumstances.

2007 PTD 2265 ref.

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

----S.36(2)---Recovery of tax not levied or short levied or erroneously refunded---Non-mentioning of relevant provisions of law---Effect of---Instead of taking into consideration technicalities, the Court looks into the matter with different angles namely as to whether substantial compliance had been made or if any of the sub-rule had been omitted then what prejudice was likely to cause to the party to whom the show-cause notice was given viewing the matter from this angle---No prejudice shall be caused to appellant because the substantial compliance of the relevant rules had been made.

Collector of Sales Tax and Central Excise, Lahore v. Zamindara Paper and Board Mills and others C.P. No.702-L of 2003 ref.

Waseem Ahmad for Appellant.

Sultan Mahmood for Respondent.

2009 P T D (Trib.) 1305

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Abdul Salam Khawar, Member Judicial/Chairman

Customs Miscellaneous Application No.6/CU/IB of 2009, decided on 11th March, 2009.

Customs Act (IV of 1969)---

----S.156(1), Cl.(89)---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Cancellation of import authorization by Minister of Commerce after goods reached Pakistan--Effect----Importer's right to import such goods would remain un-affected.

Mian Abdul Ghaffar, Advocate Assisted by Sheryar Sheikh for Applicants.

Adnan Iqbal Sawati, D. C./D. R for Respondent.

Date of hearing: 3rd March, 2009.

2009 P T D (Trib.) 1353

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial) and Humayun Khan Sikandari, Member (Technical)

Appeal No.S.109/PB of 2006, decided on 25th March, 2009.

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

----S.57---General Clauses Act (X of 1897), S.21---Civil Procedure Code (V of 1908), O.XLVII---Correction of clerical errors etc.---Application for review of appeal order under S.57 of the Sales Tax Act, 1990---Validity---Refusal to review shall not give fresh order to file appeal against it---Review application filed under S.57 of the Sales Tax Act, 1990 was undoubtedly, not maintainable as the said section related to correction of clerical or arithmetical error in any assessment, adjudication order or decision--Clerical error was an error iii writing or typing, whereas arithmetical error was an error of calculation--Rectification order like the original order was appealable, if issued---Review application, filed before the Collector (Appeals) under S.57 of the Sales Tax Act, 1990 did not relate to any clerical or arithmetical error rather it involved certain, factual and legal issues---Cause and ground of review was beyond the scope of S.57 of the Sales Tax Act, 1990 as it squarely deals only with removal of clerical or arithmetical error---Similarly, review under S.21 of the General Clauses Act, 1897 relating to issues involved was also irrelevant as the scope of the said section was restricted only to an executive order and delegated legislation---Review application under S.21 of the General Clauses Act, 1897 thus was void ab initio and nullity in the eyes of law---Likewise, even if the review application before the Collector (Appeals) by the appellant-department was considered under Order XLVII of the Civil Procedure Code, 1908 for having been filed on 41st day, then the same was barred by 26 days without any plausible explanation given by the appellant-department in this behalf.

Ghulam Hussain v. Kanwar Ashiq Ail Khan 1980 PLD SC 198 and 1998 SCMR 307 rel.

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

----S.45---Appeal---Order of decisions appealable to Appellate Tribunal---Any decision or order passed by Collector or an Additional Collector Sales Tax under S.11, 36 or 45 of the Sales Tax Act, 1990; any order passed by the Collector of Sales Tax (Appeals), under S.45-B of the Sales Tax Act, 1990 and any order passed by the Board or the Collector of Sales Tax under S.45-A of the Sales Tax Act, 1990 are appealable.

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

----S.57---Correction of clerical errors etc.---Review of order of appeal---Only S.57 of the Sales Tax Act, 1990 was invoked by the appellant/department for review of order-in-appeal passed under S.45-B of the Sales Tax Act, 1990---Had the Collector (Appeals) entertained the review application, then it would have been an order or decision or direction passed/issued under S.57 of the Sales Tax Act, 1990 and not under 5.45 13 of the Sales Tax Act, 1990---Appellate Tribunal was coram non judice to entertain such appeal.

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

---S.46(1)---Appeal to Appellate Tribunal---Limitation---Computation of---Period of limitation was to be computed from the elate when the decision or order was received by the aggrieved person.

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

----S.10---Limitation Act (IX of 1908), S.4---Computation of time---Although the parties themselves could not extend the time for doing an act in any court or office, yet if the delay was caused not by an act of their own, but by some act of the Court or office itself, such as the fact of the court or office being close, they were entitled under S. 10 of the General Clauses Act, 1897 to do the act on the next day on which the court or office was open i.e. on the first opening day.

(f) Sales Tax---

----Appeal---Limitation--Condonation of delay---Appellate Tribunal had been empowered to condone the delay in filing the appeal if it was satisfied that the appellant had sufficient cause for not filing the appeal within time---Expression "sufficient cause" ought to receive a liberal construction so as to advance the cause of substantial justice by disposing matters on merits.

Montreal Street Railway Company v. Normandin (1917) AC 170 (PC) rel.

(g) Sales Tax---

----Appeal---Limitation---Condonation of delay---Sufficient cause----Substantial justice was a material consideration when construing `sufficient cause'---Nature of the case and consequences of refusing to condone delay necessarily had to he taken into account---Factors such as the monetary stakes involved and the importance of the issue raised would be relevant of the purpose---Postal delay of unusual type resulting in late filing of appeal will constitute sufficient cause for condoning the delay---Word "sufficient" as used in the phrase "sufficient cause" means "adequate, enough, as much as may be necessary, equal or fit for end proposed, and that which may be necessary to accomplish an object of such quality, number, force, or value as to serve a need or purpose".

Nissen v. Miller, 44 N.M. 487, 105 P.2d 324, 326 rel.

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

----Ss. 46(2) & 57--General Clauses Act, (X of 1897), S.21---Civil Procedure Code (V of 1908), O.XLVII---Appeal to Appellate Tribunal---Condonation of delay---Appeal was barred by 38 days---Appeal was to he filed within 60 days i.e. on or before 5-5-2006 whereas the appeal had been filed on 7-6-2006 along with application for condonation of time bar wherein condonation was sought on the ground that the appellant/Collectorate filed an application for "review of Order-in-Appeal under S.57 of the Sales Tax Act, 1990 read with Order XLVII of the Civil Procedure Code, 1908, further read with S.21 of the General Clauses Act, 1897, which application was refused to be entertained by the Collector (Appeals)---Appellant himself admitted in application for condonation of delay that their appeal against the main order was time-barred, with no plausible explanation given thereof--- Appeal was not sustainable being barred by time and for lack of any cause for condonation.

Montreal Street Railway Company v. Normandin (1917) AC 170 (PC) and Nissen v. Miller, 44 N.M. 487, 105 P.2d 324, 326 rel.

(i) Sales Tax---

---Appeal-- Limitation---Condonation of delay---Delay of each day is to be explained for Condonation.

Federation of Pakistan v. Jamaluddin, 1996 SCMR 727; Income Tax Officer v. Sheikh Miraan Bakhsh and 25 others, 1986 SCMR 1255 and MEO and another v. Syed Qamoos Shah and 20 others, PLD 2004 Pesh. 40 rel.

(j) Sales Tax---

---Appeal---Limitation---Condonation of delay-Automatic condonation of delay----Principles---Where the appeal is time-barred and the appellants had made an application for its condonation, but it was not adverted to by the Tribunal and the appeal was admitted to regular hearing, the delay stood automatically condoned.

Customs Appeal No. 532/LB of 1999, 2002 Law Notes 207 rel.

(k) Precedent---

----Precedent of one Bench is binding on the other Bench of the Appellate Tribunal unless it is set at naught by decision of the Full Bench of the Appellate Tribunal.

2005 PTD 501 rel.

(l) Sales Tax---

---Appeal---Limitation---Condonation of delay---Appeal with application for condonation of delay---Appeal was filed along with application for condonation of delay---Appeal was admitted by the Appellate Tribunal to regular hearing and even operation of the Order-in-Appeal was suspended, but the application for condonation was not adverted to by the Appellate Tribunal---Delay in filing the appeal stood automatically condoned.

Customs Appeal No. 532/LB of 1999, 2002 Law Notes 207 and 2005 PTD 501 rel.

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

---S.46---Finance Act (III of 2006), Preamble Appeal to Appellate Tribunal---Competent authority for filing of appeal---Tax payer/registered person contended that appeal had not been filed in proper format and rnoreso same had been filed by the Assistant Collector of Legal Division of the Collectorate, who was not competent to do so under the law---Validity---Appeal was filed by the competent person i.e. Assistant Collector of Legal Division of the Collectorate---At the time of filing the appeal, the words "an Officer of Sales Tax not below the rank of an Additional Collector" were substituted for the words "the Sales Tax Department" by the Finance Act, 2006; thus, the then Assistant Collector of Legal Division was competent to file an appeal on behalf of the Sales Tax Department on the date of filing the appeal i.e. 7th June, 2006.

(n) Sales Tax---

---Format of appeal---Where an order or decision is circumscribed by no specific form or format, an appeal against such order of decision cannot be circumscribed by any specific form or format.

2006 SCMR 1670 = 2006 PTD 2277 rel.

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

---Ss. 57, 45, 45-B & 46---General Clauses Act, (X of 1897), S.21-Civil Procedure Code (V of 1908), O.XLVII---Correction of clerical errors etc.---Application for review of order of appeal---Estoppel--Validity---Appellant-Department had erred by tiling a review application before the Collector (Appeals), who rightly returned time said review application to the appellant-department for lack of jurisdiction--Refusal to review shall not give fresh order to file an appeal against it as the same review application was not sustainable in the eyes of law, besides being already time-barred by 26 days, without any plausible explanation---Appellant-department was estoppel by his own conduct by filing a review petition/application before the Collector (Appeals), who lacked jurisdiction to entertain review application involving factual and legal issues under S.57 of the Sales Tax Act, 1990--Order or decision under S.45-B of the Sales Tax Act, 1990 after it had been announced could not be modified or altered or amended except for clerical or arithmetical error under S.57 of the Sales Tax Act, 1990 or under S.46 of the Sales Tax Act, 1990 after filing an appeal against an 'order' or 'decision' passed under S.45-B of the Sales Tax Act, 1990.

Ghulam Hussain v. Kanwar Ashiq Ali Khan 1980 PLD SC 198 and 1998 SCMR 307 rel.

Barrister Syed Mudassir Ameer, Haroon Khattak, Sr. Auditor and Dost Muhammad, Sr. Auditor for Appellants.

Isaac Ali Qazi and Niaz Muhammad for Respondent.

Dates of hearing: 27th January, 4th February and 17th February, 2009.

2009 P T D (Trib.) 1388

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial)

C.A. No.198/LB of 2005, decided on 7th February, 2009.

Customs Act (IV of 1969)---

----Ss. 2(16) & 156(1)89---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Criminal Procedure Code (V of 1898), S.550---Specific Relief Act (I of 1877), S.10---Smuggling---Punishment for offence---Cut of chassis number and welded or change of engine number of vehicle---Tussle between the parties quarrelling---Confiscation of car by the customs authorities---Validity---If, any vehicle was in a genuine condition and was brought into country without paying the taxes then offence of smuggling would take place---Contravention of Imports and Exports Act, 1950 could be said as having taken place, but if the chassis number was cut and welded or engine number was changed then it was for the Motor Registration Authorities to give any registration number! exhibit to such a composed unit---Customs authorities should not have jumped into the tussle finding the parties quarrelling-Appellate Tribunal could not provide to the appellant the crunches to regain the possession--Customs Authorities had seized the vehicle--Even on criminal side the ultimate authority was the Civil Court to decide the title of a stolen or suspected moveable property under S.525-A(3) of the Criminal Procedure Code, 1898---In the specific circumstances, under S.10 of the Specific Relief Act, 1877, a person entitled to the possession of the specific movable property may recover the same in the manner prescribed by the Code of Civil Procedure---Appellant had nowhere in the appeal or in any application made to any authority had mentioned that he had paid any price to the respondent under any receipt---Appeal was partly accepted and the order was set aside to the extent the seizure was unlawful, however, the customs authorities will deliver the car seized by them to any person who produces any decree of the Civil Court declaring title or possessor of rights.

Syed Mohsin Hamdani for Appellant.

Omer Din, Inspector for Respondent.

Date of hearing: 20th January, 2009.

2009 P T D (Trib.) 1467

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial)

C.A. No.205/LB of 2009, decided on 1st April, 2009.

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

----S.156(1), Cl.(90)---Seizure of non-smuggled goods---Absence of rival claimant---Effect---Possession of owner would be considered as lawful---Provision of Cl.(90) of S.156(1) of Customs Act, 1969 would not attract to such case.

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

----S. 25(5)---Valuation of goods seized not smuggled one---Non-production of evidence by owner in respect of transactional value of such goods---Effect---Such goods would be valued under S.25(5) of Customs Act, 1969.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Appellant.

Saleem Ullah, I.O. for Respondent.

Date of hearing: 9th March, 2009.

2009 P T D (Trib.) 1590

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Humayun Khan Sikandari, Member (Technical)

S.T.A. 425/PB of 2008, decided on 1st June, 2009.

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

----Ss.10(2), 8(1)(a), 8(1)(d), 8A, 10(4), 11(2), 26(5), 33(11), 34(1), 36(1) & 73---Sales Tax Refund Rules, 2002, Chapter-V, R.8---Sales Tax Rules, 2006 , Chapter-V, R.37---S.R.O.525(I)/2005, dated 6-6-2005---Excess amount to be refunded---Refund claim was sanctioned---Subsequently, input tax invoices were sent for verification, D.C. (verification), reported that input tax invoices may not be verified due to the reasons that the registered person had no manufacturing facilities and was registered as wholesaler of polypropylene bags with their Collectorate---Description of the purchases by the claimant was PVC Pipe, whereas the supplier was registered as wholesaler and having no manufacturing facilities---Deputy Collector concluded that the claimant claimed refund against the goods in which neither the supplier was registered nor they had any manufacturing facilities---Refund claim was rejected being inadmissible and penalty equal to refund claim was also imposed---Appellant contended that replies of Collectorate to adjudicating authority and Collector (Appeals), were self-contradictory and inconsistent and, they had changed their stance and had intimated that the input tax invoices issued by the said supplier had been verified and the proof of payment in terms of S.73 of the Sales Tax Act, 1990 had also been verified from the concerned bank---Supplier had also provided the relevant record to the audit party of the Collectorate and supplier's unit was clearly traceable---Validity---Refund claim was declined as a consequence of non-verifiability and non-traceability of the supplier---Refund sanctioning authority was empowered to reject a refund claim, which remained unverified---While sanctioning a refund claim, the refund sanctioning authority exercised the executive powers conferred on him under the statute and he was under obligation to follow the prescribed rules for sanctioning the refund claim---When show-cause notice was issued to the refund claimant on the basis of an objection and the refund claim was declined purely on the basis thereof, then the State functionary exercises quasi judicial authority and he was under obligation to apply his mind judiciously and with due diligence and also to consider the pros and cons of the case including physical verification of the supporting documents and any such action as warranted under the law---Some basic verifications were required to be done by the department from different quarters including feeding/ upholding of the appellant's suppliers data in the Starr's System, enabling the appellant to get his legitimate refund, if otherwise admissible and the same verifications were accordingly carried out by the department---Starr system was a mechanical process in which there was no involvement of human interaction regarding processing of refund claim---Procedure laid down had to be followed for processing and sanctioning of refund claim-Appellant's contention was supported by the proof of payment as required under S.73 of the Sales Tax Act, 1990 and other supporting documents---Had such evidence been examined/verified by the department at the very outset, the controversy involved therein could have been amicably resolved much earlier---Appellant's contention was accepted to the extent of rejection of his refund claim, however, the order was set aside, case was remanded to Deputy/Assistant Collector (Refund), for de novo consideration, with the direction to obtain the report of the investigative audit being conducted by the Collectorate and then in the light of supporting documents of the appellant, he should decide the refund claim of the appellant by providing him an ample opportunity of hearing as well as production of any additional material evidence in support of his contention---Appeal was disposed of by Appellate Tribunal accordingly.

Messrs Superior Textile Mills Ltd. v. Federation of Pakistan; 2001 PTD 2600; Messrs Sajid Textile Industries (Pvt.) Ltd. v. The Collector of Sales Tax and Central Excise, West Karachi K-09/2003/4011 and Complaint No.1025/2006 ref.

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

----Ss.8 & 8A---Responsibilities of the buyer of invoices and Officer-in­charge (Refund)---Tax credit not allowed---Refund rules had to be read with the non-obstante clause of S.8 of the Sales Tax Act, 1990, which had overriding effect and forbids the inadmissible refunds or adjustments---Since the very insertion of Cl. (ca) "the goods in respect of which sales tax has not been. deposited in the government treasury by the respective supplier)" to Subsection (1) of S.8 of the Sales Tax Act, 1990, by virtue of Finance Act, 2006 and the enactment of newly added statute i.e. S.8A of the Sales Tax Act, 1990, the buyer could now be held responsible for the deposit of tax involved in the transactions between the parties (buyer and seller)---According to the legal position, the buyer is now equally responsible for the act done on the part of his supplier---In the matter of refund from public exchequer, verification report which was not in affirmative dis-entitles the appellant/buyer of invoices to the inadmissible refund---Under the Refund Rules, 2006, the Officer-in-charge (Refund) shall satisfy himself about the genuineness and admissibility of the refund claim on the basis of verification/investigative report and supportive documents and then reject the claim if found inadmissible.

Messrs Superior Textile Mills Ltd. v. Federation of Pakistan and 2001 PTD 2600 rel.

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

----S.10---Excess amount to be refunded---Invoices---Recovery of due tax, responsibilities of---Was not possible for the recipient of invoices to investigate the moral character of the supplier whether he discharged his legal obligation or otherwise, rather it was the foremost obligation of the department to unearth such unscrupulous elements, who either did not comply with the rules and procedures issued thereunder or even did not pay the due tax, to recover the due tax which had been paid by the recipient of invoices, .and did not penalize the honest tax payer by denying its right vested in him by the Sales Tax Act, 1990.

Messrs Sajid Textile Industries (Pvt.) Ltd v. The Collector of Sales Tax and Central Excise, West Karachi in appeal No.K-09/2003/4011 and Federal Tax Ombudsman while deciding Complaint No. 1025 of 2006 rel.

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

----Ss.23 & 73---Sales. Tax Rules, 2005, Chapter-I, R.5---Sales Tax Refund Rules, 2006, R.37---Tax invoices---Untraceable supplier---Refund claimed against unverifiable supplies by untraceable supplier had rightly been declined by the adjudicating authority under the relevant provisions of law---Claimant was not entitled to claim refund on the invoice of untraceable supplier---Refund claim of the appellant/claimant had been declined and in order to have a valid refund claim, the appellant's supplier was required under the law and rules made there-under to issue valid sales tax invoices arising out of supplies---Wisdom behind a valid sales tax invoice was to ascertain the genuineness and admissibility of the refund claim pertaining to purchases and to ensure that the input tax invoice in its chain had reached its lawful destination (Govt. Exchequer)---To such extent, there was no legal impropriety, illegality, infirmity or material irregularity in the order-in-original.

Complaint No. 1025 of 2006 rel.

Ijaz Zareen Proprietor for Appellant.

Muhammad Haroon Khattak Sr. Auditor for Respondent.

Dates of hearing: 11th March, 9th April, 14th and 26th May, 2009.

2009 P T D (Trib.) 1637

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial) and Humayun Khan Sikandari, Member (Technical)

Appeal No.7(1568)ST/IB of 2001(PB), decided on 7th May, 2009.

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

----Ss.3, 6, 7, 22, 23, 26, 33 & 34---Scope of Tax---Appellants were engaged in manufacturing and supply of Diesel Electric Locomotives without payment of sales tax-Appellants supplied to Pakistan Railways without payment of leviable sales tax---As it was proved and admitted that sales tax was not paid on locomotives handed over to Pakistan Railways, appellants were directed to pay demanded amount along with additional tax and penalty equivalent to 3% of the tax involved---Appellants contended that manufacturing/assembling Locomotives were for their own usage and were not supplied the same to any other person---Locomotives (Railways Engines) were not independently marketable products, which could be sold in the market and were not liable to sales tax---Validity---Pakistan Railways and Pakistan Locomotives Factory were both distinct registered persons---Both the registered persons were now under obligation to issue sales tax invoices in respect of supplies made to each other under S.23 of the Sales Tax Act, 1990---Pakistan Locomotive Factory/appellant had supplied Locomotives to Pakistan Railways without payment of sales tax and had violated S.3 of the Sales Tax Act, 1990---Stance taken by the appellants was not sustainable in the eyes of law and appellants were liable to pay sales tax on the taxable supplies of Diesel Engine Locomotives which were rolled out during the involved period--As the Order-in-Original did not suffer from any patent illegality, impropriety or material irregularity warranting any interference, appeal was dismissed by the Appellate Tribunal.

Sheikhoo Sugar Mills Limited v. Government of Pakistan 2001 PTD 2097 and Messrs Wapda v. Collector of Central Excise and Sales Tax Forum of March, 2002 on page 38 distinguished.

Usmani Associates v. Central Board of Revenue 2001 PTD 2982 rel.

Messrs Engro Chemical Pakistan Ltd. v. Additional Collector of Customs 2003 PTD 777 ref.

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

----S.46(4)---Appeal to Appellate Tribunal---Jurisdiction and scope---Word "in relation to the matter before it"---According to subsection (4) of S.46 of the Sales Tax Act, 1990, the Appellate Tribunal, after giving the appellants an opportunity of being heard, may pass such order in relation to the matter before it as it thinks fit---Words "in relation to the matter before it" apparently confine the powers of the Appellate Tribunal to the subject-matter of appeal and apparently it cannot travel beyond the scope of the appeal or pass an order or give a direction which would work adversely to the appellant, who has filed an appeal against the decision or order of the lower forum---Appellant cannot be put in a worse position than what he was earlier.

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

----S.46(4)-c-Appeal to Appellate Tribunal---Appellate proceedings are the continuation of the original proceedings---Proceedings under the Sales Tax Act, 1990 do not come to an end with the passing of an order, if any of the rival parties files an appeal, the proceedings are kept alive; the appeal before only continuation of the original proceedings---Legal pursuit of a remedy through filing an appeal before the first and second appellate authorities are really but steps in a series of proceedings all connected by an intrinsic unity; are to be regarded as one legal proceedings---Appellate proceedings, therefore, are the continuation of the original proceedings.

2005 PTD (Trib.) 2262 rel.

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

----S.46---Appeal to Appellate Tribunal---Re-open of entire matter---On filing of an appeal the entire matter reopens and becomes sub judice.

PLD 1969 SC 1 rel.

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

----S.46---Appeal to Appellate Tribunal---Powers to Appellate Tribunal--Appellate Tribunal as the final fact finding authority is obliged to consider the question(s) of fact(s) and that is the reason that Appellate Tribunal has been entrusted with vast powers, so as to bring the factual issues involved in the case to surface which will help in arriving at the proper, legal, just and fair decision of a case.

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

----S.46---Appeal to Appellate Tribunal---Question of law---A pure question of law can be raised at any stage of the appeal depending upon the facts and circumstances of each case.

Messrs Gatron(Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 and Haji Abdullah Khan v, Nisar Muhammad Khan PLD 1964 SC 6900 rel.

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

----S.46---Appeal to Appellate Tribunal-Question of law not taken before the louver forum---Allowability---A question of law arising out of the facts of the case relating to the fundamental issues involved therein, even if was not raised before the lower forum, can be allowed to be taken before the higher forum and Appellate Tribunal for doing complete justice may, if the facts and circumstances of the case so demand, allow to raise a question of law which was not as such taken before the lower forum---It is, in fact, the function of the Appellate Tribunal, who is seized of the matter, to apply the correct law to meet the ends of justice.

2005 PTD 480 rel.

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

---S.46---Constitution of Pakistan, 1973, Art. 187(1)--Appeal to Appellate Tribunal-.--When leave is not granted on a point, the same can be allowed to be canvassed in appeal if it is necessary for doing complete justice in a case or a matter pending before the Court as contemplated by Sub-Article (1) of Article 187 of the Constitution of Pakistan.

1992 SCMR 1072 rel.

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

----S.3---Scope of tax---Explanation and meanings of terminology--Section 3(1) of the Sales Tax Act, 1990 is a taxing section---Section 3(1)(a) of the Sales Tax Act, 1990 consists of the components/constituents as follows; the sales tax is to be levied/charged at the rate of 15% (now 16%) of the value of (i) taxable supply (ii) by a registered person (iii) in the course or furtherance of (iv) any taxable activity/business (v) carried on by him---Expression used in S.3(1)(a) the Sales Tax Act, 1990, and which are relevant for the purpose of resolving the controversy involved in this case, are (i) taxable supply (iv) taxable activity, and (iii) in the course of furtherance of---Though the first two, but not the latter one and also not the word "business", have been defined directly under S.2(28) or (41) and S.2(24) or (35), yet for proper appreciation of their meaning, one has to revert back to the definitions of goods, taxable goods, supply and taxable supply---Goods means and includes movable property other than money and securities etc., and Taxable Goods means and includes the movable property other than those which have been exempted under S.13 of the Sales Tax Act, 1990, supply means and includes sale, transfer and other disposition of goods and taxable supply means supply of taxable goods other than supply of goods which are exempt under S. 13 of the Sales Tax Act, 1990.

Messrs Myfair Spinning Mills Ltd. Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others PTCL 2002 CL 115 (H.C. Lab.); Dawood Hercules Chemicals Ltd. v. Collector of Sales Tax, Lahore 2007 PTD 1161; Messrs Al-Hilal Motors Stores and other v. The Collector, Sales Tax and Central Excise (East) Karachi and others 2004 PTD 868 and Collector of Customs Additional Collector, Hub v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench and others 2007 SCMR 1705 = 2007 PTD 2275 ref.

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

----S.3---Scope of tax---Locomotives in Completely Build Unit condition were received in the name of District Controller of Store (Shipping) of Messrs Pakistan Railways, Karachi Cantt., and after payment of leviable duty and taxes, the same were directly received by Messrs Pakistan Railways for its operation at Karachi, without arriving at Messrs Locomotive Factory, Risalpur and no value addition was made thereon---Such locos were clearly and evidently not part of the case and demand of sales tax on such CBUs was not justified.

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

----Ss.66, 7(2) & 23---Refund to be claimed within one year---Adjustment of input tax---Limitation---Period of limitation for claiming input tax adjustment/refund was one year under S.66 of the Sales Tax Act, 1990 and that was also barred by time under the provisions' of Sales Tax Act, 1990---Input tax adjustment could only be made during the relevant tax period which the appellants have failed to do so---Appellants were not entitled for the adjustment of input tax at this belated stage---Appellants failed to perform their statutory obligation under the Sales Tax Act, 1990---Input tax adjustment was neither permissible under the Sales Tax Act, 1990 nor the statute allows right of such delayed input tax adjustment facility to the registered person.

Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd., 2002 PTD 2457; Messrs Cherat electric Company Ltd., Nowshera v. The Collector, Sales Tax and Central excise, Peshawar and another 2002 PTD (Trib.) 1525 and Messrs Rainbow Industries v. Collector of Customs, and others in C.P. 469/2004 rel.

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

----Ss.34 & 33---Additional tax--Penalties--Appellant contended that they were government owned enterprise and no wilful evasion of tax was involved---Imposition of additional tax (default surcharge) and penalty were uncalled for---Department contended that appellants have violated the explicit provisions of Sales Tax, 1990 by not paying the due sales tax on the supply of locomotives and it was a wilful default on their part---They were liable to pay additional tax (default surcharge) and penalty prescribed under the law---Validity---Appellants wilfully and deliberately avoided their statutory obligations under the Sales Tax Act, 1990 as there was abundantly clear indication in the L-1 Licence issued .to them by the department in 1993 that their product was chargeable to sales tax---Even after compulsory registration, they rolled out thirteen Diesel Engine Locomotives and deliberately avoided to pay leviable sales tax thereon.

PLD 1991 SC 963 ref.

2008 PTD 1461 distinguished.

Qazi Waheeduddin and Anwar Saeed Dawar, Managing Director for Appellants.

Abdul Latif Yousafzai; Muhammad Zubair Shah, A.C., Haroon Khattak and Dost Muhammad for Respondents.

Dates of hearing: 17th, 25th November 2nd December 2009, 12th January 2009, 10th, 12th, 19th and 26th February, 2009 and 16th March, 2009.

2001 P T D (Trib.) 1669

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Humayun Khan Sikandari, Member (Technical)

S.T.A. No.447/PB of 2008, decided on 21st May, 2009.

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

----Ss. 10(2), 8(1)(a), 8(1)(d), 10(4), 11(2), 26(5), 33(11), 34(1) & 36(1)---Sales Tax Refund Rules, 2002, R.8---S.R.O. 525(I)/2004, dated 6-6-2005---Sales Tax Rules, 2006, Chapter-V, R.37---Excess amount to be refunded---STARR/CRRAS objections---Validity---Appellants were alleged to have claimed inadmissible input tax/refund---Refund claim was found admissible to some extent under the provision of S.10(2) of the, Sales Tax Act, 1990 and the balance amount objected by the STARR/CRRAS was found inadmissible under the provision of S.10(4) of the Sales Tax Act, 1990 which was rejected accordingly---Appellant contended that Collectorate by itself should have verified and examined the objection of STARR from the respective Collectorate instead of dragging the honest taxpayer in lengthy process of litigation--- In case of tax evasion, action could be taken against unscrupulous elements, rather bolding the money of genuine taxpayer for the wrong doing of others---Appellant's claim was declined as consequence of STARR objection during the process of the refund claim under S.37 of Chapter-V of the Sales Tax Rules, 2006---Refund sanctioning authority was empowered to reject a refund claim, which remained unverified due to STARR's objection---While sanctioning a refund claim, the refund sanctioning authority exercises the executive powers conferred by him under the statute and he was under obligation to follow the prescribed rules for sanctioning the refund claim---When the show-cause notice was issued to the refund claimants on the basis of STARR's objections and the refund claim was declined purely on the basis thereof, then he exercises quasi judicial authority and he was under obligation to apply his mind judiciously and with due diligence and also to consider the pros and cons of the case including physical verification of the supporting documents and any such action as warranted under the law---Some basic verifications were required to be done by the department from different quarters including feeding/uploading of the appellant's suppliers data in the STARR's System which in turn would have enabled the appellants to get their legitimate refund, if otherwise admissible, but the same basic verifications were not carried out by the department---Department's contention that STARR System was a mechanical process in which there was no involvement of human interaction regarding processing of refund claim and laid down procedure had to be followed for processing and sanctioning of refund claim, was quite convincing; however, it was apparent from available record that appellant's contention was supported by the proof of payment as required under S.73 of the Sales Tax Act, 1990 and other supporting documents thereof---Had such evidence been examined/verified by the department at the very outset, the controversy involved therein could have been amicably resolved---Appellate Tribunal accepted the contention of appellants to the extent of rejection of their refund claim, on the basis of STARR objection, except the refund claim generated against supplies of black-listed suppliers---Case was remanded to the Deputy/Assistant Collector for de novo consideration with the direction to conduct fresh inquiry/verification of the supporting documents of the appellants under the relevant provisions of Act and clearly establish genuineness or otherwise of the refund claim of the appellants by providing an ample opportunity of hearing as well as production of any material evidence, etc; in support of their contention.?

Messrs Sajid Textile industries (Pvt.) Ltd. v. The Collector Sales Tax and Central Excise, West Karachi in Appeal No.K-09/ 2003/4011; Messrs Superior Textile Mills Ltd. v. Federation of Pakistan (sic) and Complaint No.1025 of 2006 ref.

Messrs M.B. Dyes Chemicals & Silk Industry (Pvt.) Ltd. Gadoon Amazai, Swabi v. Collector of Sales Tax, Peshawar and others Appeal Case No.ST-82/PB of 2008 rel.

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

----Ss.73 & 23---Sales Tax Rules, 2005, Chapter-1, R.5---Certain transaction not admissible---Tax invoices-Claim against black-listed suppliers---Controversy as to whether the statutory liability on the part of the refund claimants had been discharged as per law by way of making payment of tax in accordance with S.73 of the Sales Tax Act, 1990, and supply of goods against valid sales tax invoices issued under S.23 of the Sales Tax Act, 1990---Validity---Refund claimed against black-listed suppliers had rightly been declined by the refund sanctioning authority under S.5 of Chapter-1 of the Sales Tax Rules, 2006--Claimants were not entitled to claim refund on the invoices of black-listed suppliers---To such extent, Appellate Tribunal did not find any legal impropriety, illegality, infirmity or material irregularity in the orders by the lower forums and same was not interfered.?

(c) Refund Rules, 2006---

----R.37---Action on inadmissible claims---Refund claim of the claimants had been declined under Rs.37 of the Refund Rules, 2006 and the appellant had wrongly referred to Refund Rules, 2002, which were not applicable---In order to have a valid refund claim, the appellant's supplier was required under the law and rules made thereunder to issue valid sales tax invoices arising out of supplies---Wisdom behind a valid sales tax invoice was to ascertain the genuineness and admissibility of the refund claim pertaining to purchases and to ensure that the input tax invoice in its chain had reached its lawful destination (Government Exchequer)---Officer Incharge refund, in view of report generated by the STARR System, was under obligation to issue refund in those claims which had properly been validated by the system and to refuse refund which was invalidated thereto.?

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

----S.10---Excess amount to be refunded---Obedience of applicable rules--Appellants filed refund claim under S.10 of the Sales Tax Act, 1990---Each refund claim was required to be processed under the relevant procedure specified by the Federal Board of Revenue under S.10 of the Sales Tax Act, 1990---Mechanism for filing of refund claim with the department under the provisions of Sales Tax Act, 1990 had been devised whereunder every claim was processed and scrutinized in the light of said procedure/system---Registered person have to abide by the applicable rules made under the sales tax law.?

2001 PTD 2600 rel.

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

----Ss.10 & 3---Excess amount to be refunded---Scope of tax---Refund claim filed was required to pass through mandatory scrutiny of the system---Stance of the claimants with reference to applicability of S.3 of the Sales Tax Act, 1990 on the matters of refund from the public exchequer was not tenable and such claim was liable to be rejected.?

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

----Ss.8 & 8A---Responsibilities of the buyer of invoices and Officer Incharge Refund---Tax credit not allowed---Refund rules had to be read with the non-obstanate clause of S.8 of the Sales Tax Act, 1990, which had overriding effect and forbid the inadmissible refunds or adjustment--On specific objection raised by the STARR, the Officer Incharge Refund was under obligation to act in accordance with the analysis report duly generated by the computer system indicating the admissible and inadmissible amount of refund out of the refund claimed and to decline the claim under objection---Since the insertion of Cl.(a) the goods in respect of which sales tax has not been deposited in the government treasury by the respective supplier" to subsection (1) of S.8 of the Sales Tax Act, 1990, by virtue of Finance Act, 2006 and the enactment of newly added section i.e. S.8A in the Sales Tax Act, 1990, the buyer could be held responsible fOr the deposit of tax involved in the transactions between the parties (buyer and seller)---Appellant was equally responsible for the act done on the part of his supplier---In the matters of refund claim the public exchequer, objection raised by the system disentitles the appellant to the inadmissible refund---Last but not the least, under Refund Rules, 2002, the Officer Incharge Refund shall satisfy himself about the genuineness and admissibility of the refund claim on the basis of said report, recommendations and supporting documents and then reject the claim if found inadmissible.?

Usman Gul, Manager Accounts for Appellants.

Muhammad Haroon Khattak Sr. Auditor for Respondents.

Dates of hearing: 11th, 17th, 26th February, 12th March, 14th April and 20th May, 2009.

2009 P T D (Trib.) 1724

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial) and Humayun Khan Sikandari, Member (Technical)

Appeal No. S.T. 80/PB of 2005, decided on 11th May, 2009.

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

----Ss.3, 6(1), 22(1), 23(1), 26(1), 33(2)(cc), 34(1) & 36(1)---Scope of tax---Supply of Locomotives without payment of sales tax---Late filing of returns---Short payment of sales tax---Levy of sales tax and penalties---Appellant contended that Pakistan Locomotive factory was part and parcel of Pakistan Railways---Diesel locomotive engines which were manufactured/assembled were directly brought in use by Pakistan Railways and it was not a case of supply as envisaged under S.3 of the Sales Tax Act, 1990---Validity---Messrs Pakistan Railways and Messrs Pakistan Locomotive Factory were both distinct registered persons---Both the registered persons were now under obligation to issue sales tax invoices in respect of supplies made to each other under S.23 of the Sales Tax Act, 1990---Messrs Pakistan Locomotive Factory/appellant had supplied Locomotives to Messrs Pakistan Railways without payment of sales tax and had violated S.3 of the Sales Tax Act, 1990---Stance taken by the appellants was not sustainable in the eyes of law and appellants were liable to pay sales tax on the taxable supplies of Diesel Engine Locomotives which were rolled out during the involved period---Order-in-original was not suffering from any patent illegality, impropriety or material irregularity warranting any interference---Appeal was dismissed by the Appellate Tribunal.

Sheikhoo Sugar Mills Limited v. Government of Pakistan 2001 PTD 2097 and Messrs Wapda v. Collector of Central Excise and Sales Tax Forum of March, 2002 on page 38 distinguished.

Usmani Associates v. Central Board-of Revenue 2001 PTD 2982 rel.

Messrs Engro Chemical Pakistan Ltd. v. Additional Collector of Customs 2003 PTD 777 ref.

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

----S.46(4)---Appeal to Appellate Tribunal---Jurisdiction and scope---Words "in relation to the matter before it"---According to subsection (4) of S.46 of the Sales Tax Act, 1990, by Appellate Tribunal, after giving 'the appellants an opportunity of being heard, may pass such order in relation to the matter before it as it thinks fit---Words "in relation to the matter before it" apparently confine the powers of the Appellate Tribunal to the subject matter of appeal and apparently it cannot travel beyond the scope of the appeal or pass an order of giving a direction which would work adversely to the appellant, who has filed an appeal against the decision or order of the lower Court---Appellant cannot be put in a worse position than what he was in earlier.

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

----S.46(4)---Appeal to Appellate Tribunal---Appellate proceedings are the continuation of the original proceedings---Proceedings under the Sales Tax Act, 1990 do not come to an end with the passing of an order if any of the rival parties files an appeal, the proceedings are kept alive; the appeal being only continuation of the original proceedings---Legal pursuit of a remedy through filing an appeal before the first and second appellate authorities are really but steps in a series of proceedings all connected by an intrinsic unity, are to be regarded as one legal proceedings---Thus, the appellate proceedings are the continuation of the original proceedings.

2005 PTD (Trib.) 2262 rel.

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

----S.46---Appeal to Appellate Tribunal---Re-open of entire matter---On filing of an appeal the entire matter reopens and becomes sub judice.

PLD 1969 SC 1 rel.

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

----S. 46---Appeal to Appellate Tribunal---Powers of Appellate Tribunal---Appellate Tribunal as the final fact finding authority is obliged to consider the question(s) of fact(s) and that is the reason that Appellate Tribunal has been entrusted with vast powers, so as to bring the factual issues involved in the case to surface which will help in arriving at the proper, legal, just and fair decision of a case.

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

----S.46---Appeal to Appellate Tribunal---Question of law---A pure question of law can be raised at any stage of the appeal depending upon the facts and circumstances of each case.

Messrs Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 and Haji Abdullah Khan v. Nisar Muhammad Khan PLD 1965 SC 6900 rel.

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

----S.46---Appeal to Appellate Tribunal---Question of law not taken before the lower forum---Allowability---A question of law arising out of the facts of the case relating to the fundamental issues involved therein, even if was not raised before the lower forum, can be allowed to be taken before the higher forum and Appellate Tribunal for doing complete justice may, if the facts and circumstances of the case so demand, allow to raise a question of law which was not as such taken before the lower forum---It is, in fact, the function of the Appellate Tribunal, who is seized of the matter, to apply the correct law to meet the ends of justice.

2005 PTD 480 rel.

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

----S.46---Constitution of Pakistan, (1973), Art. 187(1)---Appeal to Appellate Tribunal---When leave is not granted on a point, the same can be allowed to be canvassed in appeal if it is necessary for doing complete justice in a case or a matter pending before the Court as contemplated by sub-Article (1) of Article 187 of the Constitution of Pakistan.

Messrs Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 rel.

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

----S.3---Scope of tax---Explanation and meanings of terminology---Section 3(1) of the Sales Tax Act, 1990 is a taxing section---Section 3(1)(a) of the Sales Tax Act, 1990 consists of the components/ constituents as follow; the sales tax is to be levied/charged at the rate of 15% (now 16%) of the value of (i) taxable supply (ii) by a registered person (iii) in the course of furtherance of (iv) any taxable activity/ business (v) carried on by him---Expression used in S.3(1)(a) the Sales Tax Act, 1990 and which are relevant for the purpose of resolving the controversy involved in this case, are (i) taxable supply (ii) taxable activity, and (iii) in the course of furtherance of---Though the first two, but the latter one and also not the word "business", have been defined directly under S.2(28) or (41) and S.2(24) or (35), yet for proper appreciation of their meaning, one has to revert back to the definitions of goods,. taxable goods, supply and taxable supply---Goods means and includes moveable property other than money and securities etc., and Taxable Goods means and includes the moveable property other than those which have been exempted under S.13 of the Sales Tax Act, 1990, supply means and includes sale, transfer and other disposition of goods and taxable supply means supply of taxable goods other than supply of goods which are exempt under S. 13 of the Sales Tax Act, 1990.

Messrs Myfair Spinning Mills Ltd. Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others PTCL 2002 CL 115; Dawood Hercules Chemicals Ltd. v. Collector of Sales Tax, Lahore 2007 PTD. 1161; Messrs Al-Hilal Motors Stores and other v. The Collector, Sales Tax and Central Excise (East) Karachi and others 2004 PTD 868 and Collector of Customs through Additional Collector, Hub v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench and others 2007 SCMR 1705 = 2007 PTD 2275 ref.

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

----S.3---Scope of tax---Locomotives in Completely Build Unit condition were received in the name- of District Controller of Store (Shipping) of Messrs Pakistan Railways, Karachi Cantt. and after payment of leviable duty and taxes, the same were directly received by Messrs Pakistan Railways for its operation at Karachi, without arriving at Messrs Locomotive Factory, Risalpur and no value addition was made thereon--Such Locos were clearly and evidently not part of the case an demand of, sales tax on the such CBUs was not justified.

(k) Sales Tax---

----Cost of locomotives---Calculation of---Appellant contended that Department directed to re-calculate the cost of Locomotives, which was not sustainable as sufficient evidence had been placed on record to decide the matter---Cost as agitated before the original .stage of adjudication as well as at the first appellate stage as well as before the Senate was factually true and no second opinion could be formed about it---Validity---Since substantial material evidence had been produced by the appellants in support of their contention---No sales tax liability was involved on the valuation aspect---Question of additional tax and penalty to such extent did not arise at all.

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

----S.13---S.R.O.580(I)/91, dated 27-6-1991---S.R.O.561(I)/94, dated 9-6-1994---S.R.O. 598(I)/90, dated 7-6-1990---S.R.O. 908(I)/92, dated 19-94992---S.R.O.553(I)/94, dated 9-6-1994---Exemption---Objective behind S.R.O.580(I)/91, dated 27-6-1991 was to facilitate the newly investors after satisfying the qualifying mandatory conditions of the said S.R.O. while specific exemption was available to Messrs Pakistan Railways under S.R.O. 598(I)/90, dated 7-6-1990 as amended vide S.R.O. 908(I)/92, dated 19-9-1992, which the appellant availed during the said period of exemption and supplies made by the appellant became liable to sales tax after issuance of the rescinding S.R.O. 553(I)/94, dated 9-6-1994---Appellants were not entitled to avail general exemption under S.R.O. 580(I)/91, dated 27-6-1991.

Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 rel.

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

----Ss. 13, 14 & 19---Exemption---Registration---Conditions for exemptions---Mandatory condition for exemption was the date "set up" and in accordance with "explanation" embodied in Notification S.R.O. 580(I)/91, dated 27-6-1991 as amended vide S.R.O. 561(I)/94, dated 9-6-1994, it was the date on which the industry goes into production, including trial production, and the said date was required to be intimated in writing by an intending manufacturer to the Assistant Collector of Sales Tax having jurisdiction in the area at least 15 days before commencing such production---Appellants had failed to satisfy the said mandatory condition of the notification as it neither applied for the. exemption nor satisfied the mandatory provisions of Sales Tax Act, 1990---Appellants were not entitled to claim such exemption under such S.R.Os.---Moreover, appellants were not registered person under Sales Tax Act, 1990, during the currency of such exemption notification, thus, were not entitled to claim such exemption---Further, appellants avoided registration under S.14 of the Sales Tax Act, 1990 in spite of repeated notices and were compulsorily registered under S.19 of the Sales Tax Act, 1990---Appellants were not entitled to claim exemption under S.R.O.580(I)/91, dated 27-6-1991 as amended vide S.R.O. 561(I)/94, dated 9-6-1994 in the circumstances.

Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902; Messrs Bolan Chemicals (Pvt.) Ltd., v. Collector Sales Tax 1998 PTD 3064; PTCL 1988 CL 257; PLD 1977 Lah. 1327; PTCL 1999 CL 533 and PLD 1996 Lah. 718 rel.

2008 PTD 1157 PLD 2008 SC 446 distinguished and irrelevant.

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

----Ss. 13 & 19---S.R.O.580(I)/91, dated 27-64991---Exemption---Exemption under S.R.O.580(I)/91, dated 27-6-1991 was available only to the registered person under Sales Tax Act, 1990 while the appellants were not registered in 1993 and they deliberately avoided sales tax registration for almost six years despite repeated notices---As a, last resort, the department compulsorily registered the appellants.

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

----S.13---S.R.O. 580(I)/91, dated 27-6-1991---Exemption---It has been explicitly mentioned in the notification that the same shall be effective for a period of five years commencing from 1st July, 1991---It was clear that such exemption was available under the S.R.O. 580(I)/91, dated 27-6-1991 i.e. 1st July, 1991 to 30th June, 1996, to those units, who could satisfy the mandatory qualifying conditions---Plea of the appellants that exemption was available to them under such S.R.O. for the period 1993 to 1998 was not tenable because they could not satisfy the qualifying mandatory conditions.

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

----S.13---Exemption---When exemption in regard to any goods or person is granted subject to fulfilment of certain conditions, the exemption so provided for is not to operate unless the conditions are satisfied---Before claiming the benefit of exemption, the conditions laid down in the exemption granting notification, the claimants have to satisfy the department that their claim strictly falls within the purview of the exemption granting notification.

PTCL 1988 CL 257; PLD 1977 Lah. 1327; PTCL 1999 CL 533 and PLD 1996 Lah. 718 rel.

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

----Ss.66, 7(2) & 23---Refund to be claimed within one year---Adjustment of input tax--Limitation---Period of limitation for claiming input tax adjustment/refund was one year under S.66 of the Sales Tax Act, 1990 and that was also barred by time under the provisions of Sales Tax Act, 1990---Input tax adjustment could only be made during the relevant tax period which the appellant have failed to do so---Appellants were not entitled for the adjustment of input tax at this belated stage---Appellants failed to perform their statutory obligation under the Sales Tax Act, 1990---Input tax adjustment was neither permissible under the Sales Tax Act, 1990 nor the statute allows right of such delayed input tax adjustment facility to the registered person.

Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and two others reported in PTCL 2002 CL 115 (H.C. Lah.) ref.

Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd., 2002 PTD 2457; Messrs Cherat Electric Company Ltd., Nowshera v. The Collector, Sales Tax and Central Excise, Peshawar and another 2002 PTD (Trib.) 1525 and Messrs Rainbow Industries v. Collector of Customs, and others in C.P. 469/2004 rel.

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

----Ss.34 & 33---Additional tax---Penalties---Appellant contended that they were government owned enterprise and no wilful evasion of tax was involved---Imposition of additional tax (default surcharge) and penalty were uncalled for---Department contended that appellants have violated the explicit provisions of Sales Tax Act, 1990 by not paying the due sales tax on the supply of locomotives and it was a wilful default on their part---They were liable to pay additional tax (default surcharge) and penalty prescribed under the law---Validity---Appellants wilfully and deliberately avoided their statutory obligations under the Sales Tax Act, 1990 as there was abundantly clear indication in the L-1 License issued to them by the department in 1993 that their product was chargeable to sales tax---Even after compulsory registration, they rolled out thirteen Diesel Engine Locomotives and deliberately avoided to pay leviable sales tax thereon.

PLD 1991 SC 963 ref.

2008 PTD 1461 distinguished.

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

---Ss. 3, 6(1), 22(1), 23(1), 26(1), 33(2)(cc), 34(1) & 36(1)---Scope of tax---Summary of judgment---(a) Appellate Tribunal can travel beyond the scope of subject matter of the appeal and factual and legal issues neither raised in the show-cause notice nor agitated at the original .stage of adjudication nor at the first appeal stage can be considered by it (b) the appellants were liable to pay sales tax on the taxable supplies of D. E. Locomotives (c) ten (10) D.E. Locomotives in CBU condition (Age-30 Project) were imported directly by Messrs Pakistan Railways and duly custom cleared from its operation at Karachi and these never arrived at Messrs Locomotive Factory, Risalpur---Therefore, the question of any value addition thereon does not arise (d) the appellants have, not suppressed the values of D.E. Locomotives rolled out by them during the period related to this case (e) the show-cause notice issued in the instant case not time barred (f) the appellants were not entitled to claim exemption from payment of sales tax under S.R.O. 580(I)/91, dated 27-6-1991 (g) the appellants were not entitled at this belated stage to claim input tax adjustment under the provisions of Sales Tax Act, 1990 (h) the additional tax (default surcharge) and penalty imposed are clearly attractable in this case---Department was directed to recalculate the sales tax liability on the seven (7) Locomotives and collect the leviable sales tax along with the additional tax under S.34 of the Sales Tax Act, 1990 and penalty @ 3% of the tax involved under S.33(2)(cc) of the Sales Tax Act, 1990.

Qazi Waheeduddin and Anwar Saeed Dawar, Managing Director for Appellants.

Abdul Latif Yousafzai, Zubiar Shah, A.C., Muhammad Haroon Khattak, Sr. Auditor and Dost Muhammad, Sr. Auditor for Respondents.

Dates of hearing: 17th and 25th November, 2nd December, 2008, 12th January, 10th, 12th, 19th, 26th February and 16th March, 2009.

2009 P T D (Trib.) 1802

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial) and Humayun Khan Sikandari, Member (Technical)

Appeal No.7(107)ST/Trf of 2001, decided on 4th May, 2009.

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

----Ss. 13, 3, 14, 19 & 23---S.R.O. 580(I)191 dated 27-6-1991---S.R.O. 561(I)/94 dated 9-6-1994---S.R.O. 598(I)/90 dated 7-6-1990---S.R.O. 908(I)/92 dated 19-9-1992---S.R.O. 553(I)194 dated 9-6-1994---Exemption---Scope of tax---Manufacturing of Locomotives meant for Pakistan Railways---Supply of same without payment of sales tax leviable thereon as evident from the written statement of the manufacturer---Demand of sales tax---Appellant contended that factory was established in N.-W.F.P. and the sales tax was not payable for five years---Concession was not considered by the department while work carried on should have been also granted exemption---Qualifying condition was not considered meant for exemption and always the manufacturing date was considered and even the date was not considered according to the record of Locomotive Factory---Date of set up could easily be available from the record, which the department did not care to consider---However forum also did not consider that locomotives were neither saleable item nor meant for commercial purposes---Validity--Mandatory` condition for exemption was the date "set up" and in accordance with "explanation" embodied in notification S.R.O. 580(I)/91 dated 27-6-1991 as amended vide S.R.O. 561(I)/94 dated 9-6-1994, it was the date on which the industry went into production, including trial production, and the said date was required to be intimated in writing by an intending manufacturer to the Assistant Collector of Sales Tax having jurisdiction in the area at least 15 days before commencing such production---Appellants had failed to satisfy the said mandatory condition of the notification as it neither applied for the exemption nor satisfied the mandatory provisions of Sales Tax Act, 1990---Appellants were not entitled to claim such exemption under said S.R.Os---Appellants were not registered person under Sales Tax Act, 1990, during the currency of such exemption notification, and thus were not entitled to claim such exemption---Appellants avoided registration under S. 14 of the Sales Tax Act, 1990 in spite of repeated notices and were compulsorily registered under S. 19 of the Sales Tax Act, 1990---Appellants in circumstances, were not entitled to claim exemption under S.R.O. 580(I)/91 dated 27-6-1991 as amended vide S.R.O. 561(I)/94 dated 9-6-1994 in circumstances.

Collector Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902; Messrs Bolan Chemicals (Pvt.) Ltd. v. Collector Sales Tax PLJ 1998 Quetta 151; PTCL 1988 CL 257(sic); PLD 1977 Lah. 1327; PTCL 1999 CL 533(sic) and PLD 1996 Lah. 718 rel.

2008 PTD 1157 = PLD 2008 SC 446 distinguishable & irrelevant.

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

----Ss. 3 & 23---Scope of tax---Supply of Locomotives---Levy of sales tax---Appellants contended that manufacturing/assembling Locomotives was for their own usage and not for supplying the same to any other person---Locomotives (Railways Engines) were not independent marketable products, which could be sold in the market and were not liable to sales tax---Validity---Pakistan Railways and Pakistan Locomotive ' Factory were both distinct registered persons---Both the registered persons were now under obligation to issue ,sales tax invoices in respect of supplies made to each other under S. 23 of the Sales Tax Act, 1990---Pakistan Locomotive Factory/Appellant had supplied Locomotives to Pakistan Railways without payment of sales tax and had violated S.3 of the Sales Tax Act, 1990---Stance taken by the appellants was not sustainable in the eyes of law and appellants were liable to pay sales tax on the taxable supplies of Diesel Engine Locomotives which were rolled out during the relevant period---Order in original was not suffering from any patent illegality, impropriety or material irregularity warranting any interference---Appeal was dismissed by the Appellate Tribunal.

Sheikhoo Sugar Mills Limited v: Government of Pakistan 2001 PTD 2097 and Messrs WAPDA v. Collector of Central Excise and Sales Tax, Tax Forum of March 2002 on page 38 distinguishable.

Usmani Associates v. Central Board of Revenue 2001 PTD 2982 rel.

Messrs Engro Chemical Pakistan Ltd. v. Additional Collector of Customs 2003 PTD 777 ref.

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

----S.46(4)---Appeal to Appellate Tribunal---Jurisdiction and scope---Words "in relation to the matter before it"---According to sub-S.(4) of S.46 of the Sales Tax Act, 1990, the Appellate Tribunal, after giving the appellants an opportunity of being heard, may pass such-order in relation to the matter before it as it thinks fit---Words "in relation to the matter before it" apparently confine to the powers of the Appellate Tribunal to the subject-matter of appeal and apparently it cannot travel beyond the scope of the appeal or pass an order or give a direction which would work adversely to the appellant, who had filed an appeal against the decision or order of the lower Court---Appellant cannot be put in a worse position than what he was earlier.

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

----S.46(4)---Appeal to Appellate Tribunal---Appellate proceedings are the continuation of the original proceedings---Proceedings under the Sales Tax Act, 1990 do not come to an end with the passing of an order, if any of the rival parties files an appeal, the proceedings are kept alive; the appeal being only continuation of the original proceedings---Legal pursuit of a remedy through filing an appeal before the first and second appellate authorities are really but steps in a series of proceedings all connected by an intrinsic unity, are to be regarded as one legal proceeding---Appellate proceedings therefore are the continuation of the original proceedings.

2005 PTD (Trib.) 2262 rel.

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

---S.46---Appeal to Appellate Tribunal---Re-opening of entire matter---On filing of an appeal the entire matter reopens and becomes sub judice.

PLD 1969 SC 1 rel.

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

---S.46---Appeal to Appellate Tribunal---Powers of Appellate Tribunal--Appellate Tribunal as the final fact finding authority is obliged to consider the question (s) of fact (s) and that is the reason that Appellate Tribunal has been entrusted with vast powers, so as to bring the factual issues involved in the case to surface which will help in arriving at the proper, legal, just and fair decision of a case.

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

----S.46---Appeal to Appellate Tribunal---Question of law---Pure question of law can be raised at any stage of the appeal depending upon the facts and circumstances of each case.

Messrs Gatron (Industries) Ltd. v. Government of Pakistan, reported in 1999 SCMR 1072 and Haji Abdullah Khan v. Nisar Muhammad Khan PLD 1965 SC 6900(sic) rel.

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

----S.46---Appeal to Appellate Tribunal---Question of law not taken before the lower forum---Allowability---Question of law arising out of the facts of the case relating to the fundamental issues involved therein, even if was not raised before the lower forum, can be allowed to be taken before the higher forum and Appellate Tribunal for doing complete justice may, if the facts and circumstances of the case so demand, allow to raise a question of law which was not as such taken before the lower forum, it is, in fact, the function of the Appellate Tribunal, who is seized of the matter, to apply the correct law to meet the ends of justice.

2005 PTD 480 rel.

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

----S. 3---Scope of tax---Explanation and meanings of goods, taxable goods and taxable supply---Section 3 (1) of the Sales Tax Act, 1990 is a taxing section and consists of the components/constituents i.e. that the sales tax is to be levied/charged at the rate of 15% (now 16%) of the value of (i) taxable supply (ii) by a registered person (iii) in the course of furtherance of (iv) any taxable activity/business (v) carried on by him---Expressions used in S. 3 (1)(a) of the Sales Tax Act, 1990 and which are relevant for the purpose of resolving the controversy involved in the present case, are (i) taxable supply (ii) taxable activity, and (iii) in the course or furtherance of---Though the first two, but not the latter one and also not the word "business", have been defined directly under S. 2(28) or (41) and S.2(24) or (35), of the Sales Tax Act, 1990 yet for proper appreciation of their meaning, one has to revert back to the definitions of goods, taxable goods',supply and taxable supply'---Goods means and includes moveable property other than money and securities etc., and Taxable Goods means and includes the movable property other than those which have been exempted under S. 13 of the Sales Tax Act, 1990, supply means and includes sale, transfer and other disposition of goods and taxable supply means supply of taxable goods other than supply of goods which are exempt under S. 13 of the Sales Tax Act, 1990.

Messrs Mayfair Spinning Mills Ltd. Lahore v. Customs Excise and Sales Tax Appellate Tribunal, Lahore and 2 others PTCL 2002 CL 115; Dawood Hercules Chemicals Ltd. v. Collector of Sales Tax, Lahore 2007 PTD 1161; Messrs Al-Hilal Motors Stores and others v. The Collector, Sales Tax & Central Excise (East) Karachi and others 2004 PTD 868 and Collector of Customs through Additional Collector, Hub v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench and others 2007 SCMR 1705 ref.

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

----S.13---S.R.O. 580(I)/91 dated 27-6-1991---S.R.O. 561(I)/94 dated 9-6-1994---S.R.O. 598(I)/90 dated 7-6-1990---S.R.O. 908(I)/92 dated 19-9-1992---S.R.O. 553(I)/94 dated 9-6-1994---Exemption---Object behind S.R.O. 580(I)/91 dated 27-6-1991 was to facilitate the new investors after satisfying the qualifying mandatory conditions of the said S.R.O. while specific exemption was available to Pakistan Railways under S.R.O. 598(I)/90 dated 7-6-1990 as amended vide S.R.O. 908(I)/92 dated 19-9-1992, which the appellant availed during the said period of exemption and supplies made by the appellant became liable to sales tax after issuance of the rescinding S.R.O. 553(I)/94 dated 9-6-1994-- Appellants were not entitled to avail general exemption under S.R.O. 580(I)/91 dated 27-6-1991 in circumstances.

Collector Customs,. Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 rel.

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

----Ss.13 & 19---S.R.O. 580(I)/91 dated 27-6-1991---Exemption---Exemption under S.R.O. 580(I)/91 dated 27-6-1991 was available only to the registered person under Sales Tax Act, 1990 while the. appellants were not registered even in 1993 and they deliberately avoided sales tax registration for almost six years despite repeated notices---As a last resort, the department compulsorily registered the appellants.

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

----S.13---S.R.O. 580(I)/91 dated 27-6-1991---Exemption---Notification of exemption explicitly mentioned that the same shall be effective for a period of five years commencing from 1st July, 1991 and it was clear that such exemption was available under the S.R.O. 580(I)/91 dated 27-6-1991 i.e. 1st July, 1991 to 30th June, 1996, to those units, who could satisfy the mandatory qualifying conditions---Plea of the appellants that exemption was available to them under said S.R.O. for the period 1993 to 1998 was not tenable because they could not satisfy the qualifying mandatory conditions.

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

----S.13---Exemption---When exemption in regard to any goods or person is granted subject to fulfilment of certain conditions, the exemption so provided for is not to operate unless the conditions are satisfied---Before claiming the benefit of exemption, the conditions laid down in the exemption granting notification, the claimants have to satisfy the department that their claim strictly falls within the purview of the exemption granting notification.

PTCL 1988 CL 257(sic); PLD 1977 Lah. 1327; PTCL 1999 CL 533(sic) and PLD 1996 Lah. 718 rel.

(n) Sales Tax Act (VII of 1996)---

----SS.66, 7(2) & 23---Refund to be claimed within one year---Adjustment of input tax---Limitation---Period of limitation for claiming input tax adjustment/refund was one year under S. 66 of the Sales Tax Act, 1990 and that was also barred by time under the provisions of Sales Tax Act, 1990---Input tax adjustment could only be made during the relevant tax period which the appellants have failed to do so---Appellants were not entitled for the adjustment of input tax at present belated stage---Appellants failed to perform their statutory obligation under the Sales Tax Act, 1990---Input tax adjustment was neither permissible under the Sales Tax Act, 1990 nor the said statute allows right of such delayed input tax adjustment facility to the registered person.

Messrs Mayfair Spinning Mills Ltd. Lahore v. Customs Excise and Sales Tax Appellate Tribunal, Lahore and 2 others PTCL 2002 CL 115 ref.

Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt) Ltd. 2002 PTD 2457; Messrs Cherat Electric Company Limited. Nowsliwera v. The Collector, Sales Tax & Central Excise," Peshawar and another 2002 PTD (Trib) 1525 and Messrs Rainbow Industries v. Collector of Customs and others C.P. 469 of 2004 rel.

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

----Ss. 34 & 33---Additional tax---Penalties---Appellant contended that they were Government owned enterprise and no wilful evasion of tax was involved---Imposition of additional tax (defendant surcharge) and penalty was uncalled for---Department contended that appellants have violated the explicit provisions of Sales Tax Act, 1990 by not paying the due sales tax on the supply to locomotives and it was a wilful default on their part--Appellants were liable to pay additional tax (default surcharge) and penalty prescribed under the law---Validity---Appellants wilfully and deliberately avoided their statutory obligations under the Sales Tax Act, 1990 as there was abundantly clear indication in the L-1 Licence issued to them by the department in 1993 that their product was chargeable to Sales Tax---Even after compulsory registration, they rolled out thirteen Diesel Engine Locomotives and deliberately avoided to pay leviable sales tax thereon.

PLD 1991 SC 963 ref.

2008 PTD 1461 distinguished.

Qazi Waheeduddin, Anwar Saeed Dawar, Managing Director of the Appellants for Appellants.

Abdul Latif Yousafzai, Muhammad Zubair Shah, A.C., Haroon Khattak, Senior Auditor and Dost Muhammad, Senior Auditor for Respondents.

Dates of hearing: 17th, 25th November, 2nd December of 2008, 12th January, 10th, 12th, 19th, 26th of February and 16th March, 2009.

2009 P T D (Trib.) 1829

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial)

Appeals Nos. Cus. 17/PB, 19/PB of 2009, decided on 23rd April, 2009.

Customs Act (IV of 1969)---

----S.181---Option to pay fine in lieu of confiscated goods---Outright confiscation of Dry Fruit being foreign origin with an order for the release of carriage---Appeal---First Appellate Authority while setting aside the order-in-original, released the seized/confiscated goods along with the vehicle unconditionally being fruit in question was to be a local produce of Balochistan---Filing of appeal by the Collector Customs against unconditional release of offending goods (Dry Fruit) and vehicle---Validity---First Appellate Authority directed the Customs Authorities for securing fresh samples for its examination through expert so as to ascertain whether it was a local produce or of foreign origin which order of the First Appellate Authority was never complied with by the Customs Authorities with a written response thereto that "once the Expert Report having come to hand would not call for another opinion" which conduct on the part of the Customs Authorities would amount to exercise of an influence upon the appellate forum to follow the foot prints as laid down through order-in-original from which an inference could easily be drawn to the effect that the detention of truck and seizure of Dry Fruit was based on mala fide and ulterior motives certain performance of customs seizing staff, highly lamentable being far beyond the scope of law on the subject---One gets surprised that as to what made Collector Customs to have filed the appeal to question the verdict of First Appellate Authority when the record on face of it would negate their stance---Collector Customs had failed to prove his contention and the appeal even was not worth to proceed with and the order-in-appeal being based on proper appreciation of facts on record and law on the subject called for no interference by the Appellate Tribunal---Appeal being devoid of any substance was dismissed by the Appellate Tribunal.

Barrister Syed Muddassar Amir along with Naseer Khan, Deputy Superintendent and Muhammad Aqleem Khan, Inspector for Appellant.

Isaac Ali Qazi for Respondents.

Date of hearing: 23rd April, 2009.

2009 P T D (Trib.) 2025

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial) and Humayun Khan Sikandari, Member (Technical)

S.T. Nos.44/PB of 2007 (Old No.) and 102/ST/IB of 2008 (New No.) decided on 16th July, 2009.

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

----Ss.3, 2(46), 3(1), 6(2), 7(1), 11(2), 22, 23, 26, 33, 34 & 36(1)---C.B.R. Order No. 4/2005 dated 11-1-2005---Scope of tax---Tax period November, 1998 to February, 1999---Recommendation of ADR Committee---Double jeopardy---Sales tax liabilities pertaining to the said tax periods were ordered to be excluded from the period involved on the basis of recommendations of ADR Committee in the identical case of the appellate recommendations of ADR Committee were that "it is abundantly clear, that the matter pertaining to the sales tax liabilities for the tax periods of November, -1 998 to February`, 1999 have already been settled by the ADR Committee and the appellants have already deposited the due amount of tax as determined by the ADRC, therefore, it would be a case of double jeopardy, if the appellants are charged with the same allegation which has already been settled by depositing the due amount of tax and thus, it has attained finality; DR also conceded that sales tax liabilities pertaining to the tax periods of November, 1998 to February, 1999 have already been discharged by the appellants as determined by the ADR Committee."

No.7 1045 ST/Transfer/2001 PB and 2004 PTD 3020 rel.

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

----S.36(1)---Recovery of tax not levied or short-levied or erroneously ,refunded---Show-cause notice---Partial audit observations---Issuance of---Effect---Partial audit observations issued by the Department had the same legal sanctity as that of the show-cause notice under S. 36 of the Sales Tax Act, 1990.

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

----S.36(1)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Partial audit observations---If the period of time limitation as provided under S. 36(1) of the Sales Tax Act 1990, is reckoned from the date of partial audit observations i.e. 15-10-2004, then in such a situation, the department can raise their demand up to the period of October, 1999 and period beyond October, 1999 was badly barred by time limitation as provided under S. 36(1) of the Sales Tax Act, 1990---Sales tax liabilities beyond October, 1999, were barred by time limitation and the order-in-appeal to that extent was set aside by the Appellate Tribunal.

Messrs West Pakistan Tanks Terminal (Pvt.) Ltd. case C.P.L.A. No.1098 of 2006 distinguished.

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

----Ss.7, 26, 33(19) & 66---C.B.R. Order No. 4/2005 dated 11-1-2005---Determination of tax liability---Claim of input tax adjustment of tax paid at import stage which was not claimed in monthly sales tax returns when pressed by the department to pay output tax due on supplies---Department contended that appellants were required to claim their input tax adjustment in the relevant tax periods but they failed to do so and at this belated stage, the input tax adjustment was not only barred by time in accordance with the express provisions of S. 7 of the Sales Tax Act, 1990 but the assessees were not even entitled to claim the same under the provisions of S. 66 of the Sales Tax Act, 1990, as the statutory period for the input tax adjustment/claim of refund had already lapsed due to slackness of the assessees---Assessees wilfully and deliberately dill not declare their imports in the monthly sales tax returns in order to suppress their local taxable supplies---Assessees pleaded that input tax was their vested right due to very reason that they had paid due tax at the time of importation; however assessees had not filed the sales tax return for the respective periods and they. could not claim and adjust input tax in their monthly sales tax returns---Validity---Assessees had not filed their true and correct sales tax returns indicting the purchases and supplies of the relevant tax periods and could not claim their input tax---Adjudicating authority as well as the First Appellate Authority were required to invoke the penal provisions as provided under S.33(19) of the Sales Tax Act, 1990 for not filing the correct and true return for the relevant tax period but denial of input tax adjustment on this ground will amount to double taxation which was neither permissible nor maintainable in the eyes of law---Further, ADR Committee had already allowed input tax adjustment in the identical issue of the assessees for the tax periods of November, 1998 to February, 1999 and department had implemented the C.B.R. Order No.4/2005 dated 11-1-2005, based on the recommendations of ADR Committee---Denial of input tax adjustment of the assessees will amount to discrimination, which was not sustainable in the eyes of law, being contrary to the principles of natural justice---Assessees were entitled to input tax adjustment subject to payment of tax due on taxable supplies and by depositing a penalty of Rs. 5000 per return for not filing the true and correct sales tax returns.

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

----S.7A---Levy and collection of tax on specified goods on value addition---C.B.R. Order No. 4/2005 dated 11-1-2005---Scope of tax---Criteria of value addition---Appellant contended that department had made 14% value addition on Duty Paid Value (DPV) in order to arrive at the value for taxable supplies and the tax had been calculated on such value---Value addition made by the department was arbitrary and capricious in nature---Goods were sold at lowest price due to stiff competition and market conditions---Presently, Central Board of Revenue had fixed 2% value addition for commercial importers---Validity---Section 7A was inserted in the Sales Tax Act, 1990, through Finance Act, 2003, assented on 16th June, 2003, enabling the Federal Government to fix percentage of value addition for certain class. of persons---First time, "Special Procedure for payment of sales tax by commercial importers on value addition" was prescribed by the Federal Board of Revenue in 2004-2005, whereunder the commercial importers were required to pay sales tax @ 14% value addition on the taxable supplies---According to the said procedure, 14% was a minimum value addition---Prior to said period, there was no prescribed procedure for commercial importers and different practices were prevalent in the department for the purpose of value addition---Department made out the case in the year 2004-2005, therefore, 14% value addition was taken into account for the purpose of taxable supplies---Value addition 14% worked out by the department was reasonable and was in accordance with law and did not call for any interference---Appellant had already discharged their sales tax liabilities @ 10.39% value addition on their .taxable supplies during the periods of November, 1998 and February, 1999, as determined by the ADRC, duly approved by the F.B.R. and accepted by the department---Department was directed by the Appellate Tribunal to recover the sales tax @ 14% value addition on the taxable supplies for the tax periods November and December, 1999 and January and February, 2000, after allowing the input tax adjustment of the relevant period, which the appellants had already paid at import stage---Since the additional tax had already been remitted by the Board vide Order No.4/2005, dated 11-1-2005, on the recommendations of ADR Committee, in the identical case of the appellants, the same was also remitted in the present case, except the amount of penalty of Rs. 5000 per return for not filing the true and correct sales tax return for the said tax period---Order-in-appeal was modified to such extent only.

Ishtiaq Ahmad for Appellant.

Abdul Razzaq, D. R./Additional Collector, Fazal Hameed, Sr. Auditor, Muhammad Haroon Khattak, Sr. Auditor and Dost Muhammad, Sr. Auditor for Respondents.

Dates of hearing: 16th, December, 2008, 8th April, 7th May, 9th, 15th, 16th, 17th, 18th, 22nd and 23rd June, 2009.

2009 P T D (Trib.) 2189

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial) and Humayun Khan Sikandri, Member (Technical)

Review Petition Misc. No.55/PB of 004 (in Customs Appeal No.7(217)ATIB/98), decided on 7th July, 2009.

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

----194-B(2)---Orders of Appellate Tribunal---Review---Limitation---Notices were issued, no one was present for the appellant/Department on the fixed date---Appeal was dismissed by the Appellate Tribunal with the observations that "department had not furnished the required information to justify late filing of appeal and was directed to do so in the last hearing; appeal was not admitted as the department had failed to justify ,the long delay of about 4 months"---Review application mostly revolved around the sole ground that the "file of the case was roaming from one table to the other and from one section to the other, different sections/ divisions of the Collectorates and for this reason, the appeal could not be filed in time and also for the reason that the first Appellate Authority had not accepted the appeal in toto but with split judgment with ultimate result of its remand to the original forum; the same was not ascertainable as whether the same be simultaneously heard by the original authority and the Appellate Tribunal as well or otherwise causing the delay in filing the appeal---Appellate Tribunal could review any order within three years from the date of its passing, thus the petition was well in time---When the question of pecuniary matter was involved then, the delay could be condoned in order to avoid loss to the public exchequer---Validity---Contention that file was to move from one. table to another and from one section to other and that's why it caused a delay in filing the appeal, carried no legal excuse, sufficient_ cause or a plausible reason to justify the delay of 7 months---Visible deliberate attempt "beyond the obvious" was floating on the face of the record for an intentional late filing the appeal to extend undue concession to the respondent and accommodate him on one hand and to save its own skin on the other hand by having' filed the appeal, so that it may not be said that the department did not file any appeal, which contention coupled with questionable conduct in dealing with the matter could not be considered as a genuine legal ground, sufficient cause or even certain reason of compelling circumstances beyond the reach and approach of the department---Review petition for revival of appeal and prayer for the condonation of delay of 5 months and 25 days in filing appeal could neither be acceded to nor the prayer could be granted.

PLD 1982 Kar. 695 ref.

Collector of Customs, Peshawar v. Fazal Hussain and others 2001 SCMR 1630 and 1981 SCMR 37 rel.

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

----S.194---Appeal to Appellate Tribunal---Limitation---Condonation of delay---Government could not be treated differently from .ordinary litigants in respect of limitation---Government enjoys unusual facilities for preparation and conduct of its case and its resources are much larger than those possessed by the ordinary litigants.

Deputy Director of Food, Lahore Region, Lahore v. (i) Syed Safdar Hussain Shah (C.P.L.A. No.62 of 1977) (ii) Abdul Salam Qureshi (C.P.L.A. No. 63 of 1977) (iii) Khalid Farooq (C.P.L.A. No.64 of 1977; 1979 SCMR 45; Pakistan v. Firm Loahi House PLD 1968 Lah. 923 and Chairman Pak Railways through Ministry of Railways, Government of Pakistan, Islamabad and others v. Muhammad Sharif Javed Warsi PLD 2003 SC 6 rel.

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

----S. 194-B(2)---Orders of the Appellate Tribunal---Rectification of mistake---Review application---Keeping in view the meaning of word "mistake" in its common parlance and in its true legal sense coupled with mistake of facts' andmistake of law' in its broad based spectrum, the department/petitioner was yet to pull the curtain down, to place its contention to be on track in line with S.194-B(2) of the Customs Act, 1969 as none of the meanings either in plain words as .mistake or technically as mistake of facts or even legally as mistake of law could be stretched favourably by the petitioner S.194-B(2) of the Customs Act, 1969, thus would not come to the rescue of the department/petitioner nor would cover the deliberate omission of the department for the delayed filing of appeal which despite ample opportunities being extended to the department could never be justified except with the sole uncalled for contention that being an issue related to the department, this was to be processed by various sections and frequent movement of file from one table to the other and so on, a time consuming job causing the delay---Department/petitioner, failed to establish the mistake committed by the Appellate Tribunal.

Black's Law Dictionary (sixth Edition) p.1001; Mian Rafiq Sehgul and others v. Bank of Credit and Commerce International (Overseas Limited) and others PLD 1997 SC 865 and Spin Bacha and 9 others v. Mst. Neelam and others 2003 YLR 1306 rel.

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

----S. 194-B(2)---Orders of the Appellate Tribunal---Review whether continuation of appeal---Order was passed on 17-4-2001 and almost 8 years had lapsed confirming the legal status of the order irrespective of the fact that the review was filed on 15-3-2004 controerting the legality and propriety of the order, as in such like cases, review could not be considered the continuation of an appeal.

PLD 1981 SC 94 rel.

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

----S. 194-B(2)---Orders of the Appellate Tribunal---Review---Rectifica­tion of mistake---Theory of continuation of trial or proceedings was not conclusive of existence of a right to make a previous judgment open for scrutiny whether by higher. Court in the form of appeal or the same Court in the form of review and when such legal aspect of the matter was juxtaposed with the judicial pronouncements of the superior Courts, then the very review petition so filed stands nowhere, except with a razor thin marginal scope of review, when there was any "mistake" as described by the statute, floating on the face of the record and could be rectified in terms of S.194-B(2) of the Customs Act, 1969 which was not so in the present case.

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

----S. 194-B(2)---Orders of the Appellate Tribunal---Pecuniary matter---Limitation---Condonation of delay---Contention that "any petition which involved implications of pecuniary matter with ultimate loss to public exchequer, the delay could be condoned, had got no legal sense in it, rather the Government functionaries should have been much more vigilant in such like cases where the public revenue was involved but what appeared was that on one hand the department would favour the party by withholding the file, causing delay in filing the appeal and on the expiry of prescribed period of time would rush to file it so as to save their skin which amount, a loss to the public revenue, even was recoverable from all those responsible for such a delay in filing the appeal.

PLD 2003 SC 6 rel.

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

----S. 194-B(2)---Orders of the Appellate Tribunal-Delay in filing of appeal-Review application without sufficient cause or cogent reasons---Validity---Department had. not been able to forward any sufficient cause or cogent reasons to justify the delay of almost 6 months in filing the appeal---Department also had not been able to establish the hotly contested version of "mistake" either in actual, factual or legal sense, rather a futile exercise on their part with no gain except to score its efficiency and that too by putting an iron paw in a velvet glove-Order as an admitted fact called for no rectification as envisaged by S.194-B(2) of the Customs Act, 1969---Order being proper, legal, with no mistake on the face of the record, with no illegality, impropriety and irregularity, called for no interference and the review petition being devoid of material substance stood dismissed.

Hashim Raza, Muhammad Zahid, Superintendent and Muhammad Aqleem Khan, Inspector Customs for the Petitioner.

Nemo for Respondent No.1.

Asad Jamal Firdous Khan, Manager (Commercial) of the Respondent-Unit for Respondent No.2.

Date of hearing: 12th May, 2009.

2009 P T D 11

[Federal Tax Ombudsman]

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

PAKISTAN CYCLE INDUSTRIES COOPERATIVE SOCIETY, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No.344-L of 2006, decided on 12th June, 2006.

Customs Act (IV of 1969)---

----Ss. 32 (3A), 179(3) & 206---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O. 436(I)/01, dated 18-6-2001---S.R.O. 434(I)/01, dated---Untrue statement, error, etc. Deletion program---Demand of duty and tax against import on the ground that the importation of components was allowed on concessionary rates of duty for local manufacture of motorcycle and importer failed to achieve the deletion program---Short-fall of 3.8004% in the Deletion Program was found. Due to failure to achieve the deletion program the components imported in violation of the indigenization program would attract statutory rates of duty and taxes on C.B.U. vehicles because exemption was available only on achievement of progressive annual indigenization---Filing of complaint as well as appeal---Validity---Complainant had. filed appeal against order-in-original before Collector of Appeals, which was pending final decision---Department had neither disclosed the basis on which the value and duty/taxes were calculated/determined nor did they supply the formula applied before deciding it---Quantum of value and duty and taxes which were arbitrarily determined were not agreed upon by the complainant---Complainant had already obtained an interim stay against recovery of such amount from Appellate Tribunal---Main appeal before Collector of Appeals was still pending decision---Complainant could argue the same before Collector of Appeals---Appellate Authority who was competent to sort out both points of law and facts would decide the case on merits after due consideration of complainant's defence---No `maladministration' having been observed complaint was disposed' of with observations that complainant may pursue its appeal before the competent appellate forum.

Complainant No.805 of 2003 ref.

Muhammad Akbar, Advisor (Dealing Officer).

Akhtar Javed, Omar Arshad Hakeem and Waseem Ahmad for the Complainant.

M. Mohsin Rafiq, D.C., Customs, Lahore for Respondent.

2009 P T D 22

[Federal Tax Ombudsman]

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

ALLIED FLOUR MILLS (PVT.) LTD., NOWSHERA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No.1368 of 2005, decided on 27th March, 2006.

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

----S.124A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Powers of tax authorities to modify orders, etc.---Commissioner, in light of S.124A of the Income Tax Ordinance, 2001, civil petition for Leave to appeal before the Supreme Court may follow High Court decisions even in those cases in which C.P.L.A. had been filed and may take necessary action, if any, within one year after the Supreme Court judgments in those cases.

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

----S.122(5A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessment---Retrospective application of S.122(5A) of the Income Tax Ordinance, 2001 was contrary to law and constituted "maladministration" as defined S.2(3)(i)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

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

----S. 122(5A)---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessment---Flour mill---Issuance of notice---Inspecting Additional Commissioner on reply to the notice, took up a different ground that acceptance of grinding arrangements by the Assessing Officer without any probe into the matter was erroneous and prejudicial to the interest of revenue; to process further and looking into the genuineness of the grinding arrangement, assessee was asked to produce the parties for cross-examination, otherwise inference will be drawn that the grinding was assessee's own grinding and assessment will be amended accordingly---Validity---Original notice under S.122(5A) of the Income Tax Ordinance, 2001 was issued on totally wrong assumption and ignoring relevant material on record---Said assumptions could not be a valid reason for considering the assessment to be erroneous in so far as it was prejudicial to the interests of revenue---When erroneous assumption was pointed out by the complainant/assessee the Inspecting Additional Commissioner took up himself the role of an Assessing Officer and commenced assessment proceedings by requiring the complainant to produce the parties from whom he had ground the wheat---Inspecting Additional Commissioner, even at such point of time, believe that the parties were fake and again he had no genuine reason to consider the assessment to be erroneous on the ground that it was prejudicial to the interest of revenue---Inspecting Additional Commissioner on mere suspicion, had stepped into the shoes of the Assessing Officer and had attempted to commence fresh assessment proceedings---Observation of Inspecting Additional Commissioner that "if the parties were not produced for cross-examination, the entire grinding would be considered to have been done on its own account" was again quite illogical---Assessee was a limited company in which final accounts, duly audited by Chartered Accountants, were filed with the return---Grinding of wheat for other parties was a common activity among flour mills and even the failure to produce the parties could in no way justify the discarding of the audited accounts and jumping to the conclusion that all the wheat was ground on the complainant/assessee's own account---Action initiated by the Inspecting Additional Commissioner was found to fall outside the scope of S.122(5A) of the Income Tax Ordinance, 2001 and was found to fall within the definition of maladministration'.

C.Ps. Nos. D-643 to D-646 of 2004 and United Builder's case 1984 PTD 137 ref.

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

----S.122(5A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessment---Assessee, a flour mill---Merger of assessment order with appellate order---Principles---Notice was issued almost a year after the department's appeal before the Appellate Tribunal had been rejected---Assessee contended that the assessment order had merged with the order of Appellate Tribunal and could not be amended under S.122 (5A) of the Income Tax Ordinance, 2001---Department contended that since the matter of genuineness of grind receipts was not before the Income Tax Appellate Tribunal it was not considered by it and action could be validly taken---Validity---Issue was not involved in the appeal but the question before Federal Tax Ombudsman was about the quantum of sales representing its own grinding was involved and the sales as reduced by the First Appellate Authority stood duly confirmed---Inspecting Additional Commissioner now wanted to enhance the sales of wheat ground on own account on the basis of a fresh probe, which was against the accepted principle of "merger"---Section 122(5A) of the Income Tax Ordinance, 2001 did not contain any provisions similar to those contained in S.66A(IA) of the Income Tax Ordinance, 1979 and Inspecting Additional Commissioner no longer had the powers indicated in S.122(5A) of the Income Tax Ordinance, 2001---Scope of S.122(5A) of the Income Tax Ordinance, 2001 could not be extended to cases where an assessment order had merged with order of an appellate authority---Action of Inspecting Additional Commissioner would constitute maladministration---Federal Tax Ombudsman recommended that action under S.122(5A) of the Income Tax Ordinance, 2001 initiated by the Inspecting Additional Commissioner for the assessment year 2002-2003 be dropped.

1992 PTD 932 rel.

Mirza Muhammad Wasim, Advisor (Dealing Officer).

Munir Hussain Awan for the Complainant.

Shah Khan, DCIT, Legal I, Companies Zone, Peshawar for Respondent.

2009 P T D 43

[Federal Tax Ombudsman]

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

Messrs AMANA TEXTILE

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complainant No. 326-L of 2006, decided on 12th June, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 36(1)(3) & 11(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Recovery of tax not levied or short levied or erroneously refunded---Creation of tax demand and liability under S.36(1) of the Sales Tax Act, 1990, together with additional tax and penalty---Appeal filed before Collector of Appeals was decided contrary to the decision of President of Pakistan---Validity---Show-cause notice was issued on 15-12-2003 and case was decided on 30-7-2005 after the expiry of original period of 90 days as prescribed in Ss.11(4) and 36(3) of the Sales Tax Act, 1990---Admittedly, no extension in the period for deciding the case was ever obtained/granted---Order was hit by time limitation and was liable to be annulled---Collector of Appeals failed to consider the issue of time limitation and also did not consider Federal Tax Ombudsman' findings sustained by Presidential Order, dated 7-5-2005---Order-in-original being hit by time bar was void and illegal---Order-in-appeal was also not legally sustainable as it failed to hold the order-in-original as barred by time and to provide justice---Maladministration was established---Federal Tax Ombudsman recommended that the Revenue Division should direct the competent authority to re-open impugned order-in-original and order-in-appeal under the provisions of section 45A of the Sales Tax Act, 1990 and annul the order-in-original, as being hit by time limitation as provided in law, as well as annul the order-in-appeal for illegally upholding the aforesaid time-barred order-in-original and may proceed in accordance with the provisions of law.

C.P.L.A No.1968 of 2002 Supreme Court of Pakistan; Sales Tax Appeal No.131 of 2002; Complaint No.805 of 2003; Complaint No.848 of 2002 and Complaint No.593 of 2004 ref.

Complaint No.805 of 2003 rel.

Muhammad Akbar, Advisor (Dealing Officer).

Muhammad Mehtab Chughtai and Asim Afzal for the Complainant.

Muneeza Majeed, D.C., Sales Tax, Lahore for Respondents.

2009 P T D 72

[Federal Tax Ombudsman]

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

Messrs LUQMAN CORPORATION and others

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complainant Nos.62-L 326-L, 327-L, 489-L, 405-L, 551 and 527 of 2005, decided on 1st June, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S.177---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No. 1(1)S.(ITAS)/2004, dated 28-7-2004---Audit---Complainants contended that due to issuance of circulars side by side, they could not make a decision either to opt for the concession given by raising the tax liability to 20% over and above the already declared tax liability and paid along with the returns due to which discrimination had taken place, for those persons who had opted for the same had been given benefit whereas due to pendency of cases and confusion about the legality or validity of the Central Board of Revenue's guidelines, the complainants could not make a decision at the relevant time---Validity---No time limitation prescribed in C.B.R. Circular No.1 of 2004 to opt for the benefit thereunder--Contention of the Revenue Division was that said choice could have been made only during the assessment year of the returns and not thereafter, was not maintainable---Complainants should be given a choice or right either to opt for the benefit of the said circular and file revised returns for the said year---Federal Tax Ombudsman recommended that the Central Board of Revenue shall direct the competent authority to annul the order of Taxation Officer passed in these cases; allow time up to 30th June, 2006 to the complainants either to opt for the benefit or Circular No.1(1)S(ITAS)/2004. and file revised returns for the concerned year along with deposit of the amount of tax on which the same shall be accepted and in case all or any of the complainants do not opt for the said benefit up to 30th June, 2006, their cases may be proceeded under section 177 of the Income Tax Ordinance, 2001 by the officer concerned by initiating fresh proceedings in his discretion if he so liked.

Mian M. Rafi and Rizwan Ahmad Urfi, Taxation Officer, Sahiwal for the Complainant (in C. No.62-L of 2005).

Mirza Anwar Baig and Anwar-ul-Haq Jillani, DCIT for the Complainant (in C. No.326-L of 2005).

Mirza Anwar Baig and Mst. Amna Fiaz Bhatti, DCIT for the Complainant (in C. No.327-L of 2005).

Nemo for the Complainant and Mst. Amna Fiaz Bhatti, DCIT (in C. No.405-L of 2005).

M. Siddique Ch. and M. Tahir, DCIT for the Complainant (in C. No.489-L of 2005).

Khawaja Riaz Hussain and Mst. Amna Fiaz Bhatti, DCIT for the Complainant (in C. Nos.527 and 551-L of 2005).

FINDING/DECISION

JUSTICE (RETD.) MUNIR A. SHEIKH (FEDERAL TAX OMBUDSMAN).---This decision shall dispose of C.Nos.62-L, 326-L, 327-L, 489-L, 405-L, 551 and 527 of 2005 involving common questions of law and facts.

1. The complainants filed returns for the assessment year 2003 under Self Assessment Scheme. The C.B.R. issued Circular No.1 of 2004 conferring right on the assessee to opt for the said scheme in that if the assessee is ready to pay 20% higher tax as compared to the tax payable on his original return, he shall be immune from under section 177 of the Income Tax Ordinance, 2001. On the other hand, the C.B.R. had also issued guidelines to the officers dealing with the matters under section 177 of the Ordinance to follow them while deciding the cases under the said section. Different High Courts of the Provinces declared the said Circular ultra vires of the Act and held that C.B.R. was not vested with the power to control the exercise of power by the concerned officer under section 177 ibid who was directed to proceed in accordance with law under the said section and pass fresh order. These judgments were challenged before the Supreme Court of Pakistan and the matter was kept pending here to await the decision of the Supreme Court. The decision of the Supreme Court has been placed on record which shows that the parties in those cases came to a settlement and order was passed accordingly, therefore, learned counsel for the complainants has rightly argued that the said agreement or settlement is not binding on any person other than those who were parties to the cases in which the said settlement took place.

2. Even otherwise, learned counsel's contention was that the C.B.R's. guidelines could not be issued for decision under section 177 and the concerned officer is fully empowered to pass order after applying his own independent mind according to the facts of the case under the said provision of law, therefore, even if judgment of the Supreme Court based on settlement is not binding on the complainants but the complainants' contention in these cases is the same which was accepted by the Supreme Court on the basis of settlement between the parties.

3. The orders passed by the Deputy Commissioner in these cases on the basis of the guidelines issued by the C.B.R. are therefore, not maintainable as the same suffer from maladministration as such are liable to be struck down.

4. Learned counsel for the complainants submitted that due to these Circulars having been issued side by side, the complainants could not make a decision either to opt for the concession given through Circular No.1/2004 by raising the tax liability to 20% over and above the already declared tax liability and paid along with the returns due to which discrimination has taken place, for those persons who had opted for the same had been given benefit whereas due to pendency of these cases and confusion about the legality or validity of the C.B.R's. guidelines, the complainants could not make a decision at the relevant time.

5. I have gone through Circular No. 1/2004 and find that there is no time limitation prescribed therein to opt for the benefit there under. The contention of the DR who has appeared on behalf of the Revenue Division that the said choice could have been made only during the assessment year of the returns and not thereafter is not maintainable.

6. The complainants in these cases should be given a choice or right either to opt for the benefit of the said Circular and file revised returns for the said year.

7. For the foregoing reasons, these complaints are hereby accepted and the following recommendations are made:--

(a) That the C.B.R. shall direct the competent authority to annul the order of Taxation Officer passed in these cases;

2009 P T D 85

[Federal Tax Ombudsman]

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

Messrs WESTERN COMPUTER (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1106-K of 2008, decided on 31st July, 2008.

Customs Act (IV of 1969)---

----Ss. 81(2)(3) & 25A---Customs General Order 12 of 2002, para­graph 66--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Provisional assessment of duty---Complainant alleged that Collector of Customs had indulged in maladministration on the ground that Valuation Ruling was an assessment order passed in the manner provided under Paragraph 66 of Customs General Order 12 of 2002---Provisional determination/assessment of duty and taxes had attained finality---Nothing was payable, but the amount secured as security had not been refunded---Validity---Held, it was correct that determination of value was made through Valuation Ruling within the period of nine months---Assessment order by the Assessing Officials/Customs Group had to be passed on the basis of Valuation Ruling or valuation advice and presumption that Valuation Ruling by itself would be an assessment order was misconceived---Demand-cum-show-cause notice was issued after more than four months from the date of Valuation Ruling; there was no justification for such delay nor for the fact that value determined by the Valuation Department was not intimated to the importer and it was also unjust that a period of one year and seven months elapsed before the adjudication order was passed by the Deputy Collector of customs---If show-cause notice and hearing notices were correctly delivered to the importer who did not attend the hearing an ex parte order could have been passed instead of adjourning the hearing about ten times---Record established that the case was decided two years after the issue of Valuation Ruling which amounted to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue 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 hearing their arguments, and decide the review case within thirty days.

[Dealing Officer; Mr. M. Mubeen Ashan, Advisor]

M. Afzal Awan for the Complainant.

Agha Saeed Ahmad, Deputy Collector of Customs (Law), Port Qasim for Respondent.

2009 P T D 93

[Federal Tax Ombudsman]

Before Justice (Rtd.) 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.

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

----Ss. 7(2) & 36(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Determination of tax liability---Audit observation against entitlement to claim input tax by the Revenue Receipt Audit staff---Complainant stated that they had disposed of scrap/assets machinery through open auction and deposited advance sales tax on estimated weight---On actual weightment, weight was short and more amount of tax had been deposited than the actual tax payable---Such amount was adjusted instead of applying for refund---Sales tax had been paid and excess amount was adjusted through a bona fide mistake causing no loss to revenue---Validity---Whole exercise of issue of demand, show-cause notice and adjudication order was contrary to law, it was perverse in character, it was unjust and oppressive, based on irrelevant grounds, it was a case of inordinate delay, incompetence, inefficiency and miscarriage of administrative justice---No evasion of sales tax had occurred and no shortfall was in its recovery, and the demand for additional tax and penalty had no justification---Charge of maladministration was established against the sales tax authorities--Federal Tax Ombudsman recommended that Central Board of Revenue set aside the order in question passed by the Deputy Collector (Adjudication).

1993 MLD 1654 ref.

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

----S.36(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Inordinate delay---Argument of the Department that time limit fixed under subsection (3) of S.36 of the Sales Tax Act, 1990 was merely directory in nature and not mandatory could not be cited as justification for inordinate delay in passing an order which on merits did not meet the test of law.

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.

2009 PTD 116

[Federal Tax Ombudsman]

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

Messrs HAJVERI OIL INDUSTRIES

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.20 of 2008 in Complainant No.153-L of 2008, decided on 24th June, 2008.

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

----S.156---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Rectification of mistake---Jurisdiction---Mistake apparent on the face of record---Selection of case for detailed audit on 7-7-2007 by Commissioner at B while the Federal Board of Revenue had already passed an order for transferring jurisdiction in the case to Commissioner at M as on 18-6-2007---Validity---Federal Board of Revenue, on 18-6-2007, had already passed an order for transferring the jurisdiction in the case from Commissioner at B to Commissioner at M, it was also made clear therein that same was effective from 1-7-2007 meaning thereby that on 1-7-2007, the one Commissioner at B was not vested with the power to pass any order for selection of audit or otherwise---Decision suffered from mistake apparent on the face of record---Review application was accepted---Decision was recalled and Federal Tax Ombudsman recommended that Federal Board of Revenue was to direct Commissioner at M to ignore the order of selection of case of the complainant for audit by Commissioner at B, dated 7-7-2007 treating the same as non-existent being nullity as the same had been passed on the date when he had ceased to have jurisdiction of the matter and Commissioner at M to whom the jurisdiction stood transferred w.e.f. 1-7-2007 may proceed in accordance with law of his own.

(b) Income-tax---

----Jurisdiction---Any order passed by the competent higher authority for transferring of a case from one jurisdiction to another, order of conferring jurisdiction on an officer in the matter was effective from the date on which it was passed, may be some time was taken to communicate the said order, for the vesting of jurisdiction in an officer on the date when he passes an order is the requirement of law and not mere technicality.

Siraj-ud-Din Khalid for Petitioner.

Zafar Zaman Ranjha, T.O.

Date of hearing 24th June, 2008.

2009 P T D 140

[Federal Tax Ombudsman]

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

Messrs DEWAN SALMAN FIBRE LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1114-K of 2008, decided on 18th September, 2008.

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

----S.81 (2)---Customs General Order No. 01/2000 dated 20-1-2000---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9(2) & 10(3)---Provisional assessment of duty---Consignments were provisionally released against security of bank guarantees subject to final assessment by PCT Committee---Issue had not been resolved after lapse of nine years---Complainant contended that provisional assessment would become final if not finalized within the prescribed period of one year--Validity---Fact that no action was taken by the Department to decide the classification dispute and finalize cases of provisional assessment for about eight years was a clear case of inaction, inefficiency, neglect, inattention, inordinate delay incompetence, inefficiency and inaptitude and the charge of mal­administration was established---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Collector of Customs (Appraisement) to finalize the assessment in accordance with the declaration of the importer and release bank guarantees within fifteen days.

Messrs Dewan Farooque Motors Limited v. Customs, Excise and Sales Tax Appellate Tribunal 2006 PTD 1276 ref.

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

----S.22---Customs Act (IV of 1969), S.81(2)---Award of costs and compensation and refund of amounts---Delay in final assessment---Request to pay compensation equal to surcharge (a~ 14% per annum---Validity---Complainant could not be absolved of their part of responsibility for the delay because of their inaction to pursue the matter for an early decision or, otherwise, file a complaint in the office of Federal Tax Ombudsman or other legal forums for redressal of their grievance---Request for compensation, held, was not justified.

M. Mubeen Ahsan, Advisor (Dealing Officer).

M. Afzaal Awan for the Complainant.

Imran Iqbal for Respondent.

Masood Sabir, Assistant Collector of Customs (Appraisement).

2009 P T D 167

[Federal Tax Ombudsman]

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

Messrs GADOON TEXTILE MILLS LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1842-K of 2008, decided on 12th November, 2008.

Customs Act (IV of 1969)---

----Ss. 80(1) & 25(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3) & 9(2)(b)---Finance Act (IV of 2007), Preamble---Provisional Assessment of duty---Limitation---Post dated cheque was issued by the complainant with the understanding that if it was proved that Customs Value under S.25(1) of the Customs Act, 1969 was not the declared value, the cheque would be encashed otherwise the same would be returned to the company---Cheque was neither encashed nor released to the complainant, the company requested the department to return such post dated cheque or pass a valid order determining the final value of the goods imported---Issue for determination of transaction value was kept pending and no order was passed under S.80(1) of the Customs Act, 1969 within the prescribed ,period---Complainant had contended that since the stipulated period provided under S.80(2) of the Customs Act, 1969 had lapsed, the value declared by the complainant company had become final and the department was under legal obligation to release the post. dated cheque; instead of returning the cheque, the department issued a notice for revalidation of the post dated cheque which was illegal and amounted to maladministration---Department's contention that since the complainant had responded to their requisition letter regarding revalidation of post dated cheque and sought adjournment of hearing same proved that the view taken by the department that letter was within time, was not correct---Validity---Notice was issued long after the expiry of statutory limit of time provided in S.81(2) of the Customs Act, 1969 and was not in accordance with law---Maladminsitration having been established Federal Tax Ombudsman recommended that Federal Board of Revenue was to direct the Collector Appraisement to withdraw the letter/notice and to finalize the assessment on the basis of declaration of the complainant and return the post dated cheque within 15 days of the receipt of the present order.

C.P. No.137 of 2006; Messrs Shakeel Enterprises Karachi v. C.B.R. Complaint No.474-K of 2002; Complaints No.1569-K/2008; Complaint No. 88-K/2007 and Complaint No.85-K of 2007 ref.

S. Asghar Abbas, Adviser (Dealing Officer).

Afzal Awan for the Complainant.

Habib Ahmed, Deputy Collector Customs Appraisement, Karachi present of Respondents.

2009 P T D 204

[Federal Tax Ombudsman]

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

Messrs ZHONGXING TELECOM PAKISTAN (PVT.) LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-1829-K of 2008, decided on 11th November, 2008.

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

----Ss.81 & 179(3)(5)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Provisional assessment of duty---Limitation---Goods were cleared under S.81 of the Customs Act, 1969 and finalization of assessment within stipulated period was not completed and communicated by the Department---Declaration made in the Goods Declaration attained finality and there was no justification or legal validity for deciding the classification and higher assessment on a date long after the expiry of the period---Under S.179(5) of the Customs Act, 1969, the time-limit for adjudication extended up to 31-12-2006 had expired and the Adjudicating Officer had no power to pass the adjudication order under subsection (3) or (5) of S.179 of the Customs Act, 1969---Validity---Assessment of goods released provisionally under S.81 of the Customs Act, 1969 in January, 2003 was not finalized within one year of the date of provisional assessment---Instead a show-cause notice was issued in May, 2003 without lawful authority---Recovery notice was sent arbitrarily demanding payment---Adjudication order was passed on 11-8-2008 after lapse of five years in violation of time limitation prescribed under S.179(3)(5) of the Customs Act, 1969---Adjudication order was not legally sustainable and the duty and taxes adjudged in adjudication order too were not legally tenable---Federal Tax Ombudsman recommended that Federal Board of Revenue should direct the Collector of Customs to set aside the order-in-original under S.195 of the Customs Act, 1969, quash recovery notice and finalize assessment on the basis of declarations made on the GD; to conduct an investigation of failure to finalize the assessment of goods provisionally released under S.81 of the Customs Act, 1969 within the stipulated period and the reasons for issuing an illegal show-cause notice under S.32(3) of the Customs Act, 1969 for a consignment provisionally released under S.81 of the Customs Act, 1969 be ascertained; to conduct four hearings in 2003 and 2004 but keeping the case undecided for about five years; to identify the officials responsible for the maladministration established in this investigation and take necessary disciplinary action against them under Government Servant (Efficiency and Discipline) Rules, 1973.

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

----Ss.32(3) & 81---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Untrue statement, error, etc.---Issuance of show-cause notice under S.32 of the Customs Act, 1969 in spite of the fact that consignment was released and the matter was pending for decision under the parameters of S.81 of the Customs Act, 1969---Validity---Instead of finalizing the assessment, show-cause notice under S.32(3) of the Customs Act, 1969 was issued---Said action was totally uncalled for and without legal validity---Where provisional assessment had been made under S.81 of the Customs Act, 1969, action under S.32 of the Customs Act, 1969 would not be legally tenable---Section 32(3) of the Customs Act, 1969 deals with any inadvertence, error or misconstruction for any duty or charge not levied or short-levied or erroneously refunded, the person liable to pay any amount on that account was to be served with a notice within three years of the relevant date requiring him to show-cause notice why he should not pay the amount specified in the notice---When the matter was already under process under S.81 of the Customs Act, 1969, it was not hit by S.32(3) of the Customs Act, 1969 because inadvertence, misconstruction short-levy could be detected only after assessment and not in a situation where provisional assessment was yet to be finalized---Whole process of adjudication was without lawful authority.

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

----S.179(3)(5)-Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Power of adjudication----Limitation---Under subsection (3) of S.179 .of the Customs Act, 1969, the appropriate officer was required to decide the contravention cases within 90 days of receipt of the report of the period extended by 90 days---Under subsection (5) of S.179 of the Customs Act, 1969, the time for adjudication in all cases pending on 1-7-2006 was extended up to 31-12-2006 and it was established that notwithstanding the illegality of the show-cause notice, the Adjudicating Officer had no authority to pass the adjudication order on 11-8-2008 after expiry of the extended period and more than five years after the issue of show-cause notice---Show­cause notice and the adjudication order were both contrary to law and legally invalid.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Afzal Awan and Imran Iqbal, Advocates.

Habib Ahmad, Deputy Collector of Customs (Appraisement).

2009 P T D 852

[Federal Tax Ombudsman]

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

Messrs SHAHNAWAZ TEXTILE LTD., LAHORE through Director

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1263-L of 2008, decided on 15th August, 2008.

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

----S.74---Sales Tax Rules, 2006, R.28(2)---S.R.O. 1204(I)/07, dated 11-12-2007---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Preamble---Condonation of time limit---Refund file was returned by the department on the ground that its return, which was e-filed did not appear in the department's system---On verbal advice by the computer programmer, the complainant submitted a revised return as the data of earlier submitted and acknowledged returns was not available in the system and also applied for condonation of delay in filing of refund claim---Permission for condonation of delay in filing of return claim was not granted on the ground that condonation facility was not available in cases of revised returns according to the provisions of S.R.O. 1204(I)/2007, dated 11-12-2007---Validity---Claim of refund got complicated because of non-working of department's computer system despite the facts that return was a filed and it was acknowledged and the same was not uploaded in computerized system as a result of which the return data was not available for linking up the refund claim and that the complainant was misguided by the staff to file revised return---Competent authority should have considered the fact that the complainant had a-filed the original return in question and the supportive documents, which documents were also verified, within time i.e. within sixty days of the filing of return and entertained the claim for processing on merits---Even if complainant's case for condonation of delay was to be considered under the said S.R.O. then the condition at item (b) of the said S.R.O. was attracted because it was due to non-working of department's computer system that the data of return was not available in the system for linking up refund claim---Department's contention that condonation of delay was not allowed as the complainant had applied for revision of return, was not tenable because the department had not yet approved application for filing revised return and complainant had practically not filed refund claim against the revised return, which had to be first approved by the department---Maladministration' was found on the part of department as the complainant's re-return was not uploaded in the department's computer and the supportive documents submitted within time and verified by the department, were returned and not retained for processing claim after uploading the data of return in computer system---No delay was involved requiring condonation as the complainant had filed the return as well as the supportive documents within the prescribed period of sixty days of filing of return---Even if department felt that there was delay in submission of claim, the complainant's case attracted item (b) of S.R.O. 1204(I)/07, dated 11-12-2007 for grant of condonation, specially when the department had not yet granted the' complainant's request for filing the revised return---Department failed to handle the case fairly, justly and competently, which amounted tomaladministration'---Federal Tax Ombudsman recommended that Revenue Division direct the competent authority to re-open order of D.C. (Refunds), rejecting complainant's application for condonation of delay in filing of refund claim, under S.45A of the Sales Tax Act, 1990, set aside the same and entertain complainant's refund claim on the basis of original e-return and the supportive documents, which were submitted by the complainant within sixty days of the filing of return, as prescribed under rules-.Even if the case is required to be examined and decided in terms of the provisions of S.R.O.1204(I)/07, dated 11-12-2007, the complainant should be allowed the benefit of item(b) of the said S.R.O. (non-working of department's computer system), especially when the department had not yet approved complainant's application for filing revised return---Refund claim, once entertained, would be examined and decided by the department on its merits in accordance with the provisions of law.?

Messrs Ehsan Yousaf Textiles Mills Ltd. v. A.C. Sales Tax GST 2003 CL 338; Food Consultant Limited v. Collector C.E. and S.T., Lahore and 2 others GST 2004 CL 507 and NP Water Proof Textile Limited v. Federal Government of Pakistan through Secretary Revenue Division and F.B.R. Islamabad and another GST 2005 CL 23 ref.

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

----S.74---Sales Tax Rules, 2006, R.28(2)---S.R.O. 1204(I)/07, dated 11-12-2007---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Preamble---Condonation of delay---Grounds---S.R.O. 1204(I)/07, dated 11-12-2007 empowered the Collector of Sales Tax having jurisdiction to allow extension for furnishing refund claims on the prescribed software along with supportive documents, if delay in filing of the claim and documents was due to incorrect feeding of returns by the department; non-working of computer system in Collectorate or there was some error in the refund claim preparation software (RCPS); incomplete data in Computerized Risk-based Evaluation of Sales Tax (CREST) System or delay in getting certified documents from other department or agencies despite the fact that the registered person applied for the same in time---Extension shall not be allowed by Collector to registered, persons filing refund claims against revised returns and to blacklist registered persons.?

Muhammad Mehtab Chughtai for the Complainant.

Nadeem Ahsan, D.C., for Respondents.

2009 P T D 879

[Federal Tax Ombudsman]

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

SEVEN SEAS INDUSTRIES, SADIQABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1536-L of 2008, decided on 25th October, 2008.

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

----S.10---Sales Tax Rules, 2006, R.28 (6)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Excess amount to be refunded---Complainant contended that claim of refund was rejected for failure to submit supporting documents within 60 days of the filing of return without considering the fact that complainant's case was required to be processed under Special Procedure for Processing of Refund claims filed by persons engaged in making zero rated supply of ginned cotton---Collector (Appeals) disposed of an other like case with the direction to re-process the refund claim in the light of Special Procedure for Processing of Refund Claims filed by the person engaged in making zero rated supply of ginned cotton whereas complainant's case was rejected as time bared---Validity---First Appellate Authority observed that "although the facts of that case which had already been decided in favour of the party and in the instant case were same yet the period involved in that case and in the instant case was different---In that ease period involved was prior to June, 2006 when the Refund Rules, 2006 were in field/enforced---Provision of Sales Tax Rules, 2006 were not applicable on the refund claims pertaining to period prior to 5-6-2006 and the benefit of that order could not be granted to the appellant/ complainant"---Federal Tax Ombudsman observed in the light of such observation that no `maladministration' had occurred and the order-in-­original was passed on merits of the case---Collector (Appeals) had given clear cut findings on the main issue involved on the merits of the case and had passed an appealable order---Complainant had also filed appeal before Appellate. Tribunal raising therein the same issues as were being agitated in the complaint---First Appellate Authority having passed orders on the merits of the case in accordance with the provisions of law the complainant should pursue its appeal filed before the Appellate Tribunal to seek remedy of its grievances---Case involved questions of fact and law---Appellate authority, being competent to deal with points of facts and law, could examine the case in the light of facts of the case and the relevant provisions of law and pass a judgment on the merits of the case after considering the pleas of the complainant--Complaint disposed of by the Federal Tax Ombudsman with such observation.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Complaint was filed prior to filing of appeal before the Appellate Tribunal---Complainant's case was not subjudice before the Appellate Tribunal on the date when the complaint was filed in the Secretariat of Federal Tax Ombudsman---Contention that Federal Tax Ombudsman did not have jurisdiction in the case because it was a case in respect of which remedy of appeal was available, was misconceived because the Federal Tax Ombudsman was competent to take cognizance of matters in respect of which "maladministration" had been alleged.

Muhammad Akbar, Advisor, Dealing Officer.

Rana Muhammad Ishaq Khan for the Complainant.

Mian Muhammad Lateef, Collector, R.T.O. and Nadeem Ahmad, A.C., Sales Tax, Multan for Respondent.

2009 P T D 910

[Federal Tax Ombudsman]

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

Messrs MURIDKE REFINE OIL MILLS (PVT.) LTD., MURIDKE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1236-L of 2007, decided on 23rd January, 2008.

Sales Tax Act (VII of 1990)---

----Ss.10, 36(1) & 72---S.R.O. 1014(I)/06 dated 29-9-2006---Circular C. No.1(2) STAS/2004 dated 23-9-2004---Finance Act (VII of 2005), Preamble---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.3---Excess amount to be refunded---Show-cause notice was issued, on the basis of inquiry report issued by the Collectorate of Sales Tax, on the ground that complainant failed to declare the value addition as per agreement between Central Board of Revenue and Pakistan Vanaspati Manufacturing Association on monthly basis in revised returns of two years---Refund was obtained in violation of provisions of law and such agreement---Complainant contended that department calculated, the value-addition on the basis of monthly inventory statement, which was neither prescribed under sales tax law nor was it required under such agreement---Such agreement required 15% value-addition for the two years whereas the value-addition was 17.36% which was more than that for the said period---Validity---Department calculated the value-addition on the basis of monthly inventory statement, which was neither prescribed under sales tax law nor required as per agreement---Agreement required 15% value-addition for the two years---Complainant's value addition was 17.36% which was more than that for the said period and agreement was not violated---At the time of agreement there was a provision of "carry-forward" under S.10 of the Sales Tax Act, 1990, which was converted into compulsory refund by amendment in S. 10 of the Sales Tax Act, 1990 by Finance Act, 2005 and refund was processed and sanctioned under S. 10 of the Sales Tax Act, 1990 which was in vogue at the time of proceeding of refund---Refund was raised due to high rate of tax at import/purchase stage and low rate of tax at the supply stage and it was the legal right of the complainant to claim refund of excess input tax paid, which could not be adjusted due to low rate of output tax---Additional Collector (Adjudication) did not record in the Order-in-Original his findings on such legal and factual arguments advanced by the complainant before him---Adjudicating Officer passed a lopsided, sketchy and non-speaking Order-in-Original without taking into consideration all of complainant's arguments made before him---Such being against the principles of natural justice amounted to -maladministration---Federal Tax Ombudsman recommended that Revenue Division might direct the competent authority to re-open the Order in Original under the provisions of S.45A of the Sales Tax Act, 1990, set aside the same and decide complainant's case afresh by passing a detailed speaking order on its merits in accordance with the provisions of law after taking into consideration all the written and oral arguments of the complainant, including the superior Court's judgments cited in support of his contentions.

Messrs Ihsan Yousaf Textile Mills Ltd. v. Assistant Collector, Sales Tax G.S.T. 2003 CL 338; Food Consultant (Pvt.) Limited v. Collector of Central Exercise and Sales Tax. Messrs NP Water Proof Textile Mills v. Federation of Pakistan; F.T.O. in C. No. 675-K/07; C. No. 229-L/07; Complaint No.591/02 and Complaint Nos. 846,817 and 825-L/04 ref.

Muhammad Mehtab Chughtai for the Complainant.

Malik Fazal-ur-Rehman, A.C., Sales Tax LTU, Lahore for Respondents.

2009 P T D 973

[Federal Tax Ombudsman]

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

YASRAB COTTON INDUSTRIES, MAILSI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No 1040-L of 2008, decided on 14th July, 2008.

Sales Tax Act (VII of 1990)---

----S.36(1)---S.R.O. 488(I)/04 dated 12-6-2004---S.R.O. 25(I)/06 dated 9-1-2006---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Recovery of tax not levied or short-levied or erroneously refunded---Adjustment of input tax---Supply of cotton seed oil to unregistered person---Issuance of show-cause notice for recovery of sales tax along with additional tax and penalty on the ground that adjustment of input tax was not admissible to the complainant as cotton seed oil had been sold to unregistered person---Complainant contended that input involved against electricity bills was admissible irrespective of whether the oil had been supplied to registered or un­registered person under amended S.R.O. 25(I)/06 dated 9-1-2006, which had retrospective effect from 8-7-2004---Further tax was paid in compliance of audit report and liability created later was not relevant---Show cause notice should have been issued within 90 days or 180 days as it created a liability against a citizen---Collector (Appeals) had held that the complainant did not challenge the formula/working of sales tax as alleged in the show-cause notice; that under S.R.O. 488(I)/04 dated 12-6-2004 the complainant was not authorized to adjust input against electricity bills as it had supplied oil to unregistered person; that the complainant was required to give solid evidence that it supplied oil to registered person which it failed to do; that the plea the audit observation was a judgment/decision was not correct because audit report was observation of auditor, which was required to be approved by the seniors and an audit report was not a judgment or decision under S.45 of the Sales Tax Act, 1990; that even after approval, the contravention report could be prepared and sent to the adjudication officer for adjudication; that contention that action was time barred was not tenable because the period involved was 2004-05 and the complainant had deliberately adjusted the input tax for which it was not entitled and the provisions of S.36(1) of the Sales Tax Act, 1990 were correctly invoked in the show-cause notice which authorized recovery of sales tax for five years and action for recovery of evaded sales tax was not time barred and, that desk audit report signed by the auditors provided by the complainant did not cover the aspect of inadmissibility of input tax---Assistant Collector, on submission of report, directed for compliance of S.R.O. 488(I)/04 dated 12-6-2004 which was done and the charge was accordingly framed out in the audit report whereas the complainant was relying on unapproved audit report---Order-in-appeal dealt with the main contentions of complainant had given his findings on issues relating to audit report, admissibility or otherwise of input tax adjustment and the alleged time barred show-cause notice on the merit of case---Such was not maladministration---Complainant, against order-in-appeal, had filed appeal before Appellate Tribunal---Appeal though had been filed later in point of time than the filing of complaint, the complainant had raised therein more or less the same issues as had been raised before Federal Tax Ombudsman---Collector (Appeals) having decided the case on its merit, the complainant should pursue its appeal filed before Appellate Tribunal---Appellate Tribunal, which is competent to deal with both points of law and fact, could deal with the issues raised in appeal comprehensively on the basis of relevant law and the available evidence and pass a judgment on merits of the case after due consideration of the arguments of the parties to the dispute.

Collector of Sales Tax and Central Excise v. Pattoki Sugar Mills Ltd. and other 2007 SCMR 1245 = 2006 PTD 2889; Messrs Shah & Co. Karachi v. C.B.R./Customs Department Complaint No.1270-K/03 and Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala 2008 PTD 60 ref.

Muhammad Akbar, Advisor, Dealing Officer.

Rana Muhammad Ishaq for the Complainant.

Nadeem Ahmad ,A.C. ,Sales Tax, Multan for Respondents.

2009 P T D 1128

[Federal Tax Ombudsman]

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

SHAHZAD-UR-REHMAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 186 of 2005, decided on 19th April, 2005.

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

----Ss.80(1) & 25(1)---Customs Rules, 2001, R. 109(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Provisional assessment of duty---Value of imported and exported goods---Assessment had to be completed without undue delay---Complainant contended that in event of dispute, or where the goods were required to be tested, the goods, pending such tests could have been released provisionally under S.81(1) of the Customs Act, 1969---Department did not do that and took more than one month to determine the description/composition of goods---Validity---Department detained the samples for a period of one month without any justification causing undue delay which amounted to maladministration---Complainant had to unnecessarily incur demurrage---Department should issue to the complainant 'delay and detention certificate' for the said period to enable the complainant to seek waiver of demurrage from the Port authorities---Undue delay of one month caused by the department in dispatching samples of goods to the Laboratory was clearly an act of `maladministration'---Federal Tax Ombudsman recommended that the Central Board of Revenue direct the relevant Customs authority to issue delay and detention certificate to the complainant for the period from 2-8-2004 to 2-9-2004 to enable him to apply to the port authorities for waiver of demurrage charges.

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

----Ss.25(1) & 80(1)--Customs Rules, 2001, R.109(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Value of imported and exported goods---Complainant asked the Department to disclose and confront him with the material/evidence on the basis of which they had arbitrarily enhanced the value but they did not---Value of consignment was assessed without any basis--Complainant was incurring heavy demurrage, storage and other port charges---Duty and taxes were paid under protest and got the goods released--Neither the complainant was given any notice as required under S.25(4) of the Customs Act, 1969 nor for that matter passed any order under R.109(3) of the Customs Rules, 2001---Validity---Complainant requested the Department to determine value of consignment on the basis of Customs Data and the Department finalized it accordingly---Fact remained that complainant paid duty and taxes under protest, as was evident from the bill of entry---Department needed to show to the complainant the evidential values of similar/identical goods imported in Karachi or elsewhere with reference to specific bills of entry/goods declarations showing import of identical goods, the value at which the complainant's consignment was assessed---Complainant agreed to the course of action that the department should pass a speaking order disclosing therein specific bills of entry/goods declarations involving similar/identical goods cleared by the Customs at the assessed value at the place of clearance or elsewhere during the relevant period of import---Federal Tax Ombudsman recommended that department should pass a speaking and well reasoned order disclosing therein evidential values on the basis of which the complainant's assessment was finalized at the assessed value to enable the complainant to appeal against the assessment order if he so wished.?

Muhammad Akbar, Advisor (Dealing Officer) Mian Abdul Bari Rashid for the Complainant.

Ms. Farah Farooq, A.C. Dryport, Lahore for Respondents.

2009 P T D 1144

[Federal Tax Ombudsman]

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

Messrs M.K. INTERNATIONAL WH3, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-1545-K of 2003, decided on 25th March, 2004.

Customs Act (IV of 1969)---

----Ss.32(1), 168 & 186---Export (Quality Control) Order, 1973, Preamble---S.R.O. No. 1(KE), dated 7-1-2003---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Confiscation of goods meant for export after its detention with container in Port area for violation of S.32(l) of Customs Act, 1969 and Export (Quality Control) Order, 1973---Tribunal set aside such order, but authority did not allow removal of goods due to pendency of their appeal before High Court---Waiver of demurrage charges -claimed on basis of delay and detention certificate issued by authority was declined to exporter---Validity---Authority might allow or disallow shipment of goods in accordance with customs law, but they should not arbitrarily keep goods in Port area causing damage to its quality and value---Authority had wrongly kept goods in Port area---Refusal to allow removal of goods had resulted in its deterioration, loss of its value and loss of future export orders---Such attitude was not conducive towards promotion of exports---Authority had acted arbitrarily, unreasonably and contrary to established practice without valid reasons, which constituted maladministration---Federal Tax Ombudsman recommended to C.B.R. to recommend for remission of demurrage charges and direct authority to decide within specified time issues of container rent chargeable by shipping company and loss in value of goods on account of its wrongful detention in Port area after providing opportunity of hearing to complainant.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Ammar Yasser for the Complainant.

Nadeem Ahmad Mirza, Consultant.

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

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

2009 P T D 1155

[Federal Tax Ombudsman]

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

ABDUL RASHEED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1393-L of 2003, decided on 1st April, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.122 & 156---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Refund determined under S.156 of Income Tax Ordinance, 1979, claim for---Lapse of four years in taking decision, whether to comply with refund order or not---Validity---Maladministration on account of neglect, inattention, delay, incompetence, inefficiency and inaptitude was evident from taking such long period to decide what to do with refund order---Authority had failed to give valid reasons for such delay in deciding matter---Onus lying on authority to prove absence of maladministration in such case had not been discharged---Federal Tax Ombudsman recommended to the Commissioner to ensure completion of action under S.122 of Income Tax Ordinance, 1979 in accordance with law without undue delay and institute enquiry to determine responsibility for inordinate delay in taking such decision.

Muhammad Mushtaq, Advisor (Dealing Officer).

Nauman Ali Bukhari for the Complainant.

Muhammad Asim Halim, DCIT for the Revenue.

2009 P T D 1163

[Federal Tax Ombudsman]

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

Messrs CHINIOT ENTERPRISES (PVT.) LTD., HARIPUR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1291 of 2003, decided on 12th April, 2004.

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

----Ss 59, 61, 32-A & 80DD---Income Tax Rules, 1982, R.190(1)---Self-Assessment Scheme, (2000-2001), para.9(a)(ii)---Establishment of Office of Federal 'Fax Ombudsman Ordinance (XXXV of 2000), S.9---Self-Assessment Scheme---Notice for production of books---Supply of documents---Audit statement---Short document notice---Complaint was to the effect that the return filed under Self Assessment Scheme was wrongly excluded from Self-Assessment Scheme---Validity---Complainant had produced attested copies of documents which showed that the short documents notice did not contain diary number-Order sheet entry was made in the order sheet relating to previous assessment year, which was inserted afterwards---Interpolation of entries in the Order Sheet were found which established that no short document notice was issued at all---Audited account was found available in the assessment record---Allegations of the department were not substantiated---Return filed had fulfilled the condition of tax paid being higher by 10% or more---Action of the Assessing Officer excluding the complainant's return from the Self-Assessment Scheme was arbitrary', unjust, biased and oppressive which fell under the category of maladministration---Competent authority was ordered to withdraw the action taken by Taxation Officer for excluding the complainant's case from the ambit of Self-Assessment Scheme and accept the complainant's Return.

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

----Ss.2(3)(i)(b) & 9(b)---Maladministration---Remedy of appeal---Assessment---Jurisdictional remedies of appeal, review or revision were available in the relevant legislation and related only to the decisions on matters enumerated therein---No such remedy had been provided in respect of a process employed in the conduct of assessment or related proceedings---Matter related to the process employed by the respondents against which no appeal, etc. was provided in the Income Tax legislation---Provisions of S.9(2) of the Ordinance did not stand in the way of investigation by the Federal Tax Ombudsman---Complaint was held to be competent for admission---Objection of the respondent was overruled.

Muhammad Anwar, Consultant (Dealing Officer).

Zahid Hussain, ACMA, AR along with Sajid Hussain, Accountant for the Complainant.

Faheem Muhammad, DCIT Companies Zone, Peshawar for the Complainant.

2009 P T D 1179

[Federal Tax Ombudsman]

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

OVAIS MOE

Versus

C.B.R. (SALES TAX & CENTRAL EXCISE), KARACHI

Complaint No.1663-K of 2003, decided on 24th March, 2004.

Sales Tax Act (VII of 1990)---

----S.20---Recording change of business address in certificate of registered person---Essentials---Registered person wag legally bound to notify his change of address, if and when same occurred---Duty of authority, after receiving notification of change of address, was to incorporate same iii departmental records and in Registration Certificate without loss of time---Only requirement was satisfactory evidence regarding taking place of genuine change of business address---Mandatory for each registered person/tax collecting agent to mention his correct address on tax invoice.

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

Iqbal Hussain for the Complainant.

Dr. Abdul Rehman Rind, D.C. for Respondent.

2009 P T D 1184

[Federal Tax Ombudsman]

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

Malik SHAKEEL AHMED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.587 of 2003, decided on 3rd November, 2003.

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

----S.62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment of sales based on the estimates of survey team which were allegedly made on gun-point and .without apprising the Complainant/assessee of the figure that would be put in after obtaining his signatures---Validity---Some credence had to be given to the estimates of the survey team provided they were valid and according to law---If a person objected to the estimates of the team he should file his objections within a reasonable time---Was difficult to verify the complainant/assessee's contention that he was unaware of the estimates of the survey team or any coercion was used in obtaining his signatures---Sales estimated adopted for the year 2000-2001 on the basis of survey estimates could hardly be considered as harsh---First Appellate Authority had also confirmed the sales estimate---No intervention was called for by the Federal Tax Ombudsman as for as the assessment year 2000-2001 was concerned.

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

----S.62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Estimation of sales---Sales were assessed. at Rs.16,00,000 for the assessment year 2002-2003 as against the sales estimated by the survey team at Rs.12,00,000 in the assessment year 2000-2001---Validity---Estimate of total sales at Rs.16,00,000 did not appear to be based on any valid grounds because even if it was assumed that the estimates of the survey team were reasonable it did not follow that the sales would have increased by Rs.4,00,000 in the year 2002-2003---Order was arbitrary which suffers from administrative excess and involves exercise of power for improper motives---Fresh enquiries need to be made in the light of the complainant/assessee's contention that his business was on a very small scale----Federal Tax Ombudsman recommended that enquiry be made regarding the extent of the complainant's business and if it is found that the estimate of sales adopted in the year 2002-2003 is excessive, necessary action be taken under S.122A of the Income Tax Ordinance, 2001 to reduce the Complainant's sales and income to the appropriate level.

Mirza Muhammad Wasim, Adviser (Dealing Officer).

Nasir Nawaz Mufti, ITP, AR for the Complainant.

Muhammad Saleem, DCIT Circle 17, Sargodha for Respondent.

2009 P T D 1218

[Federal Tax Ombudsman]

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

Haji MUHAMMAD AMIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.280 of 2003, decided on 24th February, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.55 & 156---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2)(b) & 2(3)(i)(a)---Consolidated ex parte Assessment---Rectification---Jurisdiction---Maladministration---Visual inspection---Commissioner (Appeals) had passed an arbitrary order resulting in injustice---Maladministration in adopting a process to reach the decision had been identified---Jurisdiction to investigate---Complainant's appeal was dismissed in a summary manner without taking into consideration the facts of the case and the grounds of appeal---Inspection note of the Assessing Officer was not produced to show the nature of machinery---Visual inspection was not relevant and sufficient to support the assessment---Legal question was not adverted to---Federal Tax Ombudsman directed the complainant to file an application to Commissioner of (Appeals) for rectification of the Appellate Order and Commissioner (Appeals) shall decide same by a speaking order.

Muhammad Anwar, Consultant (Dealing Officer).

Aurangzeb, ITP for the Complainant.

Raza Munawar, IAC, Jhelum and Muhammad Aslam, Taxation Officer, Talagang.

2009 P T D 1227

[Federal Tax Ombudsman]

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

Messrs H. SHEIKH NOOR-UD-DIN AND SONS (PVT.) LTD., LAHORE CANTT.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.959/L of 2004, decided on 3rd February, 2005.

(a) Sales Tax Act (VII of 190)---

----Ss.25, 32A(2) & 45A---Sales Tax Refund Rules, 2002---Sales Tax General Order No.3 of 2004 dated 12-6-2004, paragraph. 39---Sales Tax General Order No.9 of 1999, dated 22-9-1999---S.R.O.388(I)/82, dated 22-4-1982---S.R.O.99(I)/95, dated 12-4-1995---S.R.O.579(I)/99, dated 17-5-1999---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Access to record, documents, etc.----Power of the Central Board of Revenue and Collector to call for records---Export refunds were sanctioned after due scrutiny and audit---Maladministration was alleged against department for conducting post refund audit unlawfully On the ground that Director-General could not undertake audit of registered persons except when authorized by the Central Board of Revenue--Directorate possessed information of evasion committed by a registered person which they were supposed to pass on to the concerned Collectorate of Sales Tax who could undertake the audit associating the staff of the Directorate---Validity---Once a case was decided by the Collector (Adjudication) on merit on the basis of independent special audit the aggrieved party could go in appeal if it so wished---Collector (Adjudication) should direct an auditor appointed under S.32A(1) of the Sales Tax Act, 1990 (Special Audit by Chartered Accountants and Cost Accountants) to audit all the records of the complainant, including record earlier obtained by the Director-General from the Collectorate of Sales Tax or any other record that may be considered necessary for an unbiased and purposeful audit and then adjudicate the case on merits in accordance with the provisions of law--Federal Tax Ombudsman recommended that Central Board of Revenue order the Collector (Adjudication) to direct, in terms of the provisions of subsection (2) of S.32A of the Sales Tax Act, 1990, an auditor (appointed by the Central Board of Revenue under S.3(1) of the Sales Tax Act, 1990) out of the approved list of Chartered Accountants notified by the Central Board of Revenue vide its Notification S.R.O.579(I)/99 dated 17-5-1999 to audit the entire record of the complainant for the relevant period, including the record previously obtained by the Directorate from the Collectorate of Sales Tax, and give their findings; entire cost of special audit would he borne by the complainant as undertaken in the complaint; to adjudicate depending on the findings/observations of the special audit, the case on merit, in accordance with the provisions of law, after confronting the parties to the dispute with observations of the special audit to enable them to defend their position in case of adverse audit observations and after providing them the opportunity of hearing and that Central Board of Revenue, meanwhile, direct the Director-General not to take any coercive action against the person of complainant's directors/management in terms of F.I.R. till finalization of findings by the special audit and then act/proceed only if so warranted by special audit observations and the law.

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

----S.45A---Sales Tax General Order No.9 of 1999, dated 22-9-1999---Sales Tax General Order No.3 of 2004, dated 12-6-2004, paragraph 39---Establishment of Office of Federal 'fax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Power of Central Board of Revenue and Collector to call for records Complainant's contention that the Directorate could not undertake complainant's audit because if they had any information about evasion of tax they should have passed that on to the concerned Collectorate to undertake the audit, was not tenable in view of para. (iii) of Sales Tax General Order No. 9 of 1999 dated 22-9-1999 (superseded by Sales Tax General Order No.3 of 2004, dated 12-6-2004).

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

----S.45A---Sales Tax General Order No.9 of 1999 dated 22-9-1999--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Power of the Board and Collector to call for records---Director-General could undertake audit of a registered person on specific authorization by the Central Board of Revenue.

Imtiaz Rasheed Siddique, Mian Abdul Ghaffar along with Imtiaz Ali Shah, Advisor of the Company for the Complainant.

Ahmad Kamal, D.C., Customs, Sales Tax & Central Excise (Intelligence and Investigation) for Respondents.

2009 P T D 1242

[Federal Tax Ombudsman]

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

Mst. LAIL UN-NISA and others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos.835-L and 836-L of 2004, decided on 27th December, 2004.

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

----Ss.170(4), 164(2) & 165(1)--Income Tax Rules, 2002, Rr.51, 51A & 52---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Non issuance of refund despite returns having been accepted under the Self Assessment Scheme and by operation of law---Department admitted that assessments had either attained finality by acceptance under Self-Assessment Scheme or by operation of law, however contended that IT-30/Demand Notice was not available hence no refund was obtaining on record---Lack of action for rectification and issuance of refund was attributed to non-availability of original challan/documents---Validity---Deduction certificates were made available; copies of challans provided--Applications under S.170 of the Income Tax Ordinance, 2001 moved for claiming refund---Complainant had fulfilled their part of obligation under S.164(2) of the Income Tax Ordinance, 2001 and it was for the Department to carry out verification through DPC or through the scrutiny of monthly/annual statements received by the Commissioner under S.165(1) of the Income Tax Ordinance, 2001 read with rule 51/51A and 52 of the Income Tax Rules, 2002---If there was any infraction in filing of statements, the fault lay with the "withholdings agents" or in the procedure prescribed by the Central Board of Revenue, but there was no lapse of responsibility by the complainant from whom recovery or tax had already been effected and certificate to that effect issued---Federal Tax Ombudsman recommended that refund be issued promptly after carrying out prescribed formalities and Central Board of Revenue issue instructions/direction to remove the malady identified in the present order.

2007 PTD 1217 and C.No.421--L/04, decided on 14-12-2004 rel.

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

----S.59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment---While accepting a return under Self-Assessment Scheme it was obligatory that the Deputy Commissioner shall assess, by an order in writing the total income of the assessee on the basis of such return"-Non-passing of such assessment order was "maladministration".

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

----Ss.120(1)(a)(b) & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment---Refund---For the assessment year 2002-2003 a combined reading of Cls.(a) and (b) of S.120(1) of the Income Tax Ordinance, 2001 would suggest that though "the return shall be taken for all purposes to be an assessment order issued to the taxpayer on the day the return was furnished" but `the tax due thereon' had to he the "respective amount specified in the return" which required preparation of IT-30 showing calculation of tax whereafter, in those cases where further demand was created (or a refund worked out), the result had to be communicated through a demand notice to the taxpayer---Prescribed office procedure required that proceedings be recorded on the Order Sheet to support the posting of demand/refund in the DCR---By-passing such procedure, prescribed by law and laid down in the Office Manual, besides representing "maladministration" was by itself alarming inasmuch posting "No Demand" in the DCR carried an impression to higher functionaries that entire deposit in the Treasury was net "Receipt" of Government whereas in reality considerable sums of money remain claimed as refund in the returns---Central Board of Revenue had to look into the matter with a view to remove loopholes as they were causing difficulty to the taxpayers and resulting in reporting exaggerated figures of tax collection at the national level.

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

Nemo for the Complainant.

Muzammil Hussain Butt (D-CIT) for Respondent.

2009 P T D 1254

[Federal Tax Ombudsman]

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

MUHAMMAD FAROOQ through Attorney and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 505 of 2004, decided on 19th April, 2005.

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

----S.168---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Seizure of things liable to confiscation---Release of vehicle after 18 days from the date of delivery of certified copy of court's judgment---Validity---Delay in releasing the vehicles after the High Court's decision declaring the acts of the department illegal, especially in the absence of any stay order, causing inconvenience/harassment to the complainants and the inaction and inattention to which some of the applications submitted by the complainants were subjected to acts which were tantamount to `maladministration'---Ombudsman observed that there was need for inquiry into causes of delay in the release of vehicles following Court's order and the alleged misconduct of the staff to pinpoint responsibility for taking appropriate action against those responsible for it.

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

----Ss.216 & 168---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---Release of vehicle---Complainant alleged that during detention of vehicle valuable parts such as suspensions, Gear Boxes, Clutches, Tyres, Batteries, Tool Boxes etc. were replaced/changed and the documents, including registration books were stolen---Complainants suffered a loss by way of repairs, replacement of parts, tyres etc. which were removed by the Department---Department's acts such as detention, seizure of vehicles, non-implementation of Court's orders resulting in heavy losses may be declared illegal, void and mala fide---Department he directed to pay the compensation for the financial loss suffered by them and appropriate actions may be initiated against delinquents for maladministration---Validity---Complainants were to prove before the Department that there was damage or loss and that it was caused wilfully---Complainants may lodge a claim with the department, prove their case and obtain decision on merit in accordance with the provisions of law---Intra-Court Appeals filed by the Department against High Court's order were pending and sub judice, it was not possible for Federal Tax Ombudsman to give any findings on the legality or otherwise of the Department's action to seize/detain the vehicles---However, in respect of wilful delay in releasing the buses, despite High Court's orders and allegation of misconduct on the part of staff, Federal Tax Ombudsman recommended that the Central Board of Revenue direct the D.G. (Inquiries) to inquire into allegations of delay in the release of buses after High Court's order declaring the respondents' action as illegal and harassment to the complainants, and pinpoint, in case the allegations are proved, the officials responsible for appropriate action under the Efficiency and Discipline Rules in force.

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

---S.216---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---No compensation for loss or injury except on proof of neglect or wilful act---for claim of loss on account of replacement/pilferage of parts and accessories, the complainants should have identified the missing parts and proved the same to the Customs authority before taking release of the buses or before moving the vehicles out of customs jurisdiction/charge.

Muhammad Akbar (Advisor) (Dealing Officer).

Mian Abdul Ghaffar for the Complainants.

Muhammad Talib Hussain, A.C. AFU, Multan for Respondent.

2009 P T D 1308

[Federal Tax Ombudsman]

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

Messrs KIIA PHARMACEUTICALS (PVT.) LTD. Through Messrs S.M. Rehan & Company, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-1387-K of 2005, decided on 13th February, 2005.

Income Tax Ordinance (XLIX of 2001)---

---Ss.176, 177, 148 to 156, 161, 162, 182, 233 to 236---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Notice to obtain information or evidence--- Issuance of notice under S.176 of the Income Tax Ordinance, 2001 for the purpose of monitoring of withholding taxes---Assessee contended that calling of books of accounts for monitoring of withholding taxes was against the spirit of Universal Self-Assessment Scheme and that if the Department wished to call for record and books of accounts for the purpose of monitoring of withholding taxes, then it had first to select the case for audit under section 177 of the Income Tax Ordinance, 2001 and that otherwise the Department had no jurisdiction to call for books of account---Central Board of Revenue had assigned jurisdiction only for the purpose of monitoring of' taxes withheld but had not issued any circular authorizing the Taxation Officer to call for record/books of accounts for the purpose of such monitoring---Validity---Provision of S.176 of the Income Tax Ordinance, 2001 was wide enough to authorize the Commissioner or an Authorized Officer to call for the accounts, documents or computer stored information concerning the tax affairs, including the tax deducted, from the person---Contention that Taxation Officer had no power to call for record for the purposes of monitoring of withholding taxes was not tenable as in view of the clear provision of law, there was no need to issue any separate circular instruction authorizing the Officer to call for the books of accounts for monitoring purpose---In order to check the authenticity and verify the correctness of various statements prescribed under S. 165 of the Income Tax Ordinance, 2001, the' Taxation Officer was well within his right to call for the hooks of accounts and other records and no exception could be taken to the exercise of such power---No case of maladministration had been made out and the proceedings were filed by the Federal Tax Ombudsman.

Asad Arif, Advisor (Dealing Officer).

S. M. Rehen, FCA for the Complainant.

Tahir Tanveer, DCIT for Respondent.

2009 P T D 1968

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs CRESCENT TEXTILE MILLS LIMITED, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and others

Complaint No. C-1893-K of 2008, decided on 9th July, 2009.

Customs Act (IV of 1969)---

----S.81(2)--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.3---S.R.O.27(I)/98, dated 17-1-1998---S.R.O.554(I)/98, dated 10-6-1998---S.R.O.987(I)/99---Customs General Order No.7/1998---Customs General Order No. 14/1998---Provisional assessment of duty---Non-implementation of High Court's order in a case of provisional assessment whereof the goods were provisionally released against bank guarantee---Complainant contended that application was sent to Secretary (Machinery), Revenue Division, to implement the judgment and release the bank guarantee but no action had been taken---Department contended that at the time of import the exemption of customs duty and sales tax was not available under Customs General Order No. 7 of 1998--- Customs General Order No. 14 of 1998 was issued at a later stage which was not applicable retrospectively and the benefit of exemption was denied---Complainants should adhere to the instructions contained in the judgment of High Court to pursue the case before the Secretary (Machinery), Federal Board of Revenue, and not to approach the office of Assistant Collector of Customs---Complainants failed to comply with the order of High Court by not pursuing the case with the Federal Board of Revenue---Complaint be rejected being premature, the benefit of S.R.O.554(I)/1998 and S.R.O.987(I)/99 was not admissible to the complainants as the goods were manufactured locally, and the concession if granted would be a great loss to national exchequer---Validity---Held, it was established that High Court's order for decision within two months was not complied with and provisional release under S.81 of the Customs Act, 1969 attained finality due to inaction on the part of the Customs officials--Maladministration was established---High Court's order had now been complied with by the Chief Federal Board of Revenue after lapse of eight years; it would be appropriate if the complainants filed an application to bring the factual position to the notice of High Court for redressal of their long outstanding grievance.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Afzal Awan for the Complainant.

Imran Iqbal for Respondents.

Shahid Jan, Assistant Collector of Customs (Appraisement).

2009 P T D 1983

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs FAZAL TEXTILE MILLS LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-158-K of 2009, decided on 9th July, 2009.

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

----Ss.81(2) & 32---Establishment of Office of .Federal Tax Ombudsman Ordinance (XXXV of 2000), S.3 & 9(2)(b)---Customs General Order No. 12 of 2002, Paragraph, 66---S.R.O.530(I)/2005, dated 6-6-2005---S.R.O.70(I)/2005, dated 3-4-2006---Provisional assessment of duty--Exemption was refused on the ground that imported parts were not integral part of the machinery---Goods were released provisionally against a security of post-dated cheque pending a clarification from Central Board of Revenue whether the said parts were the parts of textile machinery, for final assessment within the prescribed time frame under S.81(2) of the Customs Act, 1969---Post-dated cheque was given as a trust with the understanding that Customs Department shall finalize the matter within the prescribed time---Complainants kept pursuing the matter for finalization of provisional determination and requested for release of security---Department neither released the security nor passed a formal assessment order within the stipulated period---Department contended that clarifications from Central Board of Revenue were received in January, 2006 and April, 2006 and since goods were covered by negative list, sales tax was leviable---Post-dated cheque had expired and the demand for additional duty and taxes was raised---Validity---If the Department was of the view that provisional assessment was contingent on the Central Board of Revenue's clarifications which were received in January and April, 2006 it was the duty of the Customs officials to finalize the assessment within the period prescribed under S.81(2) of the Customs Act, 1969---Such was not done and as a result the provisional assessment attained finality under S.81(4) of the Customs Act, 1969--Post-dated cheque should have been returned to the importer---No legal justification was available to issue a show-cause notice under S.32 of the Customs Act, 1969 after about three years of the date of provisional release---Adjudication proceedings were contrary to law, against the established practice, without valid reasons and amounted to maladministration---Objection about maintainability of complaint being irrelevant was rejected---Federal Tax Ombudsman recommended that Federal Board of Revenue to set aside the order-in­-original passed by the Assistant Collector of Customs (Appraisement) under section.195 of the Customs Act; direct the Collector of Customs to finalize the assessment on the basis of the provisional assessment under subsection (4) of section 81 of the Act; and return the (expired) post-dated cheque to the complainants under subsection (3) of section 81 of the Customs Act, 1969.

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

----Ss.32 & 81---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.3---Untrue statement, error, etc.---Where goods were released provisionally under S. 81 of the Customs Act, 1969, action under S. 32 of the Customs Act, 1969 was not justified.

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

----S.3-A---Clarification of Central Board of Revenue---Scope---Central Board of Revenue's clarification could have only prospective effect and could not be enforced retrospectively on past transactions.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Afzal Awan, Advocate.

Imran Iqbal, Advocate.

Tasneem Ahmad, Manager.

Moeen Afzal Ali, Assistant Collector of Customs.

2009 P T D 2011

[Federal Tax Ombudsman]

Before, Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs CONVENIENCE FOOD INDUSTRIES (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1991-K of 2008, decided on 28th August, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 10 & 55---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10(3)---Maladministration---Allegation of maladministration had been made against the Sales Tax Authorities for, not deciding fourteen Sales Tax refund claims filed several years ago; arbitrarily refusing to accept five other refund claims; and not sanctioning some refund claims which were referred back by Collector (Appeals)---Complainants were also aggrieved on account of inordinate delay in thirteen customs duty drawback claims pending decision before the Customs Authorities of the Export Collectorate of Customs House---In view of the peculiar circumstances explained in the complaint involving allegations of undue delay in settling refund and duty drawback claims and misplacement of files by the Tax Authorities, the late submission of complaint, was entertained under S.10 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 for investigation---Complaint was accordingly referred to the Revenue Division for reply--Authorities gave reply and in the light of that reply recommendations were made to the effect that cases being of grave maladministration, responsibility for excessive delay in settling refund claims and misplacement of files etc., had to be fixed and disciplinary action had to be taken under the Removal from Service (Special Powers) Ordinance, 2000---Besides, the Collector Sales Tax and Collector Customs (Exports) were to be directed to put their houses in order to save the taxpayers from available hassles and hardship in getting their refund claims decided---Responsibility be fixed for overpayment---Necessary action be completed within specified period etc.

M. Mubeen Ahsan, Advisor, F.T.O's. (Dealing Officer).

Muhammad Aleem Khan, Authorized Representative of the Complainant.

Aamer Rashid, Dy. Collector of Customs (Exports), S. Hasan Askari, Assistant Collector of Customs (Exports) and Syed Mohsin Ali Shah, Asstt. Collector of Sales Tax, Departmental Representatives.

2009 P T D 2042

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD RIAZ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1919 of 2008, decided on 11th November, 2009.

Customs Act (IV of 1969)---

----S. 168---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9, 10 & 11---Confiscation of vehicle---Complaint against---Vehicle in question was seized by Customs Authorities on suspicion of being smuggled one and vide ex parte order it was confiscated---Appeal filed by the complainant/owner of vehicle having been dismissed by Collector of Customs (Appeals), complainant filed appeal before the Customs Appellate Tribunal which was decided in favour of the complainant---When vehicle in question was stolen F.I.R. was lodged and Police arrested the thief and recovered the vehicle from him---Additional Sessions Judge ordered the vehicle to be returned on superdari to the complainant after verifying his credentials---Computer printout from Custom House also proved that the vehicle in question had been lawfully imported by the complainant---Customs Authorities, however, did not return the vehicle to the complainant, even after the decision of the Tribunal in favour of the complainant---Evidence produced by the complainant on record had, fully proved that the complainant had lawfully imported vehicle in question, but despite that the complainant was made to suffer twice; once by the car lifters who stole his vehicle and changed its chassis number; and secondly by the Customs Authorities whose investigation miserably failed to reach the right conclusion---Recommendations were- made to the effect that Federal Board of Revenue to hold a formal inquiry as to why Customs Officers had failed to do justice in the case; that Federal Board of Revenue also look into the propriety of fixing the dates of hearing in a hurry and deciding the matter ex parte; propriety and legality of selling the vehicle on nominal price of Rs.25,000 only also needed to be thoroughly inquired into; that as the address of the complainant/owner of the vehicle mentioned in the order-in-original was incomplete, same be ascertained whether show-cause notice and hearing notices were duly and actually delivered to him; that inefficiency and arbitrariness involved in the case be adequately investigated and those found responsible dealt with under the Removal from Service (Special Powers) Ordinance, 2000; and that compliance be reported within specified period.

Shamim Ahmad, Advisor (Dealing Officer).

Muhammad Riaz for the Complainant.

Ms. Zahra Haider, D.C. (Customs) for Departmental Representative.

2009 P T D 2069

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD YOUSAF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 134 to 141 of 2009, decided on 11th September, 2009.

Sales Tax Act (VII of 1990)---

----S. 3---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9, 10 & 11---Complaint for excessive delay in payment of refund claims---Issue relating to determination of per Kg quantity of bleaching chemical---Central issue involved in complaints related to determination of the per Kg quantity. of bleaching chemical namely Sodium Hypochlorite ;required for bleaching of cotton waste---Three members committee constituted by Sales Tax Authorities in order to resolve dispute with the complainant, got a sample of the cotton waste from the factory of the complainant for laboratory test in the National University of Textiles---Laboratory test of the sample showed consumption of 930 grams of bleaching chemical per Kg of black denim waste---Dissatisfied with that, Sales Tax Authorities drew another sample of black denim cut pieces on Laboratory---Test in the same University, which showed consumption of 870 grams of chemical per Kg denim cut pieces---Complainant-company wanted to make the figure of 900 grams per Kg on the basis of said two tests as the standard measures for their chemical consumption, but Sales Tax Authorities did not accept that---Authorities presented the average figures of consumption worked out from a survey of some other cotton waste factories to the committee which decided a figure of 457 grams of bleaching chemical per Kg of denim cut pieces --On that basis Sales Tax Authorities decided the case of complainant factory allowing consumption of 457 grams per Kg---Aggrieved by that decision,. the complainant company filed appeal before Colle9tor (Appeals) who accepted the contention of the company and allowed 900 grams of chemical per. Kg---Complainant thereafter wanted a general application of that standard of 900 grams of bleaching chemical per Kg of cotton waste, however the Sales Tax Authorities did not accept that standard of 900 grams for the entire production of the company for certain reasons---As factory was using a variety of cotton waste, fixation of 900 grams standard for the entire intake of rags and cut pieces, did not seem justified---In view of that recommendations were made to the effect that Federal Board of Revenue to cross check the consumption ratio of bleaching chemical for recycling different varieties of cotton waste from other cities and prescribe national standards of each category on all Pakistan Basis; that a fool proof system be put in place to forestall chances of abuse and to resolve the dispute on sustainable basis; that each company must be monitored for keeping correct record of sales and purchases etc. as per the requirements of the law and procedure; that time bar involved in the cases be waived to enable the complainant to seek remedy as provided under the Sales Tax Act, 1990 and that compliance be reported within specified period.

Yasin Tahir, Advisor (Dealing Officer)

Rao Tasawur Ali, Authorized Representative.

Saleem Akhtar, A.C., Sales Tax, Departmental Representative.

2009 P T D 2187

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman Commodore (Retd.) K.M. HUSSAIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-557-K of 2009, decided on 16th October, 2009.

Income Tax Ordinance (XLIX of 2001)---

---- Ss.9, 10, 11(1)(b)(2), 53(1)(c) & Second Sched.---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10 & 11--- Exemption---Complainant had alleged that his request to make corrections in the assessment of income of his wife from property had remained unattended---Complainant had stated that his wife had declared income from property and while making assessment she was not given basic exemption of Rs.150,000 and deduction of expenses incurred on payment of Cantonment Taxes and senior citizen related tax benefit as provided in clause (1-A) of Part-III of Second Schedule of Income Tax Ordinance, 2001 and in circumstances tax on income from property had not been correctly charged---Section 53(1)(c) and clause (1-A) of Part-III of Second Schedule of Income Tax Ordinance, 2001, had shown that the relief in tax liability was provided in respect of tax payable by any person under the Ordinance and it was not restricted to salary or certain specific head of income or type of tax---Provisions of Ss.9, 10, 11(1)(b) & (2) of Income Tax Ordinance, 2001 had made it quite clear that relief in tax allowed under Income Tax Ordinance, 2001, could not be denied to a taxpayer whose income fell in Presumptive Tax Regime---Federal Tax Ombudsman recommended that F.B.R. to look into the claim of the complainant in the light of Ss.9, 10, 11(1)(b) & 11(2) read with clause (1-A) of Part-III of the Schedule of Income Tax Ordinance, 2001 and to decide same on merit within, specific period; to issue necessary clarification as per law to avoid that type of complaints/litigation; and also issue guidelines for senior citizens about that particular relief.

Mumtaz Ahmed, Advisor (Dealing Officer).

K.M. Hussain the Complainant in person.

Sikandar Sheikh, D.C.I.T. for Respondent.

2009 P T D 2205

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs QUDRATULLAH WEAVING FACTORY 'TANDO ADAM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-470/K of 2009, decided on 16th October, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5-A)---Income Tax Ordinance (XXXI of 1979), Ss.61 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10 & 11---Amendment of assessment---Complainant had alleged that return filed for the assessment year 2001-2002 under the Self-Assessment Scheme based on C.B.R. Circular dated 18-6-2001 was wrongly processed under normal proceedings taken up under Ss.61 & 62 of (repealed) Income Tax Ordinance, 1979---Subsequently amendment in assessment already finalized under S.62 under the repealed Ordinance was made under the provisions of S.122(5-A) of Income Tax Ordinance, 20017--Both the orders under S.62 of the repealed Ordinance, 1979 and S.122(5-A) of Income Tax Ordinance, 2001 were alleged to. be wrong and illegal---Assessee's authorized representative had contended that the return should have been processed under Self-Assessment Scheme, but Assessing Officer had wrongly issued notice under S.61 of repealed Ordinance, 1979---Representative had further pointed out that notice under S.62 of repealed Ordinance, 1979 for the assessment year 2001-2002 was also wrong and illegal---Additional Commissioner issued notice to amend order under S.62 of repealed Ordinance, 1979 by invoking the provisions of S.122(5-A) of Income Tax Ordinance, 2001---Additional Commissioner processed the return and enhanced income raising tax demand---Validity---For amendment in assessment, relating to any assessment year prior to tax year 2003, the provisions of S.65 or S.66-A of the repealed Income- Tax Ordinance, 1979 could be invoked---Action taken under S.122(5-A) of Income Tax Ordinance, 2001 was not sustainable---Even on the basis of fact, action under S.122(5-A) of Income ,Tax Ordinance, 2001 was not warranted as statement of accounts furnished with the return did not show any head of expenses with regard to wages and electricity in the trading account/manufacturing account, but those heads were mentioned in the pro forma in the Profit and Loss Account---Maladministration, having been established, it was recommended that Revenue Division could direct the FBR to cancel the order of Commissioner Income Tax (Appeals) under S.122(5-A) of Income Tax Ordinance, 2001 in terms of S.214-B as those were against facts and law; to direct cancellation of order under S.62 of repealed Income Tax Ordinance, 1979 which was also illegal to accept declared income for two years under Self Assessment Scheme and action be completed within specified period.

Dealing Officer: Mumtaz Ahmad, Advisor.

K.A. Khan, and A.R. for the Complainant..

Syed Zulfiqar Shah, Deputy Commissioner Income Tax RTO for the Department.

2009 P T D 2216

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ALOFT INTERNATIONAL TRADING CO., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 414-K of 2009, decided on 18th October, 2009.

Customs Act (IV of 1969)---

----S. 155-E---Customs Rules, 2001, Rr.455 & 460---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10 & 11---Non-payment of rebate claims---Complaint against non-payment of rebate claims by Model Collectorate of Customs against exports---Customs department in reply had stated that three cheques were issued and forwarded to the given address of the complainant and complainant/exporter having not made any electronic correspondence with the department in terms of S.155-E of the Customs Act, 1969, department could not confirm the receipt of the letters claimed by the exporter to have been written to the department---Complainant stated that department should proactively identify, whether the cheques were received by the addressee or not---If the cheques were not so received or returned undelivered on account of incomplete or erroneous addresses, etc., it should be possible for the department to locate such cheques---Written and oral submission of both sides revealed that customs department had not put in place any reconciliation system to confirm whether or not the cheques issued by them had been duly delivered to the relevant addressees---Rules 455 to 460 of Customs Rules, 2001 which governed the "Duty Drawback" were also silent in that regard---Effective reconciliation system was urgently required for the Customs Department---Recommendations were made to the effect that (i) Collector Customs (a) to investigate why the cheques of Duty Drawback issued by his Collectorate had not been duly delivered to the complainant; (b) ascertain the whereabouts of the cheques; (c) Confirm from the State Bank, whether or not the cheques had been encashed and settle the issue; (ii) F.B.R. to put in place a sustainable system of reconciliation of cases of non-delivery and misdelivery of cheques; (iii) FBR to make efficient and foolproof arrangement with the State Bank for expeditious redressel of such situation; (iv) recommendations be complied and compliance of said recommendations be reported within specified period.

Nadeem Ahmed Butt Authorized Representative for the Complainant.

Salamat Ali, Deputy Collector (Customs) Departmental Representative for Respondent.

Syed Barkat Ali Bukhari, Consultant (Dealing Officer).

2009 P T D (Trib.) 8

[Income-tax Appellate Tribunal Pakistan]

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

M.As. (AG) Nos. 286/LB to 290/LB of 2006 and I.T.As. Nos.2805/LB to 2809/LB of 2001, decided on 23rd August, 2008.

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

----S.65---Additional assessment---Show-cause notice was issued to express the intention for initiating the proceedings under S.65 of the Income Tax Ordinance, 1979---Subsequent to such show-cause notice, approval from Inspecting Additional Commissioner was obtained and statutory notice under S.65 of the Income Tax Ordinance, 1979 was issued---Assessee contended that it was illegal as prior to assumption of jurisdiction, no approval existed for issuance of show-cause notice---Validity---Held, it was merely a pre-show-cause notice being the compliance of the principle of audi alteram partem because the proceedings under section 65 of the Income Tax Ordinance, 1979 were penal in nature, prior to it the Assessing Officer afforded opportunity to the assessee for explaining the correct factual and legal position---After considering the reply, the prescribed procedure was adopted i.e. seeking approval and issuance of notice under S.65 of the Income Tax Ordinance, 1979.

2005 PTD 480; 2001 PTD 1633; 1997 PTD 47 and 2006 PTD (Trib.) 804 ref.

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

----S.65---Additional assessment---Ticking of two clauses---Notice under S.65 of the Income Tax Ordinance, 1979 ticking two clauses (a) and (b) was illegal and without jurisdiction---Doubled ticking/marking of clauses as per notice under S.65 of the Income Tax Ordinance, 1979 being not clear expression of a charge against the assessee as well as lacking the proper application of mind was illegal and without jurisdiction---Assessing Officer for framing the proceedings under S.65 of the Income Tax Ordinance, 1979 should have to express his view very categorically that under which specific provision of law the assessee was being subjected to the proposed action---Assessments being illegal and void ab initio were annulled by the Appellate Tribunal.

1988 PTD (Trib.) 973 ref.

Siraj-tid-Din Khalid, A.R. for Applicant.

Ahmad Shuja Khan, D.R. for Respondent.

2009 P T D (Trib.) 81

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Qurban Ali, Accountant Member

I.TAs. Nos.2222/LB, 2223/LB, 2232/LB, 2233/LB, 2234/LB of 2004 and 5257/LB, 4817/LB of 2002, decided on 2nd September, 2008.

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

----Ss. 62 & 61---Assessment on production of accounts, evidence etc.---Issuance of notice under S.62 of the Income Tax Ordinance, 1979 requiring the assessee to provide books of account---Validity---Notice under S.62 of the Income Tax Ordinance, 1979 was issued by the department requiring the assessee to provide books of account while under section 62 the Assessing Officer could only proceed after examination of books of account in order to point out defects, if any---Under S.61 the Assessing Officer could require an assessee to produce books of account was and not under S.62 of the Income Tax Ordinance, 1979---Notice under S.62 of the Income Tax Ordinance, 1979 though was issued but since it did not fulfil the requirement as envisaged under the law, the same would be presumed that it was not issued---Proceedings initiated were held to be null and void in circumstances---Order was vacated by the Appellate Tribunal who cancelled the assessments and directed to accept the declared results.

I.T.A. No. 366 of 2000; 2006 PTD 2654; 2006 PTD 2706; 2007 PTD 1016; 2007 PTD 345 and PLD 2001 Quetta 20 rel.

(b) Income-tax---

"--Gross profit rate---Since First Appellate Authority confirmed the Gross Profit rate of 11% in view of the history of the case as well as fixed by the Appellate Tribunal in the previous years no interference was called for by the Appellate Tribunal.

Siraj ud Din Khalid for Appellant (in I.T.As. Nos. 2232/LB, 2233/LB, 2234/LB of 2004 and 4817/LB of 2002).

Rai Talat Maqbool, D.R. for Respondent (in I.T.As. Nos.2232/LB, 2233/LB, 2234/LB of 2004 and 4817/LB of 2002).

Rai Talat Maqbool, D.R. for Appellant (in I.T.A. No. 2222/LB, 2223/LB of 2004 and 5257/LB of 2002).

Siraj ud Din, Khalid for Respondents (in I.T.A. No. 2222/LB, 2223/LB of 2004 and 5257/LB of 2002).

2009 P T D (Trib.) 89

[Income-tax Appellate Tribunal Pakistan]

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

M.A. (R) No.625/LB of 2005 and I.T.A. No.2393/LB of 2002, decided on 20th August, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66A & 59(1)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Cancellation of assessment finalized under Self-Assessment Scheme being "erroneous" insofar as same was "prejudicial" to the interest of revenue on the ground that assessee had not furnished wealth statement with the return which was obligatory under the law---Subsequently, through a corrigendum assessee was confronted with the objection that he had not furnished a wealth tax return along with the return of income---Validity---Inspecting Additional Commissioner had failed to establish the "nexus" between filing of wealth tax return and the subsequent Income Tax proceedings undertaken and describing them as "erroneous" and "prejudicial" to the interest of revenue under S.66A of the Income Tax Ordinance, 1979---Inspecting Additional Commissioner had also failed to "substantiate" as to what constituted the erroneous and prejudicial aspects of the assessees' case to justify recourse to S.66A of the Income Tax Ordinance, 1979---Order passed by the Inspecting Additional Commissioner under S.66A of the Income Tax Ordinance, 1979 was vacated by the Appellate Tribunal restoring the one passed under S.59(1) of the Income Tax Ordinance, 1979.

Afzal Ahmad Ch., ITP for Appellant.

Ahmad Shuja Khan, D.R. for Respondent.

2009 P T D (Trib.) 97

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmad, Chairman and Istataat Ali, Accountant Member

I.T.As. Nos.171/IB of 1998-99, 409/IB, 410/IB, 4053/IB and 4054/IB of 2000-01, M.A. (Ag) No.35/IB of 2008, decided on 27th May, 2008.

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

----S.62---Assessment on production of accounts, evidence etc.---Rejection of accounts---Textile manufacturing unit---Estimation of sales and application of GP rate---Assessing Officer found some defects in the books of accounts about which the assessee was properly confronted---Production/manufacturing account was neither produced by the assessee nor it was subjected to examination---Count-wise production per pound was neither provided nor probed---Was not verified as to what production results were being given by the other similarly situated and circumstances manufacturing units in respect of same quality of production---Accounting version of the assessee was not free from defects---Complete manufacturing/production account was not submitted from which quantitative/qualitative input and output of materials could be verified---History of estimation was also properly taken into account by the first appellate authority---Every year is a separate unit and has to be assessed accordingly, but at the same time history was the best guide---First Appellate Authority' had realistically analyzed the accounting version vis-a-vis history of the case and directed about sales as well as GP rate on proper lines---Order of First Appellate Authority in respect of sales as well as GP rate being on proper line were confirmed by the Appellate Tribunal.

2002 PTD (Trib.) 794; 1999 PTD (Trib.) 3892; 1994 PTD 123 and 1998 PTD 860 distinguished.

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

----Ss. 13(1)(aa) & 144/148---Addition---Deferred liabilities---Addition was cancelled by the First Appellate Authority on the ground that term "liabilities" had not at all been mentioned in S.13(1)(aa) of the Income Tax Ordinance, 1979---Validity---When liabilities were established to be bogus the natural inference would be that the assessee itself was the owner of money---Onus was on the assessee to explain the sources of acquisition of such money and if the sources were not explained properly, the addition could be made under S.13(1)(a) of the Income Tax Ordinance, 1979.

1992 PTD 1587 distinguished.

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

----Ss. 144, 148 & 13(1)(aa)---Power to call for information---Addition---Deferred liabilities---Addition without verification through action under Ss. 144/148 of the Income Tax Ordinance, 1979 in spite of request of assessee---Validity---Assessee had provided complete addresses of all the persons/parties out, of which thirty parties/persons confirmed the claim of the assessee---Assessing Officer should have provided another opportunity to the assessee and should have favourably considered the assessee's request for verification of amount through action under Ss. 144/148 of the Income Tax Ordinance, 1979---Assessing Officer showed unnecessary hurry in making the addition, which could not be justified in the circumstances---Addition was not correctly made by the Assessing Officer and its cancellation by the First Appellate Authority was correct---Departmental appeal was not accepted on this point by the Appellate Tribunal.

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

---Ss. 13(1)(aa) & 12(18)---Addition---Advances from customers---Additions of actual delivery of transacted goods in the subsequent period---Validity---Although addition could be validly made under S.13(1)(aa) of the Income Tax Ordinance, 1979 instead of S.12(18) of the Income Tax Ordinance, 1979, if the assessee had failed to furnish required evidence to the satisfaction of Assessing Officer about the sources of funds, but legal procedure was not properly followed for making the addition---Verification exercise was not conducted on scientific lines---Actual delivery of transacted goods was made in the subsequent period was also overlooked by the Assessing Officer---Assessing Officer did not bother to verify such fact from account books of the company---First Appellate Authority did not properly and judiciously appreciate the factual position because in the same set of circumstances he had cancelled the addition on account of "deferred liabilities" whereas addition under this head was set aside for reconsideration/re-examination---First Appellate Authority should not have remitted the issue back to Assessing Officer---Appellate Tribunal directed that addition should be deleted in the circumstances.

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

---Ss. 108, 139, 141 & 142---Income Tax Rules, 1982, Rr.53, 61A & 61---Penalty for failure to furnish return of total income and certain statements---Levy of initial penalty as well as for default from due date through single order---Assessee contended that imposition of entire penalty in one go was against the provisions of law because as a first step initial penalty had to be imposed through a written order and then for continuing penalty separate order had to be passed---Validity---Penalty could not be imposed because there was a defect and deficiency in the relevant law/rules and imposition of penalty in the presence of such defects/deficiencies was unlawful---Proper procedure was not followed by the Assessing Officer and he charged the entire amount of penalty through a single consolidated order whereas he was required to pass separate orders for initial penalty and continuing default---In the presence of such legal infirmities, penalty order was not legally maintainable--Penalty orders of both the authorities below were vacated and penalty order was cancelled by the Appellate Tribunal.

1999 PTD 1661 rel.

1998 PTD (Trib.) 3507; 1996 PTD 291; 2007 PTD (Trib.) 2319; 2007 PTD (Trib.) 2601 and 2003 PTD (Trib.) 346 ref.

Ch. Naeem ul Haq, A.R., for Appellant.

Muhammad Iqbal Ch. Vehniwal, L.A./D.R., for Respondent.

2009 P T D (Trib.) 113

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. Nos.203/LB and 204/LB of 2008, decided on 1st July, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62, 65 & 59A---Assessment on production of accounts, evidence etc.---Cancellation of assessment order passed under Ss.62/65 of the Income Tax Ordinance, 1979 on the grounds that assessments framed under Income Tax Ordinance, 1979 after enforcement of Income Tax Ordinance, 2001 were to be opened/rectified/modified under. the provisions of Income Tax Ordinance, 2001 and not under provisions of Income Tax Ordinance, 1979; that prescribed notices clearly showed that Taxation Officer ticked two different clauses which meant that Taxation Officer was not sure with regard to the fact that it was case of under assessment or of escaped assessment; that there was no assessment order in writing which may be rectified assessments were completed under S.59A of the Income Tax Ordinance, 1979 and that no order was passed before 30-6-2001 and 30-6-2002 as provided under S.59(4) of the Income Tax Ordinance, 1979---Order if any, passed on 31-1-2003 was nullity in law and superstructure built was to fall down for want of jurisdiction---Appellate Tribunal held that reasons given by the First Appellate Authority were in accordance with law and result of placing reliance on the decisions of Appellate Tribunal as well as that of superior Court---Order of First Appellate Authority was not interfered by the Appellate Tribunal and appeals of the Department were dismissed.

C.P. No. 702-L/2003 rel.

1997 PTD 47 and 2006 PTD (Trib.) 66 ref.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Siraj-ud-Din Khalid for Respondent.

2009 P T D (Trib.) 121

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Liaquat Ali Khan, Accountant Member

I.T.A. No. 1210/LB of 2006, decided on 26th July, 2008.

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

----S. 122(5A)---Amendment of assessment---Show-cause notice---Issuance of Show-cause notice was on presumption as Revising Authority out-rightly taken the Income Tax returns/statements documents as erroneous as well as prejudicial to the interest of revenue and confronted issues needing further investigation.

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

----S.122(5A)---Amendment of assessment---Erroneous and prejudicial to revenue---Scope---Taking as being erroneous and prejudicial to revenue should not be based on surmises and unsupported assertions.

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

----S.122 (5A)---Income Tax Ordinance (XXXI of 1979), S.66A---Amendment of assessment---Holding of inquiries---Contents of the provisions of S.122(5A) of the Income Tax Ordinance, 2001 did not empower the holding of inquiries, which was unlike the provisions of S.66A of the repealed Income Tax Ordinance, 1979.

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

----Ss. 29(1)(a)(i) & 122(5A)---Bad debts---Written off---Deletion of addition---Advance was made for down stream integration of business---On failure of that company to run project, some amount was recovered and balance irrecoverable amount was written off by the assessee---Amending Authority did not challenge the sustaining of losses by the said company and also the short/lesser amount recovered by the assessee---Show-cause notice was confined to the sole ground that the amount written off was previously not included in the taxpayer's income from business chargeable to tax---Amending Authority did not advert to the pleadings of the taxpayer wherein it was specifically explained that assessee had incurred trading loss which was rightly claimed as expenditure against the profit chargeable to tax under the law---Instead of appreciating explanations, Amending Authority enlarged the allegations and tried to make out a new case regarding the purpose of the advance and its justification---Such observations could not be justified on unsupported assertions---Order of adjudication, based on grounds which were not mentioned in the show-cause notice, was void---Department had totally failed to dislodge the sustaining of loss in the shape of short -recovery of the amount caused by failure to profitably run the project resultantly disposing of the same---Allowability of such irrecoverable amounts by bringing it within the scope of provisions of S. 29 (1)(a)(i) was totally misconceived--Order passed by the First Appellate Authority was confirmed by the Appellate Tribunal and departmental appeal failed on merits of the case.

1999 PTD 2851; 1999 PTD (Trib.) 1700; Shahid Hameed v. Income Tax Officer 1976 PTD 347=PLD 1976 Lah. 1626; CIT Karachi v. Shabir and Company 1966 SCC 260; Commissioner of Income Tax v. Sir S.M. Chitnavis (1932) 59 I.A. 291; 1982 PTD 20; (1966) 13 Tax 163 H.C. Lah.; 1967 SC 524; CIT Karachi v. Shabbir & Co. Kar. 1966 SCC 260; 1982 PTD 20; PLD 1985 SC 109; 1992 PTD 576 1976 PTD 437; PLD 1976 Lah. 1626; Gillanders Arbuthnot and Company v. Commissioner of Income Tax (Civil Reference No.7 of 1961 ref.

1987 SCMR 1840 rel.

(e) Income-Tax---

----Bad debts---Irrecoverable debt writing off and claiming as expenditures, in the course of business and incidental to business, was allowable as it was a trading loss.

C.I.T. Karachi v. Shabbir and Company Karachi (1966) SSC 260 and 1982 PTD 20 rel.

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

----Ss. 20(1), 29(1)(i)(a) & 122(5A)---Deductions in computing income chargeable under the head "Income from business"---Transaction in the shape of advance to other unit and thereafter claiming of loss was charged as expenditure caused by short recovery was duly governed by principle of "commercial expediency"---Revising authority misdirected itself by restricting the allowability to the extent of S.29(1)(i)(a) of the Income Tax Ordinance, 2001---Writing off irrecoverable amount was an allowable expenditure under S.20(1)of the Income Tax Ordinance, 2001---Clause (a) of subsection (1) of S. 29 of the Income Tax Ordinance, 2001 dealt with writing off such bad debts which were shown after making sales but clauses (b) and (c) subsequent to clause (a) in subsection (1) of S. 29 of the Income Tax Ordinance, 2001 were quite capable of allowing relief to the assessee because the debt had been actually written off in the accounts and there Were reasonable grounds for believing the debts were irrecoverable, which had never been disputed in the entire proceedings by the Department---Bad debts had rightly been allowed by the First Appellate Authority in circumstances.

1982 PTD 20 rel.

Ghazanfar Hussain, D.R. for Appellant.

Ashiq Hussain for Respondent.

2009 P T D (Trib.) 145

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T.As Nos. 706/LB and 707/LB of 2005, decided on 9th September, 2006.

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

----Ss. 87, 88 & 156(2)---Charge of additional tax for failure to pay advance tax---Levy of additional tax without formal order and confrontation-Set aside of such order by the First Appellate Authority---Validity---After recognition of the fact that no order was in existence, additional tax under Ss. 87 & 88 of the Income Tax Ordinance, 1979 could not be levied---Assessing Officer also committed flagrant violation of law when he proceeded to levy tax under Ss.87 & 88 of the Income Tax Ordinance, 1979 without confronting the assessee under S.156(2) of the Income Tax Ordinance, 1979---Since assessment was made in flagrant violation of law, firstly there was no formal order in the field, and secondly, the assessee was not confronted through issuance of notice under S. 156(2) of the Income Tax Ordinance, 1979---Non-issuance of requisite notice vitiated the whole proceedings---Appellate Tribunal vacated the order passed by the First Appellate Authority whereby he remanded the case of Assessing Officer and also cancelled the assessment finalized by the Assessing Officer.

(b) Income-tax---

----Remand of illegal order---Validity---Once the First Appellate Authority had come to the conclusion that assessment framed by the Assessing Officer was patently illegal, he had no legal justification to remand the case to Assessing Officer for assessment afresh---Power to remand should not be used in a routine manner, especially, to give an advantage to revenue to improve its case or to fill in the lacuna already crept in the assessment.

Irfan Ilyas, C.A. for Appellant.

Ghazanfar Ali, D.R. for Respondent.

2009 P T D (Trib.) 153

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Chaudhry Nazir Ahmad, Accountant Member

I.T.As Nos. 3591/LB to 3595/LB, 4460/LB to 4464/LB of 2003, decided on 22nd November, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss.52, 50(4), 86 & 144---S.R.O. No.368(I)/94 dated 30-6-1994---Liability of persons failing to deduct or pay tax---Deduction of tax at source---Capital less than 1.5 million---Issuance of notice under S.144 of the Income Tax Ordinance, 1979 instead of notice under S.52 of the Income Tax Ordinance, 1979 --Validity---First Appellate Authority instead of giving finding of legal issue as to whether issuance of notice under S. 144, of the Income Tax Ordinance, 1979 instead of notice under S. 52 of the Income Tax Ordinance, 1979, was legally tenable proceeded to set aside the case for de novo consideration---Setting aside of the case implicitly amounted to providing an opportunity to the Assessing Officer to make up his deficiencies which was not permissible in the eyes of law---First Appellate Authority erred in law while setting aside the case instead of annulling the same---Admittedly the capital of the assessee was less than 1.5 million for all the years under appeal, the assessee was not liable to deduct tax under S.50(4) of the Income Tax Ordinance, 1979 under the S.R.O. No.368(I)/94 dated 30-6-1994---Even otherwise, liability under S.52 of the Income Tax Ordinance, 1979 could not be levied without issuance of notice under S.52 of the Income Tax Ordinance, 1979---Assessing Officer was obliged to comply with such a pre-requisite, and failing to do so would render all proceedings conducted subsequent thereto null and void---Order of First Appellate Authority was vacated and assessments framed under Ss. 52/86 of the Income Tax Ordinance, 1979 were annulled by the Appellate Tribunal in circumstances.

2001 PTD (Trib.) 1480; 2002 PTD (Trib.) 1523 and 2000 PTD (Trib.) 2664 rel.

Shahbaz Butt for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

2009 P T D (Trib.) 173

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos.1262/LB to 1266/LB of 2007, decided on 1st September, 2008.

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

----S.221---General Clauses Act (X of 1897), S.21(6)---Rectification of mistake---Application for recall of assessment order---Rejection of---Filing of appeal against order of rejection of recall application moved under S.221 of the Income Tax Ordinance, 2001 read with S.21(6) of the General Clauses Act, 1897---Validity---First Appellate Authority had rightly admitted the appeals for hearing as the appeals had been filed on receipt of rejection order of recall application.

ITAT vide No. 5077/LB/2001; (1987) 56 Tax 130 and I.T.A. No.1266/LB of 2006 rel.

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

----Ss.122A & 122(5A)---Revision by the Commissioner---Jurisdiction---Correspondence between Additional Commissioner and the Commissioner of Income Tax---Suo motu order passed under S.122A of the Income Tax Ordinance, 2001 by the Commissioner of Income Tax was against the very spirit of provisions of the said section as stipulation to invoke jurisdiction under the said section was suo motu calling for record of any proceeding under the Income Tax Ordinance, 2001 or under the Income Tax Ordinance, 1979 in which an order had been passed by any Taxation Officer other than the Commissioner (Appeals) while in the present case exchange of correspondence between the Additional Commissioner and the Commissioner of Income Tax vividly and abundantly witnessed of first stressing and directing by the Commissioner to the Additional Commissioner to pass amendment order under S.122(5A) of the Income Tax Ordinance, 2001 and on refusal to do so by the Additional Commissioner by long drawn communication and requesting to the Commissioner to invoke the provisions of S.122A of the Income Tax Ordinance, 2001, the Commissioner of Income Tax cancelled the refund order passed under Ss. 99(3)/170 of the Income Tax Ordinance, 2001 through revisional order made under S.122A of the Income Tax Ordinance, 2001 which could not be termed as suo motu.

1993 SCMR 2071 and 1993 PTD 1629 rel.

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

----S.122A---Finance Act (I of 2003), preamble---Revision by Commissioner---Retrospective effect---Section 122A of the Income Tax Ordinance, 2001 was inserted by the Finance Act, 2003 which could not be operated retrospectively until and unless specifically provided to be so applied.

2008 PTD (Trib.) 1226 and (2007) 95 Tax 67 (Trib.) (sic.) rel.

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

----S.143-B---Statement regarding certain assessees---No bar to file return after filing statement---If assessee was not obliged to file statement under S.143-B of the Income Tax Ordinance, 1979 and even if he filed the same wrongly, he could furnish the return---No bar to file return even if statement was filed earlier.

2005 PTD 1607 rel.

2002 PTD (Trib.) 228; I.T.A. No.1883/KB of 1999-2000 and 2007 PTD (Trib.) 1680 ref.

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

----Ss.122A & 122(5A)---Revision by Commissioner---Order under S.122A of the Income Tax Ordinance, 2001 contained all the contents/intentions/ingredients of an amendment order under S.122(5A) of the Income Tax Ordinance, 2001---By merely writing and stating the same as an order under S.122A of the Income Tax Ordinance, 2001, did not make it a revisional order---For making a revision order under S.122A of the Income Tax Ordinance, 2001, it must be tailored according to the provisions and stipulations as mentioned in the said section.

Tax Forum-2007 (57) ref.

PLD 1976 Kar. 600 rel.

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

----Ss. 122(5) & 122(5A)---Revision by Commissioner---If the Commissioner of Income Tax intended to reduce the refund or create a liability, the provisions of the Income Tax Ordinance, 2001 did not bar him to proceed himself under S.122(5) or 122(5A) of the Income Tax Ordinance, 2001 as warranted by the facts of the case.

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

----Ss.122A & 122(5A)---Revision by Commissioner---Initiation of proceedings on the suggestion of Additional Commissioner of Income Tax by the Commissioner of Income Tax---Validity---Additional Commissioner was not justified to suspend/freeze the proceedings initiated under S.122(5A) of the Income Tax Ordinance, 2001 unattended which he was competent to do so and the Commissioner of Income Tax was not legally right in invoking the proceedings on the suggestion of Additional Commissioner of Income Tax instead of suo motu and passing the order under S.122A of the Income Tax Ordinance, 2001 which was entirely against the very spirit of the provisions contained in the said section---Order under S.122A of the Income Tax Ordinance, 2001 was not tenable in the eye of law in circumstances.

1965 PTD 321 and 1993 PTD 1629 SC Pak ref.

PLD 1975 SC 331 distinguished.

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

----Ss.127 & 122A---Appeal to Commissioner (Appeals)---Order passed by Commissioner under S.122A of the Income Tax Ordinance, 2001 having the effect of enhancing the assessment or reducing or refunding or otherwise increasing the liability of the assessee" due to unambiguous provisions of law is appealable before the Commissioner under S.127 of the Income Tax Ordinance, 2001.

1999 PTD 4061 and 2001 SCMR 777 rel.

Mrs. Sabiha Mujahid, D.R., Ghulam Kazim Hussain IAC (MN) and Akram Khan ITO (MN) for Appellants.

Niaz Ahmed for Respondent.

2009 P T D (Trib.) 211

[Income-tax Appellate Tribunal Pakistan]

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

M.A. (R) No.625/LB of 2005 in I.T.A. No.2393/LB of 2002, decided on 20th August, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A, 59(1) & 80(c)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Cancellation of assessment finalized under Self-Assessment Scheme being "erroneous" insofar as same was "prejudicial" to the interest of Revenue on the ground that assessee had not furnished wealth statement along with return of income----Subsequently, through corrigendum, assessee was confronted with the change that he had not furnished a wealth tax return along with return of income as the declared income of the assessee exceed Rs.200,000---Validity---Inspecting Additional Commissioner had failed to establish the "nexus" between filing of wealth tax return and the subsequent income tax proceedings undertaken and describing them as "erroneous" and "prejudicial" to the interest of revenue under S. 66A of the Income Tax Ordinance, 1979---Inspecting Additional Commissioner failed to "substantiate" as to what constituted the erroneous and prejudicial aspects of the assessee's case to justify recourse to S. 66A of the Income Tax Ordinance, 1979---Appellate Tribunal vacated the orders passed by the Inspecting Additional Commissioner under S. 66-A of the Income Tax Ordinance, 1979 and restored the order passed under S.59(1) of the Income Tax Ordinance, 1979 in the circumstances.

1990 PTD (Trib.) 524 and 2004 PTD (Trib.) 1029 ref.

Afzal Ahmad Ch. I.T.P. for the Appellant.

Ahmad Shuja Khan D.R. for the Respondent.

2009 P T D (Trib.) 216

[Income-tax Appellate Tribunal Pakistan]

Before Naseer Ahmad, Accountant Member

I.T.As. Nos.271/LB and 272/LB of 2008, decided on 15th August, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S.221(1A)---Income Tax Ordinance (XXXI of 1979), Ss. 107-AA & 80-D (1)---C.B.R. Circular 10 of 1960 dated 14-7-1960---Rectification of mistake---Assessments originally completed were rectified on the ground of allowing credit of tax deductions against the tax levied--Subsequently, assessee claimed tax credit under S. 107-AA of the Income Tax Ordinance, 1979 and requested for set off of the same against tax payable under S. 80-D of the Income Tax Ordinance, 1979---Rectification sought was granted by the Taxation Officer and consequently a further order was passed under S. 221 of the Income Tax Ordinance, 2001---Subsequent to passing such order, successor Taxation Officer, was of the view that assessee was illegally allowed set off and having an opinion different from his predecessor, invoked the provisions of S. 221 of the Income Tax Ordinance, 2001 and correct the stated illegality by passing a further order under S. 221 of the Income Tax Ordinance, 2001 reversing the allowed set off---Validity---Firstly, rectification had been made on the basis of change of opinion, secondly, the matter involved difference of interpretation, as in the opinion of predecessor the set off of tax credit was available against tax under S.80-D of the Income Tax Ordinance, 1979, while the successor had a different view; matter related to diversified interpretation of statutory provisions making the issue debatable and arguable and thirdly, First Appellate Authority having directed that set off of tax credit be allowed had hardly any room for the office of lower authorities to interfere with in view of the principle of merger---Action taken under S. 221 of the Income Tax Ordinance, 2001 was unjustified and unlawful and merited vacation---Basic action being illegal, whatsoever shall follow the same shall be unlawful and without jurisdiction---Question whether the tax credit was amenable to set off against tax under S.80-D of the Income Tax Ordinance, 1979 needed not to be discussed---Orders so passed were ordered to be vacated by the Appellate Tribunal being unlawful and without jurisdiction.

C.I.T. Companies-II, Karachi v. National Food Laboratories 1992 PTD 570; 2006 PTD 78; 1992 PTD 566 and 1992 PTD 932 rel.

Kasmir Edible Oil v. Federation 2005 PTD 1621; Federation v. Kashmir Edible Oil Ltd. 2006 SCMR 109; 2005 PTD 1316; C.I.T. v. Idrees Cloth House Lahore 2008 PTD 1420; Glaxo Laboratories's case 1992 PTD 566; 1992 PTD 932; Honda Shahrah-e-Faisal's case; Circular No.10 of 1960 and 1986 PTD 100 ref.

Shahbaz Butt for Appellant.

Dr. Muhammad Khan Awan, D.R., LTU, for Respondent.

2009 P T D (Trib.) 230

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos.1424/LB and 1269/LB of 2006, decided on 1st September, 2008.

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

----S. 12(19)---Income deemed to accrue or arise in Pakistan---Assessee, a leasing company---Lease rent---Addition---Taxation Officer on the one side had accepted the return filed on the basis of lease rentals received and on the other he made addition on account of accrual basis by rejecting receipts basis---Validity---First Appellate Authority had rightly deleted the addition, as the Taxation Officer had accepted the revised return to offer lease rentals on receipts basis and then had rejected the same which was contradictory itself.

I.T.A. Nos. 1237, 1238, 3014 and 3015/LB of 2001 rel.

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

----S.23(1)(v), Third Sched., R.1---Deduction---Assessee, a leasing company---Leased out assets---Extra depreciation allowance---Disallowance of extra shift allowance on the ground that assessee was asked to furnish certificates of leases regarding number of working days; failing which claim of extra shift allowance was disallowed---First Appellate Authority accepted that the certificates were furnished but the same were not authentic---Assessee contended that depreciation on assets leased out by the taxpayer being a leasing company, was admissible by deeming provisions of law and no certificates of shift working were required but the assessee had furnished all the details and the certificates---Validity---Depreciation allowance was admissible as deduction from total income under the provisions of S. 23 (1) (v) of the Income Tax Ordinance, 1979 which states that depreciation allowance shall be admissible as per Third Schedule to Income Tax Ordinance, 1979 which provided that depreciation will be allowed in respect of assets specified therein---Since leased assets on which extra depreciation allowance had been claimed remained leased out for the whole year, they were eligible for extra shift depreciation allowance---Orders of officers below were vacated and the Taxation Officer was directed by the Appellate Tribunal to allow the claim of extra depreciation allowance.

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

----Third Sched., R.8 (5)---Sale proceeds---Assessee, a leasing company---Loss on sale of leased assets---Disallowance---Assessing Officer rejected the claim on the ground that no detail in respect of loss claimed on sale of leased assets were enclosed with the reply despite the mentioning of the same and entire claim of loss on sale of leased assets was disallowed---Validity---Loss on sale of assets represented the amount computed by deducting written down value of assets from sale proceeds---Term "sales proceeds" had been defined in R.8(5) of the Third Schedule to the Income Tax Ordinance, 1979---Proviso to R.8(5) of the Third Schedule provided rules for computing sales proceeds in the case of assets given on lease---Once the law had specifically mentioned the criteria that for computing gain/loss on assets given on lease, there was no justification for ignoring these provisions and treating these transactions as normal and disallowing the loss on sale of assets---Written down value of assets represented their value appearing in the depreciation schedule whereas the residual value received was also computed from lease schedules---Taxation Officer had charged lease rentals against the assets disposed of up to their disposal, so, there was no justification to ignore that on completion of lease term, these assets had to be handed over to the concerned persons and sale proceeds thereof should be computed according to the specific legal provisions---Disposal of assets also appeared in the depreciation schedule and could be cross verified from there---Once the assessee had filed complete books of accounts and details of lease rentals accrued and lease rentals received to the Taxation Officer there was no justification to ignore lease which had completed their term---No justification for the disallowance in this respect existed---Order in question was vacated by the Appellate Tribunal and Taxation Officer was directed to allow the claim of the assessee.

(d) Income Tax---

----Ad hoc addition---Disallowance of vehicle running expenses, communication and legal and professional charges---Addition was made without pointing out any specific instance of substantiating allegations with evidence---Such type of ad hoc disallowances were unjustified.

2006 PTD 1019 and 2007 PTD 345 rel.

(e) Income Tax---

----Limitation---Assessment order was served on October 24, 2005 whereas the date of order mentioned on assessment order was 30-6-2005 which showed that the assessment order was served on the assessee after almost four months of the date of order---Assessee contended that such assessment was barred by time---Validity---Held, there was no merits in the contention of the assessee regarding the time limitation issue.

2005 PTD (Trib.) 960 disapproved.

Rai Talat Maqbool, D.R. for Appellant (I.T.A. No.1424/LB of 2006).

Rizwan Bashir, F.C.A. for Respondent (I.T.A. No.1424/LB of 2006).

Rizwan Bashir, F.C.A. for Appellant (I.T.A. No.1269/LB of 2006).

Rai Talat Maqbool, D.R. for Respondent (I.T.A. No.1269/LB of 2006).

2009 P T D (Trib.) 237

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

M.As. Nos.1021/LB to 1025/LB of 2006 in I.T.As. Nos. 6525/LB to 6529/LB of 2005, decided on 1st December, 2006.

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

----S.63---Best judgment assessment---Principle---Even where no material is produced by the respective parties, still the Assessing Authority has to make best judgment which is interpreted as fair assessment, meaning thereby, that Assessing Officer has no power to make assessment as a penalty or a higher amount than what, in his best judgment, as a fair act it should be.

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

----S.63---Best judgment assessment---Ex parte re-assessment ignoring the evidence presented in the first round of litigation---Validity---As per admission of the department, books of accounts along with all other relevant papers were submitted before the Assessing Officer, his observation while conducting re-assessment proceedings became not only irrelevant but against the facts of the case that no books of accounts had been produced---Since books of accounts were produced in first round of litigation, Assessing Officer was not justified to ignore the evidence available on record while making re-assessment---Mere absence of assessee did not absolve the Assessing Authority from the obligation of resorting to the evidence available with the Assessing Officer or, otherwise, to look into the history of the case or to confront the assessee with parallel cases to evolve reasonable basis---Evidence produced in first round of litigation was though available with the Assessing Officer yet he proceeded to act whimsically---Judgment made by the Assessing Officer under S. 63 of the Income Tax Ordinance, 1979 was not best judgment assessment at all as envisaged under the law.

1985 SCMR 786 and 1987 PTD 638 rel.

2002 82 Tax ?? ref.

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

----Ss.62 & 63---Assessment on production of accounts, evidence etc.---Best judgment assessment---Assessment record showed that notice under S. 62 of the Income Tax Ordinance, 1979 was never issued at any stage---No body could be condemned unheard---Incumbent and mandatory upon the Assessing Officer to evolve some basis and confront assessee with the same to reach at the just conclusion---Assessing Officer having failed to pass "best judgment assessment" Appellate Tribunal vacated the orders passed by the First Appellate Authority and annulled the assessments framed by the Assessing Officer.

2005 PTD 1967 rel.

Muhammad Akram Sh. For Appellant.

Ghazanfar Hussain, D.R. for Respondent.

2009 P T D (Trib.) 353

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmed, Accountant Member

I.T.A. No.1075/KB of 2005, decided on 10th September, 2008.

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

----Ss.80D, 12(19), 15 & 62---Income Tax Ordinance (XLIX of 2001), S.239---Minimum tax on income of certain persons---Assessment year 2001-02---Lease rental income---Assessee contended that Taxation - Officer had levied tax under S. 80D of the Income Tax Ordinance, 1979 without considering the fact that levy of tax under S.80D of the Income Tax Ordinance, 1979 was no more available in Ss.239(1) & 239(2) of the Income Tax Ordinance, 2001---Validity---For any income to be included in "total income" that income had to fall in any of the heads prescribed under S.15 of the Income Tax Ordinance, 1979, whereas S.80D of the Income Tax Ordinance, 1979 was a special deeming provision separate from computation of total income and tax payable on total income---Charging of tax under S.80D of the Income Tax Ordinance, 1979 after 1st July, 2002 was not justified in the eyes of law---Taxation Officer had passed the order without confronting the assessee and had made the order in accordance with the previous history of the case without considering the fact that the legal position due to the promulgation of the Income Tax Ordinance, 2001 had been changed and the decision for the previous years could not be made basis for the year under review---Order of First Appellate Authority to the extent of levy of tax under S.80D of the Income Tax Ordinance, 1979 was vacated and order passed by the Taxation Officer was annulled---Appeal filed by the assessee on the issue was allowed while the appeal filed on the remaining grounds was dismissed being not passed by the assessee.

(2001) 83 Tax 376; 1997 PTD 1555; PLD 1997 SC 582; 1993 PTD 69; 2006 PTD 2277; 2004 PTD 2479; 2005 PTD 2513; 2003 PTD 577; (1999) 80 Tax 241; 2001 PTD (Trib.) 2938; 2003 PTD (Trib.) 625; 1999 PTD (Trib.); 3892; 2001 PTD 678; 2001 PTD 2884; 2006 PTD (Trib.) 2325 and 2006 PTD (Trib.) 2060 ref.

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

----S.239--- Income Tax Ordinance (XXXI of 1979), S.80D---Savings---Provisions of Income Tax Ordinance, 1979, in so far as these relate to computation of total income and tax payable thereon, shall apply as if the Income Tax Ordinance, 2001 had not come into force and under subsection (2) of S.239 of the Income Tax Ordinance, 2001 the assessment referred to in sub-S. (1) of S.239 of the Income Tax Ordinance, 2001 shall be made by an Income Tax Authority which was competent into the Income Tax Ordinance, 2001 which made alt assessment in respect of a tax year ending on any date after the 30th day of June, 2002, and in accordance with the procedure specified in S.59, 59A, 61, 62 or 63, as the case may be, of the Income Tax Ordinance, 1979---However provision of S.80D of the Income Tax Ordinance, 1979 had not been mentioned meaning thereby that the statute had saved provisions relating to "computation of total income and tax payable there on" only.

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

----Ss. 15 & 80D---Head of income---Computation of taxable income was covered in the Income Tax Ordinance, 1979 in various sections like Chapter IV starting from S.15 of Income Tax Ordinance, 1979 and other various sections other than S.80D of the Income Tax Ordinance, 1979 and computation of tax payable on total income was covered under First' Schedule to the Income Tax Ordinance, 1979.

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

----S.2(43)---"Tax"---Definition---Term "tax" had been defined under S.2(43) of the Income Tax Ordinance, 1979, wherein the income tax, super tax, surcharge and additional tax chargeable or payable under the Income Tax Ordinance, 1979 and also included penalty, fee or other charge or any sum of amount leviable or payable under the Income Tax Ordinance, 1979.

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

----S.239---Saving---Tax---All types of taxes had not been saved in S.239 of the Income Tax Ordinance, 2001; only the tax payable on total income had been saved in S.239 of the Income Tax Ordinance, 2001.

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

----Ss. 2 (44), 11 & 80D---"Total Income"---Meanings---Total income as defined in S.2 (44) of the Income Tax Ordinance, 1979 means the total amount of income referred to in S.11 of the Income Tax Ordinance, 1979 computed in the manner laid down in the Income Tax Ordinance, 1979 and includes any income which under any provisions of the Income Tax Ordinance, 1979 was to be included in the total income of an assessee---Definition covered income' referred to in S.11 of the Income Tax Ordinance, 1979 or anyincome' which under any provision of Income Tax Ordinance, 1979 was to be included in the total income'---Receipts deemed as income under S.80D of the Income Tax Ordinance, 1979 were not included intotal income'.

Rizwan Bashir F.C.A. for Appellant.

Gohar Ali, D.R. for Respondent.

2009 P T D (Trib.) 361

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T.A. No.1161/LB of 2008, decided on 13th December, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss.21(c), 158, 122(5A), 122(9) & Chap. X, Part-V, Division III---Deductions not allowed---Advertisement payable expenses---Assessee contended that expenditure incurred had yet to be paid as the amount had been appearing as payable in the balance sheet and on payment of such amount tax would be deducted---Contention, of the assessee was turned down and proposed assessment was made by adding back the advertisement expenses in the declared income which was upheld by the First Appellate Authority---Validity---Clause (b) of S.158 of the Income Tax Ordinance, 2001 specifically expressed that tax deduction was to be made only when amount was actually paid-Section 158(b) being part of Division and Chapter relating to tax deduction, had to be, followed for determining the applicability of S.21(c) of the Income Tax Ordinance, 2001---Situation had arisen by simply following the provisions of S.21(c) of the Income Tax Ordinance, 2001, by ignoring its later part wherein it had been explained that the person was required to deduct the tax under Division-III of Part-V of Chapter-X i.e. inclusive of the provisions of S.158 of the Income Tax Ordinance, 2001---Tax deduction had to be made by following entirely what was given in Division-III of Part-V of Chapter-X and not by ignoring S.158 of the Income Tax Ordinance,2001 which was a part of it---Section.158 of the Income Tax Ordinance, 2001 being part of Chapter-X which had to govern the time of deductibility of tax i.e. only when the amount was actually paid that tax would be deducted---Proceedings had been undertaken by not taking into consideration the exactly applicable provisions of section 158 of the Income Tax Ordinance, 2001 which could not be held as legally proper--Whole of the Ordinance was to be taken into consideration and not the provisions in piecemeal---Law in its entirety was to be applied---In the Income Tax Ordinance, 2001 except the deduction under S. 151 of the Income Tax Ordinance, 2001, it. was only on the amount when actually paid that tax was to be deducted---Disallowance was illegal being against the express provision of law---Return treated to be assessment order as erroneous had lost the basis---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal as there was nothing as erroneous and prejudicial to the interest of Revenue order accordingly.

Asif Hashmi and Mehmoob Rabbani, I.T.P. for Appellant.

Dr. Malik M. Awan, D.R. for Respondent.

2009 P T D (Trib.) 377

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T.A. No.1033/KB of 2008, decided on 3rd December, 2008.

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

----Ss.122(1), 177 & 120---Amendment of assessment---Addition in sales by reliance on audit report of Sales Tax Department---Assessee contended that reliance by the Taxation Officer for the purpose of addition in sales on the basis of sales tax audit was in no way to constitute a definite information as the, matter had already been decided in favour of the assessee and as the Taxation Officer had made the addition in sales placing reliance on the Sales Tax Department which had already been reversed, and there was no basis for the addition made by the Taxation Officer--:Validity---Taxation Officer admittedly had made the addition on the basis of the finding of Excise Department which had already been held not to be legal, logical and tenable---If the very foundation of action was illegal, the whole superstructure built upon it could not validly and legally stand---Even otherwise, chart showing the year-wise details of sales which showed substantial increase for the year as compared to the previous assessment year when the sales had always been accepted by the Department---No justification was found for the addition in sales---Order of First Appeal Authority was vacated and the Taxation Officer was directed to accept the sales declared by the assessee.

1991 PTD 658 rel.

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

----Third Sched.---Depreciation---Disallowance of---Assessee contended that addition during the previous year on account of plant and machinery was made and the cost of machinery was partly charged in the year 2003 and assessment year 2002-03---Initial deprecation for the tax year 2003 was restricted to amount capitalized on plant and machinery for the year 2003 but the Taxation Officer had disallowed the claim of deprecation without any justification---Department contended that plant and machinery were added in the previous year and no claim in this respect was made---Initial depreciation on the same basis could not be allowed in the. current year---Validity---No interference was made by the Appellate Tribunal in the order or First Appellate Authority in respect of disallowing the claim of initial deprecation on plant and machinery as the First Appellate Authority had rightly upheld the treatment meted out by the Taxation Officer and the observations of the Taxation Officer while disallowing the claim were well founded and legally valid.

Zafar Iqbal, F.C.A. for Appellant.

Dr. Malik Muhammad Khan Awan, D.R. for Respondent.

2009 P T D (Trib.) 383

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T.As. Nos.6477/KB to 6481, 6557/LB to 6561/LB of 2004, decided on 22nd November, 2008.

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

----Ss.56 & 155---Notice for furnishing return of total income---Issuance of single notice for five years---Cause of prejudice---Department contended that by issuance of single notice no prejudice had been caused to the assessee and notice and the proceedings were proper under the provisions of S. 56 of the Income Tax Ordinance, 1979---Validity---Basis of prejudice and the prejudice which had been caused both had been expressed by the Appellate Tribunal in a reported judgment 2005 PTD (Trib.) 234 by making us understand firstly that for each year separate return was to be filed which was to be again assessed as per each year and on the basis of each year, income was to be assessed, that separate tax demand was to be created---Assessee was required to explain 'each year's income separately; it had become clear that single notice had caused a prejudice and S.155 of the Income Tax Ordinance, 1979 had duly referred to the situation where no prejudice was caused---Appellate Tribunal had thus established that issuance of single combined notice had caused prejudice---Word "notice" and the words "assessment year" appearing in S.56 of the Income Tax Ordinance, 1979 meant only the singular and not the plural, because in this very section reading a singular as plural would not be appropriate.

2006 PTD (Trib.) 1862 rel.

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

----S.56---Notice for furnishing return of total income---Objection on the point of issuance of single combined notice under S.56 of the Income Tax 'Ordinance, 1979 after becoming a party by getting completed the assessment proceedings for each independent year---Validity---Assessee in response to a single combined notice under S.56 of the Income Tax Ordinance, 1979 filed returns for each year and had become a party to the proceedings for each year before the Assessing Officer---Requisite details had also been filed for each year and in such a situation no prejudice had been caused---Appellate Tribunal disapproved the issuance of single combined notice but with the participation by the assessee in the assessment proceedings the lacuna had disappeared---Assessee had waived the right to agitate the same---Objection of the assessee in the circumstances was rejected being not tenable and the assessment on the issuance of combined notice was declared to be in order---After becoming a party by getting completed the assessment proceedings for each independent year then objecting on the point of issuance of single combined notice under S. 56 of the Income Tax Ordinance, 1979 would be just a hypertechnical objection because such contention could no longer be justifiable both factually and legally---Assessee had duly submitted details in respect of each year which had been discussed separately and separate tax liability had been created---Little justification thus was left to follow the earlier findings of the appellate Tribunal on the issue in circumstances.

2005 PTD (Trib.) 234 distinguished.

2005 PTD (Trib.) 234; 2006 PTD (Trib.) 1862; (1971) 82 ITR 821; 1995 PTD (Trib.) 1100; PTCL 1996 CL 1(sic); 1986 PTD Trib 314; 1990 PTD 1; 1999 PTD 4037; 1990 PTD 389; 2002 CLD 264 and PLD 1963 Kar 551 ref.

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Gift in kind---Wife of the assessee purchased land and got registered in the. name of assessee---Wife of the assessee made payment directly to the seller and it was not routed through assessee---Addition in the hands of assessee---Deletion of such addition---Validity---No dispute was about payment of purchase consideration through cross cheque by wife of the assessee---One could say that wife of the assessee purchased land, gifted the same to her husband/assessee which meant that the gift was made in kind which did not fall under purview of S. 12 (18) of the Income Tax Ordinance, 1979---Addition was deleted by the First Appellate Authority and Appellate Tribunal maintained such deleting of addition under S.12(18) of the Income Tax Ordinance, 1979 in circumstances.

Shahid Jamil, L.A. for Appellant (in I.T.As. Nos.6477/LB to 6481/LB of 2004).

Siraj-ud-Din Khalid for Respondent (in I.T.As. Nos.6477/LB to 6481/LB of 2004).

Siraj-ud-Din Khalid for Appellant (in I.T.As. Nos.6557/LB to 6561/LB of 2004).

Shahid Jamil, L.A. for Respondent (in I.T.As. Nos.6557/LB to 6561/LB of 2004).

2009 P T D (Trib.) 405

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmad, Chairperson, Ehsan ur Rehman, Jawaid Masood Tahir Bhatti, Judicial Members, Naseer Ahmad and Mazhar Farooq Shirazi, Accountant Members

I.T.As. Nos.265/KB, 414/KB, 1070/KB and 1071 of 2005, decided on 24th May, 2008.

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

----Second Sched., Part-1, Cl. 102E & S.23---Modaraba Companies and Modaraba (Floatation and Control) Ordinance (XXXI of 1980) Ss.14, 15 & 37---Modaraba Companies and Modaraba Rules, 1981, Rr.9 & 18---Banking Companies Ordinance (LVII of 1962) Ss. 91A & 35---State Bank of Pakistan Act (XXXIII of 1956), Ss. 46B & 54A---State Bank of Pakistan Circular No.13 of 1984---C.B.R. Circular Letter No. I.T.JI. 1(22)/81 dated 26-5-1988---C.B.R. Circular Letter C. No.4(78) TP-I/90 dated 11-7-1991---C.B.R. Circular No.24 of 1992 dated 30-7-1992---NBFI Circular No.1 dated 5-12-1991---Exemption---Modaraba---Claim of exemption was rejected on the grounds that assessee was earning interest by keeping the surplus funds as Bank deposits and charges the provisions of bad debts as expenditure which was not admissible---By making such add back, the distribution of profits fell short of distribution of 90% of the profits as profit in the books had incorrectly been worked out by charging the provisions for bad debts---Validity---Exemption under Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979 shall be granted on the basis of accounts as required under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980---Interest earning on keeping the surplus funds was the mark-up in the present banking system which was being acknowledged---Taking the mark-up earned as interest was not proper, even otherwise keeping the surplus funds in the Bank deposits was not in contravention with the Modaraba Ordinance and rules framed thereunder---When earning mark-up by depositing the surplus funds was in accordance with the Modaraba Rules and the Registrar of Modaraba Companies as well as the Religious Board functioning under the Modaraba Ordinance had not objected to it then the department was not competent to assume the role of Authority under the Modaraba Ordinance and Rules---Admissibility of provisions of bad debts as explained under S.23 of the Income Tax Ordinance, 1979 for framing the assessment could not be made as expenditure and also under the corresponding section of the Income Tax Ordinance, 2001 but it was allowable under the Modaraba Ordinance as well as the Rules framed thereunder and it could not be highlighted under S.23 of the Income Tax Ordinance, 1979 as a debatable issue---Net distribution of 90% profit shall be on the basis of accounts prepared as per Modaraba Ordinance and rules thereunder keeping in view the language of Preamble of Part-I of the Second Schedule to the Income Tax Ordinance, 1979 and upon fulfilment of preconditions as laid down in Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979, the exemption was to be allowed---When no violation in respect of presentation and preparation of accounts as per Modaraba Ordinance and Rules had been noticed or established by the Department, then the assessees were eligible for exemption under Cl.102E of Part-I of the Second Schedule to the Income Tax Ordinance, 1979.

Metal Box Company of India Ltd. v. Their Workmen 1969 ITR 53 SC; 2003 PTD 589; 1966 PTD 664; 43 Tax 18 = PLD 1981 SC 85; 2003 PTD 2023; 2002 PTD 2112; 2006 PTD 1709; 2006 PTD 3563; 2004 PTD 2577; Tax 1995 PTD 1128; PLD 2002 SC 800; PLD 2000 SC 225 and I.T.A. No.82 of 2004 ref.

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

----Second Sched., Part-1, Cl.102E---Exemption---Violation of objects of Modarabas---Jurisdiction---Registrar of Modaraba Companies was competent to grant registration as well as on noticing violation of objects thereof could proceed for cancellation of the same---Law pertaining to Modaraba Companies and Modarabas deals comprehensively with functions and day to day working and was vested with quite sufficient powers to deal with any contravention with law---Modaraba Companies and Modarabas after being allowed to function then after carrying on their business activities finally at the end of each income year were required to place the same in the form of the income tax return before Assessing Officer---Duties of Assessing Officer start from here if it was claimed for exemption then Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979 would come into play for granting of exemption---Assessing Officer could grant or refuse the claim of exemption by following what was given in Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979.

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

----Second Sched. Part-1, Cl. 102E---Exemption---Exclusive from exemption was only to the extent of income from trading activity in the hands of Modaraba.

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

----Second Sched., Part-1, Cl.102E, proviso---Exemption---First proviso to Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979 had laid down that 90% of the total profits for the year after deduction of transfer of the amount to mandatory reserves shall be distributed.

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

----Second Sched., Part-1, Cl.102E, proviso---Exemption---Word "said Ordinance" means the Modaraba Companies and Modarabas (Floatation and Control) Ordinance, 1980 as specified in Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979, for granting exemption to Modaraba Companies under Income Tax Ordinance, 1979.

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

----Second Sched., Part-I, Cl.102E, proviso---Exemption---Basis of working out profit for allowing exemption---For a claim of exemption under Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979, the pre-requirement was preparation, finalization and presentation of accounts of Modarabas should be as laid down in Modaraba Ordinance---Total profits were to be worked out as prescribed in Modaraba Ordinance and 90% of this total profit would be the basis of allowing exemption---No where, the question of total assessed profits as per Income Tax Ordinance, 1979 had arisen while determining the claim for exemption under Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979---90% of total profits should have been arrived at as per provisions of Modaraba Ordinance or the Rules made thereunder---When the presentation of the accounts was as per provisions of Modaraba Ordinance, there was hardly any justification of viewing this from the view point of the assessed/assessable income under Income Tax Ordinance, 1979 which had altogether a different domain and connotation---For seeking a claim for exemption under Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979, in respect of any income other than the income from trading activity, the first proviso had laid down that the reflection of figures should be as governed by the Modaraba Ordinance---In second proviso, the determinability of distribution of 90% profits, distribution of profits through bonus certificates or shares to the certificate-holders was not taken into account---Second proviso was in continuation of First proviso.

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

----Second Sched., Part-1, Cl.102E---Exemption---For scrutinizing the claim of exemption under Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979, the Assessing Officer was bound to proceed on the basis of accounts prepared under the provisions of Modaraba Ordinance which was to be followed to determining the 90% of the profits---Profits and loss account which had been drawn in compliance to Rules and Procedure given in Modaraba Ordinance were unquestionable by the Assessing Officer to the extent of grant of exemption---When was the 90% of the profit, it should not be gathered by applying the sections relevant for working out the taxable/assessable income under the Income Tax Ordinance, 1979---Provisions of admissibility or inadmissibility of expenditure of arriving at the profit for the purpose of exemption by the Assessing Officer would not come into play as per Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979---Assessing Officer totally failed to point out that the accounts and determining of profits were not in conformity with the provisions of Modaraba Ordinance and Rules---Assessing Officer could not stretch the provisions of Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979 in a manner that income which, as had been arrived at by applying the provisions of Income Tax Ordinance, 1979 would be governing the claim of exemption---Total profits determined as per prescribed provisions of Modaraba Ordinance and the rules made thereunder was the only yardstick for allowing the exemption---Only on deviation from the provisions of Modaraba Ordinance and Rules made thereunder that claim for exemption could be refused by properly confronting same to the assessee.

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

----Second Sched., Part-1, Cl.102E-Exemption-Bad debts---Provisions for bad debts were a prescribed deduction as specified in Modaraba Ordinance in determining the 90% of the profit of distribution.

Messrs Grindlays Bank PLC, Karachi v. ACIT bearing I.T.A. No.565 of 2002 rel.

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

----Second Sched., Part-1, Cl.102E---Exemption---Jurisdiction---Contention that any activity was not in accordance with the conditions as laid down in the Modaraba Ordinance, it was the duty of the Registrar of Modaraba Companies and none else to see.

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

----Second Sched. Part-1, Cl.102E---Exemption---Earning of interest as un-Islamic---Jurisdiction---Exercising of authority on the question of earning of interest as un-Islamic was not within the competency of the Taxation Officer/Assessing Officer---Such act of the Assessing Officer was ultra vires of its power which were of no legal consequence.

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

----Second Sched., Part-1, Cl.102E---Exemption---Trading activity---Income from trading activity could be charged to tax under normal taxation system but refusing to grant the exemption for any income which fell under the Modaraba Ordinance, no exception could be drawn where nothing contrary to the provisions of Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979 could be found by the Assessing Officer.

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

----Second Sched., Part-1, Cl.102E---Exemption---Add backs---Determining 90% profit by taking into consideration the add backs under the Income Tax Ordinance, 1979 was an unending phenomena---Passing on 90% profit on this way was practically not possible that was why in Cl.102E of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979, the entire yardstick was the provisions and rules of Modaraba Ordinance.

Jawaid Farooqi and Shahid Jamil Khan, L.As. and Farrukh Ansari, D.R. for Appellant.

Irfan Saadat and Hassan Naeem, Muhammad Arshad and Saleem Siddique, A.C.As./A.Rs. for Respondent.

2009 P T D (Trib.) 521

[Income-tax Appellate Tribunal. Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmed, Accountant Member

I.T.As. Nos.696/KB and 697/KB of 2008, decided on 16th December, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 221, 2(36) & 122---Rectification of mistake---Scope---"Desk Audit" of return revealed that assessee had sustained a loss and minimum tax required under S.113 of the Income Tax Ordinance, 1979 had not been paid on the plea of being non-profit organization---Record further revealed that Commissioner's approval for declaring the organization as a non-profit organization under S.2(36) of the Income Tax Ordinance, 1979 had never been accorded to the assessee---Such discrepancies were treated as a mistake being apparent from record requiring rectification---Validity---Taxation Officer had stretched the scope of S.221 of the Income Tax Ordinance, 2001 to a great extent but under S.221 of the Income Tax Ordinance, 2001, the Taxation Officer may rectify the order if there was any mistake apparent from record---Apparently there was no mistake as the Taxation Officer himself had mentioned that discrepancies in the returns had been found after `Desk Audit' of the taxpayer's return and after the scrutiny of record---Application of S.221 of the Income Tax Ordinance, 2001 was not justified and the Department, if required, may amend the already completed assessment by invoking S.122 of the Income Tax Ordinance, 2001 or under any other provision of law applicable---First Appellate Authority upheld the treatment meted out by the Taxation Office with the observation that assessment had applied for rectification of order which was not mentioned in the assessment order---Order of First Appellate Authority was vacated and orders passed by the Taxation Officer under S.221 of the Income Tax Ordinance, 1979 were annulled by the Appellate Tribunal.

Jawaid Khurram for Appellant.

Gauhar Ali, D.R. for Respondent.

2009 P T D (Trib.) 526

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Jawaid Masood Tahir Bhatti, Judicial Member and Shahid Azam Khan, Accountant Member

I.T.A. No.116/KB of 2006, decided on 28th April, 2007.

Per Shahid Azam Khan, Accountant Member [Minority view]

Income Tax Ordinance (XXXI of 1979)---

----S.12(18)--/Finance Act (III of 1998), Preamble---C.B.R. Circular No.11 of 1998, dated 25-7-1998---Addition---Deposit for share---Addition was made on account of amounts received by the assessee as loans and deposits for shares from Directors---Validity---Term "share deposit money" and "share advance money" clearly showed that the word deposit' meant the same asadvance' and was within the scope of S.12(18) of the Income Tax Ordinance, 1979 as it stood after the amendment in 1998---Assessee had not denied the receipt of loans from Directors and had also not proved that both amounts added under S.12(18) of the Income Tax Ordinance, 1979 were received through banking channels as had been provided in S.12(18) of the Income Tax Ordinance, 1979---Additions were confirmed by the Appellate Tribunal in circumstances.

2003 PTD 1527 and 2006 PTD 386 not applicable.

2006 PTD 386 rel.

Per Khawaja Farooq Saeed, Chairperson disagreeing with Shahid Azam Khan, Accountant Member

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

----S.12(18)---Sale of Goods Act, (III of 1930), Preamble---Addition---'Share deposit money'---'Loan'---Meaning---'Loan' means the amount which is to be returned in the same form while the `share deposit money' is not returnable in the same form in which it has been deposited---Buyer is to receive the shares against the share deposit money which was a trading transaction under Sale of Goods Act, 1930.

(b) Income Tax---

----Regular charging provisions---Deemed income provisions---Exemption granting provisions---Principles of interpretation with respect to the regular charging provisions, deemed income provisions and exemption granting provisions are different---In deemed income provisions the department is under a legal obligation to be very sure about the nature of transaction as it is not to enhance the power of the department so that they may start showing their muscles to the tax payers---In such like situations even an iota of doubt is to go to favour the tax payers---In deemed income provisions the legislature has declared certain unexplained investments expenditure or existence of cash to be as income---Such is in total disregard and deviation to the standard and the settled definitions of 'income'---Purpose behind such a provision is always to create a check on concealment of income which, in its nature, becomes a penal charge; in such a situation the purpose of the legislation becomes the prime factor in its interpretation.

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

----S. 12(18)---Sale of Goods Act (III of 1930), Preamble--Finance Act (III of 1998), Preamble---C.B.R. Circular No. 11 of 1998, dated 25-7-1998---Addition---Share deposit money---Transaction of salt of share was, a contract under Sale of Goods Act, 1930 on which provision of S.12(18) of the Income Tax Ordinance, 1979 did not attract being for the purpose of curbing fictitious loans and fictitious advances---Even after addition of the word "advance" the share deposit money remained a trading transaction---Provision of S.12(18) of the Income Tax Ordinance, 1979 were not applicable therein.

1973 PTD 375 rel.

Per Jawaid Masood Tahir Bhatti, agreeing with Khawaja Farooq Saeed, Chairperson

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

----S. 12(18)---Sale of Goods Act (III of 1930), Preamble---Finance Act (III of 1998), Preamble---C.B.R. Circular No.11 of 1998, dated 25-7-1998---Addition---Share deposit money---Transaction of share was a contract under Sale of Goods Act, 1930 on which provisions of S.12(18) of the Income Tax Ordinance, 1979 did not attract being for the purpose of curbing fictitious loans and fictitious advances and even after addition of the word "advance" the share deposit money remained a trading transaction and the provisions of S.12(18) of the Income Tax Ordinance, 1979 were not applicable thereon.

Faisal Nini, FCA for Appellant.

Manzoor Ahmed Memon, D.R. for Respondent.

2009 P T D (Trib.) 543

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.As. Nos.207/IB to 210/IB, 121/IB to 126/IB and 360/IB to 363/IB of 2008, decided on 20th November, 2008.

(a) Income Tax---

----"Local Authority"---Definition and characteristics---Authority which is entrusted by the Government with a `local fund' shall be considered as a Local Authority if it has its own juristic personality distinct from its member; if within its own local area, exercises considerable powers of local self-government; chalks out its schemes for the development of a local area under its control and provides civic amenities for the inhabitants other relevant area; if prepares its own annual budget for submission to the Provincial Government; exercises its powers within a limited territory included in a Province; exercises powers which belong to the Province but, which by statute, are delegated to the local authority; has powers of imposing taxes; and maintains/administers a local fund.

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

----Ss.49(4) & 66-A---Income Tax Ordinance (XXXI of 1979), Second Sched: Part-I, Cl.(88)---Pakistan Telecommunication (Re-Organization) Act (XVII of 1996), Ss. 3(1), 19 & 16---Local Authorities Loan Act (IX of 1914)---General Clauses Act (X of 1897), S. 3(31)---Finance Act (XXII of 1997), S.10---Finance Act (IV of 2007), Preamble---Exemption---Local Authority---Regulatory Authority---Pakistan Tele­communication Authority---Thal Development Authority---Distinction between and status thereof---Pakistan Telecommunication Authority Act, 1996 did not contain the like of S.2 of Thal Development Act, 1949---Pakistan Telecommunication Authority did not exercise, within its own local area, the considerable powers of local self-government, which were hallmark of Thal Development Authority and a common feature of all local authorities---Pakistan Telecommunication Authority, unlike the Thal Development Authority, was entrusted with the powers to chalk out its schemes for the development of a local area under its control and provide civic amenities to the inhabitants of the area, which was a common feature of all local authorities---Pakistan Telecommunication Authority did not have sanction of the Parliament to levy taxes in its own local area---Thal Development Authority exercised its powers [which belonged to the Province but, which by statute, were delegated to it], within a limited territory included in a Province, but this feature was lacking in case of the Pakistan Telecommunication Authority---Thal Development Authority maintained/administered a local fund', whereas the Pakistan Telecommunication Authority maintainsPakistan Telecommunication Authority Fund' which was quite different in its nature/composition from a local fund'---Unlike Pakistan Tele­communication Authority, in case of alocal authority' there was no concept if delegation of powers of the authority either to its Administrator or any of the subordinate officers---Pakistan Tele­communication Authority was not a local authority' as it was clear from S.19 of the Pakistan Telecommunication Authority Act, 1996, which provided it exemption from taxation---If the legislature had the intention to grant it the status of alocal authority', there was no need of such provision because income of a local authority' was otherwise exempt from taxation---Inherent features of Pakistan Telecommunication Authority were not on all fours with those of the Thal Development Authority---Pakistan Telecommunication Authority was aregulatory authority' and not a local authority' and also a statutory entity, established as a regulatory authority to streamline the telecom sector, its composition procedures and functions were not likening to alocal authority'.

Chief Secretary, Government of Punjab v. Commissioner of Income Tax 1976 PTD 56 distinguished.

Deputy Managing Director, National Bank of Pakistan and 3 others v. Atta-ul-Haq PLD 1965 SC 201; 2005 PTD 147; 2000 PTD 280; 61 Tax 30; 7 Tax 153; PLD 1977 Lah. 292; 1992 SCMR 1652; PLD 1983 Lah. 522; PLD 1966 Pesh. 89; Rostom Ali v. Chairman, EPIDCE PLD 1964 Dac. 721; PLC 1964 (Pak.) 511; DLR 1964 Dac. 651; Punjab Co-op. Union v. Government of Punjab Excise and Taxation Deptt. PLD 1983 Lah.522 and 1981 PTD 66 ref.

Salahuddin and two others v. Frontier Sugar Mills & Distillery Ltd. PLD 1975 SC 17 and CIT, Muzaffarabad v. Altaf Ahmad Mir AVP, NBP RHG 2001 PTD 1538 rel.

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

----S.80(2)(b)(ii)---Income Tax Ordinance (XXXI of 1979), S.2 (16)---"Person"---Pakistan Telecommunication Authority---Status of---Bodies created' under an Act of legislature fell within the definition of a "company"---Section 2(16) of the Income Tax Ordinance, 1979, provided that a body corporate formed by or under any law for the time being in force was a "company"---Section 80(2)(b)(ii) of the Income Tax Ordinance, 2001 also stipulates that a body corporate formed by or under any law in force in Pakistan is a "company"---As the control and operation of Pakistan Telecommunication Authority were held by the Government of Pakistan, it fell within the definition of "Public Limited Company"---Revenue had rightly designated the Pakistan Telecommunication Authority as a body corporate' with the status of apublic company'.

(2001) 83 Tax 3 rel.

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

----Second Sched., Part-1, Cl.(88)---Income Tax Ordinance (XLIX of 2001), S.49(4)---Constitution of Pakistan (1973), Art.165-A---Finance Act (IV of 2007), Preamble---Pakistan Telecommunication Authority---Taxation of---Assessee contended that legislature did not exercise the powers of imposition of tax under Art.165-A of the Constitution until the promulgation of the Finance Act, 2007---Validity---Legislature exercised its powers of taxation when exemption was granted to Pakistan Tele­communication Authority vide S.19 of the Pakistan Telecommunication Authority Act, 1996---Legislature again exercised its powers of taxation when the said section was omitted i.e. on 1-7-1997 and income of Pakistan Telecommunication Authority became taxable---Powers under Article 165-A of the Constitution were exercised by the Parliament long before the promulgation of Finance Act, 2007.

2006 PTD (Trib.) 2154; 2007 PTD (Trib.) 830; 2003 PTD 52; 2007 PTD (Trib.) 1226; 2005 PTD 2525; 2006 PTD 734 and 2008 PTD 1420 ref.

1996 PTD 489; Maxwell- in his Interpretation of Statutes, 12th Edition, at page 224 and PLD 1977 Lah. 292 rel.

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

----S.49(4)---Constitution of Pakistan, (1973) Art.165-A---Federal and Provincial Government, and local authority income----Retrospective effect of the amendment---Amendment had neither deprived any entity of its vested right nor had it imposed new obligations---Income of various statutory bodies enumerated in the newly inserted subsection (4) of S.49 of the Income Tax Ordinance, 2001 was taxable, and remained so thereafter, regardless of the ultimate destination of such income as laid down in Art.165-A of the Constitution---Such were machinery provisions which were intended to ensure proper application of law rather than creating any substantive liability against the taxpayer and would apply retrospectively.

1996 PTD 489 and PLD 1977 Lah. 292 rel.

2000 PTD 280; 2000 MLD 357; Canadian Eagle Oil Co. Ltd. v. Kind (27 TC 205) and 1991 PTD 999 = 1991 SCMR 2374 ref.

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

----Second Sched., Part-1, Cl.(88)---Income Tax Ordinance, (XLIX of 2001), S.49---Exemption---Income of Pakistan Telecommunication Authority was not exempt either under Cl.(88) of Part-1 of Second Schedule to Income Tax Ordinance, 1979, or S.49 of the Income Tax Ordinance, 2001 as the claim of exemption on the basis of diversion of income through overriding title had no merit.

I.T.As. Nos.39, 40/IB of 1992-93 and 110, 111/IB of 1997-98 rel.

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

----S.66-A---Income Tax Ordinance, (XLIX of 2001), S.218---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Limitation---Assessee contended that order was barred by limitation because it was not served in accordance with the provisions of S.218 of the Income Tax Ordinance, 2001; that order was actually collected by the assessee on April 7, 2008 and the appeal was within time and that order should have been properly served before initiating consequential proceedings and the limitation. starts from the date when the order was actually served on the taxpayer---Validity---Order under S.66-A of the Income Tax Ordinance, 1979 was not only passed within the period of limitation, but also validly served on the same date---Contention regarding violation of the provisions of S.218 of the Income Tax Ordinance, 2001, too, was not tenable, because the assessee had the knowledge of existence of order under S.66-A of the Income Tax Ordinance, 1979, well in time, at least on the date when first notice for fresh assessment was served as a consequence of such order---Even otherwise, order was valid and sustainable under the law---Order passed within the statutory period of limitation and communicated to the assessee later on, was a valid order---Order was passed within four years of the order sought to be cancelled, hence it was a valid order---Order so passed was in the knowledge of the assessee because the subsequent proceedings for fresh assessment were started immediately thereafter---Appeal filed on 6-6-2008 against the order under S.66-A of the Income Tax Ordinance, 1979 passed and served on the petitioner on 12-5-2006 had-neither any merit nor it was filed within the period of limitation---Appeal of the assessee failed on both counts, on merit as well as on legal premises.

Messrs Qureshi Vegetable Ghee Mills Ltd v. CIT and others 2002 PTD 399 and 2007 PTD 803 rel.

2002 PTD 549; PLD 1971 SC 61; 1986 SCMR 962; PLD 1969 Lahore 1039 and 1985 CLC 1411 ref.

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

----S. 114(4)---Return of income---Finance Act (II of 2004), Preamble---Assessment year 2002-2003---Contention was that assessment order passed on 30-6-2006 for the assessment year 2002-2003 was not sustainable, because it was based on a void notice under S.114(4) of the Income Tax Ordinance, 2001 issued on 12-6-2004, whereas notice under S.114 (4) could not be issued in respect of an `assessment year' prior to promulgation of Finance Act, 2004---Validity---Held, that issuance of notice under S.114 of the Income Tax Ordinance, 2001 and the superstructure based thereon was legally justified---Departmental action was confirmed by the Appellate Tribunal.

2007 PTD 1763 reversed.

I.T.As. Nos. 1418 & 1419/IB of 2005; I.T.As. Nos.152-153/IB of 2006; ITA Nos. 351-352/IB of 2006 and I.T.As. Nos.491-493/IB of 2006 rel.

2005 PTD (Trib.) 490 overruled.

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

----Ss.121 & 176---Income Tax Ordinance (XXXI of 1979), Ss. 63 & 66-A---Best judgment assessments---Assessee contended that since, sufficient opportunity of being heard was not provided, the consolidated ex parte order under Ss.63/66A of the Income Tax Ordinance, 1979 was not in line with the principles of natural justice---Validity---Adequate opportunity of being heard was allowed to the taxpayer, but to no avail as the assessee wilfully, did not participate in the assessment proceedings inspite of service of statutory notice(s)---Contention that assessments were arbitrary and not `best judgments', was also not tenable as surplus declared by the assessee was taxed and no additions out of the claimed expenses were made by the department---Income declared as per annual accounts of the assessee was accepted and subjected to tax at the applicable rate---Specific notices under Ss. 56, 61 & 62 of the Income Tax Ordinance, 1979 and under Ss.114 & 176 of the Income Tax Ordinance, 2001 were issued requiring the assessee to submit tax returns and produce books of accounts, but the assessee deliberately chose not to cooperate and participate in the assessment proceedings---Assessing Officer was constrained to finalize assessments ex parte, to the best of his judgment in the circumstances---Assessments were finalized on the basis of declared income/surplus as per annual accounts of the assessee---Assessee's assertions regarding arbitrariness of assessments were not supported by any credible documentary evidence---Assessee deliberately, avoided either to join the assessment proceedings or to produce the requisite books of accounts/documents---Appeal was dismissed by the Appellate Tribunal on the issue.

1998 PTD 3835; 51 Tax 181 (SC) and 1975 PTD 58 rel.

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

----Ss.190 & 239(3)---Income Tax Ordinance (XXXI of 1979), S.63 & 66-A---Imposition of penalty---Contention that "notice under S.190 of the Income Tax Ordinance, 2001 had incorrectly been issued in respect of assessments completed under Ss.63/66A of the Income Tax Ordinance, 1979" was not tenable in the light of S.239(3) of the Income Tax Ordinance, 2001 because imposition or charge of any penalty, additional tax or any other amount under the Income Tax Ordinance, 1979 had to be imposed in accordance with the corresponding provisions under the Income Tax Ordinance, 2001---Objection was dismissed by the Appellate Tribunal being devoid of merit.

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

----Ss.66-A & 63---Income Tax Ordinance, (XLIX of 2001), Ss.121 & 114(4)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Pakistan Telecommunication Authority---Status and taxation of income---Pakistan Telecommunication Authority was not a local authority'; it was a body corporate with status ofpublic limited company'; its income was taxable---Order under S.66-A of the Income Tax Ordinance, 1979 and the penultimate action was justified---Issuance of notice under S.114(4) for requisitioning tax return and subsequent assessment for the assessment year 2002-2003 was legally tenable---Ex parte/best judgment orders under Ss.63/66-A of the Income Tax Ordinance, 1979 for the assessment years 1998-99 to 2001-2002 as well as under S.121 of the Income Tax Ordinance, 2001 for the tax years, 2003 to 2007 were validly made---Orders of the authorities below were upheld by the Appellate Tribunal.

Naveed Andarabi, Anjum Asim Shahid, C.A. and M. Ayub for Appellant.

Muhammad Asif and Mrs. Reema Masood, D.R. for Respondents

2009 P T D (Trib.) 590

[Income-tax Appellate Tribunal Pakistan]

Before Javed Iqbal, Jawaid Masood Tahir Bhatti, Judicial Members and Shahid Azam Khan, Accountant Member

I.T.As. Nos.836/KB to 839/KB of 2006, decided on 28th October, 2008.

Per Javed Iqbal, Judicial Member; Jawaid Masood Tahir Bhatti, Judicial Member, agreeing

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

----Ss.161 & 236(1)(b)(3)---Failure to pay tax collected or deducted---Pay phone cards---Prepaid phone cards---Tax was levied under S. 161 of the Income Tax Ordinance, 2001 declaring the assessee as defaulter for not withholding the tax @ 10% on sale of payphone cards---First Appellate Authority found that prepared telephone cards which were subject to withholding collection of tax under S. 236 of the Income Tax Ordinance, 2001 were different in character from payphone cards---Validity---Held: payphone cards relevant to various public call offices (PCOs) of the assessee's companies were not liable to action under S.236(1)(b)(3) of the Income Tax Ordinance, 2001 withholding tax.

I.T.As. Nos.153/IB to 156/IB of 2008; I.T.As. Nos.107/IB to 109/IB of 2007; I.T.As. Nos. 243/IB to 244/IB of 2007; I.T.As. Nos.118/IB to 120/IB of 2007; I.T.As. Nos. 99/IB to 101/IB of 2007; Oxford Encyclopedic English Dictionary 1991 Edition and 2008 PTD (Trib.) 442 rel.

1998 PTD (Trib.) 3771; (1948) 16 ITR Suppl. 101 HL; The Black's Law Dictionary 7th Edn. and 1993 SCMR (sic) ref.

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

----S.2(41)---Permanent establishment---Assessee was permanent establishment' of non-resident in Pakistan as it was proved that assessee had its office and telephone numbers in Pakistan---Assessee fell under the provisions of S.2(41) of the Income Tax Ordinance, 2001 and was termed aspermanent establishment'.

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

----S.153---Payment of goods and service---Payment outside Pakistan---Import of equipment---Withholding tax---Payment having been made outside Pakistan, it was not liable to deduction of tax on import of equipment---Order of First Appellate Authority was upheld by the Appellate Tribunal.

1999 PTD (Trib.) 2515 rel.

Per Jawaid Masood Tahir Bhatti, Judicial Member, agreeing with Javed Iqbal, Judicial Member

(d) Income Tax Appellate Tribunal---

----Member of Appellate Tribunal---Difference of opinion---One member had no authority to differ from the conclusion drawn by the other which was based on the earlier decisions of the Appellate Tribunal having similar set of facts moreso when one member had not found any deviation in the facts and without recording in his order that the facts of the two cases were not similar---Merely for the reason that in his opinion, the Appellate Tribunal in its earlier orders had not touched upon certain issues which, according to him were important, did not authorize him to deviate from the earlier orders and to record his own findings different from the findings recorded in the earlier decisions.

2006 SCMR 496 = 2006 PLC (C.S.) 355; PLD 1963 SC 296; PLD 1995 SC 423; 178 ITR 548; 2007 PTD 1533; ITRA 176 of 2007; 2004 PTD 62; 93 Tax 72; PLD 2004 Pesh. 47; 1997 PTD 879; 1998 PTD 3319; I.T.A. No.42/KB of 1999-2000; 2003 PTD 2321 and 2005 PTD 2247 ref.

(e) Income Tax Appellate Tribunal---

----Members of Appellate Tribunal---Difference' of opinion---One member, in the absence of his contradictory note on the facts of the case, ought not to have deviated from the judgments of the Appellate Tribunal and forming questions on the basis of his own findings whereby he had tried to create legal infirmities in the earlier decisions of the Appellate Tribunal.

(f) Income Tax Appellate Tribunal---

----Division Bench decision---Binding effect---Decision of Division

Bench was binding on another Division Bench and that a Single Bench

had no authority not to follow a decision of a Division Bench.

1997 PTD 879; 2008 PTD (Trib.) 442; Bashir Ahmad v. State PLD 1960 Lah. 687; and I.T.As. Nos.42/KB and 43/KB of 1999-2000 rel.

2006 SCMR 496 = 2006 PLC (C.S,) 355; PLD 1963 SC 296; PLD 1995 SC 423; 178 ITR 548; 2007 PTD 1533; ITRA 176 of 2007; 2004 PTD 62; 93 Tax 72; PLD 2004 Pesh. 47; 1997 PTD 879; 1998 PTD 3319; I.T.A. No.42/KB of 1999-2000; 2003 PTD 2321 and 2005 PTD 2247 ref.

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

----S.236---Telephone users---Deduction of tax---Payphone cards--Prepaid cards---Cards issued by the assessee were payphone cards and not prepaid cards---On payphone cards, the provisions of S.236 of the Income Tax Ordinance, 2001 were not applicable---Provisions of S.236 of the Income Tax Ordinance, 2001 were not very clear about public call office (PCO) operators who operate through payphone cards---Where there was any ambiguity in the taxation laws, the benefit of the same had to be given to the assessee.

2008 PTD (Trib.) 442 rel.

(h) Constitution of Pakistan (1973)---

----Art. 25---Equality of citizens---Equality and taxation---Legislature had complete powers, authority and domain of taxing a particular class of citizens while exempting the other class of citizens from the same tax---Benefit of doubt arising from a taxing statute is to be given to the assessee---If a particular class by virtue of the benefit of doubt remains outside from the charge of tax, it was the legislature to provide in clear terms that the said tax was applicable on such class.

PLD 1997 SC 582 = 1997 PTD 1555 rel.

(i) Income Tax Appellate Tribunal---

----Decision of Division Bench---Binding force---Since a decision of a Division Bench was binding on the other Division Bench of the same strength, there was no escape for a Single Member from not following the judgment of a Division Bench even if it had not addressed some issues which, in the opinion of Single Member, had a bearing on the decision given by the Division Bench---What was left with the Member was to record his concerns and let the matter to be decided by higher authorities but he was not saddled with the power to dissent from a Division Bench decision.

Per Shahid Azam Khan, Accountant Member.---[Minority view].

I.T.As. Nos. 153/IB to 156/IB of 2008; I.T.As. Nos. 107/IB to 109/IB of 2007; I.T.As. Nos. 243/IB to 244/IB of 2007; I.T.A. Nos.118/IB to 120/IB of 2007; I.T.As. Nos. 99/IB to 101/IB of 2007; 1993 SCMR (sic) and I.T.As. Nos. 293/IB & 294/IB of 2007 ref.

Hassan Naeem and Asad Fawad, C.A. for Appellant (in I.T.As. Nos.836/KB and 837/KB of 2006).

Rehmatullah Wazir, D.R. Farrukh Ansari and Zain Aslam Ali, (Additional Commissioner) for Respondent (in I.T.As. Nos.836/KB and 837/KB of 2006).

Rehmatullah Wazir, D.R. Farrukh Ansari and Zain Aslam Ali, (Additional Commissioner) for Appellant (in I.T.As. Nos.838/KB and 839/KB of 2006).

Hassan Naeem and Asad Fawad, C.A. for Respondent (in I.T.As. Nos.838/KB and 839/KB of 2006).

2009 P T D (Trib.) 638

[Income Tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmad, Accountant Member

I.T.A. No.875/KB of 2006, decided on 22nd October, 2008.

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

----Ss.121(1)(d), 174(2) & 177---Best judgment assessment---Case was selected for total audit by observing that expenses claimed were approximately 95% of the receipts which were exorbitantly high and assessment was amended by disallowing all the Profit and Loss account expenses---Validity---While making best judgment assessment, Assessing Officer treated the entire receipt as Income and disallowed all the expenses claimed---Order was totally silent as to why all expenses were disallowed and why entire receipt was treated as income---No reasons were recorded for such treatment---Assessment did not meet the requirement of law as order was totally non-speaking---Relief in respect of add backs was allowed by the First Appellate Authority in accordance with the previous history of the case after giving due consideration to the facts of the case and on examination of books of accounts and evidence submitted by the assessee---No interference was warranted by the Appellate Tribunal in circumstances.

(b) Income-tax---

----Appeal---Vague grounds---Grounds of appeal were vague as neither any specific disallowance was pointed out nor any specific grievance had been mentioned.

Gohar Ail, D.R. for Appellant.

Haji Yousaf and Arshad Malik, ITP for Respondent.

Date of hearing: 7th October, 2008.

2009 P T D (Trib.) 654

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmed, Accountant Member

I.T.As. Nos.644/KB, 645/KB, 947/KB and 948/KB of 2005, decided on 16th December, 2008.

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

----Ss. 107AA, 80-D, 221 & 122---Tax credit for investment---Department pleaded that tax credit was wrongly allowed under S. 107AA of the Income Tax Ordinance, 1979 and while doing so Taxation Officer, who charged tax under S.80-D of the Income Tax Ordinance, 1979 in the revised order erroneously adjusted the same against the tax credit allowed under S.107AA of the Income Tax Ordinance, 1979 whereas the tax credit was adjustable against taxpayer---Such order was rightly amended by the Taxation Officer which had been annulled by the First Appellate Authority without any justification---Validity---Credit allowed by the Taxation Officer was strictly in accordance with law as Ss.107A and 107AA of the Income Tax Ordinance, 1979 were inserted in years 1996 and 2000 respectively and relevant section override all the sections including S. 80D of the Income Tax Ordinance, 1979 which was inserted by the Finance Act, 1991 as the insertions of Ss.107A and 107AA of the Income Tax Ordinance, 1979 were subsequent in time---Section 107A of the Income Tax Ordinance, 1979 was inserted which starts with the word "notwithstanding" authorizing the Central. Board of Revenue to make scheme or schemes for the provisions of tax credit"---Sections 107 A and 107AA of the Income Tax Ordinance, 1979 were inserted which mentioned about tax credit and its allowability and it did not say that it will not be allowed in case of S.80-D of the Income Tax Ordinance, 1979---First Appellate Authority had rightly annulled the order passed by Taxation Officer under S. 122 of the Income Tax Ordinance, 2001 on legal as well as factual planes---Appeals filed by the Department were dismissed by the Appellate Tribunal in the circumstances.

1999 PTD (Trib.) 811; 2000 PTD (Trib.) 3776; 2003 PTD (Trib.) 2308; 2001 PTD (Trib.) 2919; 2001 PTD 1467; 2008 PTD 1420; 2005 PTD 1316; I.T.As. Nos. 366 to 368/KB of 2005; I.T.As. Nos.509 to 513/KB of 2005; 2007 PTD (Trib.) 1780; 1987 PTD (Trib.) 116; 1997 PTD (Trib.) 36; 1993 SCMR 274 and 1993 PTD 69 ref.

1977 SCMR 1097 rel.

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

----S.80-D---Minimum tax on income of certain persons---Tax credit---Tax paid under S.80 of Income Tax Ordinance, 1979 was a tax payable and the taxpayer could claim credit in respect of tax payable.

(c) Interpretation of Statutes---

----Non-obstante clause overrides only those sections, which come in conflict with the two relevant statutory provisions.

(d) Interpretation of statutes---

----Construction should be made in a manner that no statutory provision becomes redundant.

(e) Interpretation of statutes---

----When a new section was added or inserted, it is presumed that legislature was conscious of the existing law.

1993 SCMR 274 = 1993 PTD 69 ref.

(f) Interpretation of statutes---

----Fiscal provision of statute is to be construed liberally in favour of the taxpayer and in case of any substantial doubt the same is to be resolved in favour of the citizens.

1993 SCMR 274 = 1993 PTD 69 rel.

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

----Ss. 122 & 170---Amendment of assessment---Assessee filed application for refund under S. 170 of the Income Tax Ordinance, 1979 for issuance of refund but the Taxation Officer, instead of issuing refund, had amended the order under S. 122 of the Income Tax Ordinance, 1979 which was annulled by the First Appellate Authority---Validity---Duty of refunding authorities was controlled to the extent of cross check of me documents for calculation of the amount of refund only and to satisfy that no other tax was outstanding against him before issuance of refund---Taxation Officer had amended/rectified the assessment on application filed by the assessee for issuance of refund under S. 170 of the Income Tax Ordinance, 2001---First Appellate Authority had rightly annulled the order passed by the Taxation Officer which required no further interference.

2007 PTD (Trib.) 1780 rel.

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

----Ss. 170, 129 & 221----Refunds---Order passed under Ss.170, 129 and S.221 of the Income Tax Ordinance, 2001 in violation of the directions of First Appellate Authority, was illegal and beyond jurisdiction.

Farrukh Ansari, D.R. for Appellant.

Abid Shaban and Jan-e-Alam, ITP for Respondent.

2009 P T D (Trib.) 677

[Income-tax Appellate Tribunal Pakistan]

Before Javed Masood Tahir Bhatti, Judicial Member and Iqbal Ahmed, Accountant Member

I.T.As. Nos. 107/KB and 169/KB of 2004, decided on 16th December, 2008.

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

----S.24(g)---Deduction not admissible---Gratuity fund---Payment made to gratuity fund was allowed by the First Appellate Authority with the observation that "Taxation Officer disallowed the claim of payment made to gratuity fund as it was incurred in the earlier year while in all the previous years the provisions for gratuity were disallowed and subject to tax only after allowing any sum actually paid during that year"---Validity---If the principle adopted by the Taxation Officer was followed then any expenses on accrual basis would not be allowed as deduction in the year of accrual if mercantile system of accounting was followed---Section 24 (g) of the Income Tax Ordinance, 1979 it provided that deductions were not admissible to any sum paid to any provident fund, superannuation fund or gratuity fund not being a recognized provident fund, an approved superannuation fund, or a approved gratuity fund---Payments made to an approved gratuity fund was allowable deduction---Treatment meted out by the First Appellate Authority was in accordance with law which was upheld by the Appellate Tribunal and appeal filed by the department was dismissed.

I.T.As. Nos. 1674 and 1675/KB of 2002 distinguished 2007 PTD (Trib.) 2237 ref.

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

----Third Sched., R. 5-A, Cl. (E)---Finance Act (III of 1998), Preamble---Finance Act, (IV of 1999), Preamble---Finance Ordinance (XXV of 2001), Preamble----Rules for the computation of depreciation allowance---First year allowance---Disallowance of---Claim of first year allowance was disallowed by the Taxation Officer for the reason that inclusion of service industry in Clause-E of the Table annexed to R. 5A did not over-ride the pre-condition that such service industry should first be an industrial undertaking---Disallowance of first year allowance was maintained by the first appellate authority---Validity---"Service" in no way suggested process of manufacturing as the legislature while adding the word "service" in the Table had made it clear that the service provider like banking, insurance company were also termed as "industrial undertaking"---Legislature had intentionally omitted the words "engaged in the manufacture of goods and materials or the subjection of goods or materials to a manufacturing process"---Concept that only manufacturing industries were termed as industrial undertaking and as such first year allowance under R.5A of the Third Schedule to the Income Tax Ordinance, 1979 was to be allowable to only industrial undertaking who processed manufacturing activities was incorrect and illegal---Deletion of word had clearly established that service industries were also to be given the benefit of first year allowance which includes to social service provider---Taxation Officer was directed to allow the allowance to the assessee as provided in R.5A of the Third Schedule to the Income Tax Ordinance, 1979 regarding the first year allowance---Appeal was allowed by the Appellate Tribunal.

2004 PTD (Trib.) 1499 rel. 2004 PTD 1666 distinguished.

Rehmatullah Wazir, D.R. for Appellants (in I.T.A. No.107/KB of 2004).

Muhammad Arshad, F.C.A. and Zubair Abdul Sattar, F.C.A. for Respondents (in I.T.A. No.107/KB of 2004).

Muhammad Arshad, F.C.A. and Zubair Abdul Sattar, F.C.A. for Appellants (in I.T.A. No.169/KB of 2004).

Rehmatullah Wazir, D.R. for Respondents (in I.T.A. No.169/KB of 2004).

2009 P T D (Trib.) 696

[Income-tax Appellate Tribunal Pakistan]

Before S. Hassan Iman, Jawaid Masood Tahir Bhatti, Judicial Members and Shahid Azam Khan, Accountant Member

I.T.A. No.534/KB of 2005, decided on 23rd January, 2007.

Per S. Hasan Imam, Judicial Member

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

----S. 122(4A)---Income Tax Ordinance (XXXI of 1979), S.62---Finance Act (1 of 2003), Preamble---Amendment of assessment---Limitation---Assessment was finalized under S.62 of the Income Tax Ordinance, 1979 as on 19-5-1999---Additional Commissioner of Income Tax amended said order vide order dated 28-6-2004 within the meaning of S.122(1) of the Income Tax Ordinance, 2001 and for determining the limitation he took benefit of S.122(4A) instead of S.122 of the Income Tax Ordinance, 2001---First Appellate Authority while observing that S.122(4A) of the Income Tax Ordinance, 2001 was not attracted found that order under S.62 of the Income Tax Ordinance, 1979 passed on 19-5-1999 was amendable on or before 18-5-2004---Order dated 28-6-2004 passed under S.122(1) of the Income Tax Ordinance, 2001 being ab initio illegal was not sustainable in the eyes of law and was annulled being time-barred--Validity---Held, as assessment had been carried out on 19-5-1999, 5 years' limitation will start from 1-7-1999 and end on 30-6-2004--Notice issued on 11-5-2004 for compliance on 17-5-2004 was within time as prescribed in S.65(3) of the Income Tax Ordinance, 1979---Order of First Appellate Authority to the extent that "provisions of S.122(4A) of the Income Tax Ordinance, 2001 were not attracted as the order under S.62 of the Income Tax Ordinance, 1979 being issued on 19-5-1999 was barred by limitation on 18-5-2005 was not in accordance with the provisions of law; however, order could not be amended either by invoking S.122(1) or S.122(4A) of the Income Tax Ordinance, 2001, besides Sub-sec.(5) of S.122 of the Income Tax Ordinance, 2001 had been amended by Finance Act, 2003 and was available with effect fron3 1st July, 2003---Subsections (5) and (5A) of S.122 of the Income Tax Ordinance, 2001 had same effect so far as retrospectivity of the provision was concerned---Amended provision was not available to amend the order passed under S.62 of the Income Tax Ordinance, 1979 passed on 19-5-1999.

I.T.As. Nos.910 and 552, 553/KB of 2004; I.T.A. No.420/KB of 2005 rel.

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

----S.122---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment----Amendment by Assessing Officer instead of Commissioner---Validity---Section 122 of the Income Tax Ordinance, 2001 pertaining to amendment of assessments provides that Commissioner may amend assessment order issued under S.62 of the Income Tax Ordinance, 1979 by making such alterations or additions as the Commissioner considers necessary---Section 122(2) of the Income Tax Ordinance, 2001 restricts the powers to amend the assessments to orders passed by the Commissioner or wherein Commissioner had issued or was treated as having issued the assessment order on the taxpayer--Order under S.62 of the Income Tax Ordinance, 1979 was passed in 1999 and was served by the Assessing Officer and not by the Commissioner---Section 122 of the Income Tax Ordinance, 2001 invoked by Taxation Officer would not be helpful for making additional assessments under amending order under S.62 of the Income Tax Ordinance, 1979 although the said provision provides 5 years' period with effect from service of the order.

Per Shahid Azam Khan, Accountant Member.---[Minority view].

1980 PTD 69; 2004 PTD 1173; 1966 PTD 664; PLD 1994 SC 894 and PLD 1995 SC 423 ref.

Per Jawaid Masood Tahir Bhatti, Judicial Member (Agreeing with S. Hasan Imam, Judicial Member).

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

----S.122(1)-Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Since the original order under S.62 of the Income Tax Ordinance, 1979 was passed on 29-5-2000 prior to July, 2003, the provisions of S.122(1) of the Income Tax Ordinance, 2001 having no retrospective effect were not applicable.

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

----S.122(1)---Amendment of assessment---Section 122 of the Income Tax Ordinance, 2001 was applicable in respect of "taxpayer" and "tax year" and not "assessee" and "assessment year".

2005 PTD 1621 rel.

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

----S.122 (4A)---Amendment of assessment---Section 122(4A) of the Income Tax Ordinance, 2001, is held, was vague, ambiguous and unnecessary.

Fauji Oil Terminal's case 2006 PTD 734 rel.

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

----S.122 (1)---Income Tax Ordinance (XXXI of 1979), Preamble---Amendment of assessment---Provisions of S.122 of the Income Tax Ordinance, 2001 were inapplicable on assessments concluded under the Income Tax Ordinance, 1979.

2008 PTD 1136 rel.

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

----S.122(1)---Amendment of assessment---Section 122 of the Income Tax Ordinance, 2001 applies only to assessment orders finalized by the Commissioner of the taxpayers for the tax year and not on assessment orders made by the Deputy Commissioner of Income Tax for the assessment year 2002-03 and earlier years.

2008 PTD 1420 rel.

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

----S. 122(4A)---Income Tax Ordinance (XXXI of 1979), Ss.62 & 65---C.B.R's. Circular No.7 of 2003, dated 11-7-2003, para.36---Amendment of assessment ---Assessment year 1998-99---Validity---Held, in order to apply the provisions of S.122 (4A) of the Income Tax Ordinance, 2001 assessments ought to have been made under S.65 of the Income Tax Ordinance, 1979---Para. 36 of C.B.R.'s Circular No.7 of 2003 provides that "where an assessment order was earlier passed under S.65 of the Income Tax Ordinance, 1979 the limitation contained in S.122 of the Income Tax Ordinance, 2001 shall neither be curtailed nor extended by the provisions of Sub-S.(2) or Sub-S.(4) of S.122 of the Income Tax Ordinance, 2001"-Original assessment had been finalized under S.62 of the Income Tax Ordinance, 1979 and not under S.65 of the Income Tax Ordinance, 1979---Provisions of S.122(1) or for that matter S.122(4A) of the Income Tax Ordinance, 2001 were not applicable in respect of assessment year 1998-99---Order of First Appellate Authority had rightly been upheld by the Tribunal and there was no justification for vacating the order of First Appellate Authority---Departmental appeal was dismissed.

I.T.A. No.1236/KB of 1995; Honda Shahrah-e-Faisal case 2005PTD 1316; Kashmir Edible Oil's case 2006 SCMR 109; 2005 PTD 1621; 2008 PTD 123; Fauji Oil Terminal's case 2006 PTD 734; 2008 PTD 1136 and 2008 PTD 1420 rel.

Rahematullah Wazir, D.R., Farrukh Ansari, D.R., Dr. Muhammad Ali Khan, D.R. and Ageel Abbasi L.R. for Appellant.

Dr. Muhammad Farogh Nasim for Respondent.

2009 P T D (Trib.) 738

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Anwar Ahmed, Accountant Member

I.T.As. Nos.360/LB and 1137/LB of 2008, decided on 14th January, 2009.

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

----S.170---Refund---Taxation Officer, instead of determining the refund had entered into contents of assessment while deciding the application filed by the assessee under S.170 of the Income Tax Ordinance, 2001---Validity---Refunding Authority had no jurisdiction to determine the legality of a return or the scrutiny of the claim of profit and loss account---Such was only the field of a assessing authority as under the scheme of Income Tax Ordinance, 2001 the work had been distributed to two separate departments---Assessing authority and Refunding Authority had been assigned distinct work with clear and unambiguous jurisdiction---Facilitation Division, Information Processing Department, Enforcement Division etc; all had separately defined jobs---Job of audit was totally with Audit Division and they could not issue refund; likewise Refunding Authority had nothing to do with assessment or assessment work----Order of First Appellate Authority was vacated and order passed by the Taxation Officer under S.170 of the Income Tax Ordinance, 2001 was set aside with the direction to make fresh order in accordance with law determining the refund of assessee according to the assessment order and issue the refund in accordance with law unless any other proceedings had been initiated against him till the service of order.

2007 PTD 1780 rel.

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

----S.115---Workers' Welfare Funds Ordinance (XXXVI of 1971), S.4---Finance Act (I of 2008), Preamble---C.B.R. Circular No.13 of 2008 dated 23-10-2008---Persons not required to furnish return of income---Tax year 2007---Levy of workers' welfare fund---Validity---Assessing Officer was not authorized to charge worker's welfare fund unless corresponding amendments were made in S.4 of the Workers' Welfare Funds Ordinance, 1971---Amendments in this regard had been made through Finance Act, 2008 effective from 1-7-2008 which was not applicable for the year under review---Order of First Appellate Authority in respect of workers' welfare fund was vacated and the workers' welfare fund charged by the Taxation Officer was deleted and appeal filed by the assessee for the tax year 2007 was allowed by the Appellate Tribunal.

2003 PTD 1530 rel.

M. Imran Rashid for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2009 P T D (Trib.) 742

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Istataat Ali, Accountant Member

M.As. (Stay) Nos.24/KB to 30/KB of 2009, decided on 11th February, 2009.

Wealth Tax Act (XV of 1963)---

----S.31B(1)(b)---Additional Wealth Tax---Stay application against outstanding demand on the ground that rectification applications have been filed against restoring the additional tax charged for the period from the due date till the framing of assessments whereas under the provisions of S.31B(1)(b) of the Wealth Tax Act, 1963 such tax was chargeable only for the period till the end of the relevant assessment year---Validity---Additional tax should have been charged in the light of proviso to S.31B(1)(b) of the Wealth Tax Act, 1963---Prima facie the calculation of additional tax did not appear to be correct---Final position of the matter will be determined at the time of hearing of rectification application---Assessee's request for grant of stay in respect of excess amount of additional tax having not been charged in accordance with the provisions of S.31B(1)(b) of the Wealth Tax Act, 1963, was accepted by the Appellate Tribunal with the direction that calculation of additional tax should be made keeping in view the provisions of S.31B(1)(b) of the Wealth Tax Act, 1963 as well as the case law---Balance demand of additional tax was stayed for a period of two months or decision of miscellaneous application for rectification whichever was earlier.

2002 PTD (Trib) 221 rel.

Abdul Tahir, I.T.P. for Applicant.

Muhammad Asif and Mrs. Reema Masood, D.R. for Respondent.

2009 P T D (Trib.) 749

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairperson and Istataat Ali, Accountant Member

I.T.A. No.230/IB of 2008, decided on 21st January, 2009.

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

----S.122(5A)---Amendment of assessment---Taxation of accumulated profits---Business of Association of Persons was taken over by limited company/assessee including pre-incorporation accumulated profits---Proceedings were started to amend the assessment under S.122(5A) of the Income Tax Ordinance, .2001 on the ground that assessment was erroneous in so far as being prejudicial to the interest of Revenue for the reason that a huge amount of accumulated profits for the last many' years, remained untaxed,--Validity---Assessee-company had been regularly filing its returns and assessments were completed on the basis of accounts submitted along with return after proper consideration of relevant details---Department had no case to prove that assessee concealed true particulars of its income/profits---If the argument of department that "at the time of taking over AOP's' business, the company also became owner of the entire amount of accumulated profits and in this manner, this amount became company's income chargeable to tax" accepted, then departmental action was legally flawed because the so called income could be taxed in relevant year(s) only---Proceedings for taxing the pre-incorporation receipts had already been dropped by department and action in this regard had attained finality---Accumulated profit worked out included profits pertaining to pre-incorporation period---Such assessments had become barred by time and income declared/assessed already for three years could not be taxed again under the garb of action under S.122(5A) of the Income Tax Ordinance, 2001--Provisions of S.122(5A) of the Income Tax Ordinance, 2001 required that an assessment order should be erroneous in so far as it is prejudicial to the interests of revenue but the accumulated profits pertaining to many years, had not been established at all that deemed assessment order under consideration was erroneous and prejudicial to the interest of Revenue---Assessments for preceding years were also framed on agreed basis and income assessed for such years had attained finality and profit/income assessed for such years could not be made basis for any action under S.122(5A) of the Income Tax Ordinance, 2001---Income in question had already been taxed in the hands of `Association of Persons' and it could not be taxed again in the hands of company/assessee in the shape of accumulated profits---First Appellate Authority had rightly annulled the assessment---Order of First Appellate Authority was confirmed by the Appellate Tribunal and the departmental appeal being devoid of any merit was rejected.

2003 PTD 1762; (1995) 79 Taxman 184 (Guj) and PLD 1992 SC 549 = 1992 PTD 932 rel.

Black's Law Dictionary Eight Edition p.23 ref.

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

----S.114(6)---Return of income---Revision of the return---"Omission" or "wrong statement"---Scope---Scope of "omission" or "wrong statement" was very wide and all encompassing---If a taxpayer, after filing his return, discovers that it was not correct and any part of taxable income had been omitted and not included in taxable income or a "wrong statement" including "wrong statement of accounts" had been filed, he was legally entitled to correct such "omission" or "wrong statement"---Contrary to provisions of Income Tax Ordinance, 1979 the right of revision of return did not abate (during statutory limitation) even after the completion of deemed assessment or amended assessment---Such right continues to remain legally due, even after pointation of any "omission" or "wrong statement" from the department---Law did not stop any taxpayer from revising his return---No bar could be put against the rights of a taxpayer granted to him by the statute---Powers of assessment of income, conferred upon the tax authorities by law, could nevertheless be exercised, in relation to the return so revised by a taxpayer and they were also empowered to declare a return as invalid, if it did not fulfil all legal requirements-Tax authorities could not refuse to accept a revised return, under any circumstances---Additional Commissioner's action of refusal to accept the revised return was legally not correct.

1996 PTD (Trib.) 759; 1986 PTD (Trib.) 446; 1991 PTD (Trib.) 319; 1992 PTD (Trib.) 713 and 2007 PTD 1810 ref.

M. Asif, IAC/DR for Appellant.

Hafiz M. Idrees and Abdul Basit, FCA for Respondent.

2009 P T D (Trib.) 765

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmad, Accountant Member

M.A. (AG) No.192/KB of 2008 and I.T.A. No.373/KB of 2006, decided on 2nd November, 2008.

(a) Income Tax---

----Additional grounds arising out of the proceedings of the case and being the legal issue could be taken at any stage of the proceeding.

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

----Ss.66(c), 79, 132 & 62---Limitation for assessment in certain cases---Setting aside of an issue out of two---Appeal was filed against order passed by the Assessing Officer before First Appellate Authority on two grounds only---Firstly invocation of provisions of S.79 of the Income Tax Ordinance, 1979 and secondly, on issue of applicability of Workers' Welfare Fund---First Appellate Authority set aside the issue of invocation of provisions of S.79 of the Income Tax Ordinance, 1979 vide his order dated 30-4-2001 and deleted the addition made on the issue of applicability of Workers' Welfare Fund---Department filed appeal before Appellate Tribunal on the issue of chargeability of Worker's Welfare Fund only which was dismissed vide order dated 20-6-2002---No appeal in respect of invocation of S.79 of the Income Tax Ordinance, 1979 was filed by the department before Appellate Tribunal meaning thereby the department had accepted the order passed by the First Appellate Authority---Provision of S.66(c) of the Income Tax Ordinance, 1979 specifically states that if an appeal is preferred against an order which was set aside in full or in part and a.. further appeal was preferred in respect thereof either under S.134 or under S.136 of the Income Tax Ordinance, 1979, then the limitation provided under S.66 of the Income Tax Ordinance, 1979 would not apply---Appellate Tribunal did not set aside the issue of Workers' Welfare Fund either in full or in part therefore, subsequent filing of reference application by the department before High Court would not defer the limitation as provided under the provisions of S.66 of the Income Tax Ordinance, 1979---Order passed by the Appellate Tribunal was served on the Department on 9-7-2002 therefore the assessment framed by the Taxation Officer as on 30-6-2005 was barred by limitation---Order of Taxation Officer was annulled by the Appellate Tribunal being ab initio void and illegal.

PLD 1998 Kar. 373; 2007 PTD 1418; PLD 1990 SC 934 and PLD 2008 Kar. 38 ref.

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

----S.66(c)---Limitation for assessment in certain cases---If no appeal is filed in respect of a particular issue the limitation would then be governed squarely under provisions 9f Cl.(c) of S.66 of the Income Tax Ordinance, 1979 but if either the assessee or the department prefers any appeal in respect of an order which is set aside in full or in part then the limitation provided under this clause would not run.

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

----S.66(c)---Limitation for assessment in certain cases---Limitation would only stop if an order is set aside in full or in part and a further appeal in respect thereof had been preferred to the higher authority.

(e) Interpretation of Statutes---

----No law is to be interpreted in a manner to make any part of the law redundant.

PLD 1990 SC 934 and PLD 2008 Kar. 38 rel.

Irfan Saddat Khan for Appellant.

Yousaf Haider Shaikh, D.R. for Respondent.

2009 P T D (Trib.) 779

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.886/LB of 2006, decided on 20th November, 2008.

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

----S.122(5A)---Amendment of assessment---Treatment of Courier Services as contractor---Validity---Services rendered had wrongly been interpreted where mental element was involved---No value addition was made by the taxpayer as it was only delivery of letters---Case of the taxpayer had wrongly been treated as that of a contractor and the taxpayer's case did not fall within the category of Presumptive Tax Regime---Invoking the provisions of S.122(5A) of the Income Tax Ordinance, 2001 being illegal the order framed under S.122(5A) of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal.

2008 PTD 1423 and 2004 PTD (Trib.) 2749 ref.

I.T.A. No.457/LB of 2008 rel.

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

----S.122 (5A)---Amendment of assessment---Tax year 2003---Provisions of S.122(5A) of the Income Tax Ordinance, 2001 could be invoked for the tax year 2003---Even otherwise the competent authority had delegated the power to invoke the provisions of S.122(5A) of the Income Tax Ordinance, 2001 to the author of amended order.

M. Ajmal Khan for Appellant.

Javed Iqbal Rana, D.R. for Respondent.

2009 P T D (Trib.) 782

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Ehsan-ur-Rehman Sheikh, Judicial Members and Ch. Naseer Ahmed, Accountant Member

I.T.As. Nos.820/LB, 821/LB, 1175/LB, 6859/LB of 2004, decided on 21st November, 2008.

(a) Interpretation of statutes---

----Fiscal enactment---Distinct types of provisions---Effect.

(b) Interpretation of statutes---

----Fiscal enactment-Interpretation of charging sections, assessment and collection/recovery provisions---Charging sections have to be strictly construed and any benefit found therein has to go to the taxpayer---Assessment and collection/recovery provisions are merely the ordinary sections and can be liberally construed.

(c) Interpretation of statutes---

---Fiscal enactment---Exemptions---Nature and construction of---Generally there are sections providing exemptions from the general rule whereby the income on the subject matter of levy of tax is allowed to escape the tax net and concession in rate of tax or in tax liability are allowed---Such provisions are in the nature of exceptions and can be compared to a proviso through which exception is allowed to the general rule---As there are distinct types of provisions in a fiscal statute and the purpose of each type of provision is different, therefore, the intention to impose or charge upon any subject must be shown by clear and un­ambiguous language---By applying the informal interpretation of rules and looking to the context in which the provisions are contained.

1989 PTD 961 rel.

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

----Ss.80-D, 80-DD, 50(5), 54, 9, 10, 14, 2(43) & 2(44)---Minimum tax on income of certain persons---Levy of surcharge---Before the assessee was taxed under Presumptive Tax Regime under S.80-D or 80-DD of the Income Tax Ordinance, 1979 his final tax liability was first calculated under the normal tax regime on the basis of total income as the return in this regard was being filed by the assessee in accordance with the law---Provisions of S.80-D or 80-DD of the Income Tax Ordinance, 1979 were applicable only when the liability under the normal law regime was taxed on this basis was less than the tax deducted under S.50(5) of the Income Tax Ordinance, 1979---In some cases it may be more than the tax calculated under the normal tax regime including the surcharge and it was against the very scheme of Income Tax Ordinance, 1979 to levy surcharge on an assessee who was already paying tax at an amount higher than the tax calculated under normal law regime which as per S. 80-D/80-DD of the Income Tax Ordinance, 1979 was the final tax liability including Income Tax and surcharge.

1989 PTD 961 and 2006 PTD 148 rel.

I.T.A. No.4453/KB of 2005 confirmed.

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

----Ss.9 & 10---Charge of Income tax, super tax and surcharge---Inducing sections---Schedule had nexus with certain sections in the main enactment, which were called the inducing sections, which control and regulate the Schedule---Inducing sections of the First Schedule are Ss.9 and 10 of the Income Tax Ordinance, 1979.

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

----Ss.10, 9, 14, 2(43), 2(44), 80-D, 80-DD & First Sehed., Part-III, Para-C---Charge of super tax and surcharge---Levy of surcharge on minimum tax under S.80-D of the Income Tax Ordinance, 1979---Validity---Under S.10 of the Income Tax Ordinance, 1979 surcharge was levied on the basis of assessed total income meaning thereby that where tax was not levied on the basis of assessed total income, no surcharge could be levied---In the present case it was not contended that tax under S.80-D or S.80-DD of the Income Tax Ordinance, 1979 was levied on the basis of the assessed total income and if tax was not levied on the basis of assessed total income, no surcharge could be levied---When the very scheme of Income Tax Ordinance, 1979 did not support the levy of surcharge on tax recovered, under S.80-D or 80-DD of the Income Tax Ordinance, 1979 in Para-C of Part-III of First Schedule of the Income Tax Ordinance, 1979 as certain sections of the Presumptive Tax Regime had been mentioned in Para-C---Certain sections of the Presumptive Tax Regime had been mentioned in Para-C only to clarify that wherein a person was assessed to tax under normal law regime and his income also includes a portion of income covered under the Presumptive Tax Regime the latter will be excluded---Sections 80-D and 80-DD of the Income Tax Ordinance, 1979 were separate and independent provisions of law having no direct nexus with the provision of the First Schedule and surcharge---Provisions of Part-III of the First .Schedule of the Income Tax Ordinance, 1979 regarding rates of surcharge were not relevant to Ss.80-D & 80-DD of the Income Tax Ordinance, 1979.

2002 PTD (Trib.) 2662 overruled.

I.T.A. no.4453/KB of 2005 confirmed.

Messrs Madni Ghee Mills's case I.T.As. Nos.1761 and 1774/LB of 20021 and Messrs Ellahi Cotton Mills and others v. Federation of Pakistan 1997 SCC 1097 ref.

2005 PTD 944 and I.T.A. No.5804/LB of 2005 not relevant (set aside assessment).

Jalal Ahsan, A.C.A. for Appellants Nos. 1 to 3.

Sh. Muhammad Yousaf, ITP for Appellant No.4.

Rana Javed Iqbal, D.R. (LTU) along with Jan Muhammad Ch., Legal Advisor of the Department.

2009 P T D (Trib.) 803

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos.5276/LB to 5278/LB of 2004, decided on 26th November, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss.80AA, 50(3A) & 12(5)---Agreement of Avoidance of Double Taxation Between Pakistan and U.S.A., Art. XI---Tax on income of non-residents from fees for technical service---Assessee in default---Deduction of tax at source---Assessee in default---Payment was made by the assessee/company to non-residents and payments made to non-residents from outside Pakistan by the non-resident share-holders of the company---Assessing Officer considered such professional charges as fee for technical services and assessee/company was declared as assessee-in-­default for non-deduction of tax---Validity---At the time of making assessment, Taxation Officer had not established that the claimed expenses were not related to income earned in Pakistan on the ground that the same were exclusively for the business carried out in Pakistan---Like-wise payments were made to non-residents having neither any fixed base in Pakistan for receiving such payments---Assessee was required to deduct tax under S.50(3) of the Income Tax Ordinance, 1979 only if the payment give rise to income which was liable to tax in Pakistan---Taxation Officer had assumed taxability without realizing the fact that the tax treaties empowered the Tax Department of Pakistan to charge tax only if such types of income were earned by maintaining fixed base in Pakistan---Taxation Officer had not conducted any enquiry to find out if there was any fixed basis of persons to whom the payments were made and had failed to establish taxability---In the subsequent years, similar treatment meted out by the Taxation Officer had not been approved by the Department itself and the contention of the assessee had been accepted by the A.D.R.C. which had been approved by the Federal Board of Revenue---No justification existed for treating the assessee/company as assessee in default---Order of First Appellate Authority was vacated and the orders passed by the Taxation Officer were annulled---Additional tax being consequential was also deleted by the Appellate Tribunal and appeal was allowed.

1985 PTD (Trib.) 877 ref.

Khaliq-ur-Rehman, F.C.A. for Applicant.

Rai Talat Maqbool, D.R. for Respondent.

2009 P T D (Trib.) 820

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.623/LB of 2000, 4874/LB to 4880/LB, 5697/LB to 5703/LB of 2005, decided 28th February, 2008.

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

----S.2(16)---Companies Act (VII of 1913), S.26---Companies Ordinance (XLVII of 1984), S.42---Companies---Association of persons---Chamber of Commerce and industry---Status---Although assessee was registered as limited company with the Joint Registrar of Companies under S.26 of the Companies Act, 1913 but the Appellate Tribunal did not subscribe to the view that it was a limited company in stricto senso with the object of doing business, therefore, filing of return with the status of Association of Persons was not acceptable to the Department---Assessee got prior permission from the Federal Government before it could get itself registered as a company with the Joint Registrar of the Companies---Such was a distinguishable feature which separates the assessee from other ordinary companies, which were involved in doing business because they could get themselves registered with the Joint Registrar of Companies after fulfilling the legal requirements prescribed under the law i.e. Companies Ordinance and Security and Exchange Commission Act etc., but were not under any legal obligation to seek prior permission from the Federal Government, as in the case of assessee---One had to go through objects of the company as set out in the Memorandum of Association and also the nature of activities involved before one could ascertain whether it was a limited company formed for the purpose of doing normal business activities or an association made for some other purposes i.e. charitable etc.

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

----S.2(16)---Companies Act (VII of 1913), S.26---Chamber of Commerce and Industry---Status---Assessee having objects like promoting and protecting the trade, commerce and industries and to watch over and protect the general industrial and commercial interests of the persons engaged in trade, `commerce and industries, clearly it was a charitable institution and it could not only dispense with the word "limited" but it could show its status as an Association of Persons at the time of filing of return---In the case of limited company veil could be lifted to ascertain true nature of a particular corporate body---Assessee could declare its status as a Association of persons despite the fact the it was registered as a limited company.

PLD 1985 SC 97; Commissioner of Income Tax, Madras v. Andra Chamber of Commerce (1965) ITR Volume 11 page 306; CIT East Pakistan, Dhaka v. Narain Ganj 1968 PTD 513 and Commissioner of Income Tax, Bombay v. Karachi Chamber of Commerce (1939) ITR Volume 7 Page 575 rel.

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

----S.22(b)---Income from business or profession---Chamber of Commerce and Industry---Doctrine of mutuality---Applicability---Receipts made on account of subscription/contribution, research/ development and TQM service were for the benefits of its members and no individual member could claim any specific service in consideration of contribution/subscription paid to the Chamber, therefore, the doctrine of mutuality was attracted in the case of assessee---Receipts made by the assessee on account of contribution/subscription, research and development contributions and TQM service etc., were not covered by the provisions of S.22(b) of the Income Tax Ordinance, 1979 and were not assessable.

1997 PTD (Trib.) 1034 rel.

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

----Second Sched., Cls. (93) & (94)---Exemption---Charitable purposes'---Any benefit for the purposes of welfare extended to a section of public would fall within the ambit ofcharitable purposes'.

Ameen Mouddin Foundation Ltd., Karachi v. Commissioner of Income Tax, East Karachi 1984 PTD 282; Ahmedabad Ran Caste Association v. Commissioner of Income Tax, Gujarat 704 ITR Volume 82; CIT East Pakistan, Dhaka v. Narain Ganj 1968 PTD 513; Commissioner of Income Tax, Bombay v. Karachi Chamber of Commerce (1939) ITR Volume 7 page 575; Commissioner of Income Tax, Madras v. Andra Chamber of Commerce (1965) ITR Volume 11 page 306; and Commissioner of Income Tax, New Dehli v. Federation of Commerce and Industry (1981) ITR Page 186; Ahmadabad Rana Caste Association v. CIT, Gujrat (1971) 82 ITR 704 (SC) and 1997 PTD (Trib.) 1034 rel.

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

----Second Sched., Cls. (93) & (94)---Exemption---Charitable pur­poses'---Chamber of Commerce and Industry---Object set out to protect the commerce, trade and industry would always be considered ascharitable'.

Ameen Mouddin Foundation Ltd., Karachi v. Commissioner of Income Tax, East Karachi 1984 PTD 282; Ahmedabad Ran Caste Association v. Commissioner of Income Tax, Gujarat 704 ITR Volume 82; CIT East Pakistan, Dhaka v. Narain Ganj 1968 PTD 513; Commissioner of Income Tax, Bombay v. Karachi Chamber of Commerce (1939) ITR Volume 7 page 575; Commissioner of Income Tax, Madras v. Andra Chamber of Commerce (1965) ITR Volume 11 page 306 and Commissioner of Income Tax, New Dehli v. Federation of Commerce and Industry (1981) ITR 186 rel.

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

----Second Sched., Cls. (89), (93) & (94)---Exemption---`Charitable purposes'---Chamber of Commerce &,Industry---Deleted Cl. (89) of the Second Schedule of the Income Tax Ordinance, 1979 was specifically meant for granting-exemption to bodies like Chamber of Commerce but deletion of one clause did not stop operation of other clauses still appearing in the statute book.

CIT East Pakistan, Dhaka v. Engineers Limited (1967) SCC 289 ref.

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

----Second Sched., Cl. (94)---Exemption---`Charitable purposes'---Chamber of Commerce & Industry---Clause (94) of the Second Schedule of the Income Tax Ordinance, 1979 refers to income received by the charitable institution through voluntary contribution to bring it within the domain of grant of exemption---Chamber of Commerce was a charitable institution and its contribution was also voluntary in nature---Despite the fact that Cl. (89) of the Second Schedule of the Income Tax Ordinance, 1979 was no more in the statute book, the case of the assessee would stand covered by Cl. (94) of Second Schedule of the Income Tax Ordinance, 1979 and contributions received by the Chamber of Commerce from its members would be exempt from incidence of taxation.

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

---S.62---Assessment on production of books of accounts, etc.---Profit and Loss expenses---Disallowance:-Taxation Officer had not uttered even a single word while making add backs under various heads of Profit & Loss account---No notice under S.62 of the Income Tax Ordinance, 1979 was ever issued and at no stage the same was confronted to the assessee---Assessing Officer had miserably failed to cite any instance of un-vouch unverifiable item of expense---Such additions could not be clothed with the cover of legal sanctity---Appellate Tribunal directed to delete the same.

Dr. Muhammad Sharif Ch. and Ch. Mumtaz-ul-Hassan for Appellant (in I.T.As. Nos.623/LB of 2000, 2874/LB to 2880/LB of 2005).

Mian Yousaf Umer, L. A. for Respondent (in I.T.As. Nos.623/LB of 2000, 2874/LB to 2880/LB of 2005)

Mian Yousaf Umer, L.A. for Appellant (in I.T.As. Nos.5697/LB to 5703/LB of 2005).

Dr. Muhammad Sharif Ch. and Ch. Mumtaz-ul-Hassan for Respondent (in I.T.As. Nos.5697/LB to 5703/LB of 2005).

2009 P T D (Trib.) 869

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.As. Nos.1335/LB and 1336/LB of 2007, decided on 17th April, 2008.

(a) Income-tax---

----Income and expenses---No concept of earning income without incurrence of expenses.

2005 PTD (Trib.) 2161 rel.

(b) Income-tax---

----Composite business---Allocation of expenses---Assessee's business was composite business where certain expenditure had relation with various sources of income, despite it that there were certain expenditures which were directly relatable to any one of the sources of income---Expenditures which were general in nature or could not be assigned to any one source were to be prorated after proper scrutiny---Expenditure should be allocated to each head of income with the supporting evidence---Order passed by both the authorities below was vacated by the Appellate Tribunal in a manner that the assessee was directed to precisely submit the claim of expenses in a manner that its incurrence should be co-related to the nature of income so that it could be allocated to each specific head of income and Assessing Officer was directed to objectively analyze the claim and proceed properly by confronting the assessee.

(c) Income-tax---

----Value of export sales for proration of expenses---Foreign commission---Contention that sales were to be shown by deducting the commission was not tenable because the amount against sales had been realized for the total amount of goods shipped i.e. without any element for deduction of commission.

(d) Income-tax---

----`FOB Value'---Meaning---FOB means the expenses till the shipment of goods or consignment was to be borne by assessee as exporter---. Foreign commission paid, by no stretch of imagination, could be made part of expenses towards shipment.

(e) Income-tax---

----Prorating of expenses---Export sales---Deduction of foreign commission---Validity---Inclusion of foreign commission paid in sales was not with a view to allocate any expenditure but it was simply for the reason that the assessee had received the entire amount against the value of sales and the buyer had paid it as a price for the goods purchase---Expenditure of foreign commission had been incurred with a view to secure the business of export which, in no way, had any bearing on the value of sales proceeds realized---Value realized against the sales without any deduction which should be a basis for proration of expenditure.

(f) Income-tax---

----Proration of expenses---Duty drawback---Duty drawbacks represent the amount of custom duty rebates received on export of goods---Such duty drawbacks were taken by the assessee as part of export proceeds i.e. not offered for separate taxation under normal law but claimed as an amount on which tax had already been paid on a deduction by the bankers after realization of export proceeds---Duty drawbacks were to be taken as part of sales for proration of expenditure keeping in view the stance of the assessee itself.

2001 PTD 1030 ref.

1997 PTD (Trib.) 1143 not relevant.

(g) Income-tax---

----Duty drawbacks---Taxation of---Validity---Duty drawbacks had been allowed to be taken as part of export proceeds, thus were not chargeable to tax separately under normal law over and above the exports.

2001 PTD 1030 and 1970 PTD (Trib.) 879 rel.

(h) Income-tax---

----Proration of expenditure---Duty drawbacks---Inclusion of duty drawbacks in export sales for proration of expenditure---Validity---Duty drawbacks were the part of export sales so duty drawbacks shall be included in export sales for proration of expenditure to export sales and normal sales.

(i) Income-tax---

----Proration of expenditure---Foreign commission---Sales without deduction of foreign commission from export sales would form basis for proration of expenses towards export sales.

Muhammad Iqbal Kh. for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

2009 P T D (Trib.) 888

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Mian Masood Ahmad, Accountant Member

M.As. Nos.200/LB to 204/LB of 2008, decided on 25th June, 2008.

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

----S.156---Rectification of mistake---Additional grounds---Department filed additional grounds through miscellaneous application, drawing attention of the Appellate Tribunal that the same had not been made part of the main order though filed earlier---Validity---Authorized Representative of the Department denied any information regarding filing of miscellaneous applications for additional grounds with further categorical denial that the department had not provided any copy prior or after the filing of the same in the Appellate Tribunal---Main appeals had been disposed of after hearing both the parties and department was particularly represented by the D.R. who failed to point out submission of any additional grounds at that time.

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

----S.156---Rectification of mistake---Ignoring of binding judgment of High Court---Mistake apparent from record---Applications seeking rectification were filed by the assessee before the Taxation Officer relying upon a judgment of the High Court which was available at the time of framing assessment by the Assessing Officer but the findings of High Court with the citation were ignored---Held, First Appellate Authority rightly allowed relief as ignoring any binding judgment of High Court was a mistake apparent from the record.

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

----S.156 (3)---Income Tax Ordinance (XLIX of 2001), S.221---Rectification of mistake---Assessment year 2000-01---Limitation---Expiry of limitation at the time of repeal of Income Tax Ordinance, 1979 and on promulgation of Income Tax Ordinance, 2001---Effect---Limitation prescribed under 5.156 (3) of the Income Tax Ordinance, 1979 had not expired at the time of repeal of Income Tax Ordinance, 1979 and on promulgation of Income Tax Ordinance, 2001---Limitation as prescribed under S.221 of the Income Tax Ordinance, 2001 had governed it by extending the period of limitation by one year.

Ghazanfar Hussain, D.R. for Appellant.

Asim Zulfiqar Ali, A.C.A./A.R. for Respondent.

2009 P T D (Trib.) 900

[Income-tax Appellate Tribunal Pakistan]

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

M.A. (AG) Nos.119/LB, 120/LB, W.T.As. Nos.153/LB and 154/LB of 2007, decided on 7th March, 2009.

Wealth Tax Act (XV of 1963)---

----Ss. 3, 16(5) & 23---Charge of wealth tax---Assessment---Representative of the company contended that the company did not own any immovable property which could be subjected to wealth tax as done by the Assessing Officer---Reassessment proceedings were finalized ex parte and the assessee was once again condemned unheard and the "core" issue of ownership of property which was a "sina qua non" for levy of wealth tax was missing in the case---Documentary evidence of the property was also furnished---Validity---Case was remanded by the Appellate Tribunal to the assessing authority for de novo assessment after taking into account the assessee's contention along with supporting documentary evidence that the assessee did not own the property in question and levy of wealth tax was unwarranted in the case---Assessing Officer was further directed to provide opportunity to the assessee to present his case and assessee was also advised in his own interest to cooperate in the re-assessment proceedings.

Siraj-ud-Din Khalid for Appellant.

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

2009 P T D (Trib.) 902

[Income-tax Appellate Tribunal Pakistan]

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

S.T.A. No.405/LB of 2002, decided on 6th May, 2006.

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

----Ss.2(25), 2(37), 2(14), 7, 8, 10, 14, 22, 23, 26, 34 & 36---Registered person---Person liable to be registered---Adjustment of Input tax---Tax period 1-7-1998 to 27-7-1998---Adjustment of input tax was found recoverable along with additional tax on the ground that taxpayers were registered with the Sales Tax Collectorate on 28-7-1998 whereas they availed inadmissible input tax adjustment against sales tax invoices received during the period 1-7-1998 to 27-7-1998 when they were not registered as according to provisions of S.7 of the Sales Tax Act, 1990 an unregistered person was neither entitled to claim input tax adjustment nor authorized to issue sales tax invoices---Taxpayers contended that during the period July, 1998 the definition of registered person covered the person who was registered or was liable to be registered; as the persons liable to be registered were also covered under the definition of registered person and were entitled for all the benefits which were available to registered persons---Validity---Taxpayers during such period had verified the relevant invoices and confirmed sales tax payment against such invoices---Invoice had been found duly reflected in purchase register---Sales tax had also been paid against invoices issued during such period as well reflected in the monthly return---Such invoices had also been reflected in sales register of the party---Suppliers had verified issuance of invoices and also confirmed payment of sales tax---Application for registration indicated the date of commencement of business as 1-7-1998---During the period registered person was entitled under the law to claim/receive input tax credit on the supplies received as the definition of registered person also covered the persons who were liable to be registered---Taxpayers were allowed to issue tax invoices under the provisions of S. 23 of the Sales Tax Act, 1990 as they were covered under the definition of registered person under S.2(25) of the Sales Tax Act, 1990 in July, 1998---Departmental appeal was dismissed being devoid of merit by the Appellate Tribunal.

(b) Sales Tax---

----Show-cause notice---Scope---Neither charge of any fraudulent act was raised by the detecting agency against the registered person nor there was any allegation of tampering with documents against the registered person in the show-cause notice---Department could not go beyond the scope of charges raised in the show-cause notice.

Saleem Akhtar, Supdt. for Appellant.

Falak Sher, Consultant for Respondent.

Date of hearing: 30th November, 2005.

2009 P T D (Trib.) 918

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.748/LB to 750/LB of2007, decided on 13th September, 2008.

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

----S. 12(18)---Addition---Loan---Assessee claimed that loan was received from the company through cheque, which stance was duly verified by the bank but Assessing Officer found that the word `cash' used in the bank statement necessitated an action under S.12(18) of the Income Tax Ordinance, 1979---Proceedings were initiated and addition was made---Validity---Routing of loan amount through banking channel had been proved to an undeniable extent, as far as the splitting of the amount of crossed cheque by crediting to two different persons though husband and wife under the instructions of the issuing company could also not be proved as false in the light of written instructions of issuing company duly certified by the banks---Assessing Officer had not at all stated that such exercise by the assessee was to make back-dated entries in an attempt to cover up some transactions---Provisions of S.12(18) of the Income Tax Ordinance, 1979 were not attracted in such cases because money had been routed through proper banking channel.

2007 PTD 1377 rel.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Addition in the case of Director of company had been made under S.12(18) of the Income Tax Ordinance, 1979 where the company in which he was Director had directly made certain payments on his behalf to the third parties---Such transactions did not attract the provisions of S.12(18) of the Income Tax Ordinance, 1979---Appellate Tribunal directed that such addition shall be deleted.

2007 PTD 1377 rel.

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

----S.13(1)(d)---Unexplained investment etc., deemed to be income---Addition---Addition was made by discarding price as recorded in the registered purchase deed but by simply referring to other cases without specifying the locality---For dislodging the price as recorded in the registered sale deed, the reference was to be based on the exact location, size and ambient circumstances which had not, been done---Appellate Tribunal directed that addition under S.13(1)(d) of the Income Tax Ordinance, 1979 shall be deleted in circumstances.

Asim Zulfiqar Ali, A.C.A. and Zulfiqar Ali Sheikh, I.T.P./A.Rs. for Appellant/Assessee.

Javed Iqbal Rana, D.R. for Respondent/Department.

2009 P T D (Trib.) 927

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmad, Chairperson and Istataat Ali, Accountant Member

I.T.A. No.94/IB of 2008, decided on 2nd August, 2008.

Income Tax Ordinance (XLIX OF 2001)---

---Ss. 177, 174(2), 120 & Chap. X, Part-VIII---Income Tax Rules, 2002, R.30(3)---Audit---On desk audit of tax return it was observed that assessee claimed profit and loss expenses at the rate of 65% of the gross private medical practice receipts---Case was selected for audit under S.177 of the Income Tax Ordinance, 2001---Books of account were not produced and evidence in support of expenses was not furnished by the assessee---Declared version was rejected and assessment was finalized by allowing expenses at the rate of 15% of the gross private medical practice receipts---First Appellate Authority observed that ex parte assessment was finalized without following the due process of law and assessee's claim of expenses was curtailed in total disregard of the facts and treatment meted out in other parallel cases---Selection of case for audit was upheld by the First Appellate Authority and ordered that profit and loss account expenses should be allowed at the rate of 60% of the receipts---Validity---First Appellate Authority had unrealistically directed to allow expenses @ 55% of the receipts---Assessing Officer, without following the procedure laid down in Part-VIII of Chapter X of the Income Tax Ordinance, 2001, disallowed/curtailed the expense under S.174(2) of the Income Tax Ordinance, 2001 claimed by the assessee under various heads---Spirit of changes with regard to audit proceedings brought about through Income Tax Ordinance, 2001 was altogether overlooked by the assessee, by the Taxation Officer and also by the First Appellate Authority---No taxpayer could now state that account books were not maintained by him because in the verification part of tax return form he testifies that account books were properly maintained---While carrying out audit, it was essential that such books were produced for examination of Taxation Officer---Taxation Officer had to examine these books and give a clear finding about admissibility as well as verifiability of every item of expenditure---Expenses had to be allowed only to the extent of admissibility and verifiability---Expenses, which failed to stand the test of admissibility and verifiability could be straightaway disallowed---Fixation of certain percentage of expenses by both the authorities below was against the spirit of law and such fixation could not be approved---Assessment order was remanded back to Assessing Officer with the directions that all the legal requirements should be strictly fulfilled and all the objections raised by the assessee should be judiciously considered--Detail of expenses should be first called for from the assessee and realistic comparison of the same with the information obtained from hospital should be carried in a judicious manner to find out discrepancy therein, if any---Expenses on those items, which were not provided by the hospital should be critically examined in order to ascertain their nexus with business/profession of the assessee and no disallowance should be made unless it was undoubtedly established that these items of expenditure were not actually incurred by the assessee---Assessee should also be provided with reasonable opportunity to put forth his explanation, which should be considered in accordance with the relevant provisions of law.

Mir Alam Khan, D.R. for Appellant.

Respondent in person.

2009 P T D (Trib.) 938

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2237/LB of 2005 and 1223/LB of 2006, decided on 2nd July, 2007.

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

----S.22---Income from business or profession---Sale of export quota---Amount realized on sale of export quota was not offered to tax by the assessee with the contention that it was covered under presumptive tax regime being part of export sale proceeds like export rebate etc.---Assessing Officer assessed the same under normal tax regime as business income under the provisions of S. 22 of the Income Tax Ordinance, 1979 stating that it was recurring in nature and permission to export had been sold out within the country did not amount to export sales proceeds---Validity---Nothing had physically been exported by the assessee nor any amount had been realized in terms of foreign exchange by the assessee on export of it---Assessing Officer had charged it to tax as income from normal business activity under S. 22 of the Income Tax Ordinance, 1979 and with this background of the matter, certain questions arose which remained unanswered at assessment stage such as (i) exports were effected in whose name whether the assessee of the purchaser of export quota; that export sales proceeds had come into whose possession and what channel of its receipt was adopted and that various rebates on exports allowed by the Government were how actually received by whom and the mode of its receipts from such Government departments---Only on finding out the answers to such questions by the Assessing Officer that exactly the taxability of its could be determined in the hands of assessee---Matter was remitted back to Assessing Officer by the Appellate Tribunal to proceed by bringing on record the answers to such questions and also directed to pass speaking order after allowing proper opportunity of being heard to assessee.

(b) Income Tax---

----Deferred cost---Merger---Prior to merger amortization of deferred cost was allowed in the hands of assessee---Assessing Officer despite acknowledging the allowing of such amount in the hands of taken over company/assessee had still not allowed simply for the reason that addition was warranted---Arbitrarily departure from the history was against the principle of consistency as the right once granted could not be unilaterally withdrawn---Appellate Tribunal directed that amount claimed should be allowed as a deduction in the year also.

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

----Ss.221 & 23(5)---Finance Act (I of 2003), Preamble---Rectification of mistake---Initial depreciation---Disallowance of claim of initial depreciation by rectification under S. 221 of the Income Tax Ordinance, 2001 when the department noticed that as per pre-amendment provisions contained in S. 23 (5) of the Income Tax Ordinance, 2001, the assessee was not entitled to claim the initial depreciation on building---Rectification proceedings were initiated against a deemed order by developing an understanding that pre-amended provisions of S.23(5) of the Income Tax Ordinance, 2001 remained relevant only for tax year 2003 so rectification under S. 221 of the Income Tax Ordinance, 2001 was made to disallow the initial depreciation claimed---Validity---When rectification proceedings were initiated, the amended provisions of S.23(5) of the Income Tax Ordinance, 2001 were on the statute book---Revenue was first required to establish that even the amended provisions were legally inapplicable but nothing had been spelled out on it; secondly, how far only the intervention period the claim was to be disallowed, when department was allowing .preceding and succeeding years; and thirdly, with this backdrop as to whether it was a mistake within the purview of S.211 of the Income Tax Ordinance, 2001 or not---Amendment in S.23(5) of the Income Tax Ordinance, 2001 was remedial or clarifactory in nature and had retrospective and retroactive effect---Revenue was not empowered to proceed under S. 221 of the Income . Tax Ordinance, 2001 on the basis of such provisions which, at the material date, were non existent---Appellate Tribunal directed that claim for initial depreciation was rightly made and should be allowed.

Jalal Ahsan, F.C.A. for Appellant.

Jan Muhammad Ch. L.A. and Muhammad Aslam, D.R. for Respondent.

2009 P T D (Trib.) 947

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmad, Chairperson and Istataat Ali, Accountant Member

I.T.As. Nos.277/IB to 280/IB of 2008, decided on 27th August, 2608.

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

----S. 221(1)---Rectification of mistake---Appeal was rejected by the First Appellate Authority---Assessee moved application for rectification stating that notice of hearing was not delivered properly---First appellate authority observed that call notice was not properly served and recalled its order after considering facts---Assessment was set aside with the directions to re-frame it on merits after providing reasonable opportunity of hearing to assessee---Department contended that First Appellate Authority had no powers to recall its own order and rectification was contrary to law---Validity---When a decision was given after careful consideration of facts, rectification could not be made in a case in the same set of circumstances and in such situation no attempt could be made to circumvent the law-First appellate authority had given a conscious decision through which assessee's appeal had been rejected---Mistake or an error could be rectified only where it was floating on the surface of record and it did not involve reappraisal of facts or evidence---First appellate authority did not have powers under the law to recall its order for rectification---Proper course of action was that the taxpayer should have agitated the matter in appeal before appellate tribunal, who was competent to take into account all the relevant facts to arrive at a judicious conclusion---Order of First Appellate Authority passed under S.221(1) of the Income Tax Ordinance 2001 was not only illegal but also in violation of judicial discipline because First Appellate Authority had reversed its own order by way of sitting as a judge on its own findings---Order passed under S. 221 of the Income Tax Ordinance, 2001 by the First Appellate Authority was vacated by the Appellate Tribunal and restored its original appellate order.

Shaukat Masood v. Federation of Pakistan Civil Petition Nos.752, 753, 754, dated 27-2-2008; 2007 PTD 967; 1992 SCMR 687; 2003 SCMR 1401 and 2000 PTD 306 rel.

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

----Ss.182, 184, 186 & 114(4)--- Income Tax Ordinance (XXXI of 1979), Ss. 61, 62, & 13(1)(aa)---Penalty for failure to furnish a return or statement, concealment of income and for non-compliance with notices---Return was neither filed suo motu nor in response to notices---Notices issued remained uncomplied with---Assessment was framed ex parte--Penalty orders were passed ex parte and penalties were imposed---First appellate authority deleted such penalties with the observations that penalties were levied without establishing actual concealment as well as wilful default of notices---Department contended that First Appellate Authority was not justified to delete such penalties specially in view of the fact that ex parte assessment order on the basis of which penalties were imposed was confirmed by the First Appellate Authority---Validity---Deletion of penalties was fully justified as the penalties were imposed without establishing wilful concealment of income or intentional default of statutory notices---Although, appellate tribunal reversed the orders of First Appellate Authority regarding assessment of income on technical grounds but the penalties were not imposed according to law ---Orders of First Appellate Authority on deletion of penalties were upheld by the appellate tribunal and rejected the departmental appeals.

1981 PTD (Trib.) 15; 2003 PTD (Trib.) 1085; 1998 PTD (Trib.) 3507; (2003) 87 Tax 426; 2004 PTD (Trib.) 1225; 2001 PTD 678 and 2005 PTD 1 rel.

Muhammad Zaheer Qureshi, D R for Appellant.

Khalid Masood for Respondent.

2009 P T D (Trib.) 953

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.A. No.595/LB of 2005, decided on 3rd June, 2008.

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

----Ss. 52 & 86---S.R.O. No.586(I)/91, dated 30-6-1991---Liability of persons failing to deduct or pay tax---Purchase of diesel and buses---Assessee was taken as "assessee-in-default" in respect of payment made towards diesel purchases and for payment on account of purchase of buses---First Appellate Authority noticed that payments made for diesel purchases was not liable to tax deduction as per S.R.O. No. 586(I)/91, dated 30-6-1991 and deleted the same---Tax deductions on account of payments for purchase of buses was also deleted for the reason that the recipient had discharged its tax liability---Validity---Deletion of tax on account of payments made for petroleum products were quite in compliance with the S.R.O. No.586(I)/91, dated 30-6-1991---Tax levied for non-deduction of tax on payment on account of purchase of buses had also been properly deleted as it was wholly supported by Full Bench order of Appellate Tribunal---Departmental appeal was dismissed by the Appellate Tribunal.

2000 PTD (Trib.) 2883 rel.

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

----S.52---Liability of persons failing to deduct or pay tax---When recipient had discharged its liability of tax, then proceedings against the taxpayer under the provisions of S.52 of the Income Tax Ordinance, 1979 would amount to double taxation.

2000 PTD (Trib.) 2883 rel.

Dr. Muhammad Akram Khan, D.R., for Appellant.

Ahmad Nauman, I.T.P./A.R. for Respondent.

2009 P T D (Trib.) 961

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.As. Nos. 5930/LB of 2003, 3584/LB of 2004, 4862/LB and 4863/LB of 2005, decided on 13th May, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Cl. (126-D) & S.80-D---Protection of Economic Reforms Act, (XII of 1992), Preamble---Exemption---Assessee claimed exemption under Cl. (126-D) of the Second Schedule to the Income Tax Ordinance, 1979 and consequent to it, exemption from the provision of minimum tax under S.80-D of the Income Tax Ordinance, 1979---Validity---Provisions of S.80-D of the Income Tax Ordinance, 1979 will not be attracted as the exemption under Cl. (126-D) of the Second Schedule to the Income Tax Ordinance, 1979 was covered in the Economic Reforms Act, 1992---Preamble to Second Schedule to the Income Tax Ordinance, 1979 had clear cut overriding effect on the provisions of the Income Tax Ordinance, 1979 and had made the exemption available particularly the insertion of Cl. (126-D) of the Second Schedule to the Income Tax Ordinance, 1979 was later to insertion of S.801) of the Income Tax Ordinance 1979 in the main statute---Provisions of S.80D of the income Tax Ordinance, 1979 will not become applicable as the assessee was enjoying exemption under Cl. (126-D) of the Second Schedule to the Income Tax Ordinance, 1979.

2001 PTD 1829; 2006 PTD (Trib.) 1968 and Ellahi Cotton Mills's case 1997 PTD 1555 rel.

2001 PTD 1203; 2007 PTD 1999 and 2001 PTD (Trib.) 865 ref.

Shahbaz Butt, A.R. for Appellant.

Masood Akhtar Shaheedi, D.R. (ITU) for Respondent.

2009 P T D (Trib.) 982

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Mian Masood Ahmad, Accountant Member

M.A. (AG) No.51/LB of 2007 in I.T.A. No.7490/LB of 2005, decided on 17th May, 2008.

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

----Ss.66-A & 62---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Proration of expenses---Sales were taken as inclusive of sales tax---When assessment was framed by proration of expenditure towards income under normal law assessable, the figures of sales were taken by the assessee as inclusive of sales tax and same was adopted by the assessing panel---Department noticed that by including the sales tax in sales for proration of the expenditure to it, was incorrect because it had resulted in higher allocation of expenditure towards normal sales as sales were to be net i.e. exclusive of sales tax---Validity---Including the sales tax in sales and then claiming it as expenditure in Profit & Loss Account was erroneous and prejudicial to the interest of Revenue as sales tax was not an expenditure but it was always by adjustment of payment and receipts of sales tax with its net effect was accounted for---Sales tax when charged in sales invoices and recovered was subject to adjustment against the sales tax on purchases made where the assessee had paid the amount---Such was erroneous as well as prejudicial to the interest of Revenue for the reason that on the one hand, the allocation of expenditure was by higher ratio than actual on the basis of net sales and higher amount had been charged to the normal tax regime---Straightaway deduction of sales tax had been as a part of Profit & Loss Account expenditure had double fold adverse effect on net income assessable under normal law---It was an admitted fact as well as a legally permissible practice that sales tax paid and received were liable to adjustments and/or excluding it from the sales---Treatment given in order under S.62 of the Income Tax Ordinance, 1979 was both erroneous as well as prejudicial to the interest of Revenue---Invocation of S.66-A of the Income Tax Ordinance, 1979 was maintained by the Appellate Tribunal.

1986 SCMR 968; 2002 PTD (Trib.) 1997; 1992 PTD 1671; 2002 PTD 1014; 2004 PTD 330; 2002 PTD 1699; 2002 PTD 2542; 1992 PTD 1681; 2006 PTD 2678; 2008 PTD (Trib.) 47; 1993 PTD 1113; 1993 PTD (Trib.) 1116; 2006 PTD (Trib.) 2680; I.T.A. No.134 of 1998; I.T.A. No.135 of 1998; I.T.A. No.78/LB of 1992-93; I.T.A. No.1591/LB of 1996; I.T.A. No.1952/LB/1996; I.T.A. No.1598/LB of 1996; I.T.A. No.4016/LB of 2001; I.T.A. No.3533 to 3535 of 1992-93 to 1994-95; Messrs Jamhoor Textile Mills Ltd., DCIT/WT, Circle-7, Coys. Zone-I, Lahore in the case of Messrs Gojra Samundri Sugar Mills Ltd. 1995-96 to 1997-98 and Assessment Order dated 21-12-2001 passed by the Income Tax Panel-IV, Special Zone, Lahore in the case of Messrs Lahore Textile & General Mills Ltd. Lahore pertaining to the assessment year 2000-01 ref.

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

----Ss.66-A & 62--Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Forwarding expenses---Proration of local sales and exports---No material had been brought by either party to resolve this factual controversy---It was a factual controversy as providing that it was relatable to local or export sales or to both, only then a decision over it could be made----Assessing Officer was directed that in re-assessment an opportunity to the assessee shall be allowed to explain its duly substantiated point of view.

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

----Ss.66-A & 62---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order--Financial charges proration of---Department was attributing the financial charges as not entirely chargeable to business carried on because the bank borrowings had been used for making advances to associated companies--Amount of net advances and accumulated losses in the balance sheet indicated that compulsorily funds were not available for advancing the loans to the associated companies from own available cash---Explanation submitted by the assessee had no relevance with the issue---Action of revising authority was maintained by the Appellate Tribunal but in the re-assessment, it was directed that another opportunity shall be afforded prior to drawing any adverse inference---Care should be exercised in proceeding for disallowing the expenditure in a manner that it should not be contrary to the facts and against the law.

Kh. M. Iqbal, A.R. for Appellant.

Dr. Malik Muhammad Khan, D.R. (IT.U.) Respondent.

2009 P T D (Trib.) 996

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.A. No.1385/LB of 2006, decided on 3rd June, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss.80C(2)(a)(i) & 143-B---Tax on income of certain contractors and importers-Software engineering services---Assessment was framed in a manner that receipts claimed to be covered under the normal tax regime were taken as chargeable under presumptive tax regime under S.80C of the Income Tax Ordinance, 1979 and created tax demand @ 5% on local sales---Assessee's contention that receipts were as a result of software engineering services which did not fall in the presumptive tax regime but were liable to be charged under normal tax regime but such contention was turned down by urging that providing software services were other than the payments on account of services rendered---First Appellate Authority directed to charge tax on local receipts under normal law by excluding it from presumptive tax regime---Validity---Provisions of law exactly supported the contentions of assessee that the services rendered in software engineering was not covered within the presumptive tax regime as such services were other than specified therein---Other factors also proved that the treatment accorded by the department being inconsistent with exactly identical business in which the department had itself made the taxability under normal tax regime for exactly similar nature of receipts---Department had itself issued exemption certificate, exempting the assessee from tax deduction, the payments made to the assessee as recipient, thus accepted the taxability under normal tax regime---Order of First Appellate Authority was upheld by the Appellate Tribunal and departmental appeal being devoid of merit, was dismissed.

(2005) 91 Tax 263 ref.

Systems (Pvt.) Ltd. (NTN 07-054707331); 2005 PTD (Trib.) 668 and ITAT's Order, dated 7.1-2006 in I.T.A. No. 6875/LB of 2004 rel.

Dr. M. Akram Khan, D.R. for Appellant.

Abdul Hameed Ch., F.C.A./A.R. for Respondent.

Date of hearing: 3rd June, 2008.

2009 P T D (Trib.) 1117

[Income-tax Appellate Tribunal Pakistan]

Before Jawad Masood Tahir Bhatti, Judicial Member and Anwar Ahmed, Accountant Member

M.A. (Cond.) No.1/LB of 2009 and I.T.A. No.1028/LB of 2008, decided on 20th January, 2009.

(a) Income-tax---

----Condonation of delay----Assessee was out of country for a month and due to his absence in the country there had been delay in filing the appeal---Affidavit had also been filed---Sufficient cause had been shown for late filing of appeal--Delay in filing the appeal was condoned by the Appellate Tribunal and appeal filed by the assessee was treated to be filed in time.

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

----Ss. 122(4), 115(4) & Second Sched., Part-IV, Cl.41---Income Tax Ordinance (XXXI of 1979), S. 143B & Second Sched., Part-IV, Cl. (40)---Finance Act (VII of 2005), Preamble---C.B.R. Circular No. I of 2005, dated 6-7-2005---S.R.O. 1130(I)/2005, dated 14-11-2005---Amendment of assessment---Tax year, 2005---Assessee was individual and filed statement under 5.143-B of the Income Tax Ordinance, 1979 for the tax years, 2003 and 2004 in routine, being a manufacturer, under Cl. (40) Part-IV of Second Schedule to the Income Tax Ordinance, 2001-Return filed for the tax year, 2005 was treated under Presumptive Tax Regime' on the ground that appellant was under legal obligation to file statement under S.115(4) of the Income Tax Ordinance, 2001 for the subsequent three years since he had himself opted forPresumptive Tax Regime'---Validity---For the period 1-7-2005 to 13-11-2005 there was no option available with the manufacturers so they had to file returns and returns so filed were not only valid but this was the requirement of law at that time---Appellant had rightly filed return of income under S.114 of the Income Tax Ordinance, 2001 because the statement filed under S.115(4) of the Income Tax Ordinance, 2001 for previous year did not constitute option to be assessed under Presumptive Tax Regime' and for the reasons that the law at the time of filing of return did not provide any option to the manufacturer for being assessed underPresumptive Tax Regime'---Taxpayer had rightly filed return and there was no justification for invoking S.122 of the Income Tax Ordinance, 2001---Order of First Appellate Authority was vacated by, the Appellate Tribunal and order passed by the Taxation Officer under S. 122(4) of the Income Tax Ordinance, 2001 was cancelled.

2005 PTD (Trib.) 2029 rel.

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

----S. 115(4) & Second Sched., Part-IV, Cl. 41---Income Tax Ordinance (XXXI of 1979), S.143B & Second Sched. Part-IV, Cl. (40)--Finance Act (VII of 2005), Preamble---C.B.R. Circular No.1 of 2005, dated 6-7-2005--S.R.O. 1130(I)/2005, dated 14-11-2005.

Persons not required to furnish a return of income---Tax year, 2005---Manufacturers---Summary of legal position emerges from provisions of law.

(d) Income-tax---

----Presumptive tax Regime'---Any statement filed in earlier years did not mean filing of option because option forPresumptive Tax Regime' was to be filed in writing and that too within three months of the commencement of the tax year whereas statement was filed after the closure of tax year.

2005 PTD (Trib.) 2029 rel.

M. Atta-ur-Rehman, ITP for Appellant.

Mrs. Sabiha Mujahid, D.R. Respondent.

2009 P T D (Trib.) 1136

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Anwar Ahmed, Accountant Member

I.T.As. Nos. 1316/LB to 1318/LB of 2002, decided on 3rd February, 2009.

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

----Ss. 65, 13(1)(aa) & 59(1)---Additional assessment---Assessment finalized under S.59(1) of the Income Tax Ordinance, 1979 was reopened on an anonymous complaint regarding concealment of actual profit and income---Validity---Under S.13(1)(aa) of the Income Tax Ordinance, 1979, the unexplained investment could be deemed to be income of the assessee if it was found that assessee had made any investment or was found to be owner of any money or valuable articles in any year---Assessing Officer failed to bring on record that assessee was found to have made any investment or was to be found to be the owner of money or valuable articles in any of the years---Assessee specifically explained that being wholesaler, the commission earned by him had been further distributed to the retailers---Burden of proof was on the department to establish that assessee had made any investment or was found to be the owner of any or valuable articles which onus had not been fulfilled by the Assessing Officer---No notice had been served on the assessee---First Appellate Authority had remanded the assessment affording the Assessing Officer to fill in the legal gaps and lacunas which was not justified---Order of the First Appellate Authority was vacated and order passed under Ss.62/65 of the Income Tax Ordinance, 1979 was annulled being without any justification---Assessments completed under S.59(1) of the Income Tax Ordinance, 1979 was restored by the Appellate Tribunal.

2003 PTD (Trib.) 1956; (1982) 45 Tax (sic); 1999 PTD (Trib.) 705 and 1988 PTD (Trib.) 117 rel.

1989 PTD (Trib.) 39 and 1996 PTD (Trib.) 896 ref.

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

---S. 65(2)---Additional assessment---Setting aside of assessment after pointing out discrepancies---Validity---Assessee was granted final adjournment for 25-4-2001 but in the diary sheet there was no entry for the date 25-4-2001 and next entry was 28-4-2001 for which date the 'assessee had no intimation for appearance and order had been passed on 30-4-2001 whereby the case was entered in the demand and collection register which had also not been initialed/signed by the Assessing Officer---After finding such discrepancies, there was no justification for remanding the matter---Condition precedent for reopening of already completed assessment with the Assessing Officer must have come into possession of a `definite information' of a concealment based on material evidence which otherwise was not available at the time of completing the original assessment.

(1982) 45 Tax (sic) rel.

(c) Income-tax---

----Legal plea going to the root of the case, could be allowed even at a belated stage of the proceedings.

1999 PTD 401 and 1976 PTD 56 rel.

Zulifqar Ali Sh., ITP for Applicant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2009 P T D (Trib.) 1149

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairperson and Istataat Ali, Accountant Member

I.T.As. Nos. 394/IB and 395/IB of 2008, decided on 27th November, 2008.

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

----Ss.26(b), First Sched. & Fifth Sched.---Special provisions regarding business of insurance and production of oil and natural gas and exploration and extraction of other mineral deposits---Rate of tax---Assessee contended that specific provisions had been laid in S.26(b) of the Income Tax Ordinance, 1979 to the effect that rules contained in Part-I of Fifth Schedule of the Income Tax Ordinance, 1979 shall not apply for the purposes of working out profits and gains and tax payable thereon in respect of income of companies who discovered petroleum (including natural gas) before 24-9-1954---In such conditions, rates of tax on income of companies as contained in First Schedule to the Income Tax Ordinance, 1979 were applicable---Tax was payable @ 35% in assessment year 1997-98 and 33% in assessment year 1998-99 on company's income in the light of provisions contained in First Schedule to the Income Tax Ordinance, 1979---Assessing Officer was not justified to apply tax 50% on company's income and First Appellate Authority was not legally correct to uphold the same---Validity---On 24-9-1954 no separate Schedule existed in the Income Tax Act, 1922, about working out tax liability of petroleum companies---With the introduction of Income Tax Ordinance, 1979 Fifth Schedule was specifically introduced therein which contained rules for the computation of profits of petroleum companies and taxes payable thereon---When said specific legislation came into existence, the profit of all petroleum companies and taxes payable thereon had to be worked out in the light of such specific/exclusive provisions of law---Nevertheless the agreement between the company and Government of Pakistan was at the same time applicable for working out the tax liability of the company---Since, taxes had been specifically fixed @ 50% in the agreement, dated 24-9-1954, the company's profits shall be taxable at the same rate during the entire period of currency of agreement-- Any upward or downward revision in tax rates by Government of Pakistan shall not apply to the case of said company---During such assessment years, rate of tax for private companies including those not engaged in oil exploration business was more than 50% and it was not clear as under what provisions of law the assessee was claiming that tax @ 35% or 33%---Taxation Officer had rightly charged tax @ 50% of company's profit---Such treatment was absolutely correct in the eyes of law and First Appellate Authority had rightly upheld the same---Orders of authorities below were confirmed by the Appellate Tribunal and company's appeal being devoid of any merit was rejected.

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

----S.26(b), proviso---Special provisions regarding business of insurance and production of oil and natural gas and exploration and extraction of other mineral deposits---Application of proviso to S.26(b), Income Tax Ordinance, 1979---Scope---Proviso to S.26(b) of the Income Tax Ordinance, 1979 applies to companies who discovered commercial production before 26-9-1954---Assessee-company achieved the level of commercial production after the said date---No evidence was submitted that the company had achieved commercial production before 24-9-1954---In fact, company entered into agreement for production of petroleum with Government of Pakistan on 24-9-1954 and commenced its operations after the said date---Commercial production was discovered much later than the said date---Proviso to S.26(b) of the Income 'fax Ordinance, 1979, thus did not apply to company's case.

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

----S.26(b)---Special provisions regarding business of insurance and production of oil and natural gas and exploration and extraction of other mineral deposits--Rate of petroleum companies were specifically determined in the concession agreement(s) entered into by them with Government of Pakistan---Said tax rates remain fixed/frozen during the period of currency of concession agreement---Any upward or downward revision in tax rates by the Government of Pakistan did not apply to the cases of petroleum companies----Said companies were liable to par taxes @ 50% of its income.

Khalid Mehmood, F.C.A. for Appellant.

Muhammad Asif, D.R. for Respondent.

2009 P T D (Trib.) 1187

[Income-tax Appellate Tribunal Pakistan]

Before Javed Iqbal, Jawaid Masood Tahir Bhatti, Judicial Members and Shahid Azam Khan, Accountant Member

I.T.As. Nos.591/KB, 592/KB, 593/IB of 2005 and 326/KB & 69/KB of 2004, decided on 13th August, 2008.

Per Javed Iqbal, Judicial Member

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

---S.80-D---Income Tax Ordinance (XLIX of 2001), S.169--Minimum tax on income of certain persons---Charging provisions---Provision of law has to be construed strictly, and tax can only be levied if it has unequivocally been levied under the charging section and there is no question that S.80D of the Income Tax Ordinance, 1979 and S.169 of the Income Tax Ordinance, 2001 are charging sections.

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

---Ss.107AA, 8000 & 80D---Income Tax Ordinance (XLIX of 2001), S.113---Tax credit for investment---Tax credit under S.107AA of the Income Tax Ordinance, 1979 was allowable and adjustable against the tax demand of Ss.80D & 80CC of the Income Tax Ordinance, 1979 and S.113 of the Income Tax Ordinance, 2001.

I.T.A. No.249/IB of 2004; I.T.A. No.250/IB of 2004; I.T.A. No.521/IB of 2005 and I.T.A. No. 522/IB of 2005 rel.

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

---Ss.107AA, 80CC & 80D---income Tax Ordinance (XLIX of 2001), S.113 & 169(2)(d)---Tax credit for investment --Assessment years 2001-2002, 2002-2003 and tax year, 2003---Tax credit under S.107AA of the Income Tax Ordinance, 1979 was not only available to Ss.80D & 80CC of the Income Tax Ordinance, 1979, but likewise available against tax under S.113 of the Income Tax Ordinance, 2001, as S.169(2)(d) of the Income Tax Ordinance, 2001 did not prohibit adjustment of tax credit, allowed under the Income Tax Ordinance, 1979---Department was directed to give credit for assessment years 2001-2002, 2002-2003 against the demand of tax under Ss.80D, 80CC of the Income Tax Ordinance, 1979 while for tax year, 2003 under S.113 of the Income Tax Ordinance, 2001.

I.T.A. No.249/IB of 2004; I.T.A. No.250/IB of 2004; I.T.A. No.521/IB of 2005 and I.T.A. No. 522/IB of 2005 rel.

1999 PTD (Trib.) 811; PLD 1997 SC 582 = 1997 PTD 1555 (Para 54); I.T.A. No.250/IB of 2004; 66 Tax 132; CIT v. Abdul Majeed 81 Tax 317= 2000 PTD 359; 2004 PTD 2352; CIT v. M. Iqbal Saigol PLD 1976 Lah. 547 = 1976 PTD 11; Pakistan Medical Stores's 15 Tax 157 = 1967 PTD 339; Pakistan Electric Fittings Manufacturing Co. Limited's case 2000 PTD 2407; 2005 PTD (Trib.) 960; 2005 PTD (Trib.) 1061; 2004 PTD 1071 and 2009 PTD 2380 ref.

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

---Ss.80C & 80D---Tax on income of certain contractors and importers---Tax paid under S.80C of the Income Tax Ordinance, 1979 was to be excluded from total tax paid under the provisions of S.80D of the Income Tax Ordinance, 1979.

2003 PTD 622 rel.

(e) Income-tax---

----Gratuity---Provision of gratuity---Neither the gratuity had been got approved as per requirement of law nor actually it had been paid---First Appellate Authority had rightly disallowed the same which was confirmed by the Appellate Tribunal.

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

----S.80-D---Minimum tax on income of certain persons---Other income---Scrap sales---Chargeability of minimum tax on other income, which largely represent scrap sales could not form the part of turn over, therefore, tax under S.80D of the Income Tax Ordinance, 1979 was not chargeable over the other income.

1999 PTD (Trib.) 811 rel.

Per Shahid Azam Khan, Accountant Member---[Minority view].

Per Jawaid Masood Tahir Bhatti, Judicial Member agreeing with Javaid Iqbal, Judicial Member

(g) Income-tax---

----Correct application of law---Jurisdiction of Appellate Tribunal---Rectification---Appellate Tribunal as well as all the judicial forums have to correctly apply the law and if the law has not been correctly applied due to any mistake, on the application of the aggrieved parties as well suo motu action should be taken and that illegality should be rectified---Appellate Tribunal is well as all other judicial forums are very much within the jurisdiction to rectify the order where law had not been properly applied.

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

---S.221---Rectification of mistake---Scope---Section 221 of the Income

Tax Ordinance, 2001 could be invoked only to handle the situation where a mistake is apparent from and floating on the surface of the record---Such is precise scope of S.221 of the Income Tax Ordinance, 2001 which could not be transgressed--If in the course of rectification some findings were to be made and the matter involved needs debates and arguments, then application of S.221 of the Income Tax Ordinance, 2001 was ousted.

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

----Ss. 107AA, 80CC & 80D---Income Tax Ordinance (XLIX of 2001), S.113 & 154--Tax credit for investment---Credit under S.107(AA) of the Income Tax Ordinance, 1979 was duly available against tax under Ss.8000 and 80D of the Income Tax Ordinance, 1979 and against tax under Ss.113 and 154 of the Income Tax Ordinance, 2001.

I.T.A. No.249/IB of 2004; I.T.A. No.250/IB of 2004; I.T.A. No.521/IB of 2005; 2004 PTD 2479 and PLD 1997 SC 582 = 1997 PTD 1555 rel.

2004 P'AI'D 2479 ref.

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

----S.107AA---Income Tax Ordinance (XLIX of 2001), S.169(2)(d)---Tax credit for investment---Credit under S.107(AA) of the Income Tax Ordinance, 1979 was available against S.154 of the Income Tax Ordinance, 2001---Section 169(2)(d) of the Income Tax Ordinance, 2001 prohibits adjustment of tax credits under the Income Tax Ordinance, 2001 but no such provision existed in the Income Tax Ordinance, 1979.

I.T.A. No.249/IB of 2004; I.T.A. No.250/IB of 2004; I.T.A. No.521/IB of 2005; 2004 PTD 2479 and PLD 1997 SC 582 = 1997 PTD 1555 rel.

90 Taxation 191 ref.

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

----S.80D---Minimum tax on income of certain persons---Conflict between two laws---Preference---Mode---If a later law is in conflict with S.80D of the Income Tax Ordinance, 1979, the later law shall prevail and entire S.80D of the Income Tax Ordinance, 1979, shall not apply; it logically follows that tax under S.80D of the Income Tax Ordinance, 1979 could be reduced as well, to less than half per cent, by a later law, if the later law can render the whole section, of no effect, and thereby reduce the tax under S.80D of the Income Tax Ordinance, 1979 to zero.

CIT v. M. Iqbal Saigol PLD 1976 Lah. 547 = 1976 PTD 11 rel.

(l) Income-tax---

----Scrap sale---Turnover---Sale of scrap, by no spread of reverie, is turnover---Once it is not turnover, it obviously cannot be part of business turnover and it is not income---Once it is not income it cannot be assessed under any provision as income.

(m) Words and phrases---

---'Turnover'-Connotation-Expression "turnover" denotes buying and selling, processing and selling, with an aim to earn profit.

(n) Income-tax---

----Scrap sale---Turnover---Such sale is no turnover as the phenomena of buying and selling or buying, processing and selling are not involved and even there is no intention, to earn income or to make profit, therefore, it is not the business of the assessee to earn profit from selling scrap and for all these reasons no maximum tax can be levied on sale of scrap--Legislative intent is to levy tax on business turnover and not an fractional recovery of cost---It would be akin to levying tax on purchase return, for practical retrieval of cost can be equated with purchase return---If the sale return cannot be taken as turnover, the purchase return cannot be treated as turnover---`Returns' connote reversals and there cannot be any tax thereon---Business turnovers are intended to and in actual fact, in the main, produces income---Scrap sales are neither meant to produce income, nor they supply any income whatsoever.

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

---Ss. 80D & 8000---Minimum tax on income of certain persons---Sections 80D and 80CC of the Income Tax Ordinance, 1979 are identical in some ways---Comparison of the provisions---Both these sections were under `presumptive Tax Regime' and regardless of actual income, there was some income fictionally presumed and tax was computed and levied thereon---In case of S.80D of the Income Tax Ordinance, 1979, the tax so computed was minimum tax and a higher tax was further chargeable, if tax on income, under other pertinent provisions of law was more than the minimum tax---On the other hand, tax levied under S.80CC of the Income Tax Ordinance, 1979 was final tax, and once this tax was levied, no other tax was levy-able on the other relevant income.

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

----Ss.107(AA), 80CC & 80D---Tax credit for investment---Section 80D and S.80CC of the Income Tax Ordinance, 1979, in the context of subject matter of appeal, have similarity in the sense, that tax credit allowed under S.107(AA) of the Income Tax Ordinance, 1979 was adjustable against tax under Ss.8000 and 80D of the Income Tax Ordinance, 1979, for the reasons that S.107(AA) of the Income Tax Ordinance, 1979 was a later law and both Ss.8000 and 80D of the Income Tax Ordinance, 1979 represent earlier law and it was a trite rule of law, that the former legislation shall give way to the following legislation.

(q) Interpretation of statutes---

----Later law shall prevail over earlier law.

PLD 1997 SC 582 1997 PTD 1555 rel.

(r) Income-tax---

----Appeal to Tribunal---Legal plea can be raised, at any stage of the appeal, and it is incumbent upon the Appellate Tribunal to appropriately implement the law.

PLD 1997 SC 582 = 1997 PTD 1555 rel.

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

----Ss. 107(AA), 8000 & 80D---Tax credit for investment-Acceptance of fresh plea---Judicial Member had accepted the fresh plea raised, in relation to adjustment of tax credit under S. 107(AA) of the Income Tax Ordinance, 1979 against under S.80CC of the Income Tax Ordinance, 1979 S.154 and in relation to non levy of tax under S.113 of the Income Tax Ordinance, 2001 and had adjudicated the same in accordance with law.

Gohar Ali, D.R. for Appellant (in I.T.As. Nos.591/KB to 593/KB of 2005 and 326/KB of 2004).

Sheikh Jalaluddin, FCA and Mr. Saifuddin Adeeb for Respondents (in I.T.As. Nos.591/KB to 593/KB of 2005 and 326/KB of 2004).

Sheikh Jalaluddin, FCA and Mr. Saifuddin Adeeb for Appellants (in I.T.A. No.69/KB of 2004).

Gohar Ali, D.K. for Respondent (in I.T.A. No.69/KB of 2004).

2009 P T D (Trib.) 1281

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairperson and Istataat Ali, Accountant Member

I.T.As. Nos.569/IB, 629/IB and 631/IB of 2005, decided on 20th November, 2008.

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

----S. 62--Assessment on production of accounts, evidence etc.----Trial production---Commercial production---Taxation on profit earned during "trial production"---Validity---No concept of "trial production" or "commercial production" in the income tax law---Such is for internal management/working of a business concern that it treats the production of initial stages as on "trial basis"---Income or loss had to be assessed on the basis of account books and tax liability for the relevant period had to be worked out accordingly---Nevertheless question of "trial production" viz-a-viz "commercial production" had its relevance in cases where question of exemption from tax was materially involved because in that case it had to be determined as from which date the commencement of period of exemption had to be reckoned--Since the question of exemption from tax was not involved in the present case, the income/loss of the company during the so-called "trial production" period shall be assessable under normal law---Treatment given by the Assessing Officer was correct and order of First Appellate Authority being extra-legal was vacated by the Appellate Tribunal and appeal on this point was accepted.

2004 PTD 1653; (1971) 23 Tax 4 (Trib.) and 2006 PTD 2474 ref.

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

----S.30---Income from other sources---Interest income---Income on account of interest on bank deposits was assessable under S.30 of the Income Tax Ordinance, 1979 as "income from other sources".

2004 PTD 2255 (SC Pak.) rel.

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

----S.31(1)(b)---Deduction---For claiming any expenditure its relationship with its purpose was essential---If the loan was obtained for the purposes of business, then interest on loan will be allowed as expenditure against business income---If the money was borrowed for the purpose of earning interest income, then the interest paid on borrowed money will be allowable as deduction against income from interest---Assessee obtained loan for the purposes of business, and claimed the interest paid on this loan as deduction from business income in the shape of "financial charges"---Assessee will not be entitled to claim that interest paid on borrowed capital was allowable as deduction from interest income---Entire amount of interest paid on borrowed money had been claimed and allowed as deduction from business income and no further deduction was admissible on the same score against interest income.

1999 PTD (Trib.) 708 rel.

2005 PTD 2086 and 1972 PLD 186 distinguished.

(d) Income-tax---

----Appeal---Non-adjudication of certain issues---All grounds of appeal raised before the First Appellate Authority had to be adjudicated on merits--Company's profit/loss during the so-called "trial production" period was assessable under normal law---First Appellate Authority was directed that assessee's grounds of appeals should be decided on merits.

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

----S.80D---Minimum tax on income of certain persons---Levy of surcharge on minimum tax---Validity---Tax under S.80D of the Income Tax Ordinance, 1979 was payable as minimum liability and surcharge could not be added to it---Surcharge was includible in the tax payable under normal law and then the liability under normal law was compared with liability under S.80D of the Income Tax Ordinance, 1979 and higher of the two became payable under the law---No surcharge was leviable on tax liability under S.80D of the Income Tax Ordinance, 1979, the same being the minimum tax---Assessee's appeal on this point was accepted by the Appellate Tribunal.

1989 PTD (Trib.) 1199; 1994 PTD 1171 and 2008 PTD (Trib.) 1884 rel.

Naeem Ayaz, P.C.A. for Appellant.

Muhammad Asif and Muhammad Zaheer Qureshi, D.Rs., for Respondent.

2009 P T D (Trib.) 1297

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.A. No.414/KB of 2007, decided on 4th April, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.218, 162 & 154--Service of notices and other documents - Neither any evidence for service of notice had been furnished nor any evidence in this regard had been submitted by the Department---First Appellate Authority cancelled the order passed by the Taxation Officer under S.162 of the Income Tax Ordinance, 2001 as he had treated the taxpayer in default for recovery of short deduction of tax which was deductible under S.154 of the Income Tax Ordinance, 2001 but the Taxation Officer had passed the order without affording the opportunity of hearing to the assessee---Order of the First Appellate Authority was upheld by the Appellate Tribunal in the circumstances and the department appeal was dismissed.

Ahmed Saeed Siddiqui, D.R. for Appellant.

Abdul Tahir Ansari, ITP for Respondent.

2009 P T D (Trib.) 1313

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zareen Saleem Ansari, Accountant Member

I.T.As. Nos.457/KB and 458/KB of 2007, decided on 1st April, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 221 & 128(5)---Rectification of mistake'--Bifurcation of payment of work, supplies and transportation---First Appellate Authority directed the Taxation Officer to rectify the orders passed in the light of revised certificate and issue the refund if found that deductions of tax were made in excess after verification, as the assessee had filed the revised statement after receipt of correct certificate issued by the Executive Engineer who had bifurcated the payment of work, supplies and transportation---Rectification application was filed by the assessee before the Taxation Officer but he had rejected the same without getting the certificate reconfirmed from the issuing authority---First Appellate Authority had rightly held that this was a mistake of facts that was rectifiable according to law---Orders of First Appellate Authority was upheld and the appeals filed by the Department were dismissed by the Appellate Tribunal.

Ahmed Saeed Siddiqui, D.R. for Appellant.

Abdul Tahir Ansari, ITP for Respondent.

2009 P T D (Trib.) 1332

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairman and Istataat Ali, Accountant Member

I.T.A. No.187/IB of 2005, decided on 28th February, 2009.

(a) Income-tax---

----Local authority---Qualifications and characteristic of local authority---An entity will be "local authority" if it (i) has its own juristic personality distinct from its members (ii) within its own local area, exercises considerable powers of local self-government (iii) chalks out its schemes for the development of a local area under its control and provides civic amenities for the inhabitants of the area (iv) prepares its own annual budget for submission to the Provincial Government (v) exercises its powers within a limited territory included in a Province (vi) exercises powers which belong to the Province but, which by statute, are delegated to the local authority (vii) has powers of imposing taxes; and, (viii) maintains/administers a local fund.

1976 PTD 56 rel.

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

----Ss. 49(2)(4), 2(31A) & 122(5A)---Income Tax Ordinance (XXXI of 1979), Second Sched: Part-I, Cl. 124AA, 88 & S.80D---General Clauses Act, (X of 1897), S. 3(31)--National Highway Authority Act, (XI of 1991), Ss. 10, 12, 13, 19 & 21---Finance Act (IV of 2007), Preamble---C.B.R. Letter C. No.2(3) WT/93, dated 25-11-2000---C.B.R. Letter C.No.4(2) WHT/91-Pt., dated 27-12-2004---Constitution of Pakistan, 1973, Art. 165A---Federal and Provincial Government, and local authority income---Exemption---Assessee was engaged in construction of national highways and strategic roads filed return declaring "nil" income claiming exemption in the status of local authority---Assessment was finalized by the Assessing Officer for the reason that Authority's income was not exempt from tax---Assessee contested that claim of exemption was wrongly rejected by the Assessing Officer--Assessment was set aside with certain directions---Assessee contended that First Appellate Authority did not discuss the claim of exemption for being a local authority and he was not justified to set aside the assessment---Validity---Given conditions had to be simultaneously and cumulatively fulfilled for any entity to qualify as local authority that it has its own juristic personality distinct from its members---National Highway Authority fulfills these conditions because it was established through an Ordinance as a regulatory authority being independent in the performance of its functions---Condition of exercising considerable powers of self-government within its own local area consists of three parts i.e. (a) it had its own local area; (b) it exercises considerable powers; and (c) these powers are of local self-government---Authority's operations are not restricted to any local area neither it has the powers of local self-government, its operations are spread all over the country and its powers are not in the nature of local self-government, said condition of having local area and powers of local self-government is not satisfied by the National Highway Authority---Condition that it chalks out its schemes for the development of a local area under its control and provide civic amenities for the inhabitants of the area; such condition consists of four parts i.e. (a) it chalks out its schemes (b) these schemes are for development of local area under its control (c) provides civic amenities and (d) these amenities are for inhabitants of the area, said conditions are not fulfilled by the Authority because although it chalks out its schemes for development but these schemes are not for the development of any "local area" under its control, in fact there is no local area under its control, its schemes for development are of national level and are spread in all parts of the country and it did not provide any civic amenities---Provision of civic amenities for "inhabitants of the area" was far fetched propositions for it---Condition that it prepares its annual budget for submission to the provincial government, authority was established by the Federal Government and its operations are controlled by the Federal Government, condition of submission of budget to provincial government is not fulfilled---Condition that it exercises its powers within the limited territory included in a province, this condition is also not fulfilled by Authority because its operations are spread throughout the country and it did not exercise powers within a "limited territory included in a province"--Condition that it exercises powers which belong to the province but, which by statute, are delegated to the local authority, authority does not fulfil this condition because powers being exercised by it did not belong to any province, its powers essentially belong to the Federal Government and it was performing its functions on behalf of the Federal Government---Condition that it has powers of imposing taxes, Authorities does not fulfil this condition because it could collect "tool" and not "tax", very important feature of having powers of imposition of taxes was missing in the case of the Authority---Condition that it maintains/administers a local fund, it is provided in the National Highway Authority Ordinance, 2002 that there shall be a "fund", which will vest in and utilized by it to meet its expenses, said fund is not a "local fund"; local fund means the fund vested in any authority which had its operations restricted to "local area", whereas Authority's operations are spread all over the country and its Fund could not be treated as a "local fund"-In addition to other features the local authority had the powers to lay out towns, mandis, market places, villages, roads, break up land for cultivation etc.---Such features essentially lead to infer that all the operations of a local authority were restricted in a limited area for the uplift and welfare of inhabitants of that very area---Local authority generates its own revenue through imposition of local taxes and short fall of finances, if any, was met out of grants from the Provincial Government---Characteristic of National Highways Authority's operations were in no way similar to those of local authority----Authority was not a local authority; it is rather a regulatory authority---Claim of exemption for being local authority by the National Highway Authority was rightly rejected by the department, however, since no second appeal was filed by the department, the order of Assessing Officer could not technically be restored---Appellate Tribunal rejected the assessee's appeal and maintained the orders of First Appellate Authority whereunder the assessment order was set aside.

1976 PTD 56 and 1981 PTD 66 rel.

2004 PTD 174 (ITAT Lahore); K. D. As. PLD 1977 Kar. 1562; 1980 PTD 329; Army Welfare Sugar Mills Ltd. v. Federation 1992 SCMR 1652; Commissioner of Income Tax v. Shahnawaz Ltd. 1993 SCMR 73; Far Eastern Impex (Pvt. )Ltd. v. Federation of Pakistan 2005 PTD 955; Qaiser A. Manoo v. Income Tax Appellate Tribunal 2006 PTD 406; Muhammad Streamship Company Ltd. v. Commissioner of Income Tax (Central) Karachi, PI,D 1966 SC 828; 1992 SCMR 1652; PLD 1965 SC 201; DLR 1965 SC 74; Rostom Ali v. Chairman LPIDCE PLD 1964 Dac. 721; PLC 1964 Dac. (Pak.) 511; DLR 1963 Dac. 651; Pb. Co. Op. Union v. Govt. of Pub. Excise and Taxation Dept( PLD 1983 Lah. 522; PLD 1966 Pesh 89 (DB); PLD 1965 SC 2001; Messrs Pakistan Telecommunication Authority Ltd. (PTA) 2009 PTD (Trio.) 543 and 2000 PTD (Trib.) 2853 ref.

Syed Tariq Jamil, FCA and Farrukh Jamil, ACA for Appellant.

Muhammad Asif, DR for Respondent.

2009 P T D (Trib.) 1382

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Masood Ali Jamshed Accountant Member

I.T.A. No.847/LB of 2008, decided on 2nd May, 2009.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---C.B.R. Circular No. 7 of 2002, dated 15-6-2002, Para.9(A)(ii)---Self-assessment---Selection of case for total audit---Limitation---No appeal was filed by the department against the order of High Court declaring the selection of the case of the assessee being improper and at naught, the case of the assessee could not be selected for total audit even if the Supreme Court of Pakistan in other cases had reversed the order of High Court regarding appeals of 83 assessees wherein the assessee was not the party in proceedings---Supreme Court of Pakistan specifically mentioned that "pending decision of appeals arising out of that instant petitions, Income Tax Department shall be free to examine the returns of assessee/respondents whose cases had been selected for total audit but no recovery, if any, of the Income Tax shall be made from them till the final decision of the appeals"---Observation of the Supreme Court of Pakistan clearly showed that even regarding the 83 appeals filed by the department against various assessees the Supreme Court of Pakistan realizing the limitation provided under the law had directed to examine the returns of the assessees whose cases had been selected for total audit and only the recovery of the tax had been stayed till the decision of the appeals---Assessment in the case made by the Taxation Officer was barred by time which had been upheld by the First Appellate Authority without any justification---Order of First Appellate Authority was vacated and the assessment order passed by the Taxation Officer was cancelled by the Appellate Tribunal.

Abbas Raza ITP for Applicant.

Ch. Safdar Hussain, DR for Respondent.

2009 P T D (Trib.) 1386

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmad, Chairperson and Ch. Nazir Ahmad, Accountant Member

I.T.A. No. 297/KB of 2008, decided on 17th January, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.221, 120, 12(5A) & Second. Sched., Part-III, Cl.(2)---Finance Act (III of 2006), Preamble---Rectification of mistake---Tax years, 2006 and 2007---Tax rebate---Assessing Officer observed the 75% tax rebate had wrongly been claimed by the taxpayer as the rebate was only allowable on salary income and not on other income---Validity---Amendment made in Cl.(2) of Part-III of Second Schedule through Finance Act, 2006 substituting the clause restricting reduction of 75% to tax payable on' salary income only, had no retrospective application---Factually there was no mistake in the deemed order which could be rectified---First Appellate Authority had rightly annulled the amended order passed under S.21 of the Income Tax Ordinance, 2001---Appeal filed by the department was dismissed being devoid of merit.

Dr. Manzoor Memon, D.R. for Appellant.

A.S. Jaffery for Respondent.

2009 P T D (Trib.) 1536

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T.As. Nos.35/LB and 36/LB of 2009, decided on 9th May, 2009.

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

----S.122(5A), 120, 221, 170(4) & 124(4)---Amendment of assessment--Orders under S.170(4) of the Income Tax Ordinance, 2001 were passed but no refunds were issued---Subsequently, such orders were cancelled by passing order under S.221 of the Income Tax Ordinance, 2001---Appellate Tribunal found that the returns filed by the taxpayer and order passed under S.170 of the Income Tax Ordinance, 2001 were in accordance with law---No appeal effect order was issued as provided under S.124(4) of the Income Tax Ordinance, 2001---Instead of making compliance of the appellate orders of the Appellate Tribunal, Additional Commissioner initiated proceedings under S.122(5A) of the Income Tax Ordinance, 2001 and amended the order by treating the declared sales/supplies under Presumptive Tax Regime---Validity---First Appellate Authority maintained the orders passed under S.221 of the Income Tax Ordinance, 2001 amending the orders treated to have been passed under S.120 of the Income Tax Ordinance, 2001---Assessee filed appeal before Appellate Tribunal which was decided in favour of the assessee/taxpayer by holding that the order passed under S.170 of the Income Tax Ordinance, 2001 was in accordance with law---Such position indicated that the order treated to have been passed under S.120 of the Income Tax Ordinance, 2001, the order passed under. S.221 of the Income Tax Ordinance, 2001 amending the order passed under S.120, the appellate order of First Appellate Authority had merged into the order of Appellate Tribunal--Original order treated to have been passed under S.120 of the Income Tax Ordinance, 2001 ceased to exist and was absorbed into the appellate order---Additional Commissioner did not have jurisdiction to amend the order of Appellate Tribunal which had already come up before the Appellate Tribunal---Order passed by the Taxation Officer/Additional Commissioner under S.122(5A) of the Income Tax Ordinance, 2001 had been passed without having jurisdiction and the First Appellate Authority had maintained the order without any justification---Order of First Appellate Authority was vacated and the order passed by the Additional Commissioner/Taxation Officer under S.122(5A) of the Income Tax Ordinance, 2001 were cancelled by tile Appellate Tribunal---Consequently, order already passed by the Taxation Officer under Ss.170(4)/120 of the Income Tax Ordinance, 2001 were restored.

2008 PTD (Trib.) 929 ref. 2008 PTD 1525 rel.

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

----S.122(5A)---Amendment of assessment---Once the matter had come up to the Appellate Tribunal and the Appellate Tribunal had given specific observations regarding the assessment by holding that the orders passed by the Taxation Officer were in accordance with law, no order could be passed on the same issues by the Taxation Office by amending the orders regarding those observations which had already been made.

Imran Rashid for Appellant.

Ch. Safdar Hussain, D.R. for Respondent.

2009 P T D (Trib.) 1551

[Income-tax Appellate Tribunal Pakistan]

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

M.As. Nos.734/LB to 738/LB of 2006 and W.T.As. Nos.515/LB to 519/LB of 2005, decided on 20th February, 2009.

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

----S.35---Rectification of mistake---Application seeking rectification/re­call of Appellate- Tribunal's order---Assessee contended that findings given by the First Appellate Authority were not 'only well-reasoned but stood supported by the relevant case-law incorporated in the order---Mistake floating on the surface of the order was committed when the Appellate Tribunal observed that no reason had been assigned and no case-law had been cited in support thereof when the same stands mentioned in the order of First Appellate Authority---Validity---Conten­tion of the assessee was correct---Case-law discussed by the First Appellate Authority was neither mentioned nor discussed by the Appellate Tribunal while dismissing appeals of the assessee---Arguments advanced by the assessee before the Appellate Tribunal were also neither attended to, nor dilated upon---Resultantly, mistakes on the face of record had been committed, which required rectification---Order was recalled by the Appellate Tribunal in circumstances.

(1972) 83 ITR 582 (S.C. of India); PLD 2002 SC 208; 1996 PTD (Trib.) 2904; (1997) 75 Tax 108 (Trib.); 2009 PTD (Trib.) 62 and 2000 PTD (Trib.) 2157 rel.

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

----S.16---Wealth Tax Rules, 1963, R.8(2)---Assessment---Shares and securities---Valuation of---Assessee contended that all assets of the company vested in the Court auctioneer and neither the assessee-could be a willing seller of shares nor there could be any willing purchaser of such shares---Assessee did not own shares on the valuation date, thus the shares had no capital value for the assessee---Assessee was assessed at nil capital value of the shares---First Appellate Authority accepted the plea of the assessee and found that valuation on basis of face value of the shares was illegal---Validity---Appellate Tribunal having already found that mistakes apparent on the face of the order passed by the Appellate Tribunal were committed, Appellate Tribunal, therefore, rectified the same---Order of Appellate Tribunal was based on erroneous assumption--Appellate Tribunal fell in error, while ignoring the ratio settled through the judgments delivered by the Supreme Courts and Tribunal---Departmental appeal was rejected by the Appellate Tribunal through the rectified order.

(1972) 83 ITR 582 (S.C. of India) and C.M.A. No.982/L/98 rel.

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

----Ss.3 & 16---Charge of wealth tax---Sales of property were denied by the Assessing Officer---Sales proceeds were deposited to pay liabilities--Assessee contended that Assessing Officer had no authority to levy wealth tax on sale proceeds on the basis of suspicion---Previous transactions could not be made basis for levy of wealth tax because burden of proof of the allegation that the assessee had sale proceeds with him on valuation date while the assessee had specifically denied the same---Validity---Addition on account of sale proceeds were deleted---Order of First Appellate Authority was in consonance with the legal pronouncements delivered by the higher legal forums and called for no interference---Appeals of the Revenue being devoid of any merit were rejected by the Appellate Tribunal.

PLD 1996 Karachi 68 rel.

Mian Ashiq Hussain and Ch. Mumtaz-ul-Hassan for Appellant.

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

2009 P T D (Trib.) 1559

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Masood Ali Jamshed, Accountant Member

I.T.As. Nos. 4943/LB and 5929/LB of 2005, decided on 2nd. May, 2009.

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

----Ss.67 & 21(k)---Apportionment of deductions---Sale promotion expenses---Proration of sales promotion expenses, import sales and adding such to normal income---Assessee contended that no advertisement was made for goods imported for re-sale purposes and proration could not be made on the basis of presumptions---Department pleaded that sales promotion expenses comprised mainly of TV advertisement and were attributable to income from sale of imported goods as advertisement benefits related to both locally manufactured and imported goods---Validity---Appellate Tribunal had already adjudicated the issue and upheld the treatment of First Appellate Authority deleting the addition on account of proration of advertisement expenses with the observations that "since the expenditure made by the assessee did not qualify to be common expenditure as specified under S.67 of the Income Tax Ordinance, 2001, therefore, addition made on this account has rightly been deleted"---Appellate Tribunal did not find justification, for the addition made in this respect and deleted such addition following the previous judgment.

I.T.A. No.2164/LB of 2006 rel.

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

----S.21(k)---Deductions not allowed---Assessing Officer treated the gift and presents and baby feeding schemes as excess perquisites under S.21(k) of the Income Tax Ordinance, 2001 and disallowed the claim of expenses---Assessee contended that gifts and presents were not given to employees, and they had no nexus with calculation of excess perquisites under S.21(k) of the Income Tax. Ordinance, 2001; that such items including certain company products, of nominal value given occasionally to customers, suppliers, and other business associates or external visitors as souvenirs that said expenses could not be added back as perquisites of the employees as such expenses were not in the nature of perquisites---Validity---Gifts and presents which were not given to employees of the company could not be included in the calculation of excess perquisites and could not be disallowed under S.21(k) of the Income Tax Ordinance, 2001.

Black's Law Dictionary ref.

(c) Income-tax---

---Obsolete stock, store and spare parts---Addition of---First Appellate Authority deleted the addition made on account of obsolete stock, store and spare parts---Validity---Appellate Tribunal had already adjudicated the matter in favour of the assessee and did not interfere in the order of First Appellate Authority---Departmental appeal was dismissed by the Appellate Tribunal on the issue.

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

----S.23(5)---Initial allowance---Claim was disallowed of the reason that initial allowance was admissible from tax year, 2002 whereas in the taxpayer case the year, 2003 was a period of 12 months from January to December, 2002 and the initial allowance was not allowable---Assessee contended that amendment made in subsection (5) of S.23 of the Income Tax Ordinance, 2001 regarding the initial allowance was applicable from the tax year, 2003 and not from the tax year, 2004---First Appellate Authority found that amendments being remedial in nature were applicable to a tax year irrespective of the accounting period involved and directed to allow the initial allowance---Validity---Appellate Tribunal declined interference and appeal filed by the department on this ground was also dismissed.

I.T.A. No.2237/LB of 2005 and I.T.A. No.1223/LB of 2006 ref.

(e) Income-tax---

----Deferring of expenditure---First Appellate Authority deleted the addition made on account of deferring 50% of the expenditure to the next year following the judgment of Appellate Tribunal wherein it was held that "the expenditure is to be allowed in total if it is claimed by the assessee in its return---Based on such findings the assessee claimed the total expenditure without deferring to the subsequent year; and contended that no valid ground was available for deferring 50% of the expenditure to the next year---Validity---Directions made by the First Appellate Tribunal were in accordance with the directions of the Appellate Tribunal---No interference was required and the appeal filed by the department was dismissed.

I.T.As. Nos. 2519 and 2522/LB of 1999 ref.

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

---S.34---Accrual-basis accounting---Actuarial losses---Claim of actuarial losses was disallowed for the reason that the claim was not admissible as it did not reflect in the accounts and conditions mentioned in S.34 of the Income Tax Ordinance, 2001 had not been met---First Appellate Tribunal deleted the addition with the observation that "the expenditure in this respect has been properly reflected in the accounts and meets all the conditions of S.34 of the 'Income Tax Ordinance, 2001 "---Since the calculation of the liability was complex and involves satisfied working by the Actuary and the conditions mentioned in S.34 of the Income Tax Ordinance, 2001 were also met, there was no justification in the addition in this respect---First Appellate Authority had rightly deleted the addition made---Order of First Appellate Authority was upheld by the Appellate Tribunal and departmental appeal was dismissed.

I.T.A. No.2164/LB of 2006 ref.

2004 PTD (Trib.) 1135 and 2006 PTD (Trib.) 76 rel.

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

---Ss.27(c) & 20---Employee training and facilities---Deletion of addition on account of adjustment of selling expenses---Claim of external training- expenses and foreign visit expenses was disallowed and added back to the total income for the reason that S.27(c) of the Income Tax Ordinance, 2001 allows training expenses in connection with a scheme approved by the Central Board of Revenue and the external training had not been received in connection with a scheme approved by the Central Board of Revenue in terms of provisions of S.27(c) of the Income Tax Ordinance, 2001---Assessee contended that according to the requirement of business, the training expenses were incurred on employees of the company to enable them to gain/obtain such additional knowledge, which would increase the level of competency in relation to their assigned jobs; that purpose of the training was to enhance the job knowledge and skills of the employees and that such was a business expense allowable in full---Validity---Assessee-company was amongst the largest manufacturing concern of its type and had been expanding to increase the manufacturing activities in the country---Such visits to the factory and any expense thereon could not be said to have not been incurred for the purpose of business---Purpose of such visits includes visits by technical staff of the companies from which assessee had purchased machinery to advice on installation, working etc. of the machinery---Contentions of the assessee and the observation of the First Appellate Authority were based on the decisions of Superior Courts---First Appellate Authority had rightly deleted the addition---Department appeal was dismissed by the Appellate Tribunal.

PLD 1967 SC 524 and 2002 PTD 1535 rel.

Ghazanfar Hussain, D.R. for Appellant.

Asim Zulifqar, ACA for Respondent.

2009 P T D (Trib.) 1609

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2795/LB of 2000 and 3926/LB of 2002, decided on 20th May, 2009.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Order of Taxation Officer passed in compliance with the order passed by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979---Appeal against to Appellate Tribunal-Validity-Appellant should have firstly filed appeal before the First Appellate Authority and after the decision of First Appellate Authority he should have come up before the Appellate Tribunal---As the proper mode had not been adopted, Appellate Tribunal dismissed the appeal in line being premature.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order--Merger---Amendment of assessment order---Assessee contended that at the time of original assessment specific queries had been raised regarding issue of claim of mark-up through notices which were properly replied and no action was taken but later at belated stage when all the issues had been thrashed out up to the Appellate Tribunal, Inspecting Additional Commissioner had amended the original assessment order---Inspecting Additional Commissioner had not considered that theory of merger will come into play and the original assessment order had already merged in the higher tier order---Where the original order had gone through the test of appeals before the higher forums, the jurisdiction under S.66-A of the Income Tax Ordinance, 1979 was ousted---Department contended that issue of admissibility of financial expenses confronted to assessee had never been adjudicated upon as was evident from the assessment order---No findings whatsoever had been given by the Assessing Officer on the issue of admissibility of financial expenses or otherwise when the loan was not utilized for his own business rather it was advanced to its sister concern---Since the matter under consideration was not adjudicated upon, the question of its decision by the appellate authorities did not arise at all. and theory of merger of original order of Assessing Officer in the subsequent orders of the appellate authorities was not applicable on this specific issue/point---No objection was raised in respect of the facts of the case before the Assessing Officer which shows that financial expenses allowed by the Assessing Officer were in fact not admissible under the law---Loan was not wholly utilized for own business rather it was advanced to its sister concern---Assessee was not entitled to claim the financial expenses to minimize its profit and tax liability thereon---Assessing Officer should have disallowed the financial expenses proportionately as the interest paid in respect of capital borrowed for the purpose of business or profession was allowable deductions or allowance to the' extent of amount of loan utilized by the assessee-company---Validity---Assessee in his returns had declared bank overdrafts and loans, out of which certain amounts had been advanced: to the associated . undertakings by the assessee---Assessee against the bank's profits and loans had paid mark-up but all the mark-up had been charged against income as financial expenses---Since loan was not utilized for the assessee's business and was advanced to sister concern, the mark-up paid on loss was to be disallowed proportionately---However, at the time of assessment, Assessing Officer failed to take the cognizance of this facts and financial expenses were allowed in full instead of disallowing these proportionately as the interests paid in respect of capital borrowed for the purpose of the business or profession was allowable deduction or allowance to the extent of amount of loan---Inspecting Additional Commissioner had rightly cancelled the assessment order being erroneous in so far as prejudicial to the interest of revenue as the interest was wrongly claimed by the assessee-company and was erroneously allowed by the Assessing Officer needless to say that this resulted into loss of revenue---Assessment order had been merged on the point/issue only which was the subject matter of appeal---Since no addition on account of mark-up was made by Assessing Officer, this issue did not merge with the appellate order---No interference was warranted by the Appellate Tribunal in the order of Inspecting Additional Commissioner passed under S.66-A of the Income Tax Ordinance, 1979---However, Assessing Officer in compliance of the order of Inspecting Additional Commissioner had not taken the correct figures of total outstanding, total mark-up due to associated companies, 'average mark-up rate and other figures of amount, the order passed by the Taxation Officer was set aside for de novo consideration with the directions to Assessing Officer to pass afresh order after giving proper opportunity of being heard to assessee---Assessee was directed to place the details which had been furnished before the Bench to submit the same before the Assessing Officer who will pass order in accordance with law after considering these details---Appeals of assessee were dismissed by the Appellate Tribunal.

(1996) 73 Tax 156 (Trib.); 1999 PTD (Trib.) 700; 1992 PTD 932 and 1992 SCMR 523 distinguished.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Decisions of reopening the matter were not subject matter of appeals---Re-opening of assessment--Validity---Although original assessment had been scrutinized through process of appeal up to the Appellate Tribunal and the Inspecting Additional Commissioner had passed the order after the decision of the Appellate Tribunal but there was a material fact the decisions of reopening the matter by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 were never even the subject matter of the first appeal before the First Appellate Authority or further appeals by both the parties before the Appellate Tribunal---Admittedly, in the assessment order there was nowhere mentioned regarding the financial expenses which had been allowed by the Assessing Officer in full instead of disallowing these proportionately as interest paid in respect of capital borrowed for the purpose of business or profession was allowable deductions or allowance to the extent of amount of loan utilized thus rendered the assessment erroneous in so far as prejudicial to the interest of revenue as observed by the Inspecting Additional Commis­sioner.

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

----Ss. 66-A(1A), 129, 134 & 137---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Insertion of subsection (IA) in S.66-A of the Income Tax Ordinance, 1979---Effect of and purpose---By insertion of subsection (IA) through Finance Act, 1991 in S.66-A of the Income Tax Ordinance, 1979, even where appeal had been filed under Ss. 129, 134 & 137 of the Ordinance or a Reference had been made under 5.136 of the Income Tax Ordinance, 1979 against an order passed by the Assessing Officer and where an appeal or reference had been decided in respect of any point or issue which was not the subject-matter of appeal or reference the order under S.66-A of the Income Tax Ordinance, 1979 could be made---Before the amendment of S.66-A of the Income Tax Ordinance, 1979 frivolous appeals were sometimes filed in order to protect the erroneous order against any revision by the Inspecting Additional Commissioner therefore legislature thought it appropriate to insert a new subsection in S.66-A of the Income Tax Ordinance, 1979 empowering the Inspecting Additional Commissioner to revise the order of Assessing Officer in such situation.

Zia Ullah Kayani for Appellant.

Ghazanfar Hussain, DR for Respondent.

2009 P T D (Trib.) 1618

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Siddiqui, Accountant Member

I.T.As. Nos.462/KB and 463/KB of 2007, decided on 14th May, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 80C, 62, 65 & 66-A---Tax on income of certain contractors and importers---Correction of order---First Appellate Authority cancelled the assessment order for the reason that Taxation Officer had suo motu passed the order under S.180C of the Income Tax Ordinance, 2001 without allowing proper opportunity of being heard to the assessee and wrongly mentioned S.180C of the Income Tax Ordinance, 1979---Department contended that notice was issued and served upon the assessee and order was passed by the Taxation Officer under S.80C of the Income Tax Ordinance, 1979 but mistakenly mentioned S.180C instead of 80C---Assessee contended that Taxation Officer not only passed the order under wrong section but also without jurisdiction---If at all any corrective action was warranted that should have been initiated under S.65 or 66-A of the Income Tax Ordinance, 1979 by the higher authorities---Assessing Officer did not have the provisional power whereas he assumed the same which was not sustainable in the eyes of law---Validity---Assessment order under review did not mention issuance of any show-cause notice prior to initiation of any corrective action---Appellate Tribunal agreed with the contention of the assessee and order of First Appellate Authority was not interfered with and was maintained---Appeal filed by the Department was dismissed.

2007 SCMR 262 rel.

M. Farooq Azam Memon., D.R. for Appellant.

Abdul Tahir Ansari ITP for Respondent.

2009 P T D (Trib.) 1627

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.As. Nos.47/KB, 48/KB, 17/KB and 18/KB of 2007, decided on 20th May, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.162---Recovery of tax from the person from whom tax was not collected or deducted---Service of show-cause notice---Department contended that First Appellate Authority was not justified to cancel the assessment order passed under S.162 of the Income Tax Ordinance, 2001, treating service of show-cause notice as improper---Assessee also urged that he was not given proper opportunity of being heard and order passed by the First Appellate Authority was not a speaking order as envisaged under the law---Both the parties had agreed to remand the case to Assessing Authority for de novo assessment---Appeals preferred by different parties on the same issue were already pending adjudication before the Appellate Tribunal---Order passed by the First Appellate Authority was set aside in circumstances with the direction that the present case be remanded to Taxation Officer for assessment fresh.

Dr. Abdul Sattar, Abbasi, D.R. for Appellant (in I.T.As. Nos.47/KB and 48/KB of 2007).

Abdul Tahir Ansari, ITP for Respondent in (I.T.As. Nos.47/KB and 48/KB of 2007).

\Abdul Tahir Ansari, ITP for Appellant (in I.T.As. Nos.17/KB and 18/KB of 2007).

Dr. Abdul Sattar Abbas, D.R. for Respondent (in I.T.As. Nos.17/KB arid 18/KB of 2007).

2009 P T D (Trib.) 1701

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.As. Nos. 15/KB and 16/KB of 2007, decided on 20th May, 2009.

Income Tax---

----Identical Issues---Appeals---Setting aside of---Since the issues involved in the appeals were almost identical to the issues agitated in other appeals and appeals in those cases had already been remanded for de novo assessment---Order passed by the First Appellate Authority in the appeal were also directed to be vacated and the present appeals were also sent back to the assessing authority for fresh assessment.

Abdul Tahir Ansari, I.T.P. for Appellant.

Dr. Abdul Sattar Abbasi, D.R. for Respondent.

2009 P T D (Trib.) 1716

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Siddiqui, Accountant Member

I.T.As. Nos. 397/KB to 399/KB of 2007, decided on 13th May, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170(4), 153(1)(b)---C.B.R. Letter No. 5 (1)-M (FAATE) dated 29-12-2005---Refund---Claim of refund was rejected by the Taxation Officer by holding that the services by assessee fell under Presumptive Tax Regime---Appellate Tribunal had already decided that services rendered or provided did not fall under the Presumptive Tax Regime---High Court also held that all the services be that of any form were chargeable under general tax provision and not as full and final discharge---Appeal allowed by the First Appellate Authority was confirmed by the Appellate Tribunal in circumstances.

2006 PTD 1936 and 2008 PTD 1243 rel.

M. Farooq Azam, Memon, D.R. for Appellant.

Abdul Tahir Ansari, I.T.P. for Respondent.

2009 P T D (Trib.) 1772

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.1315/LB of 2006, decided on 14th May, 2009.

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

----Ss.59 (1) & 13(1)(aa)---C.B.R. Circular No.7 dated 24-3-2003, para.9(a)(ii)---Self-Assessment---Selection of case of total audit---Addition---Assessee contended that case was selected for three reasons out of which the Assessing Officer had drawn adverse inference only to the extent of claim of foreign remittances and on other two issues, the Assessing Officer being satisfied with the submission of the assessee had accepted the assessee's stance---Declared version of the assessee had wrongly been put to the test of verification and profit and loss expenses were curtailed, as this was not the basis of recommendation for audit---Case of the assessee should have been accepted under Self-Assessment Scheme as the basis of selection of case for audit i.e. addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 had been deleted by the First Appellate Authority---Validity---Assessing Officer had accepted the declared business receipts of the assessee and drawn inference only to the extent of addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 on account of foreign remittance---Assessing Officer had also made routine Profit & Loss Addition on estimate basis which was not the very purpose of selection of case for audit through para.9(a)(ii) of the C.B.R. Circular No.7 of 2002---Since very basis of selection of case for audit was that of addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 which was deleted in appeal, there was no justification left with the department to process the case under normal law for routine addition on account of Profit & Loss expenses---No justification existed for processing the case under normal law by merely curtailment of profit and loss expenses on estimate basis which was not the basis for selection of the case in terms of para.9(a)(ii) of the C.B.R. Circular No.7 of 2002 dated 23-3-2003---Appellate Tribunal directed that the case of the assessee for assess­ment years 2002-2003, be accepted under Self-Assessment Scheme.

I.T.A. No.386/LB of 2005, decided on 23-9-2005 ref. 2007 PTD (Trib.) 898 rel.

Suhail Mutee Babri, I.T.P. for Appellant.

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

2009 P T D (Trib.) 1794

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.A. No.126(IB) of 2009, decided on 28th April, 2009.

Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(aa)---Addition---Cash gift---Rejection of---Assessee contended that neither Assessing Officer nor First Appellate Authority had denied the presence of the three elements which make a gift valid---Gift had been rejected merely for the reasons that there was no "blood relationship" between the donor and the donee which makes the transaction doubtful because "every wealthy person could not divest of his hard-earned possessions through a gift without any quid pro quo"---Validity---Assessee had not only explained the nature and source but the Assessing Officer had also found the explanation satisfactory while making observations that "...no doubt that the so-called donor has sufficient funds in his possession et it is not necessary that each wealth person might have made gift of money he earned through his hard work. If it was loan the position would have been a bit different..."-From such observations of the Assessing Officer it became clear that he had not doubted the nature and source of amount but he doubted the intention behind such source because every wealthy person could not part with his hard earned possession(s) through gift in the absence of any blood relationship---Assessing Officer had stated that had it been a loan then the situation would have been a bit different and acceptable---In view of such observations of the Assessing Officer, the amount claimed to have been received by the assessee did not attract the provision of S.13(1)(aa) of the Income Tax Ordinance, 1979---Action of department as well as that of First Appellate Authority were not sustainable in law---Order was vacated by the Appellate Tribunal and assessee's appeal was accepted.

2007 PTD (Trib.) 651; 1987 SCMR 1907; 2004 PTD (Trib.) 1523; 1999 MLD 1687; PLD 1980 Lah. 770 and 1979 CLC 580 ref.

Hafiz M. Idrees, M. Mazhar, I.T.P. and Abdul Basit, F.C.A. for Appellant.

Sardar Ali Khawaja for Respondent.

2009 P T D (Trib.) 1837

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.493/LB, 520/LB and 521/LB of 2009, decided on 1st June, 2006.

(a) Income Tax---

----Books of accounts---Direction for estimation---Requirement of books of accounts---No books of accounts were required when there were directions regarding estimation.

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

----S.62---Assessment on production of accounts, evidence etc.---Gross profit rate--Direction regarding--Violation of--Taxation Officer in assessment order referred the reply of taxpayer in compliance to notice under S.62 of the Income Tax Ordinance, 1979 wherein the assessee had taken specific plea that "computerized books of accounts presented at the time of first round of assessment were never returned to us" but the Taxation Officer without confronting the plea of taxpayer had observed that neither books of accounts had been presented nor copies of the Sales Invoices/Vouchers were produced---No justification was available for applying Gross Profit rate as the appellant had referred parallel cases where Gross Profit rate at 15.51% and 5.5% had been applied which had been in the order---Specific directions were given to Assessing Officer to refer the parallel cases or any other basis of estimation but the Taxation Officer had failed to refer any parallel case or any other basis for estimation---Parallel cases referred by the taxpayer were to be accepted and declared Gross Profit rate was directed to be accepted.

1987 PTD 638 and 1984 PTD 150 ref.

(c) Income Tax---

----Sale rate---Value determined by the Sales Tax Department---Adoption of---Assessee declared average sale per chassis as they were manufacturers of chassis only---Department applied price of whole rickshaw inclusive of body of rickshaw, route numbers and change of various parts---Value determined by the Adjudication Officer on the sales tax side was upheld by the Customs, Excise & Sales Tax Appellate Tribunal---Value determined by another department of the similar nature should be accepted regarding the similar transitions of the same articles---Income Tax Appellate Tribunal directed that the same value be applied for the Income Tax purposes.

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

----S.13(1)(a)---Addition---Consequential addition---Addition under S.13(1)(d) of the Income Tax Ordinance, 1979 could not be made at any later stage as no consequentional addition had been made in the original assessment order---Appellate Tribunal directed that no addition could be made under the head of advance from customers under S.13(1)(a) of the Income Tax Ordinance, 1979.

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

----S.122(5A)---Amendment of assessments---Tax year 2003---Filing of return as on 7-1-2004---Amendment of---Assessee contended that provisions of S.122(5A) of the Income Tax Ordinance, 2001 was not applicable from the tax year 2003---Validity---Section 122(5A) of the Income Tax Ordinance, 2001 having been inserted with' effect from 1-7-2003 was not applicable to the assessments finalized before 1-7-2003 but in the present case return had been filed on 7-1-2004 which was taken to be an assessment order under S.120(1) of the Income Tax Ordinance, 2001---Assessments finalized before 1-7-2003 could not be reopened/revised/amended but this was not the position in the present case---Ground taken by the assessee was rejected by the Appellate Tribunal.

2008 PTD 1420 and 2009 PTD 1 ref.

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

----S. 21(c)---Deductions not allowed---Repair, maintenance and advertisement---Assessee contended that addition had been made without considering the fact that the payments were made below taxable limit to various parties and complete ledger accounts were provided-Taxation Officer had not denied that the payments had been made below the taxable limit but had made the addition on the basis of stock phrases on presumption and surmises which could not be upheld---Order was vacated by the Appellate Tribunal and addition made by the Taxation Officer under S.21(c) of the Income Tax Ordinance, 1979 was deleted.

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

----S.111---Unexplained income or assets---Suppression of purchases---Addition of---Assessee contended that purchases of finished goods fell under the final tax regime and tax calculated at input stage became final tax and no further tax was to be charged on such inputs---Validity---Ledger account of inputs were provided--Amounts booked under Presumptive Tax Regime were also appearing in the ledger account---Inputs being covered under Presumptive Tax Regime tax had been duly deducted at input stage---No loss of revenue had arisen as the assessee had explained the position---Taxation Officer had made addition without any justification---Addition made was deleted by the Appellate Tribunal.

(h) Income Tax---

----Initial allowance/depreciation---Assessee claimed initial allowance according to the months whereas the Taxation Officer had restricted the same according to the number of days---Taxation Officer did not have any material wherein the date of addition had been available---Disallowance under the head depreciation was based on mere guess work arbitrarily on presumption, and surmises which was deleted by the Appellate Tribunal.

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

----S.161---Failure to pay tax collected or deducted---Provision of S.161 of the Income Tax Ordinance, 2001 could not be invoked in respect of payments to fixed assets.

2008 PTD 1683 rel.

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

---S.153---Payment for goods and services---Provisions of S.153 of the Income Tax Ordinance, 2001 were not attracted in the transaction of fixed assets.

2008 PTD 1683 rel.

(k) Income Tax---

---Purchases---Store and spares---Addition of---Taxation Officer had charged tax under raw material purchases, and purchases of store and spares without pointing out any single instance of payment---Assessee himself declared an amount of tax deducted but not deposited---Assessee conceded that amount needed reconciliation---Tax deducted appearing as payable in the balance sheet was as certain payments were made in the end of year and certain amounts of tax deducted appearing as payable in balance sheet included tax paid during previous years but entry for payment could not be booked--Assessment order to the extent of tax deducted appearing as payable in the balance sheet was set aside for fresh consideration with the directions that actual payable be determined after making reconciliation from the payments already made by the assessee---Charge of additional tax was also set aside with the directions to recalculate same afresh.

2008 PTD 787 rel.

Tipu Sultan for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

2009 P T D (Trib.) 1856

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.215/LB of 2009, decided on 3rd June, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5A), 115(4), 153(6A) & Second Sched., Part-IV, Cls.(40) & (41A)---C.B.R. Circular No.1 of 2005, dated 5-5-2005, Para.22---Amendment of assessment---Tax year, 2005---Filing of return---Amendment of assessment for the tax year, 2005 on the basis of statement filed for the tax year, 2004---Assessee contended that requirement to avail option had duly been met with and he had rightly filed his return for tax year, 2005 instead of statement under S.115(4) of the Income Tax Ordinance, 2001---Department contended that taxpayer having filed statement under S.115(4) of the Income Tax Ordinance, 2001 for the tax year, 2004 was committed to file statement for the tax year, 2005 also as such option for presumptive tax regime was final and irrevocable---Validity---On behalf of taxpayer no declaration had been furnished opting for the presumptive tax regime for the tax year, 2005---No justification was available for amending the order on the basis of statement filed for the tax year, 2004 as the restrictions of three years had already been completed exercising the option by the tax payer from the assessment years 2002-2003 to tax year, 2004---First Appellate Authority had not correctly considered the relevant provisions of law---Order of First Appellate Authority was vacated and order passed by the Taxation Officer under S.122(5A) of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal.

2008 PTD (Trib.) 929 rel.

Sh. M. Yousaf, ITP for Applicant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2009 P T D (Trib.) 1887

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.595/LB of 2008, decided on 7th May, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A), 122(9) & 115(4) Second Sched., Part-IV, Cl. (41-A)---Amendment of assessment---Taxation Officer observed that assessee filed statement under S.11'5(4) of the Income 'Tax Ordinance, 2001 for the preceding year and by virtue of Cl. (41-A) of Part-IV of the Second Schedule to the Income Ordinance, 2001, the assessee was required to file statement under S.115(4) of the Income Tax Ordinance, 2001 rather than filing of regular return under S. 114 of the Income Tax Ordinance, 2001 for the tax year 2005---Show-cause notice was issued by. the Taxation Officer under S. 122(9) of the Income Tax Ordinance, 2001 to amend the already completed assessment under S.122(5A) of the Income Tax Ordinance, 2001---Taxation Officer treated the return filed under S.114 of the Income Tax Ordinance, 2001 as invalid return and assessment framed on the basis of that return was found to be erroneous in so far as same was prejudicial to the interest of revenue---Exports and supplies made by the assessee were assessed under Presumptive Tax Regime as tax deducted thereon was treated as final discharge of tax liability---Assessment was amended under S.122(5A) of the Income Tax Ordinance, 2001---Assessee contended that he never filed any option under Cl. (40), Part-IV to the. Second Schedule of the Income Tax Ordinance, 2001, to be assessed under Presumptive Tax Regime---Departmental treatment of return as "invalid return" was not maintainable in the eyes of law---Submission of declaration in writing was a legal requirement and not a procedural in nature and no such option was filed---No reason existed for the department to proceed under Presumptive Tax Regime, merely on the basis that since the assessee had furnished statement under Presumptive Tax Regime in the previous two years, therefore, he should have to file a statement under Presumptive Tax Regime in the third year as well---Validity---Since the appellant/ assessee had not furnished any option (in writing) to be assessed under Presumptive Tax Regime, its return of income furnished under S. 114 of the Income Tax Ordinance, 2001, should be accepted as valid return of Income for tax year 2005---As filing of written option under Cl. (40), of Part-IV, of the Second Schedule, of the Income Tax Ordinance, 2001, was a mandatory requirement of law---Order passed by the First Appellate Authority was vacated by the appellate Tribunal and the amendment of assessment made under S. 122 (1) of the Income Tax Ordinance, 2001 by the Taxation Officer, for the tax year 2005 was annulled.

2008 PTD (Trib.) 929 rel.

Shoaib Ahmad Sheikh for Appellant.

Muhammad Tahir, D.R. for Respondent.

2009 P T D (Trib.) 1896

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalil Siddiqui, Accountant Member

I.T.A. No.441/KB of 2007, decided on 26th June, 2009.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 221, 120, 115(4) & 233---Rectification of mistake---Sale of various products of Pakistan Mobile Communication---Statement under S.115(4) of the Income Tax Ordinance, 2001 was filed claiming refund on the basis of certificate---Certificate was issued by the principal of the company that the tax had been, withheld---Taxation Officer rejected the refund application---First Appellate Authority vacated the refund rejection order and directed the Taxation Officer to pass fresh order strictly in accordance with law and as per provision of S.233 Of the Income Tax Ordinance, 2001---Taxation Officer instead of issuing of refund issued show-cause notice under S.221(2) of the Income Tax Ordinance, 2001---Assessee contended that Taxation Officer without considering the fact that the assessment had already been finalized under S.120 of the Income Tax Ordinance, 2001 and requirement of additional documents or reinvestigation of the evidence already filed by the assessee did not permit to call the documents by recourse to S.221 of the Income Tax Ordinance, 2001---Taxation Officer violating the law had amended the assessment by rectifying under S.221 of the Income Tax Ordinance, 2001 taking suo motu action---Initial condition for exercise of such powers was that the mistake must be apparent on the face of record which may be seen on the surface of the record and did not require investigation or further evidence---Validity---First Appellate Authority had directed to restore the assessment under S.120 of the Income Tax Ordinance, 2001 and to issue refund after examining the evidence of tax withheld by the principal in accordance with law and considering the facts and circumstances of the case required no further interference which was upheld by the Appellate Tribunal.

2006 SCMR 619; 1992 PTD 570 and 1993 PTD 964 (Trib.) ref.

Dr. Abdus Sattar Abbasi, D.R. for Appellant.

Abdul Tahir Ansari, ITP for Respondent.

2009 P T D (Trib.) 1919

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Chairperson and Anisul Hasnain Mousvi, Accountant Member

I.T.As. Nos. 85/KB and 86/KB of 2008, decided on 14th February, 2008.

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

----Ss. 122 & 111(1)(a)---Amendment of assessment---Definite informa­tion---Salary case-Credit entries in the bank statement---Addition---Assessee contended that amendment in deemed order had been suggested on account of difference of opinion and not on the basis of definite information---Entire amount credited in the bank statement was actually reconciled and there was "Nil" amount which was to be added under S.111(1)(a) of the Income Tax Ordinance, 2001---Validity---Provisions of S.122 of the Income Tax Ordinance, 2001 had been invoked in absence of definite information---Assessing Officer, while reconciling the credit entries could not conceive cash in hand at the beginning of the assessment year---Such amount had completely escaped consideration---Contra entries were also appearing in the credit side of the bank statement which were not taken into account---As regards, sale of plot, although sale-deed could not be produced by the assessee but the fact remained that copy of the sale receipt was produced coupled with it the said asset was not declared by the assessee in his wealth statement in the subsequent tax year---Nothing was available on record wherefrom it could be deduced that there was a definite information in possession of the Assessing Officer on the strength of which the deemed order could be amended---Entire edifice of the assessment had been built by the Assessing Officer on the assumed facts --- No tangible material was in possession of the department capable of sustaining such opinion---Statutory authority could not be exercised in order to amend the deemed order on the whimsical inference drawn from certain set of facts---Order under S.122(1) of the Income Tax Ordinance, 2001 was passed by the Taxation Officer without having any lawful jurisdiction---Even otherwise the addition was not sustainable in the eye of law---Order passed under S.122(1) of the Income Tax Ordinance, 2001 was knocked out by the Appellate Tribunal.

200 PTD 253 (Trib.); PLD 1947 Note 129 at page 189; 1991 PTD (Trib.) 802 and (1983) 141 ITR 67 (Bom.) ref.

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

----Ss. 122 & 120---Amendment of assessment---Non-ticking of sub-sections in the notice---Effect---Until and unless relevant subsection of S.122 of the Income Tax Ordinance, 2001 was ticked the Assessing Officer could not assume jurisdiction to amend the order---Ticking of relevant subsection of 5.122 of the Income Tax Ordinance, 2001 was sine qua non for assumption of jurisdiction to amend the deemed order which had been made under S. 120 of the Income Tax Ordinance, 2001.

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

----S.111(1)(a) --- Income Tax Ordinance (XXXI of 1979), S.13(1)(a)---Unexplained income or assets---Salary case---Credit entries in the bank statement---Addition---Validity---Addition to be made under S.111A(1)(a) of the Income Tax Ordinance, 2001 was para materia to S.13(1)(a) of the Income Tax Ordinance, 1979 which envisaged maintenance of books of accounts whereas this was a case of salary income wherein no books of accounts were required to be maintained under the rules---In no way the. bank account or the bank statement maintained and supplied by the bank to the taxpayer could be treated to be the books of accounts maintained by the person/taxpayer as is laid down in subsection (1)(a) of S.122 of the Income Tax Ordinance, 2001---Since, subsection (1)(a) of S.122 of the Income Tax Ordinance, 2001 was not attracted to the facts of the case, the addition made was not sustainable in law.

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

---Ss. 122(9).& 111(1)(a)---Amendment of assessment---Addition was made in the year in which the discovery was made---Validity---Law was very much clear that addition under S.122 of the Income Tax Ordinance, 2001 could be made in the immediately preceding year after the year in which it was discovered---Discovery of the fact that assessee was maintaining a bank account, was in the tax year 2006---Amount should have been included in the person's income chargeable to tax in the tax year immediately preceding the financial year in which it was discovered---Such would be the tax year 2005 and not the year under appeal---After discovery, law had prescribed. a complete procedure as how to proceed and in what manner the addition would be made---Year of discovery, would be taken in the year in which the fact came to the knowledge of department and not the year in which show-cause notice was issued---Addition was to be made in the tax year 2005 and not the year under appeal.

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

----Ss. 111(1)(a) & (2)---Unexplained income or assets---Credit entries in the bank statement---Addition---Principles---Only the amount of peak deposit was to be probed and if found unexplained that should be treated as income ` from undisclosed sources under the provision of S. 111(1)(a) and (2) of the Income Tax Ordinance, 2001.

1998 PTD 88; 1995 PTD 666 and 2007 PTD 2140 rel.

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

----Ss. 184, 122(1) & 111(1) (a)---Penalty for concealment of income---As the order passed under S.122 (1) of the Income Tax Ordinance, 2001 had been declared by the Appellate Tribunal to have been passed without any lawful jurisdiction coupled with the fact that the addition made under S.111 (1) (a) of the Income Tax Ordinance, 2001 had been held to be not tenable in law, the penalty order was also liable to be quashed.

Javaid Zakaria for Appellant.

Muhammad Ali Saand, D.R. for Respondent.

2009 P T D (Trib.) 1963

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

W. T. As. Nos. 1/KB to 5/KB of 2009, decided on 24th June, 2009.

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

----S.2(5)(ii)---Assets---Assessees contended that Taxation Officer treated the property owned by the assessee as taxable, whereas the property in question had not been held for the purpose of business of construction and sale or letting out and the same could not be subjected to tax as defined under S.2(5)(ii) of the Wealth Tax Act, 1963---Validity;---If, for some span of time the asset was rented out, it would not 'remain within the charge created by the definition of "asset" under S.2(1)(5)(ii) of the Wealth Tax Act, 1963, and explanation provided therein---Benefit of doubt had to be given to assessee and the case could have been decided in favour of the assessee---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---Temporary let out of property was not subject to charge under Wealth Tax Act, 1963---Taxation Officer treated the property owned by the assessee as taxable without establishing that the purpose of assessee regarding the property was business of construction and sale or letting out under S.2(5)(II) of the Wealth Tax Act, 1963---Order of First Appellate Authority was vacated and orders passed by the Taxation Officer were cancelled by the Appellate Tribunal and levy of additional tax was also deleted.

2008 PTD 838; 1996 SCMR 1670; PLD 1985 Kar. 407 and 1989 PTD 1044 rel.

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

----S.17---Wealth escaping assessment---Non-ticking of sub-clause of the provision on the notice---Effect---Assessee contended that notice issued under S.17 of the Wealth Tax Act, 1963 was vague and illegal as no specific sub-clause had been marked which was mandatory requirement and the order passed by the Taxation Officer was ab initio, unlawful, without jurisdiction and subsequent proceedings built thereon were unlawful---Validity---Taxation Officer issued notice wherein he had not properly ticked sub-clause of the provision under which he was going to tax the assessee---Such vague notice was ab initio illegal and any consequent proceedings were without jurisdiction and liable to be quashed---Notice was not specifically ticked meaning thereby the Taxation Officer was not definite in his mind as to which clause of the provision mentioned on the notice was attracted to the facts of the case.

2002 PTD (Trib.) 260; 2001 PTD 480; 1997 PTD 47; 2004 PTD (Trib) 1052; 2000 PTD (Trib) 531 and 1983 PTD 246 rel.

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

----S.2(5)(ii)---Assets---Temporary let out of property was not subject to tax under the Wealth Tax Act, 1963.

2008 PTD 838 rel.

Abdul Rahim Lakhani for Appellant.

Dr. Abdul Sattar Abbasi, D.R. for Respondent.

2009 P T D (Trib.) 1974

[Income-tax Appellate Tribunal Pakistan]

Before Javaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

I.T.A. No.131/LB of 2008, decided on 31st July, 2009.

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

----S.122(9)--Income Tax Rules, 2002, First Schedule, para. 2---Amendment of assessment---Service of notice---Assessee denied service of notice---First Appellate Authority annulled the amended assessment order framed under S.122(1) of the Income Tax Ordinance, 2001 on the ground of technical flaw of the notice---First Appellate Authority had dilated upon the technical defects in the notice issued under S.122(9) of the Income Tax Ordinance, 2001 and had recorded contention of the assessee that the said notice was not served on the assessee and annulled the assessment---Held, it was not understandable as to how the assessee was able to expose the technical flaws of the notice before the First Appellate Authority, when he had not received it---First Appellate Authority did not notice contradiction between the pleadings of the assessee---Mere technical flaw, if any, in the notice under S.122(9) of the Income Tax Ordinance, 2001 was neither of any help to the tax payer nor did it constitute a sufficient basis for annulment of assessment---Non-disclosure of income were not even touched upon and the assessment was annulled merely on technical grounds, which were misconceived and annulment of assessment was not justified---Order of the First Appellate Authority was vacated and the order passed under S.122(1) of the Income Tax Ordinance, 2001 by the Assessing Officer was restored by the Appellate Tribunal.

1997 PTD 47 ref.

CIT v. Abdul Ghani 2007 PTD 967 and Pakistan Fisheries Limited v. United Bank Limited PLD 1993 SC 109 rel.

(b) Income-tax---

----Notice---Technical flaw---Mere technical flaw in the form of a notice cannot vitiate an order of assessment if the charge of tax otherwise stands established beyond any shadow of doubt.

CIT v. Abdul Ghani 2007 PTD 967 and Pakistan Fisheries Limited v. United Bank Limited PLD 1993 SC 109 rel.

(c) Income-tax---

----Notice---Technical flaw---Mere technical flaw in a notice cannot defeat a levy if it is otherwise countenanced by law.

(d) Income-tax---

----Non-service of notice---Assessee's stance regarding non-service of notice before First Appellate Authority did not appear to be correct because in the grounds of appeal, it was contended that the said notice was not in the proper format---Such a stance could be taken only if the assessee was in possession of the said notice.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Nemo for Respondent.

2009 P T D (Trib.) 1990

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.A. No.105/KB of 2006, decided on 24th June, 2009.

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

----Ss.65, 62 & 13(1)(aa)---Additional assessment---Definite informa­tion---Approbate and reprobate---Cash gift deed filed by the assessee stating that she had received cash gift from her ex-husband was accepted---Complaint was made by the ex-husband of the assessee that the gift deed was bogus---Case was reopened under S.65 of the Income Tax Ordinance, 1979 on the basis of such alleged `definite information' that ex-husband of the assessee was not present in Pakistan on the date of execution of gift deed and addition was made under S.13(1)(aa) of the Income Tax Ordinance, 1979---Validity---At the time of processing assessment, ex-husband of the assessee himself appeared before the Assessing Officer and stated that he had provided the gift to the assessee---Nobody should be allowed to approbate and reprobate and the given two versions being contrary to each other could not be allowed to stand---Ex-husband of the assessee paid advance against purchase of property to the seller through his bank account---Assessee had been house wife and the property was purchased in her name whereas the payment was made, through his ex-husband as he was only earning member and having sufficient funds which was evident from bank transaction---Gift may also be oral and in the present case cash gift deed was from husband to wife although, later on, the marriage had been dissolved---Since source of investment was fully explainable, S.13(1)(aa) of the Income Tax Ordinance, 1979 was not attracted---Order of First Appellate Authority was upheld and the appeal filed by the Department was dismissed by the Appellate Tribunal.

2005 CLC (C-1066); 1995 PTD (Trib) 1 and SBLR 2005 135/D (sic) rel.

(b) Income-tax---

----Approbate and reprobate---Law did not allow to approbate and reprobate and giving two contradictory statements would amount to blow hot and cold at the same time, which was not tenable under the law.

2005 CLC (C-1066); 1995 PTD (Trib) 1 and SBLR 2005 135/D (sic) rel.

Dr. Abdus Sattar Abbasi, D.R. for Appellant.

Abdur Rahim Lakhani for Respondent.

2009 P T D (Trib.) 2007

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.As. Nos. 392/KB and 393/KB of 2007, decided on 18th June, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S.170---Income Tax Ordinance (XXXI of 1979), S.143-B---Refund---Assessee contended that statement under S.143B of the Income Tax Ordinance, 1979 was filed but the Taxation Officer had wrongly stated in the order under S.170(4) of the Income Tax Ordinance, 2001 that the original statement under S.143-B of the Income Tax Ordinance, 1979 was neither available on record nor any entry on file was available in the relevant receipt, but he had accepted in the assessment order that the tax payer had furnished the certificate in support of his claim of refund---Taxation Officer without any basis had observed that the filing of revised statement under S.143(b) of the Income Tax Ordinance, 1979 and consequent filing of rectification application and refund application were time barred---Claim of refund could not be revised on account of limitation as provided under S.170(2)(c) of the Income Tax Ordinance, 2001---Validity---First Appellate Authority had directed the Taxation Officer to rectify the order passed in the light of revised certificate and issue the refund if found that the deductions of tax were made in excess after verification regarding the assessment years 1999-2000, 2000-2001 and 2001-2002 and tax year 2004 but upheld the treatment meted out by the Taxation Officer for the assessment years 1996-97 and 1997-98 under review despite the facts that the revised certificate for these two years with the claim of refund had been filed after receipts of correct certificate issued by the Executive Engineer who had bifurcated the payment of work, supplies and transportation which had not been reconfirmed by the Taxation Officer from the issuing authority and had rejected the claim of the assessee for the reason that the refund applications were time barred without considering the fact that Appellate Tribunal had already held that the claim of refund could not be rejected on account of limitation---Order of First Appellate Authority was vacated to this extent for the year under review and order passed by the Taxation Officer under S.170(4) of the Income Tax Ordinance, 2001 was set aside with the directions to issue refund in accordance with law if the deductions of tax were made in excess after verification and confirmation from the deducting authority.

(2008) 1997 Tax 16 (Trib.); PLD 1998 SC 64 and (1999) 79 Tax 27 ref.

(2008) 47 Tax 16 (Trib.) rel.

Abdul Tahir, ITP for Appellant.

Dr. Rajabuddin, D.R. for Respondent.

2009 PTD (Trib.) 2019

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.As. Nos.8/KB to 10/KB of 2007, decided on 1st September, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.131 & 221---Rectification of mistake---Application for---Appeal to Appellate Tribunal---Respondent/assessee a Public Limited Company managed and controlled by Government being State enterprise---Such legal status of assessee having been taken as that of a Private Limited Company, company filed application under S.221 of Income Tax Ordinance, 2001 for rectification of mistake---Rectification application was dismissed by the Taxation Officer holding the company a Private Limited Company---Appeal before Commissioner Income Tax (Appeals) against order of Taxation Officer, having been accepted, department filed appeal before Appellate Tribunal alleging that Commissioner (Appeals) had erred in admitting and accepting appeal against rejection of application for rectification---Validity---Assessee company was a State owned enterprise whose 100% shares were held by State Engineering Corporation---Said company was nationalized in pursuance of the Economic Reforms Order, 1972---Documents which had been discussed in the impugned orders of the officers below, had shown that company had come under the definition of `Public Limited Company'---As 100% of shares of the company were held by State Engineering Corporation, which in turn was fully owned by Federal Government, shares of the company, would be deemed to have been held by the Federal Government---Legal issue involved in the case having already been settled in favour of assessee/company by the Tribunal, there was no justification not to follow the direction of the Tribunal, until and unless decision given by the Tribunal was reversed by the higher authorities---No justification was for interference in the impugned order of C.I.T. (A)/Commissioner (Appeals)---Same was upheld and appeals filed by the appellant/department were dismissed.

2003 PTD (Trib.) 1903; 1999 PTD 825 and 1992 PTD 570 ref.

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

S. Muniruzzaman for Respondent.

2009 P T D (Trib.) 2046

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairman, Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Sherazi, Accountant Member

I.T.As. Nos. 4305/LB and 4916/LB of 2001, decided on 30th May, 2009.

(a) Income Tax Appellate Tribunal---

----Powers of---Scope---Income-tax Appellate Tribunal had no authority to interpret the power of Legislature or the provisions of the Constitution.

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

----S.12 (9A)---Income deemed to accrue or arise in Pakistan---Methods of distribution of dividends---Provisions of S.12 (9A) of the Income Tax Ordinance, 1979 contain two methods of distribution i.e. to distribute cash dividend within seven months but no minimum requirement has been given, and to distribute dividend (not cash) but no time frame has been given.

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

----S.12(9A), proviso---Income deemed to accrue or arise in Pakistan---Proviso to S. 12(9A) of the Income Tax Ordinance, 1979 is restricted to the assessment year commencing on the first day of July, 1999 issued by the Central Board of Revenue whereas in the assessee's case the income year commences from 1-10-1998 which extends to 30-9-1999---Clause (i) of the proviso talks about the income year ending on a date prior to 30th June, 1999 and clause (ii) converses about the income year ended on 30-6-1999 and both clauses did not cover the income year ending on 30-6-1999---Both clauses did not cover the assessee's income year.

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

----S. 12(9A) & Second Sched., Part-IV, Cl. (59)---C.B.R. Circular No.26 of 1999 dated 30-9-1999---Income deemed to accrue or arise in Pakistan---Company listed in stock exchange was not hit by mischief of S.12(9A) of the Income Tax Ordinance, 1979 if it distributes 40% of after tax profits.

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

----S.12(9A)---Income deemed to accrue or arise in\ Pakistan---Reduction of profit by the Assessing Officer---Addition by taking reserve for the previous years---Validity---Allegation of Assessing Officer that company had reduced its profits by showing a provision of Twenty Million of tax liability and it could only be current tax liability and not the deferred tax liability and in case the deferred tax liability had to be included, it should be reasonable---For said reason, assessing officer reduced the said provision from Twenty Million to Rs.1,60,21,587 and in this way he had come to the conclusion that the distribution of reserve was short of 40% and had applied the formula of 50% as per S.12(9A) of the Income Tax Ordinance, 1979 without any legal force---Reserves taken by the Assessing Officer were related to previous years---Section 12(9A) of the Income Tax Ordinance, 1979 was not applicable to the reserves, of previous years and its. applications was only restricted to the reserves of assessment years 2000-2001-Addition made under S. 12(9A) of the Income Tax Ordinance,-1979 was deleted by the Appellate Tribunal--On the issue, assessee's appeal was allowed while the appeal filed by the department was dismissed.

India Industrial Corporation Ltd. v. C.I.T./1963/48 ITR 543; Legal Dictionary, Words and Phrases by Mian Mahbullah Kakahel, on pages 1616-1617 and 1970 76 ITR 656 at pp.660-61 ref.

2004 PTD (Trib.) 1135 rel.

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Business advances---Addition of---Validity---Business advances or the trade advances were not hit by mischief of S. 12(18) of the Income Tax Ordinance, 1979---Addition made under S.12(18) of the Income Tax Ordinance, 1979 was deleted by the Appellate Tribunal and appeal filed by the assessee on the issue was allowed.

Income Tax Appeal No.491/2000 decided on 6-2-2001; 86 ITR 2 SC; 48 ITR 59 SC, 55 ITR 741 SC; Principles of Statutory Interpretation: 6th Edition, by Justice S.P. Singh; 1990 PTD 29 (32); PLD 1969 SC 241; (1989) 178 ITR 31 Andara Pardash High Court; (1991) 189 ITR 741 Orissa High Court; Chapter 10 of Maxwell on Interpretation of Statutes, 12th Edition; 1991 PTD 488 492 SC; 1996 PTD 505 (509); 2002 PTD 877; 2004 PTD 1659; 2007 PTD (Trib.) 139; 2007 PTD (Trib.) 1703; 2007 PTD (Trib.) 776; 2007 PTD HC 178; 2007 PTD SC 1377; 2002 PTD 613 Pesh. HC; 2006 PTD 774, 2007 PTD 1843 and 2006 PTD 2602 ref.

(g) Income Tax---

----Addition on account of Sugarcane 'Department, Anticane pouching and subsidy on transportation---Assessee contended that Assessing Officer had made addition without pointing out any instances of un­verifiability of transaction or giving any basis which were illegal and unjustified---Validity---As no basis for additions were given, the addition made under all the heads of account were deleted by the Appellate Tribunal.

(h) Income Tax---

----Profit and Loss expenses---Disallowances of---Previous history---First Appellate Authority confirmed the disallowance made by the Assessing Officer as per history of the case but assessee submitted that Appellate Tribunal had deleted such disallowances made in the same pattern in the previous years---Keeping in view the previous history the disallowances were deleted by the Appellate Tribunal.

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

---Ss. 24(i) & 25(c)---Deductions not admissible---Addition---No interference was warranted by the Appellate Tribunal regarding additions on account of lease rentals, additions made under S. 25(c), under S.24(i) of the Income Tax Ordinance, 1979 and regarding addition on account of depreciation as assessee had not pressed the grounds in -that respect---Appeal regarding such addition was dismissed.

Dr. Ilyas Zafar along with Syed Nasir Ali Gillani for Appellant (in I.T.A. No.4305/LB of 2001).

Shahid Jamil Khan, L.A. for Respondent. (in I.T.A. No.4305/LB of 2001).

Shahid Jamil Khan, L.A. for Appellant (in I.T.A. No.4916/LB of 2001).

Dr. Ilyas Zafar along with Syed Nasir Ali Gillani for Respondent (in I.T.A. No.4916/LB of 2001).

2009 PTD (Trib.) 2074

[Income-tax Appellate Tribunal Pakistan]

Before Khalida Yasin, Mian Muhammad Hanif Tahir, Members Judicial and Zafar Iqbal, Member Technical

Sales Tax Appeals Nos. H-26, H-27, H-29, H-101, H-134, H-84, H-132, H-133, H-83, H-275, H-276, H-277, H-278, H-272, H-181, H-193 of 2005, H-160, H-161, H-250, H-159, H-187, H-214 of 2004 and H-106 of 2006; decided on 30th November, 2006.

Per Zafar Iqbal, Member Technical, Mian Muhammad Tahir Member Judicial, agreeing--

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

----S. 36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Nineteen appeals out of - twenty three were allowed by the Appellate Tribunal on the short point that orders were barred by limitation---Validity---Order-in-Original had not been framed within the time specified in the proviso to S.36(3) of the Sales Tax Act, 1990 and Collector had also not given any extension of time as envisaged in the said proviso.

Pace International v. Secretary 2006 PTD 340, C.B.R. v. Pace International 2006 PTD 340; SS Oil Mills Ltd. v. Secretary GST 2005 CL 592; CST v. Hilal Tanneries PLD 1976 Lah. 655 and Nagina Silk Mills v. ITO PLD 1963 SC 322 rel.

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

----S. 36(3), proviso---Recovery of tax not levied or short-levied or erroneously refunded---Nature of the provisions, mandatory or directory---Period specified in the proviso to S.36(3) of the Sales Tax Act, 1990 and in analogous provisions of other statutes was mandatory and not directory in nature.

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

----S.36(3), proviso---Recovery of tax not levied or short-levied or erroneously refunded---Vague and defective show-cause notice---Show­-cause notices were vague and defective for want of necessary particulars and the same had also not mentioned the subsection of S.36 of the Sales Tax Act, 1990 under which they had been issued.

Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838; Zamindara Paper and Board Mills (Pvt.) Ltd. v. Collector, Customs and Excise 2003 PTD 1257; D.G. Khan Cement Co. Ltd. v. Collector of Customs, Sales Tax and Central Excise 2003 PTD 1797; Atlas Tyre v. Additional Collector (Adjudication) 2003 PTD 1593 and Caltex Oil v. Collector, Central Excise 2005 PTD 480 rel.

Matiari Sugar Mills Ltd. and others v. Federation of Pakistan 2003 PTD 773; Mirpurkhas, Sugar Mills Ltd. and others (i.e. C.P. No. D-123 of 2001; Yousaf A. Mitha v. Aboo Baker PLD 1980 Karachi 492; Khalid Adamjee v. CIT 1983 PTD 246 and Amin Fabrics Ltd. v. CIT 1998 PLC (CS) 694 ref.

(d) Sales Tax Ruling---

----Adjudication before receiving contravention report---Validity---Sales Tax Ruling left no scintilla of doubt that after the same the adjudication officers could not conduct adjudications unless they first receive contravention reports by Executive Collectorates---Such contravention reports could not be issued by officers below the rank of Collector---Contention that such was only an internal procedure and could not be used by assessee/registered person hardly had any merit---Very nature of the text of Sales Tax Ruling so also its publication in the press confirmed that it was not meant only for internal use but other for regulation of jurisdiction.

Province of West Pakistan v. Din Muhammad PLD 1964 SC 21; Collector v. Muhammad Tasleem 2002 MLD 296; Rani v. CWT 1993 PTD 206; 1997 PTD (Trib.) 2209; Mustafa Prestressed Pipes v. CIT 1990 PTD 974; 1988 PTD (Trib.) 760; 1995 PTD (Trib.) 580; B.S. Industries v. Deputy Registrar PLD 1969 Dacca 451; Fayyaz H. Qadri v. Administrator Lahore PLD 1972 Lahore 316; Shahzad Ahmed Corporation v. FOP 2005 PTD 23; Zeb Traders v. FOP 2004 PTD 369; N.P. Water Proof v. FOP 2004 PTD 2952 and Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996 ref.

(e) Sales Tax---

----Jurisdiction---Power vested in any authority could only be exercised by that authority, in default whereof, the entire action' would be without jurisdiction, void ab initio and of no legal effect.

Abida Rashid v. Secretary PLD 1995 Kar. 587 rel.

(f) Jurisdiction---

----Exercise of---Mandatory condition---Where the mandatory condition of exercise of jurisdiction by a Court, Tribunal or Authority was not fulfilled, then the entire proceedings would become illegal and all subsequent orders would be without jurisdiction.

Rashid Ahmad v. The State PLD 1972 SC 271 rel.

(g) Administration of justice---

---Method of performance---Where power was given to do a certain thing in a certain way, then that thing must be done in that way or not at all and all other methods of performance not so prescribed were necessarily forbidden.

(h) Sales Tax Ruling---

---After the Sales Tax Ruling all actions initiated by adjudication authorities, without contravention reports, or all actions initiated by adjudication authorities, upon contraventions reports given by officers below the rank of a Collector would be completely coram non judice. And void---Similar would be the outcome of all subsequent orders based upon such unlawful adjudication proceedings which were vacated for yet one more reason by the Appellate Tribunal.

Abida Rashid v. Secretary PLD 1995 Kar. 587; Rashid Ahmad v. The State PLD 1972 SC 271 and Abdul Razzaq v. Muhammad Sharif PLD 1997 Lah. 1 rel.

Province of West Pakistan v. Din Muhammad PLD 1964 SC 21 and Collector v. Muhammad Tasleem 2002 MLD 296 ref.

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

----Ss. 3(1A), 2(25) & 2(47)---Further tax---Conclusions drawn by the Appellate Tribunal from the judgment of Fatima Sugar Mills Ltd. GST 2003 CL 413.

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

----S.3(1A)---Further tax---Supplies to persons liable to be registered---Taxation of---Validity---Supplies were made by the registered persons to or through brokers/dealers, who were liable to be registered under the Sales Tax Act, 1990, as such the supplies of the appellants, which were in issue, did not attract S.3 (1A) of the Sales Tax Act, 1990.

Fatima Sugar Mills Ltd. v. Collector GST 2003 CL 413 rel.

Abdul Razzaq v. Muhammad Sahrif PLD 1997 Lahore 1; Caltex Oil v. Collector, Central Excise 2005 PTD 480; Waqas and Co. v. Customs, Excise and Sales Tax Appellate Tribunal 2003 PTD 2100, Phalia Sugar Mills Ltd. v. Collector Sales Tax Writ Petition No.21776 of 2001, decided by the Lahore High Court on 19-2-2002 and C.A. No.54/2002, dated 7-5-2003 ref.

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

---Ss. 3(1A) & 3(1)---Constitution of Pakistan (1973), Art.25---Further tax---Unverifiable sales---Where the sales for the purposes of S.3(1) of the Sales Tax Act, 1990 had been accepted to be verifiable, the stance of the department to term the same sales to be unverifiable, for the purposes of S.3(1A) of the Sales Tax Act, 1990, will be completely unwarranted, inconsistent and discriminatory and also violative of Art.25 of the Constitution---Payments received on account of sales were predominantly through account payee cheques' i.e. verifiable' parties---Unverifiability of sales could be no ground for their rejection or a warrant to apply S.3(1A) of the Sales Tax Act, 1990.

(l) Sales Tax---

----Market reality---Levy of sales tax---It is a market reality that a purchaser, who buys from a seller, may or may not leave his address or correct address or whereabouts with the seller, and the seller cannot force the purchaser in this regard except choose not to deal with him---In the context of income tax, and while keeping this market reality in the background unverifiability of sales or purchases had been held to be no ground to reject the trading results---Such market reality did not change for the levy of sales tax.

Ayenbee (Pvt.) Ltd. v. ITAT 2002 PTD 407 ref.

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

----S.3(1A)---Further tax---Unverifiability of sales---Levy of further tax--Validity---Statute did not specify unverifiability of sales to be a precondition for imposition of levy of further tax under S.3(1A) of the Sales Tax Act, 1990---Only condition necessary to warrant the application of S.3(1A) of the Sales Tax Act, 1990 was supplies to unregistered persons---Such supplies may or may not be verifiable---One may think of a myriad of situations where although sales may be verifiable, further tax under S.3(1A) of the Sales Tax Act, 1990 would be still leviable---Department in invoking S.3(1A) of the Sales Tax Act, 1990 in view of unverifiability of sales (though factually in these appeals sales are verifiable) had sought to introduce a condition extraneous to the statute, which renders the entire exercise to be a nullity---Unverifiability of sales was neither a condition nor a justification to warrant the application of S.3(1A) of the Sales Tax Act, 1990.

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

----Ss: 73 & 31(1A)---Certain transactions not admissible---Further tax---Unverifiability of sales---Section 73 of the Sales Tax Act, 1990 did not provide that if sales were unverifiable further tax under S.3(1A) of the Sales Tax Act, 1990 should be imposed---Section 73 of the Sales Tax Act, 1990 did not also require the supplies to be verifiable---No input adjustment was being claimed by the appellants in respect of the purchase price received for the final supplies---Application of S.73 of the Sales Tax Act, 1990 in circumstances was incorrectly mooted.

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

----Ss. 2(25) & 19---Registered person---Persons liable to be registered---Person was liable to be registered under the Sales Tax Act, 1990, but not actually registered, was to be construed as `registered person' since under S.2(25) of the Sales Tax Act, 1990 the definition of the term "registered person" included the persons actually registered and those who were liable to be registered---Such interpretation was also quite in line with the express provision contained in S.19 of the Sales Tax Act, 1990 whereby persons who were liable to be registered and not registered were deemed to have been registered from the date they became liable to be registered.

Fatima Sugar Mills Ltd. v. Collector GST 2003 CL 413 rel.

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

----Ss. 19 & 2(25)---Compulsory registration or enrollment---Persons liable to be registered---Supplies made to persons not actually registered, were to be construed as supplies made to registered persons since the purchasers even if not so registered were deemed to be registered under S.19 of the Sales Tax Act, 1990.

(q) Interpretation of statutes---

---Parliamentary debates---Legislation---Object and purpose---Although parliamentary debates may be inadmissible for construing a provision of a statute, "the speech made by the mover of the bill, explaining the reason for introducing the bill can be referred or the, purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted.

Elahi Cotton v. FOP PLD 1997 SC 582 and K.P. Varghese v. ITO (1981) 131 ITR 597(SC) rel.

Govt. of Pakistan v. Muhammad Ashraf PLD 1993 SC 176 and Northern Bottling Co. v. FOP 2004 PTD 2267 ref.

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

---S.3(1A)---Further tax---Section 3(1A) of the Sales Tax Act, 1990 is aimed at penalizing a registered person for dealing with an unregistered person.

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

---S.3(1A)---Further tax---Registered person, making the supplies, can hardly be blamed and then taxed for such default of other person, for which he was not responsible---Provision was unreasonably harsh and unjustly illogical.

(t) Interpretation of statutes---

----Repeal by the amending legislation was remedial .and curative in nature---All curative and remedial amending legislations are retrospective and apply to all pending proceedings, assessments and appeals.

CST v. Kruddsons Ltd. PLD 1974 SC 180; CIT v. Olympia 1987 PTD 739; CIT v. Shahnawaz Ltd. 1993 SCMR 73 and Dawood Cotton Mills v. CIT 2000 PTD 285 rel.

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

----S.3(1A)---Further tax---Repeal of S.3(1A) of the Sales Tax Act, 1990 vide Finance Act, 2004 being remedial and curative, retroactively applies to all the pending adjudications/assessments and appeals, which include the present pending appeals---Section 3(1A) of the Sales Tax Act, 1990 was to be construed as never having existed on the statute book but this was of course only for the purposes of the pending proceedings, assessments and appeals/references---Appeals were allowed by the Appellate Tribunal on this score as well and all the proceedings and orders were vacated on this ground too.

CST v. Kruddsons Ltd. PLD 1974 SC 180; CIT v. Olympia 1987 PTD 739; CIT v. Shahnawaz Ltd. 1993 SCMR 73 and Dawood Cotton Mills v. CIT 2000 PTD 285 rel.

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

---Ss. 34 & 33---Additional tax and penalties---No wilful default---No justification to impose any additional tax and penalty when there was no wilful default or mala fides on behalf of the appellants---Where the entire case was at best a matter of interpretation, penalty and additional tax were remitted by the Appellate Tribunal accordingly.

1990 PTD (Trib.) 1042; (1962) 46 JTR 1; (1974) 94 ITR 1; 1993 PTD (Trib.) 960/964; (1978) 114 ITR 19 and 1993 SCMR 662 ref.

D.G. Khan Cement Co. Ltd. and others v. FOP 2004 SCMR 456; Nestle Milk Pak Ltd. v. Additional Collector Adjudication Multan 2002 PTD (Trib.) 300; CST Faisalabad v. Coca Cola Beverages Pakistan Ltd., Faisalabad 2005 PTD 1984; CST v. Kashif Enterprises Faisalabad 2005 PTD 1978; CST Faisalabad v. Farooq Traders, Jhawarian 2005 PTD 1953; Millat Tractors Ltd., Lahore v. CST Lahore 2003 PTD 1445; and Ghandhara Nissan Diesel Ltd. v. Sales Tax Department and others 2004 PTD 2771 rel.

(w) Sales Tax---

---Show cause notice---Vacation of---Mere error in adding the figures on its own cannot be a ground to vacate the show cause notice.

(x) Sales Tax---

---Burden of proof rests on the alleger.

(y) Sales Tax---

---Double jeopardy---Show-cause 'notice---Demand envisaged in the show cause notice, Order-in-Original was deleted/vacated by the Appellate Tribunal on the ground of double jeopardy as the earlier demand for the same period was more than the demand covered by the present show-cause notice.

(z) Sales Tax---

----Adjustment of tax in the wrong period was to be condoned as no actual loss of revenue had occasioned---Orders of penalty and additional tax were also held to be without justification---Rulings of Central Board of Revenue were in line with the spirit of law and the irregular adjustment was condoned by the Appellate Tribunal and the show cause notice/Order-in-Original to such extent were vacated---Payment made by the appellant in this regard was liable to be refunded.

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

---S.34---Additional tax---Payment in instalments---Payment of additional tax under protext---Validity---Once the Central Board of Revenue had itself provided for payment of instalments of the amount, additional tax would be payable by the appellant and as such there could be no justification of any imposition of additional tax which was ordered by the Appellate Tribunal to be deleted.

Bawany Violine Textile v. CIT (1967) 15 Taxation 191 (Kar.) and CIT v. Sultan Sargodha Textile 1987 PTD 144 rel.

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

----Ss.33 & 73---Offences and penalties---Penalty was imposed by the adjudicating authority on two transactions/audit observations on the grounds that the same information was not produced at the original stage---Validity---Since it had been proved that the payments were made up by `account payee cheques', duly verified by the bank statements, there was no warrant to impose the penalty as no mala fides were attached on part of the appellant---Penalties were remitted by the Appellate Tribunal as the same was confirmed that even at the original stage information had been given by the appellant to the Department.

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

----S.7---S.R.O. 578(I)/98, dated 12-6-1998---Determination of tax liability---Input tax claimed on building material was treated as in violation of S.R.O. 578(I)/98, dated 12-6-1998---Validity---Since the input claim related to the construction items which were required to facilitate the manufacture of goods, which were the subject matter of taxable supplies, there was no violation of S.R.O. 578(I)/98, dated 12-6-1998---Input adjustment was held to be in order.

Sindh Alkalies Ltd. v. Collector of Customs, Sales Tax and Central Excise Appeals, Appeal No.11 of 2002 rel.

C.P. No.1477/99; 1992 PCr.LJ 1520 and Islamabad Tribunal in Appeals Nos.154 and 1555 of 2005, dated 28-11-2005 ref.

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

----S.7---Determination of tax liability---Input adjustment on telephone and electricity were disallowed on the grounds that the same pertained to expenses of Administration Office and not the Factory---Validity---Admittedly, the Administration in Office was situated in the Factory's premises and activities in the said office were part and parcel to the main activity and necessary for making 'the taxable supplies, disallowance was deleted by the Appellate Tribunal as well as additional tax in that regard---Payments made under the relevant head were directed to be refunded.

Sindh Alkalies Ltd. v. Collector of Customs, Sales Tax and Central Excise Appeals, Appeal No.11 of 2002 rel.

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

----S.34---Additional tax---Instalments---No justification to impose additional tax when instalments had been granted by the Central Board of Revenue.

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

----S.3---S.R.O.388(I)/2001, dated 18-6-2001---Scope of tax---Sale of scrap includes sale of iron---Contention of the appellant was that the sale of scrap was covered by normal law and 15% sales tax was payable thereon---Department contended that sales of scrap included sale of iron which carried rate of 20% under S.R.O. 388(I)/2001, dated 18-6-2001---Validity---Contention of the appellant was devoid of force and applying the rate given in the S.R.O.388(I)/2001, dated 18-6-2001, the stance of the department was sustained by the Tribunal---Order-in-Original and consequent demand to that extent were upheld---Demand already paid in that regard was not liable to be refunded.

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

----S.56---Service of order, decisions, etc.---Any show-cause notice without service on the registered person was a nullity in law and any order passed by the Additional Collector in pursuance of the said notice ab initio lacked in jurisdiction and lawful authority---Entire proceedings and the Order-in-Original were held to be nullity in law.

1967 PTD 189 rel.

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

---Ss. 73 & 3(1A)---Certain transactions not admissible-Demand towards violation of S.73 of the Sales Tax Act, 1990 was totally incorrect as in the context of further tax under S.3(1A) of the Sales Tax Act, 1990, S.73 of the Sales Tax Act, 1990 was totally irrelevant.

Per Khalida Yasin (Member Judicial) (Minority view)---

Interpretation of statues---

---Mandatory or directory statute---Principles---No hard and fast rule to determine whether a statute was mandatory or directory---Court was to decide which provision of law was mandatory and which was directory.

Interpretation of statutes---

----Mandatory or directory provisions---Distinction---There is no universal rule by which directory provisions may under all circumstance be distinguished from those which are mandatory.

Interpretation of statutes---

---Mandatory or directive provisions---Language affirmative in form indicates that the statute is supposed to be only directory or permissive while negative language implies a prohibitory, obligatory or mandatory provision.

Interpretation of statutes---

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

PLD 1974 SC 1341; PLD 2001 SC 4991; PLD 1979 SC(AJ&K); PLD 1978 Kar. 925 and PLD 1961 SC 145 1987 PLC 5931 ref.

State through DAG, Peshawar v. Panda Gul 1993 SCMR 311 rel.

Sales Tax Act (VII of 1990)---

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

State through DAG, Peshawar v. Panda Gul 1993 SCMR 311 rel.

Customs Act (IV of1969)---

---S.l71---When seizure or arrest is made, reason in writing to be given-Mandatory or directory provisions---Principles--Provisions of S.171 of the Customs Act, 1969 were not mandatory since any consequence of nullification for non-compliance thereof were not given in the said section itself or elsewhere in the Custom Act, 1969 or Sales Tax Act, 1990.

State through DAG, Peshawar v. Panda Gul 1993 SCMR 311 rel.

Sales Tax Act (VII of 1990)---

----S.36(3), proviso---Constitution of Pakistan (1973), Art. 254---Customs Act (IV of 1969), S.194-B(1)---Limitation---Concept of time limit---Discussion in respect of mandatory and directory provisions.

Sales Tax Act (VII of 1990)---

----S.36(3) proviso. Mandatory or directory provisions---Provision of S.36(3) of the Sales Tax Act, 1990 was not mandatory but directory---Appellate Tribunal was not bound to follow the decision of Federal Tax Ombudsman which only deals with maladministration of Revenue Department---Federal Tax Ombudsman was not superior to Appellate Tribunal.

Sales Tax Act (VII of 1990)---

---S.36(3), proviso---Income Tax Ordinance (XXXI of 1979), S.59(4)---Recovery of tax not levied or short-levied or erroneously refunded---Analogy of, S.59(4) of the Income Tax Ordinance, 1979 could not be applied to the provision of subsection (3) of S.36 of the Sales Tax Act, 1990 as no such consequences had been given in S.36 of Sales Tax Act, 1990 in case of passing of adjudication order beyond the prescribed period of 90 days or extended period total being 180 days.

Pace International v. Secretary Revenue Division, Islamabad 2006 PTD 340 and The Commissioner of Sales Tax v. Hilal Tanneries PLD 1976 Lahore Page 655 not fol.

Nagina Silk Mills Lyallpur v. Income Tax Officer PLD 1963 SC 322 ref.

Sales Tax Act (VII of 1990)---

----S.32(2)---Delegation of powers---Under S.32(2) of the Sales Tax Act, 1990 the Collector may delegate its powers to any officers of the Sales Tax subordinate to him---News item in newspaper did not supersede the enactment---Collector could empower the Assistant Collector what was enjoyed by him, therefore, finding that contravention report sent by Assistant Collector was coram non judice and void was not correct.

Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838; Zamindara Paper and Board Mills (Pvt.) Ltd. v. Collector, Customs and Excise 2003 PTD 1257; D.G. Khan Cement Co. Ltd. v. Collector of Customs, Sales Tax and Central Excise 2003 PTD 1797; Atlas Tyre v. Additional Collector (Adjudication) 2003 PTD 1593 and Caltex Oil v. Collector, Central Excise 2005 PTD 480 ref.

Sales Tax (VII of 1990)---

----S.3(1A)---Further tax---Further tax was demanded because the sugar producing registered persons were selling the sugar to the unregistered persons who were' liable to be registered but were not registered, therefore, omission of writing subsection in the show cause notice was nth fatal as no prejudice was caused to the appellant and substantial compliance was made.

C.P. No.702-I of 2003 Collector of Sales Tax & CE Lahore v. Zamindara Paper and Board Mills 1992 PCr.LJ 1520 ref.

Sales Tax Act (VII of 1990)---

----S.3(1A), 23 & 73---Further tax---Tax invoices---Certain transactions not admissible---Appellant had not touched the point of violation of Ss.23 and 73 of the Sales Tax Act, 1990 Which were mentioned in the show cause notice that they had not provided particulars or proof of payment nor provided any proof regarding whether a registered person supplying the goods to another unregistered person liable to be registered, was required to issue Sales Tax invoice giving, the information as prescribed and to receive the sale proceedings in excess of Rs.50,000 through a negotiable instrument under Ss. 23 and 73. of the Sales Tax Act, 1990 respectively---Appellant had failed to prove that Sales Tax invoice as prescribed under S.23 of the Sales Tax Act, 1990 had been issued and the amount of sale proceeds were received through a negotiable instrument---Said persons were to give the names of the buyers and brokers with complete address and any evidence that these persons were actual buyers and their .turnover was higher than the minimum threshold prescribed for registration of these persons under the Sales Tax Act, 1990---Appellant had not charged further tax knowing the legal position in this regard.

Sales Tax Act (VII of 1990)---

----S.7---Determination of tax liability---Input tax adjustment---Electricity consumption---Where electricity consumed was not producing taxable supplies were chargeable to tax and input adjustment was not allowed---Lower forum had rightly disallowed the input adjustment on electricity consumed or non-production of taxable supplies.

Sales Tax Appeal No. 188 of 2005 Collector of Custom v. Sindh Fine Textile Mills decided on 21-11-2006; Appeal No.H-20/2006 in Messrs Salim Textile v. The Collector and Sales Tax Appeal No.K-140/2001, decided on 14-9-2005 rel.

Sales Tax Act (VII of 1990)---

----Ss.73 & 3(1A)---Certain transactions not admissible---Further tax---Scope.

Sales Tax Act (VII of 1990)---

----Ss. 3(1A), 23 & 73---Further tax---Tax invoices---Certain transactions not admissible---Appellant had not provided any tax invoices to prove that they had complied with S.23 of the Sales Tax Act, 1990 nor had not provided any bank statement showing that S.73 of Sales Tax Act, 1990 was complied with therefore, order in original was correct--Held, there was common issue of further Tax along with other issue, that Order-in-Original and show-cause notice was barred by time and without jurisdiction which was decided in favour of department---Further tax was payable in non-compliance of S.23 and S.73 of the Sales Tax Act, 1990.

Sales Tax---

----Limitation---Condonation of delay---No application for condonation had been filed nor even argued that point---Appeal was rejected as barred by time.

Sales Tax Act (VII of 1990)---

----S.3(1A)---Further tax---Retrospective effect---Section 3(1A) of the Sales Tax Act, 1990 had been abolished under the Finance Act, 2004, it could not be given retrospective effect; it will be effective from the date it was notified.

Per Mian Muhammad Hanif Tahir, Member Judicial, agreeing with Zafar Iqbal, Member Technical---Majority view---

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

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Member . Technical in 19 appeals out of 23 appeals had given his findings that the period specified in the proviso to S.36(3) of the Sales Tax Act, 1990 and in analogous provisions of other statutes were mandatory and not directory in nature---Chart available on the order-in-appeal showed the manner in which the order-in-original had become barred by limitation in this way finding given by the Member Technical was correct in holding that 19 appeals were barred by time.

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

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Show cause notices were vague and defective as necessary particulars were not given such as non-mentioning of subsection of 36 of the Sales Tax Act, 1990 under which they had been issued.

Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838 and Caltex Oil v. Collector, Central Excise 2005 PTD 480 rel.

(kk) Sales Tax Rulings---

----Executive Collectorates would initially formulate a comprehensive contravention report on the basis of audit observations indicated in the audit reports compiled by Auditor General's office and this report should elaborate the violation, specific section and rules of the Sales Tax Act, 1990 which were not properly followed by the concerned units/persons, thereafter the Sales Tax Collector would submit the contravention report to the Adjudicating Officer, who would then issue show-cause notices to the concerned person within the specific period.

(ll) Sales Tax---

----Conduct of adjudications---Procedure---Adjudication officers could not conduct adjudications unless they first receive contravention reports by the Executive Collectorates and the ruling also showed that such contravention reports could not be issued by the officers below' the rank of a Collector.

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

----Ss. 3(1A) & 2(25)---Further tax---Application of---Section 3(1A) of the Sales Tax Act, 1990 was inapplicable where taxable supplies were made to registered persons---Term registered person, was defined in S.2(25) of the Sales Tax Act, 1990 which means a person registered or liable to be registered under Sales Tax Act, 1990---Any person who was liable to be registered under the Sales Tax Act, 1990, but was actually not registered was to be considered as a registered person---Persons who were liable to be registered under Sales Tax Act, 1990 were mentioned in S.14 of the Sales Tax Act, 1990---Where supplies were made to persons who were not actually registered but otherwise liable to be registered, the said supplies would have to be considered to have been made to registered persons under the Sales Tax Act, 1990 and for such transactions S.3(1A) of the Sales Tax Act, 1990 was totally inapplicable.

Civil Appeals Nos. 307 to 317 of 2001; 2573 to 2584 of 2001, dated 1-3-2006 and K.P. Varghese v. ITO (1981) 131 ITR 597(SC) ref.

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

----S.2(47)---Wholesaler'---Dealer'---Term "wholesaler" was defined in S.2(47) of the Sales Tax Act, 1990 which includes a `dealer'.

(oo) Sales Tax---

----Registered taxpayer could not be made responsible for any default of the department in failing to register the unregistered persons.

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

----S.3(1A)---Further tax---Supplies made by the registered persons to or through brokers/dealers, who were liable to be registered under the Sales Tax Act, 1990, did not attract S.3(1A) of the Sales Tax Act, 1990.

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

----Ss. 3(1) & 3(1A)---Constitution of Pakistan (1973), Art. 25---Scope of tax---Further tax---Unverifiability of the sales---Where the sales for the purposes of S.3(1) of the Sales Tax Act, 1990 had been accepted to be verifiable, the unverifiability of such sales for the purposes of S.3(1A) of the Sales Tax Act, 1990 will be completely unwarranted and discriminatory and against Article 25 of the Constitution.

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

----Ss. 73 & 3(1A)---Certain transactions not admissible---Further tax---Section 73 of the Sales Tax Act, 1990 deals with the eligibility to claim input adjustments only where the payments were made through a banking channel, was relevant---Said section did not say that if sales were unverifiable further tax under S.3(1A) of the Sales Tax Act, 1990 should be imposed and S.73 of the Sales Tax Act, 1990 did not require the supplies to be verifiable---Application of S.73 of the Sales Tax Act, 1990 was not correct in circumstances.

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

----Ss. 19 & 3(1A)---Compulsory registration or enrollment---Further tax---Supplies made to the persons not actually registered, were to be construed as supplies made to registered persons as the purchasers even if not so registered, were, deemed to be registered under S. 19 of the Sales Tax Act, 1990.

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

----S.3(1A)---Further fax-Repeal of S.3(1A) of the Sales Tax Act, 1990 was remedial and curative in nature and as such it will apply to all pending proceedings, assessments and appeals.

Muhammad Naseem, Ms. Danish Zubairi and S. Hammad Raza for Appellants.

Nadeem Memon, Assistant Collector for Respondents.

2009 P T D (Trib.) 2143

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.404/LB of 2009, decided on 31st July, 2009.

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

----Ss.161, 150, 205 & 2(19)---Failure to pay tax collected or deducted---Expression "deduction" and "collection" connotation---Specie dividend--Distribution of dividend in specie to share holders through issuance of equity shares---Assessing Officer, after scrutiny of prescribed withholding tax statements and records noticed that no deduction of income tax en payment of specie dividend had been made which was obligatory upon the Company/assessee to deduct tax from gross amount of dividend paid in specie---Assessing Officer treated the Company/ assessee as taxpayer in default, for default of 5.150 of the Income Tax Ordinance, 2001 on the face value of shares distributed to members/ shareholders declared as dividend in specie---Validity---Provisions of S.150 of the Income Tax Ordinance, 2001 were not applicable in respect of specie dividend---Expression deduction' had a limited scope under the provisions of law which was fortified from the fact that legislature had on numerous occasions used the expressioncollection' in the Income. Tax Ordinance, 2001---If the legislator had intended that withholding was to be effected in case of specie dividend, expression collection' would have been used in addition todeduction' as such expression meant withholding a specified proportion while advancing something divisible that can only be cash or some other liquid monetary assets---Action of taxation officer was not in accordance with the statutory provisions which had been upheld by the First Appellate Authority without any justification---Order of First Appellate Authority was vacated and the order passed by the Taxation Officer under S.161 of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal.

1999 PTD (Trio.) 2152 rel.

Black's Law Dictionary ref.

AIR 1956 Bombay 381 held not relevant.

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

----S.156(2)---Prizes and winning---Expression "deduction" and "collection"---Kind transactions---Provision of S.156(2) of the Income "Tax Ordinance, 2001 was quite well placed as legislature in kind transaction had laid down mechanism of withholding by prescribing that in such a situation instead of deduction, payer shall collect tax with reference to the fair market value of the articles being given.

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

----S.150---Dividend---Expression "deduction" and "collection"---Bonus shares---Original provisions of S.150 of the Income Tax Ordinance, 2001 confirm such position as in such provisions withholding in case of bonus shares was prescribed and the expression collection' was employed by the legislature making it completely obvious that legislature was well aware of the limited meaning of expressiondeduction'.

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

----S. 150---Dividend---Expressions "paid" and "payment"---Connota­tion---Expression paid'' carries a wider connotation only where a transaction is originally denominated in money and is settled otherwise than in cash---Transaction which had their origin in kind, it could not be said that these stand covered when expressionpaid' is used---Expression `payment' had been interpreted to include, settlement in kind only to hold that withholding provisions were not played around with by arguing that eventual settlement did not entail any monetary outflow.

1999 PTD (Trib.) 2152 rel.

Black's Law Dictionary ref.

AIR 1956 Bombay 381 not relevant.

(e) Interpretation of statutes---

---Definition---Interpretation of---Principles---While interpreting legal provisions `definition' in a statute is always to be applied with reference to the context and. subject in which a particular expression is used and an indiscriminate application of a particular definition cannot be allowed.

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

----Ss.150 & 2(19)---Dividend---Expression "dividend" and "deduction"---Connotation---If it is held that expression dividend' as used in S.150 of the Income Tax Ordinance, 2001 is to be understood as defined in S.2(19) of the Income Tax Ordinance, 2001 use of expression,deduction' in S.150 of the Income Tax Ordinance, 2001 becomes superfluous in many situations which could not be justified as per settled norms of statutes interpretation.

Asim Zulfiqar Ali, A.C.A. for Appellant.

Javed Iqbal, D.R. along with Shahid Jameel Khan, L.A. for Respondent.

2009 P T D (Trib.) 2154

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.216/LB to 219/LB of 2009, decided on 6th May, 2009.

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

----Ss.153(1)(c), 153(6A) & 170---Payments for goods and services---Canteen contractor---Manufacturer'---Connotation---Assessee contended that he being canteen contractor was primarily engaged in the business of manufacturing of food articles and since his nature of business was manufacturing, tax deducted under S.153(1)(c) of the Income Tax Ordinance, 2001 was final discharge of tax liability as laid down in S.153(6A) of the Income Tax Ordinance, 2001---Being manufacturer, tax deducted under S.153(1)(c) of the Income Tax Ordinance, 2001 was adjustable and he was entitled for claim of refund---Validity---Taxpayer was obliged to provide breakfast, lunch, dinner to the employees of the contractee company---Breakfast, lunch, dinner and even preparation of tea involves different articles and when they were put together, they were converted into another distinct article or produce which were completely changed or reshaped and were put to different use as compared to their original condition---Definition of word "manufacturer" was quite comprehensive and refers all sorts of processes including the one of the canteen contractor---Taxpayer was amanufacturer' and his case fell within the purview of S.153(1)(c) of the Income Tax Ordinance, 2001---Order of First Appellate Authority was vacated and assessment order passed by the Taxation Officer was annulled by the Appellate Tribunal.

2003 PTD 2073 rel.

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

----S.153---Payments for goods and .services-'Manufacturer'-Connotation-Term "manufacturer" inserted in Income Tax Ordinance, 2001 clarifies the ambiguity if there was any with regard to the meaning of word "manufacturer"-'Manufacturer' could be explained as article singly or in combination with other articles, material, components either converted into another distinct article or produce is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or a process of assembling mixing, cutting, packing, repacking or preparation of goods in any other manner.

(c) Words and phrases---

---`Manufacturer'---Definition---Manufacturer, included any material produced by hand and also fell within the ambit of the term "manufacturer"---Production of article for use from raw material or prepared material by giving such material new forms, qualities, properties of combinations also included in the definition of 'manufacturer'.

Black's Law Dictionary, 6th Edn. at p.965 ref.

Bashir Malik for Appellant.

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

2009 P T D (Trib.) 2163

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.669/LB to 673/LB of 2008, decided on 5th May, 2009.

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

----S.221 & Seventh Sched., Part-II---Rectification of mistake---"Textile made ups"---Rate of tax---Rectification application, on the ground that cotton fabrics fell within the definition of made ups' and 'the rates of withholding tax applicable on themade ups' (0.75%) was to be deducted whereas at the time of deduction rates applicable to the goods manufactured in Pakistan (1 %) falling under Part-II of the Seventh Schedule was applied and excess deduction was made---Taxation Officer, in the present case, observed that cotton fabrics did not fall within the ambit of `made ups' and application for the assessment year 2002-03 and tax years 2003 & 2004 were rejected on the plea that no mistake was apparent from record while the applications for assessment years 2000-01 and 2001-02 were rejected on the basis of limitation---Validity--Definition of word "textile made ups" having stood settled through various judgments of the higher legal fora as well as Appellate Tribunal in favour of assessee, order of the First Appellate Court was vacated and assessment framed under S.221 of the Income Tax Ordinance, 2001 were annulled for all the years---Taxation officer was directed to allow the rectification as claimed.

I.T.A. Nos. 885/LB to 859/LB of 2006 and I.T.As. Nos.1371 to 1380/LB of 2006 ref.

1999 PTD 4138 rel.

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

----S.170---Refund---Excess levy of tax---Limitation in respect of refund---Excess levy of duties over the actual levy was refundable irrespective of time limitation.

PLD 1998 SC 64 rel.

Muhammad Iqbal Khawaja for Appellant.

Muhammad Tahir, D.R. for Respondent.

2009 P T D (Trib.) 2166

[Income-tax Appellate Tribunal Pakistan]

Before Javaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.As. Nos. 360/KB, 361/KB, 1326/KB of 2003 and 1143/KB of 2004, decided on 16th July, 2009.

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

----Ss.79 & 62---Income from transactions with non-residents---Addition was proposed on the ground that raw materials imported from foreign' principal at a sum higher than the price at which comparable raw materials were being imported by other companies---Assessee objected that no supporting evidence to substantiate the addition proposed had been given in order to give a satisfactory reply---While the assessing office informed that material on which he has proposed the addition had already been supplied to the assessee and addition was made---Assessee contended that it was incumbent upon an officer to confront the assessee in respect of the materials on the basis of which adverse inference was being drawn---Principles of natural justice had to be applied in strict sense and principle of 'audi alteram partem' had to be applied in every case before drawing an adverse inference---Assessing officer having passed the orders without following the principles of law his orders were liable to be vacated---Department submitted that as the document (LCs) were confidential those were not confronted to the assessee---Validity---Assertion of department that as the material was confidential in nature that is why the same was not confronted to the assessee was not borne out from the order---Assessing officer had stated that he had enclosed the same materials along with the notices issued under S.62 of the Income Tax Ordinance, 1979, which the assessee had vehemently denied to have received---Basic controversy between the department and the assessee was with regard to confronting of the materials on the basis of which the assessing officer had drawn adverse inference against the assessee---Before resolving the issue, it would be very difficult to proceed any further as both the parties had made divergent submissions in this regard---It would be in fairness of things if the appeals were remanded to assessing officer to confront the entire materials to the assessees and give them . sufficient opportunity to make their submissions/arguments---Assessing officer while confronting the materials and making the additions under S.79 of the Income Tax Ordinance, 1979 if any, should keep in view the decision given by the High Court and Appellate Tribunal.

2007 PTD 1946 and I.T.A. No.573/KB of 1998/99 ref.

(b) Income Tax---

----Exchange loss---Disallowance with the reason that same was notional---Assessee contended that entire exchange loss was not notional---It was incumbent upon the assessee to prepare its accounts in accordance with the International Accounting Standards (IAS) and as per IAS, transactions in foreign currency account had to be presented in Pak Rupees---Assessee had declared in foreign currency liability in Pak rupees and due to exchange fluctuations had incurred certain loss which was an allowable expenditure---Validity---Facts had not been scrutinized properly to find out as to what portion of loss was notional and what portion was an actual loss---Assessments were remanded on the issue for de novo proceedings with the direction that department should examine the accounts of the assessee to ascertain the nature of exchange loss and if it was found that the exchange loss was an actual, the same, should be allowed as business expenditure and the assessee should be provided due opportunity to explain the case and furnish necessary details.

1993 PTD (Trib.) 908; 60 Tax 25(sic); 1986 PTD (Trib.) 105; 2006 PTD (Trib.) 2737 and 305 ITR 75 ref.

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

----Ss.24(i) & 23---Deductions not admissible---'Excess perquisites'---Addition on the ground that interest free loans had been advanced to directors/employees which fell under the definition of excess perquisites---Validity---Matter required further probe as to whether the assessee had claimed any expenditure against the advance/loan given to its executives or employees under S.23 of the Income Tax Ordinance, 1979---If it was proved with evidence that claim was made by the assessee-company then addition may be made, however if it was proved that no such claim was made then obviously no addition would be warranted under S.24(i) of the Income Tax Ordinance, 1979-Proper opportunity of hearing be provided to the assessee for making out the case.

183 ITR 103; 1979 PTD (Trib.) 24; 2005 PTD (Trib.) 2041 and 2000 PTD 1292 ref.

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

----S.2(29)---Constitution of Pakistan (1973), Fourth Schedule, Part-I of the Federal Legislature list, Entry 47---Income'---Addition on account ofremission of short terms foreign currency loan' on the ground that remission of loan was a benefit and was liable to be taxed as an extra-ordinary gain to the company---Assessee contended that amount represents waiver' of short term loan by the principal company to improve the financial position of the company which was neither assessed as trading liability of allowed as an expense or loss in the previous assessment years---Department submitted that there was a close connection between the principal company and the assessee---Assessee had been remitting secret profits by way of transfer pricing to the principal company and in turn the principal company had waived the loans advance to the Pakistani company; there was prima facie collusion between the, two---Department was fully justified in adding the said amount as an extraordinary gain to the company---Validity---Such issue required thorough investigation as to whether the said amount fell under the termincome' or not and whether the amount remitted was a gain in the hands of the company or was advanced as a financial help to the company to reduce its huge losses---Taxation officer while making the assessment should carry out a detailed inquiry as to whether the loan waived was voluntary and without any obligation on the lender and that the company neither had a right nor any claim against it---Taxation officer should also examine the relation between the principal company and the company whether it was that of parent and its subsidiary or whether there was business relationship between them---Taxation officer while re-assessing said issue should provide reasonable opportunity of bearing heard to the assessee.

Black's Law Dictionary; Ballentine's Law Dictionary; A.R 1932 PC 138; 1983 PTD 30; 261 ITR 501; 13a Tax Mean 301 and 1987 PTD 482 ref.

60 ITR 253; 90 Tax 17 and 74 Tax 1 not relevant.

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

----Ss.31 & 30---Deduction---Income from other sources---Addition of non-allocation of expenses against interest income---Assessee contended that Assessing Officer treated the amount received as interest income assessable as income from other sources and not as business income of the assessee/appellant---Assessing officer did not allocate expense against this income---Department contended that as the assessee had failed to point out the expenses relating to the interest income earned by them, department was justified not allowing any expenses against the said interest income---Validity---When any income was assessed then its related expenditure had to be allowed---When the said income was assessed under S.30 of the Income Tax Ordinance, 1979 then as per provisions of S.31 of the Income Tax Ordinance, 1979 its related expenses had to be allowed---Case was remanded with the instructions to require the assessee to submit the expenditure incurred in relation to earning of the said income.

1990 PTD 731 ref.

(f) Income Tax---

----Loss on amalgamation of Companies---Disallowance of---Assessing Officer disallowed the loss of subsidiary company which was amalgamated with the assessee company, with the observation that the said loss was capital in nature---Validity---Loss claimed by the assessee was nothing but accounting loss which had rightly been disallowed as a capital loss---Appeal was dismissed by the Appellate Tribunal on the issue.

2007 PTD (Trib.) 1885 distinguished.

Irfan Saadat for Appellant.

Rehmatullah Wazir and Farrukh Ansari, D.Rs. for Respondent.

2009 P T D (Trib.) 2182

[Income-tax Appellate Tribunal Pakistan]

Before Javed Masood Tahir Bhatti, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.A. No.1132/KB of 2007, decided on 31st August, 2009.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 65, 68, 111(3), 113, 120(1)(b), 122(5-A), 131 & 176---Assessment---Filing of return---Acceptance of return---Appeal to the Appellate Tribunal---Respondent/Taxpayer company running a hospital, filed return for relevant year declaring loss, whereon tax amount was paid under provisions of S.113 of the Income Tax Ordinance, 2001---Said return stood accepted and deemed to be assessment order as per the provisions of S.120(1)(b) of Income Tax Ordinance, 2001---Taxation Officer, allegedly issued, show-cause notice under provisions of S.122(5-A) of the Income Tax Ordinance, 2001 to the respondent/ taxpayer that assessment finalized was erroneous and prejudicial to the interest of revenue---Taxation Officer observed that as on the date of hearing no one having appeared on behalf of the taxpayer, he proceeded and determined the cost of construction and declared cost was worked out, which was added income of the taxpayer under the provisions of S.111(3) of Income Tax Ordinance, 2001-Respondent taxpayer aggrieved by order of Taxation Officer filed appeal with Commissioner Income Tax (Appeals) contending that he had never received said show-cause notice allegedly issued under the provisions of S.122(5-A) of Income Tax Ordinance, 2001 allegedly sent through TCS courier service---Order passed by the Commissioner Income Tax (Appeals) had revealed that TCS courier service had informed that alleged TCS tracking number reported by the appellant department was an invalid tracking number---Departmental representative could not produce before the court copy of receipt of TCS courier service through which alleged show-cause notice was sent to the respondent/Taxpayer---Action of the department could not stand the test of the appeal where reasonable opportunity of being heard was not afforded to the taxpayer---No one was to be condemned unheard---Audi alteram partem was universally accepted principle of law, which had laid down that nobody could be condemned unheard and reasonable opportunity of being heard be provided before drawing any adverse inference---On basis of non-service of notice on assessee/respondent, order of Assessing Officer, on appeal by the taxpayer, was cancelled by the Commissioner Income Tax (Appeals)---Validity---Commissioner Income Tax (Appeals), had rightly held that without proper service of show-cause notice and without confrontation to taxpayer, action taken by Taxation Officer, was not sustainable in the eyes of law---Appeal filed by department was dismissed and order passed by Commissioner Income Tax (Appeal), was upheld.

(2007) 95 Tax 236 (H.C. Lahore) '(sic) and ITAT No.165 of 2000 ref.

Gohar Ali, D.R. for Appellant.

Muhammad Iqbal Ibrahim, I.T.P. for Respondent.

2009 P T D (Trib.) 2209

[Income-tax Appellate Tribunal Pakistan]

Before Javed Masood Tahir Bhatti, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.As. Nos. 23/KB and 53/KB of 2007, decided on 29th August, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.131, 154 & 162---Export of goods---Short deduction of tax---Appeal to Appellate Tribunal---Appellant/Taxpayer who was exporter of dry dates, being aggrieved by the order passed by the Taxation Officer under S.162 of Income Tax Ordinance, 2001, contested order of Taxation Officer in appeal before Commissioner Income Tax (Appeals)--Commissioner cancelled the order passed by the Taxation Officer on the ground of improper service of show-cause notice---Both the Taxpayer and Income Tax Department filed appeals before Appellate Tribunal against order passed by the Commissioner Income Tax (Appeals)---Contention of counsel for. Taxpayer was that Commissioner had not passed speaking order and that Commissioner should have annulled the order of the Taxation Officer instead of cancelling same---Departmental Representative had contended that Commissioner was not justified to cancel order of Taxation Officer because show-cause notice was served on the person who had been receiving almost all other correspondence made by the Taxation Officer---Commissioner Income Tax (Appeals) had cancelled order passed by the Taxation Officer on the ground that show-cause notice issued by the Assessing Officer was not properly served on the Taxpayer; but he had not elaborated the facts as to how he came to the conclusion that the show-cause notice was not properly served on the Taxpayer---Departmental Representative who had contended that the show-cause notice was served on the person who had been receiving almost all other correspondence made by the Taxation Officer, had not even identified the said person and had not produced any relevant evidence in support of his defence---Validity---In order to meet the ends of justice, case was remanded to the Taxation Officer for proper service of show-cause notice affording reasonable opportunity of being heard to the Taxpayer and finalization of case as per law---Order passed by the Commissioner Income Tax (Appeals) was vacated and case was remanded accordingly for de novo proceedings.

PLD 1993 SC 1049; 2006 PTD 1542 and 2009 SCMR 344 = 2009 PTD 37 ref.

Gohar Ali, D.R. for Applicant.

Abdul Tahir, I.T.P. for Respondent.

Date of hearing: 28th August, 2009.

2009 P T D (Trib.) 2219

[Income-tax Appellate Tribunal Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.A. No.7174/LB of 2005, decided on 8th August, 2009.

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

----Ss.114(4), 121, 131, 218 & 239---Failure to file return---Finalization of assessment ex parte---Annulment of assessment order---Appeal to Appellate Tribunal---Respondent/assessee who derived income from sale of utensils/crockery, having not filed return, a notice was issued to him under S.114(4) of Income Tax Ordinance, 2001, however, assessment was finalized ex parte at net income and assessee/respondent was issued a demand notice by Taxation Officer---Respondent/assessee filed appeal before Commissioner Income Tax (Appeals) which appeal was accepted and assessment order passed by Taxation Officer was annulled on the ground that notice was issued to person other than the respondent/assessee---Feeling aggrieved by said order of Commissioner - Income Tax (Appeals), Revenue had filed appeal before Appellate Tribunal---Main ground on which Commissioner Income Tax (Appeals), annulled the assessment order was ex parte action which was unjustified because notices under S.114(4) of Income Tax Ordinance, 2001 were not validly served upon the respondent/assessee---Mere issuance of notice was not sufficient unless it was validly served---Notice issued to or served upon some unrelated or unknown person was of no legal effect---Before taking any action on the basis of a notice, it was duty of the Authority issuing a notice to satisfy itself that the notice had been validly served---Purpose of notice was to afford an opportunity to the party to explain his position/stance to do the needful and/or to provide him an opportunity of hearing---Golden principle of natural justice was that no one should be condemned unheard---When issuance of notice was a statutory requirement, the subsequent proceedings taken on the basis of that notice without its valid. service were without jurisdiction and ab 'initio null and void--Before proceeding ex parte under S.121 of Income Tax Ordinance, 2001, a valid service of notice under S.114 of Income Tax Ordinance, 2001, was a mandatory requirement of law and non-observance thereof was fatal---Proceeding ex parte, did not mean to punish a party for his non-appearance; its purpose was decision of the case on merits without unnecessary delay---Order passed by Commissioner Income Tax (Appeals) was based on correct appreciation of facts and the law---Appeal being devoid of any merit was dismissed---Annulment of assessment merely on the ground of invalid service of notice would not debar the Revenue, subject to limitation to do the needful de novo after meeting the legal requirements especially valid service of notice on the assessee/taxpayer.

1994 SCMR 2232; PLD 1990 SC 666; PLD 1964 SC 673; 1988 CLC 1318; 1981 CLC 909 and 1981 CLC 1654 ref.

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

----Arts.4 & 5(2)---Right of protection of law and treating in accordance with law---Obedience to the Constitution and law was the inviolable obligation of every citizen wherever he could be and of every other person for the time being within Pakistan---To enjoy protection of law and to be treated in accordance with law was inviolable right of every citizen of Pakistan wherever he could be and of every other person for the time being in Pakistan---In particular no action detrimental to life, liberty, body, reputation or property of any person would be taken except in accordance with law.

Ashraf Ahmad Ali, D.R. for Appellant.

Nemo for Respondent.

2009 P T D 390

[Islamabad High Court]

Before Muhammad Munir Peracha, J

FECTO BELARUS TRACTORS LIMITED through Chief Executive

Versus

GOVERNMENT OF PAKISTAN through Ministry of Finance, Economic Affairs and 3 others

Constitutional Petition No.1236 of 2008, decided on 14th January, 2009.

(a) Mala fide---

----Mala fide cannot be attributed to a legislature.

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

----S.19(3) [as added by Customs (Amendment) Ordinance (XXXVI of 2002)]---Constitution of Pakistan (1973), Arts. 199 & 187(2)---Effect of Customs (Amendment) Ordinance, 2002 adding subsection (3) in S.19, Customs Act, 1969---Subsection (3) as added in S.19, Customs Act, 1969 by Customs (Amendment) Ordinance, 2002 has removed the defect and adequate provisions in the validating law for a valid imposition of tax have been made by the Amending Ordinance---Amending Ordinance was to take effect retrospectively and had not taken away vested rights.

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

----S.6(1-A) [as added by Sales Tax (Amendment) Ordinance, 2002]---Constitution of Pakistan 1973), Arts. 199 & 187(2)---Constitutional petition---Effect of Sales Tax (Amendment) Ordinance, 2002 adding subsection (1-A) in S.6, Sales Tax Act, 1990---Subsection (1-A) as added in S.6, Sales Tax Act, 1990 removed the defect and adequate provision in the validating law for a valid imposition of tax has been made by the Amending Ordinance---Amending Ordinance was to take effect retrospectively and had not taken away vested rights.

Muhammad Salman Aslam Butt and Muhammad Waqar Rana, for Petitioner.

Nasir Saeed Sheikh for Respondents Nos.3 and 4.

Date of hearing: 22nd December, 2008.

2009 P T D 932

[Islamabad High Court]

Before Muhammad Munir Peracha and Syed Qalb-i-Hassan, JJ

MUHAMMAD FAISAL IQBAI, QURESHI and others

Versus

ADDITIONAL COLLECTOR CUSTOMS and others

Customs Reference No.1 of 2008, decided on 12th January, 2009.

Customs Act (IV of 1969)---

----Ss.32, 156(1)(14)(77), 157 & 178---Import and Export (Control) Act (XXXIX of 1950), S.3 (1)---Pistols, import of---Cancellation of import licence by Ministry of Commerce after such goods reached Pakistan---Effect---Such cancellation would not affect importer's right to import such goods.

Messrs A.R. Hosiery Works, Karachi v. Collector of Customs (Export), Karachi and another 2004 PTD 2977 ref.

Mian Abdul Ghaffar for Applicants.

Mujeeb-ur-Rehman Warriach for Respondents.

Date of hearing: 16th December, 2008.

2009 P T D 1500

[Islamabad High Court]

Before Syed Qalb-i-Hassan and Muhammad Munir Peracha, JJ

COMMISSIONER INCOME TAX, COYS ZONE, ISLAMABAD

Versus

Messrs PAK DATA COMPANY LTD., ISLAMABAD

T.R. No. 53 of 2002, heard on 27th April, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 80-C(i)(2) & 50(4)---Receipt on account of execution of contracts for setting up operating and maintenance of data communication network are covered by the term "services rendered" and as such not liable to be taxed under the provisions of S.80-C, Income Tax Ordinance, 1979---Principles.

Shahid Iqbal for Petitioner.

Mian Ashiq Hussain for Respondent.

Date of hearing: 27th April, 2009.

2009 P T D 1620

[Islamabad High Court]

Before Muhammad Munir Peracha and Syed Qalb-i-Hassan, JJ

Messrs Ch. MUHAMMAD ARIF and others

Versus

COMMISSIONER OF INCOME TAX COMPANIES ZONE, ISLAMABAD and another

Tax References Nos.61, 66 and 67 of 2007, decided on 18th May, 2009.

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

----S.64---Completion of assessment process---Plea that such process would complete not merely on passing of assessment order, but only after service of such order and demand notice---Validity---Assessment order would be deemed to be made, when Assessing Officer assessed total income of assessee and determined tax payable thereon---Mentioning of tax payable in assessment order not essential, but mere entry thereof in Register by Assessing Officer would be sufficient.

Commissioner of Income Tax and Wealth Tax, Sialkot Zone, Sialkot v. Messrs Thapur (Pvt.), Sialkot 2002 PTD 2112; Ali Akbar v. The State 1969 PCr.LJ 1307; Mian Aftab A. Shaikh and others v. Income Tax Appellate Tribunal 1988 SCMR 50; State of Punjab v. Amar Singh Harika AIR 1966 SC 1313 and Kalyankumar Ray v. Commissioner of Income Tax 1992 PTD 243 ref.

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

----S.156(4)---Period of four years, computation of---Scope---Such period would be computed from date of service of order sought to be rectified.

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

----Ss.121 & 122(2)(4)---Assessment order---General complaint against Assessing Officer of putting an earlier date on such order---High Court emphasized on legislature to provide safeguard to assessees---Method stated.

There is a general complaint that the Assessing Officer put an earlier order on the order of assessment. High Court emphasized that the legislature should provide a safeguard against it. A provision can be added in the Income Tax Ordinance, 2001 to the effect that the order of assessment passed under section 121 or any order passed under subsection (2) or subsection (4) of S.122 along with notice of demand shall be sent by the Commissioner within 14 days of the order passed through registered post to the assessee and the assessment be considered to have been made or amended on a date deducting 14 days from the date of sending of the order and notice of demand to the assessee.

Hafiz Muhammad Idrees for Petitioner.

Hafiz Munawar Iqbal and Rai Azhar Iqbal and Sarfraz Ahmad, Commissioner Legal, RTO, IBD for Respondents.

Date of hearing: 15th May, 2009.

2009 P T D 1632

[Islamabad High Court]

Before Muhammad Munir Peracha and Syed Qalb-i-Hassan, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, ISLAMABAD

Versus

Messrs SHAKEEL EXPRESS (PVT.) LTD., ISLAMABAD

Tax Reference No.21 of 2003, decided on 1st June, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 108 & 139 [as amended by Finance Act (I of 1995)]---Income Tax Rules, 1982, R.53 [as amended by S.R.O. 1050(I)/98, dated 13-10-1998]---Filing of monthly statement of deduction of income tax from salary under S.139 of Income Tax Ordinance, 1979---Scope---Section 139 of Income Tax Ordinance, 1979 before its amendment by Finance Act, 1995 provided for filing of such statement on or before first day of September in each year regarding preceding financial year---Rule 53 of Income Tax Rules, 1982 requiring forthwith filing of such statement after deduction of tax from salary was, thus, ultra vires to such extent---Word "forthwith" as used in R.53 of Income Tax Rules, 1982 was later on substituted by words "on or before 15th day of every month" w.e.f. 1-7-1995.---Words "required under section 139" as added in R.53 vide S.R.O. 105(I)/98, dated 13-10-1998 would not mean that before such amendment, payer of salary was not required to furnish such statement---Duty of assessee to furnish such statement before 15th of every month.

(1998) PTD (Trib.) 3507 ref.

Hafiz Munawar Iqbal for Petitioner.

Shakeel Ahmad for Respondent.

Date of hearing: 28th May, 2009.

2009 P T D 1661

[Islamabad High Court]

Before Muhammad Munir Peracha and Muhammad Ramzan Chaudhry, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, ISLAMABAD

Versus

Messrs PAKISTAN MINERAL DEVELOPMENT CORPORATION, ISLAMABAD

Tax Reference No.13 of 2003, decided on 29th June, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss.62, 26(c) & 80-C---Assessment of assessee who was engaged in the business of mining, managing and controlling 13 different projects of mineral deposits-Scope-Section 26, Income Tax Ordinance, 1979 deals with the methodology of computing the profits and gains in respect of extraction of mineral deposits and thus makes 'a special provision in respect of the business of assessee---If there are general provisions in a statute and also special provisions, covering certain. situations, special provisions would prevail over the general provisions---Section 80-C, Income Tax Ordinance, 1979 being a general provision and S.26(c) being a special provision regarding the business of exploration and extraction of mineral deposits, Income Tax Appellate Tribunal was justified in holding that assessee's income was assessable under S.62 read with S.26(c) of the Income Tax Ordinance, 1979 and not under S.80-C of the said Ordinance.

Shahid Iqbal and Hafiz Munawar Iqbal for Petitioner.

Date of hearing: 12th June, 2009.

2009 P T D 1694

[Islamabad High Court]

Before Muhammad Munir Peracha, J

Mrs. KHALIDA AZHAR

Versus

VIQAR RUSTAM BAKHSHI and others

C.M.A. No.702-S of 2009 in Civil Suit No.1727 of 2008, decided on 18th May, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S.216---Application for summoning Income Tax Record-Keeper as witness with record---High Court had no power to require the record keeper of Income Tax Department to produce before it any Record relating to any proceeding under the Income Tax Ordinance, 2001---No doubt, subsection (3) of S.216 of Income Tax Ordinance, 2001 was an exception to subsections (1) & (2) of said section, however, clause (m) of S.216, prima facie, was not attracted in the facts of the case, because in the present case neither the Federal Government nor any Income Tax Authority was a party; and the matter also did not arise out of any proceedings under Income Tax Ordinance, 2001---Application was dismissed, in circumstances.

Dr. Azeem Azhar Raja Advocate/Special Attorney for Applicant.

Ch. Muhammad Iqbal and Muhammad Arbab Abbasi for Respondents.

Date of hearing: 11th May, 2009.

2009 PTD 1702

[Islamabad High Court]

Before Muhammad Munir Peracha and Muhammad Ramzan Chaudhry, JJ

Messrs AL-TECHNIQUE CORPORATION OF PAKISTAN LTD.

Versus

ADDITIONAL COLLECTOR ADJUDICATION, SALES TAX, ISLAMABAD and 4 others

Sales Tax Reference Application No.1 of 2009, decided on 16th June, 2009.

Sales Tax Act (VII of 1990)---

----Ss.2(16)(17)(33) & 3---Gamma sterilization of medical/surgical products through radiation by petitioner for pharmaceutical companies on payment of sterilization charges---Plea of Revenue that such activity of petitioner was manufacturing and its unit was manufacturer, thus, liable to pay sales tax on such receipts---Validity---Sales tax could be levied on value of taxable supplies or goods imported into Pakistan---Petitioner received medical products from their manufacturers and after passing through process of sterilization returned same to manufacturers---Petitioner charged sterilization charges from manufacturers---Medical products after going through process of sterilization were not converted into another distinct article or product nor were so changed, transformed or reshaped becoming capable, of being put to use differently or distinctly---Process of sterilization would not fall within definition of `manufacture'---Such activity was neither a sale nor lease nor disposition of goods nor a supply nor petitioner was a manufacturer---Levy of sales tax on such activity under S.3 of Sales Tax Act, 1990 would depend upon taxable supplies made in furtherance of taxable activity.

Messrs AMIE Investment (Pvt.) Ltd. v. Additional Collector and others 2006 PTD 1459 and Ramna Fitting and Pipe Industry v. The Collector of Sales Tax 2002 PTD 470 rel.

Syed Tauqeer Bokhari for Petitioner.

Rizwan Akhtar Awan for Respondents.

Date of hearing: 3rd June, 2009.

2009 P T D 1718

[Islamabad High Court]

Before Muhammad Munir Peracha and Syed Qalb-i-Hassan, JJ

COMMISSIONER OF INCOME TAX/WEALTH, TAX COMPANIES ZONE, ISLAMABAD

Versus

TARIQ AZIZ and 6 others

T.A. No. 31 of 2003, decided on 11th May, 2009.

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

----Ss.17(1) & 17-A(2)(b)(c)---Wealth escaping assessment-'Definite information' received by Revenue regarding purchase of property by assessee in foreign country---Service of demand notice on assessee on 14-9-1998---Failure of assessee to declare such property in return filed after such notice---Passing of assessment order on 30-6-2001---Validity--Such notice would be deemed to have been issued under S.17(1)(a) of Wealth Tax Act, 1963 attracting period of limitation under S.17-A(2)(b) thereof---Such assessment order was not hit by period of limitation.

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

----Ss. 17(1)(a)(b)---Wealth escaping assessment, completion of---Limitation, determination of---Test stated.

A notice under section 17, Wealth Tax Act, 1963 cannot be issued by the Deputy Commissioner unless definite information has come into his possession, therefore, the real test would not be whether the notice has been issued in consequence of any information. The criteria to determine as to notice has been issued under which clause of section 17(1) would be whether the wealth escaped assessment due to omission or failure on the part of the assessee to make a return of his net-wealth or to disclose fully and truly all material facts necessary for his assessment. In case, the wealth escaped assessment due to omission or failure of the assessee, notice under section 17(1) will be given and since the wealth escaped assessment due to the failure of the assessee, a longer period for completion of the assessment has been provided. This intention of the legislature can be gathered from the use of the phrase "notwithstanding that there has been no such omission or failure as is referred to in clause (a)" used in clause (b) of section 17(1).?

Hafiz Munawar Iqbal for Petitioner.

Ghulam Sarwar for Respondent.

Date of hearing: 4th May, 2009.

2009 P T D 1767

[Islamabad High Court]

Before, Muhammad Munir Peracha and Syed Qalb-i-Hassan, JJ

COMMISSIONER OF INCOME TAX COMPANIES ZONE, ISLAMABAD

Versus

Messrs PAKISTAN MOBILE COMMUNICATION (PVT.) LTD., ISLAMABAD

I.T.Rs. Nos. 44 and 45 of 2007, decided on 26th May, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 50, 52 & 156(4)---Non-deduction of tax under S.50 of Income Tax Ordinance, 1979 regarding payments made by a person---Limitation for declaring such person to be assessee in default in respect of such tax---Scope---Legislature had not provided any period of limitation for passing an order declaring a person to be assessee in default---Period of limitation prescribed under S.156(4) of Income Tax Ordinance, 1979 would not be read in S.52 thereof---Person having deducted such tax could not be permitted to pocket same on the ground that he had not been declared in default within four years from end of assessment year in which payments liable to deductions were made---Section 156(4) of Income Tax Ordinance, 1979 would come into play, if there was an order already in existence requiring rectification by an authority having passed same, but not otherwise---No time limit fixed for action under S.52 of Income Tax Ordinance, 1979.

T.R. No.345 of 2003; Commissioner of Income Tax Zone C, Karachi v. Messrs Agha's Super Market, Karachi 2003 PTD 1571 and Commissioner of Income Tax v. Kamran Model Factory 2002 PTD 14 distinguished.

Shahid Iqbal for Petitioner.

Naveed A. Andrabi and Khalid Gill, Inspector for Respondent.

Date of hearing: 21st May, 2009.

2009 P T D 50

[Karachi High Court]

Before Muhammad Ather Saeed and Dr. Qamaruddin Bohra, JJ

INTERNATIONAL POWER GLOBAL DEVELOPMENTS LTD.

Versus

COMMISSIONER INCOME TAX

Income Tax Reference Application No. 185 of 2007, decided on 9th October, 2008.

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

----Second Sched., Part-IV, Cl. (9-A), Ss.80-C & 50(4)---Tax on income of contractor---Non-resident---Scope---Clause (9-A), Part-IV, Second Schedule, Income Tax Ordinance, 1979 is applicable only to those non-residents who fall within the ambit of S.80-C(2)(b) of the Ordinance---Section 80-C, Income Tax Ordinance, 1979 provides that only those payments fall within the ambit of the presumptive tax regime which are received by non-resident on account of execution of a contract for construction, assembly or like projects in Pakistan on which tax is deductible in Pakistan under S.50(4), Income Tax Ordinance, 1979---Proviso (a) to S.50(4) of the Ordinance provides that a number of payments made to a non-resident including payment for any contract or services have been subjected to withholding tax---Contract executed for rendering of the service of O & M contractor does not fall within the ambit of S.80-C(2)(b) of the Ordinance---No conflict exists between S.80-C(2)(b) and clause 9-A, Part-IV of Second Schedule to the Income Tax Ordinance, 1979.

(b) Interpretation of statutes---

----Conflict between main statute and Schedule of the statute---Provisions of main statute to prevail.

Shahnawaz Junejo v. The State 2001 YLR 197 fol.

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

----Second Schedule, Part-IV, Cl. (9-A) & S.80-C(2)(b)---Tax on income of contractor---Non-resident---Option under the Schedule cannot be provided to a person to opt to be assessed under a particular system unless he qualifies otherwise to be assessed under that System---Only by reading Cl. (9-A), Part-IV, Second Schedule, and S.80-C(2)(b), Income Tax Ordinance, 1979 together with a harmonious interpretation would lead to the conclusion that only those non-residents can opt under Cl.9-A, Part-IV, Second Schedule of the Ordinance to be assessed under S.80-C(2)(b) of the Ordinance who otherwise qualify to be assessed under S.80-C(2)(b)---If the applicant was entitled to be assessed under the presumptive tax regime under Cl.9-A, Part-IV of the Second Schedule, then there was no necessity of incorporation of Cl.10 in Part-II of Second Schedule of the Income Tax Ordinance---Where applicant's income for assessment year 1995-96 to 1997-1998 was assessed under said Clause, which was a time limited allowability for three years, the applicant's entitlement ended after three years---Despite filing option under Cl.9-A of Part IV of Second Schedule of the Income Tax Ordinance, 1979 the applicant was not entitled to be assessed under presumptive tax regime and the action of assessing their income under normal law was unexceptionable and no interference was called for from the High Court.

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

----Ss. 23(2)(xv) & 133(4)---Reference to High Court---Capital expense' orrevenue expense'-Determination---Appellate Tribunal although had given a finding of fact that equipment in question had not passed on to the owner and was, therefore, a capital expense and not allowable as a revenue expense but on examination of the agreement between the parties it was doubtful whether such finding was based on proper appreciation of evidence---High Court, remanded the case to the Tribunal on said point to examine the various provisions of the agreement and give a clear-cut finding substantiated with relevant clauses to the agreement as to whether the ownership of those assets had passed on to the owner and even if the Tribunal arrived at the conclusion that the equipment in question passed over to the owner then they should give legal reasoning for treating same either as "capital expense" or "revenue expense".

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

---S. 23(1)(xviii)---Deductions---Expenses on staff training and recruitment were a revenue expense covered by S.23(1)(xviii) of the Income Tax Ordinance, 1979.

Commissioner of Income Tax, East Pakistan Dacca v. Engineers Limited, Dacca (1967) 16 Tax 81 fol.

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

---S. 133(4)---Reference to High Court---High Court under its advisory jurisdiction under S.133, Income Tax Ordinance, 1979 cannot adjudicate on a question of fact.

Ms. Farzeen E. Bhadha for Applicant.

Aqeel Ahmed Abbasi for Respondent.

2009 P T D 66

[Karachi High Court]

Before Muhammad Ather Saeed and Dr. Qamaruddin Bohra, JJ

Messrs HASSAN ASSOCIATES (PVT.) LTD.

Versus

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Income Tax Case No. 293 of 1992, decided on 16th October, 2008.

Income Tax Ordinance (XXXI of 1979)---

----S. 23(2)(xviii)---Allowable deduction---Expenditure claimed on the encashment of assessee's performance bonds by the Government on allegation of non-completion of work having been expended wholly and exclusively for the purposes of business, was allowable under S.23(2)(xviii) of Income Tax Ordinance, 1979.

Commissioner of Income v. Premier Bank Limited, Karachi (1999) 79 Tax 589 distinguished.

Karachi Steam Navigation Co. Ltd. v. Commissioner of Income Tax reported in (1967) 15 Taxation 73 fol.

Hind Mercantile Corporation Ltd. v. Commissioner of Income Tax Mardas (1963) 8 Tax 343; Commissioner of Income Tax (Central), Madras, v. Inden Biselers (1973) 91 ITR 427 and Commissioner of Income Tax v. Mihir Textiles Ltd. (1994) 206 ITR 112 ref.

Rehan Hassan Naqvi along with Ms. Lubna Pervez for Petitioner.

Nasrullah Awan for Respondent.

2009 P T D 119

[Karachi High Court]

Before Muhammad Mujibullah Siddiqui and Khilji Arif Hussain, JJ

ABDUL MAJEED

Versus

COLLECTOR OF CUSTOMS (PREVENTIVE)

S.C.A. No.03 of 2003, decided on 8th September, 2005.

Customs Act (IV of 1969)---

----Ss. 19, 159 & First Sched. Heading No.71/78---S.R.O. 714(I)/93, dated 14-11-1989---State Bank of Pakistan Notification FE1/94-SB dated 20-3-1994---Import of gold as accompanied baggage in March 1997---Seizure and confiscation of such gold by customs authorities on basis of Notification No.1 (2) ECS/48, dated 1-7-1948---Validity---State Bank of Pakistan through Notification No. F. E.1/94-SB, dated 20-3-1994 had permitted such import in accordance with import policy order---Authority had not shown any violation of import policy by such import---High Court directed release of such gold on payment of tax in terms of S.R.O. No.714(I)/93, dated 4-11-1989.

Chaudhry Muhammad Iqbal for Appellant.

Muhammad Nadeem Qureshi for Respondent.

Date of hearing: 8th September, 2005.

2009 P T D 131

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Noor Khan, JJ

Mst. HALEEMA PERVAIZ

Versus

COMMISSIONER OF INCOME TAX, ZONE `F' KARACHI

I.T.Rs. Nos. 1 to 49 of 2003, decided on 6th November, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Part-IV, Cl. (6A), Ss.65, 11 & 15---Protection of Economic Reforms Act (XII of 1992), Preamble---Assessees, in the present case, were the employees of a Pakistani Company, a subsidiary of a foreign company and had filed their returns of the income showing their salary income and all the returns were accepted under S.59-A of the Income Tax Ordinance, 1979, however, later on definite information came in the possession of the Deputy Commissioner of Income Tax regarding the exercise of stock option by all these employees for 100 shares of foreign principal company and that allotment and sales of shares and gains arising from such shares were not reported by the said employees in their income tax returns---Action was, therefore taken under S.65, Income Tax Ordinance, 1979 and the cases of these employees were reopened---Assessment order also showed that a scheme of stock option was offered by the employer informing the employees that there was one-time option grant that entitled them to acquire 100 shares of foreign principal company and all the employees were eligible to exercise that option and said option was exercised by them and sale of such shares resulted in a gain---Gains arising from sale of such shares were remitted in foreign exchange in individual foreign currency accounts of each assessee---Deputy Commissioner of Income Tax after granting them exemption for 60% of such income to which they were entitled under the domestic law of Pakistan, taxed the rest of the amount---Held, provisions of Protection of Economic Reforms Act, 1992 had not been violated by the department as no enquiry had been made by the department regarding source of these deposits of the assessees and no information was requisitioned from the banks in respect of their foreign currency accounts or the deposits made therein and the assessment was based on the declared, stated and admitted facts that the assessees had received capital gain on the disposal of shares received by them in respect of shares which were acquired by them as a benefit of stock option received from their employer---Such amount was taxable and was not exempt from tax as Economic Reforms Act, 1992 only exempted the balances in any such accounts or interests accrued on such balances, therefore, any deposit made in their accounts was taxable if made without reference to their accounts and without reference to and without any enquiry and on the facts acquired independently it could be related to any source of income which was taxable under the provisions of Income Tax Ordinance, 1979---Principles.

Hudabiya Engineering (Pvt.) Ltd. v. Pakistan and 6 others 1998 PTD 34 distinguished.

Muhammad Fareed for Applicant.

Jawaid Farooqui for Respondent.

Date of hearing: 6th November, 2008.

2009 P T D 148

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Noor Khan, JJ

Messrs CRESCENT DISTRIBUTORS

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL, KARACHI and 2 others

Spl. Sales Tax Appeals Nos. 1 to 4 of 2001, decided on 31st October, 2008.

Sales Tax Act (VII of 1990)---

----Sched. VI, Items Nos.12 & 13---S.R.O. 357(I)/84, dated 28-4-1984---Drugs Act (XXXI of 1976), Ss.7, 8 & 3(g)(i)---Barium Sulphate is a drug within the Drugs Act, 1976 and hence exempt from sales tax---Principles.

Barium Sulphate is included in the list of prescription chemical of Pakistan National Formulary and because of this reason, its specific registration as a drug under section 8 of the Drugs Act, 1976 is not required, if the same is imported as a prescription chemical and if it is clear from the perusal of the bill of entry that it had been imported as a prescription chemical under S.R.O. 357(I)/84 and, therefore, for all practical purposes it falls within the definition of drugs specially also because it is used as a diagnostic reagent for the diagnosis of the diseases and such substance which is used for the above purpose is included in the definition of drugs under the Drugs Act, 1976. It also falls within the definition of medicament and is more closer to such definition than many of the items or substances which have been specifically excluded from the ambit of Items Nos.12 and 13 of VI-Schedule of the Sales Tax Act, 1990 and therefore if legislature was of the view that such exemption should not apply to Barium Sulphate (X-Ray quality) then they would have specifically excluded it from the ambit of Items Nos.12 and 13, hence its non-exclusion makes the intention of the Legislature clear that it falls within the definition of Drugs Act and medicament for the purposes of exemption in these two items of VI Schedule. The adjudicating authority, the Collector Appeals and the Tribunal fell in error when they held that since this is not a registered drug and is not used for alleviation of the diseases and wounds, it cannot be included in the definition of the term medicament and since it is not registered as a drug it cannot be treated as a drug, and is, therefore, not entitled to exemption under Items Nos. 12 and 13 of VI Schedule.

Glaxo Laboratories Pakistan Ltd. v. Federation of Pakistan PLD 1992 SC 455 and Central Insurance Company v. Central Board of Revenue 1993 SCMR 1232 = 1993 PTD 766 ref.

Abid S. Zubairy for Appellant.

Jawaid Farooqui for Respondents.

Date of hearing: 31st October, 2008.

2009 P T D 193

[Karachi High Court]

Before Arshad Noor Khan, J

Messrs SHADMAN COTTON MILLS LTD. through Director

Versus

FEDERATION OF PAKISTAN through the Chairman, Central Board of Revenue (Revenue Division), Islamabad and another

Civil Suit No. 979 of 2003 and C.M.A. No.9172 of 2007, decided on 17th November, 2008.

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

----Ss. 19 & 217---Sales Tax Act (VII of 1990), S.13(2)(a)---Civil Procedure Code (V of 1908), S.9 & O. VII, R.11---Specific Relief Act (I of 1877), S.42---Suit for declaration---Plaintiff's claim for declaring its imported goods to be exempt from levy of customs duty and sales tax by challenging vires of subsequent withdrawal of exemption S.R.O. issued at relevant time---Validity---Government under special statutes (i.e. Customs Act, 1969 and Sales Tax Act, 1990), in exercise of its delegated powers, could issue notifications regarding incentive or imposition or withdrawal of customs duty and sales tax---Such delegated powers of Government could not be checked or limited by filing declaratory suit under S.42 of Specific Relief Act, 1877---No provision of such special statutes could be made dormant or redundant by filing a declaratory suit---No provisions of such special statutes or notifications issued thereunder could be checked or examined on any ground in civil Courts---Complete mechanism for claiming such relief was provided in both such special statutes and. in case of its refusal by relevant authority, plaintiff could avail remedies provided thereunder---Such suit was completely barred by S.217 of the Customs Act, 1969---Plaint in such suit was rejected under O. VII, R.11, C.P.C.

Messrs Shafiq Textile Mills Ltd. Karachi v. Federation of Pakistan and others 2007 PTD 1480; Messrs Rohi Ghee Industries (Pvt.) Ltd. v. Collector of Customs and others 2007 PTD 878 and Messrs Binaco Traders v. Federation of Pakistan and others 2006 PTD 1491 ref.

(b) Interpretation of statutes---

----Special law would normally prevail over ordinary law of land.

(c) Specific Relief Act (I of 1877)---

----S.42---Customs Act (IV of 1969), S.19---Sales Tax Act. (VII of 1990), S.13(2)(a)---No provision of special statute can be made dormant or redundant by filing a declaratory suit.

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

----O. III, R. 2, O. VII, R. 11 & O. XXIX, R.1---Suit by Corporation through its Director---Non-filing along with plaint power of attorney in favour of such Director or resolution of Board of Directors authorizing him to sign, verify and present plaint---Effect---Plaintiff had not presented plaint through a proper agent or attorney---Plaint was rejected under O.VII, R.11, C.P.C.

(e) Specific Relief Act (I of 1877)---

----S.42---Customs Act (IV of 1969), S.19---Sales Tax Act (VII of 1990), S.13(2)(a)---Civil Procedure Code (V of 1908), O. VII, R.11---Constitution of Pakistan (1973), Art. 199---Suit for declaration---Vires of notifications issued under Customs Act, 1969 and Sales Tax Act, 1990 challenged in such suit after dismissal of constitutional petition filed thereagainst in High Court---Effect---Vires of such notifications could not be challenged in a civil suit---Plaint in such suit was rejected under O.VII, R.11, C.P.C.

Nishat Mills Limited v. Federation of Pakistan and other reported in 2005 PTD 495 rel.

None present for Plaintiff.

Raja Muhammad Iqbal for Defendant No.1.

S. Tariq Ali, Standing Counsel.

2009 P T D 248

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Noor Khan, JJ

Messrs IBRAHIM FIBRES LTD. through Secretary/Director Finance

Versus

FEDERATION OF PAKISTAN through Secretary/Revenue Division and 3 others

C.P. No. D-548 of 2008, decided on 22nd November, 2008.

Income Tax Appellate Tribunal Rules, 2005---

----R. 3---Civil Procedure Code (V of 1908), S.20(c)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Appeal before Income Tax Appellate Tribunal at Lahore, pendency of---Action and inaction of Members of the Tribunal challenged by appellant in constitutional petition before Karachi High Court---Maintainability---Sealing of impugned order by Tribunal in compliance with interim order of Karachi High Court---Effect---Such compliance out of respect would not mean that Tribunal had impliedly given consent to jurisdiction of Karachi High Court---Impugned action and inaction of Members of Tribunal had taken place within territorial limits of Lahore High Court, thus, cause of section had fully arisen at Lahore---Effect of final order to be passed by Tribunal would be either to demand tax from appellant or extinguish his liability by Taxation Officer at Lahore---No person or authority based in Karachi or any part of Sindh Province could issue any demand of tax or take coercive action against appellant---Income Tax Tribunal as Federal institution was functioning through ,Benches in different areas assigned to them by Chairman---Lahore Bench of Tribunal was constituted to hear appeals against orders of Tax Department performing functions in Lahore---Writ of mandamus issued by Karachi High Court could not run beyond its territorial jurisdiction---Income Tax Tribunal, Lahore Bench and its Members, Taxation Officers based at Lahore were not falling within territorial jurisdiction of Karachi High Court---Constitutional petition was dismissed in circumstances.

Messrs Al-Iblagh Ltd. Lahore v. The Copyright' Board, Karachi and others 1985 SCMR 758; Itehad Cargo Services, v. Rafaqat Ali PLD 2002 Karachi 420; Gulzar Ahmad Khan v. The Chief Election Commissioner of Pakistan Islamabad and 7 others PLD 1997 Lah. 643; Trading Corporation of Pakistan (Private) Ltd. v. Pakistan Agro Forestry Corporation (Private) Limited and another 2000 SCMR 1703; Secretary, Ministry 'of Religious Affairs and Minorities and 2 others v. Syed Abdul Majid 1993 SCMR 1171; Ch. Akbar Ali v. Secretary, Ministry of Defence, Rawalpindi and another 1991 SCMR 2114; Flying Kraft Paper Mills (Pvt.) Ltd. Charsadda v. Central Board of Revenue, Islamabad and 2 others 1997 SCMR 1874; Asghar Hussain v. Election Commissioner of Pakistan and others PLD 1968 SC 387; Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue and others PLD 1997 SC 334; Sabir Din v. Government of Pakistan through Secretary, Ministry of Defence and others 1979 SCMR 555; Abdul Ghaffar Lakhani v. Federal Government of Pakistan and 2 others PLD 1986 Kar. 525; Mst. Shahida Maqsood v. President of Pakistan through Secretary, Law Justice and Human Rights 2004 CLC 565; Subhan Beg and 18 others v. Pakistan State Oil Co. Ltd. Rawalpindi PLD 1980 Kar. 113; Zafar Ali Shah's case PLD 2000 SC 869; Messrs Facto Belarus Tractors Ltd. Karachi and another v. Federation of Pakistan PLD 2006 Kar. 479 and Collector, Customs and Central Excise, Peshawar v. Messrs Rias Khan Ltd. 1996 SCMR 83 ref.

Khawaja Shamsul Islam and Jawed Zakaria for Petitioner.

Aqeel Ahmed Abbasi for Respondents Nos.1 to 5.

Shahid Jamil Khan for Respondents Nos.9, 10 and 12 to 14.

Ikram Ahmed Ansari for Intervernor.

G.N. Qureshi, DAG for the State.

2009 P T D 266

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Noor Khan, JJ

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF PACCS, KARACHI

Versus

MUZAMMIL AHMAD

Special Customs Reference Applications Nos. 63, 64, 86, 87, 131 to 133, 116 to 118 of 2008, 403, 404 and 406 of 2007, decided on 5th December, 2008.

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

----S. 194-C(3-A) & (4) [as amended by Finance Act (IV of 2007)]---Procedure of Appellate Tribunal---Interpretation of S.194-C(3-A) & (4), Customs Act, 1969---Limitation of a Bench of Single Member to hear a matter involving question of law has been removed by the deletion of explanation to subsection (3-A) by Finance Act, 2007 and the pecuniary jurisdiction has been enhanced by the amendment of its subsection (4).

Although no amendment has been made in subsection (3-A) of S.194-C, Customs Act, 1969 but the plain and simple interpretation of this subsection is that the Chairman has the power to constitute as many benches consisting of single members as he may desire and the only interference of the Federal Government will be to specify cases or such classes of cases which these Benches can hear. So the Central Government is not a party to the constitution of the Benches but only to the specification of cases/classes of cases which may be heard by the Single Members and, therefore, the process of constituting these Benches is not different from constituting the Benches under subsections (3-A) and subsection (4). The only limitation is that such Benches can only hear the classes of cases specified by the Central Government. These specifications have been made by the Central Government in the conditions attached to the hearing of the cases given in subsections (3-A) and (4) as to the pecuniary jurisdiction and the legal jurisdiction. The limitation of a bench of single member to hear a matter involving question of law has been removed by the deletion of the explanation to subsection (3-A) by Finance Ordinance, 2007 and the pecuniary jurisdiction has been enhanced by the amendment of subsection (4).

Aman and Amin Trading Co. v. Collector of Customs Karachi 2008 PTD 459 distinguished.

Messrs Aman and Amin Trading Co. v. Collector of Customs' 2008 PTD 459; 2008 PTD 996; 2008 PTD 1274; 2005 PTD 108; 2004 PTD 921; PLD 2003 Kar. 127 and "2002 MLD 229 ref.

(b) Interpretation of statutes---

----Non-obstante clause in a provision---Effect---Non-obstante clause in a statute overrides the provision of the statute which has been mentioned in the non-obstante clause.

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

----S. 194-C(3-A)---Procedure of Appellate Tribunal---Interpretation of S.194-C(3-A) Customs Act, 1969---Non-obstante clause in sub-section (3-A) of S.194-C, Customs Act, 1969---Purpose---Held, intent of the legislature is that if Special Bench comprising two or more technical members cannot hear a matter involving question of law then it will be illogical and absurd to conclude that the legislature intended that a technical member sitting singly can hear a matter relating to a question of law---Absurdity cannot be presumed in an interpretation.

The purpose of the non-obstante clause in subsection (3-A) of S.194-C, Customs Act, 1969 is to empower the Chairman to constitute single benches. Even if the contention that the provisos have been overridden, is accepted the intention of the legislature has to be arrived at by reading the entire section 194-C and determining what was the purpose for deleting the explanation to subsection (3-A) and whether by removal of such set of explanation both Judicial and Technical Members will become empowered to decide questions of law sitting singly. When reading the statute as a whole although prima facie it is seen that the deletion of explanation will empower both judicial member and technical member to decide questions of law sitting singly but after considering the second proviso to subsection (2) and trying to arrive at a harmonious interpretation the only interpretation which follows is that the intent of the legislature is that if Special Bench comprising two or more technical members cannot hear a matter involving question of law then it will be illogical and absurd to conclude that the legislature intended that a Technical Member sitting singly can hear a matter relating to a question of law and that absurdity cannot be presumed in an interpretation.

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

----S. 194-C(3-A) [as amended by Finance Act (IV of 2007)]---Procedure of Appellate Tribunal---Member Technical of the Tribunal does not have the jurisdiction to adjudicate in matters involving questions of law---Principles.

Aqeel Ahmed Abbasi and Ghulam Haider Shaikh for Petitioner.

Sirajul Haq and Faisal Siddiqui, Amici Curiae.

Zia-ul-Hassan, Jawaid Farooqui and Afzal Awan for Respondents.

2009 P T D 284

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Noor Khan, JJ

MUHAMMAD UMER

Versus

COMMISSIONER INCOME TAX, KARACHI

Income Tax Reference Application No. 379 of 2007, decided on 4th December, 2008.

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

----S. 177(4)---Selection of case for audit---Scope---Provision of S.177(4) of the Income Tax Ordinance, 2001 provides that the Commissioner will select a person for audit of his income tax affairs having regard to certain conditions---Nowhere in S.177, it is mentioned that the return of income will be selected for audit but the only thing which has been mentioned is that persons selected by the Commissioner can be subjected to the audit of their income tax affairs---Even in cases where return or statement has not been filed, any person can be selected for the audit of his income tax affairs provided the conditions therein have been met.

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

----Ss. 133 & 177---Reference to High Court---Selection of case for audit---Disputed question of fact---Statement of assessee that his case was selected by the Taxation Officer was contradictory to the observations in the assessment year which had not been specifically contradicted by the assessee, being a disputed question of fact which could not be resolved by High Court in its advisory jurisdiction.

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

----Ss. 113-A & 2(63)---Tax on income of certain persons---Presumptive tax under various provisions including S.113-A, Income Tax Ordinance, 2001 is "income tax" payable on such income and even in S.113-A(3) of the Ordinance it is specified that the tax paid under said section shall be on income arising from the turn-over---Contention that if a statement is filed under S.113-A it means that the assessee is not paying "tax" but is paying "turnover tax" only which does not fall within the definition of "tax" was repelled.

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

----S. 120(1-A)--Assessment---Selection of case for audit---Provision of S.120(1-A) Income Tax Ordinance, 2001 reveales that subsection (1-A) only provides that even those cases can be selected for audit in which the return filed has been accepted and has been converted into an assessment order---Section 120(1-A), however, does not provide that, except those persons who had filed returns which were deemed to have been assessed under S.120, no other person can be selected for audit of his tax affairs.

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

----S. 177---Selection of case for audit---All categories of persons irrespective of the fact whether they have filed return or not can be selected for audit under S.177, Income Tax Ordinance, 2001---Ground of selection that sales have been reduced by more than 50 per cent and it was necessary to audit to verify these sales is a very valid reason for selection of case for audit.

Trading Corporation of Pakistan (Pvt.) Ltd., Karachi v. Commissioner of Income Tax, Companies Zone-III, Karachi 2006 PTD 1362 distinguished.

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

----S. 133---Reference to High Court---Academic questions declined by High Court to answer.

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

----Ss. 177(4), 115(4) & 113-A---Selection of case for audit---Scope--Statement filed under S.115(4) read with S.113-A, Income Tax Ordinance, 2001, could be selected for audit under S.117 of the Income Tax Ordinance, 2001.

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

----S. 183---Reference to High Courts-Question referred being against the finding of fact given by the Appellate Tribunal, High Court declined to answer.

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

----S. 177---Selection of case for audit---Prior notice to assessee---Requirement---No prior notice is required before selection of case for audit and if after issuance of intimation regarding selection of case for audit the assessee is able to convince the authorities that his case has wrongly been selected, the notice can be withdrawn---Even after the issuance of the notice intimating the selection of case the contention of the assessee for removal of his case from audit was considered and rejected, the principles of natural justice had not been violated.

Syed Irshadur Rahman for Applicant.

Jawaid Farooqui for Respondent.

2009 P T D 331

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME TAX, KARACHI

Versus

Messrs GELCAPS (PVT.) LTD., KARACHI

I.T.R. No.58 of 1992 and I.T.C. No. 226 of 1991, decided on 10th April, 2003.

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

----S. 15---Business income---Commercial expediency---"Interest on investment"---To earn interest on "investment" is distinct from earning interest in "deposit"---Earning of interest by assessee, who had obtained loan for setting up an industry, and would have been manufacturing the product when it might have started the production was not to be deemed an "income from business" on the principle of commercial expediency.

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

----S.15---Classification of income under S.15, Income Tax Ordinance, 1979---Criterion---Sole criterion to classify the income under S.15, in ordinary course, is the source and/or the nature of activity and conduct wherefrom and/or whereby the particular income is being generated---As long as the sources can be factually found, circumstances seldom have any bearing on the characteristic of the income.

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

----Ss.30 & 15---Classification of income---"Income from business"---"Income from other sources"---Interest earned by an assessee who deals in money as stock-in-trade is "income from business", but such income cannot be anything but "income from other sources" for an assessee who has earned it on money held as capital, irrespective of the fact that it is borrowed or contributed by proprietor/director/partner/sponsor or shareholder---Interest income is assessable as "income from other sources" in circumstances.

CIT v. A.P. Industrial Infrastructure Corpn. Ltd. (1989) 176 ITR 361; Madhya Pradesh State Industries Corpn. Ltd. v. C.I.T., (1986) 69 ITR 824 (M.P.); Traco Cable Company Ltd. v. C.I.T. (1969) 72 ITR 503 (Kar. H.C.); Collis Line (Pvt.) Ltd. v. C.I.T. (1982) 135 ITR 390; CIT v. Bihar Alloy Steels Ltd. 1995 PTD 1189 (14.C. Patna); C.I.T., N.-W.F.P. v. N.-W.F.P. Forest Development Corporation 1990 PTD 178; CIT, Dacca v. Liquidator, Khulna-Bagerhat, Railway Company Ltd. 1962 PTD 415; PLD 1961 Dacca 108; C.I.T. v. Hindustan Electro Graphites Ltd. 1991 PTD 252; CIT v. Bihar Alloy Steels Ltd., 1994 206 ITR 351; Addl. CIT, Madras v. Madras Fertilizers Ltd. 1990 122 ITR 139; CIT v. Maglam Cement Ltd. 1996 217 ITR 369; Madhya Pradesh State Industries Corporation Ltd. v. CIT M.P. 1968-69 ITR 824 and Bokaro Steel Ltd. v. CIT 1988 170 ITR 545 ref.

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

----S.15---Classification of income---If an income properly falls under a particular head, it cannot be assessed by the Assessing Officer under another head---Where an assessee keeps his money intended to be used as capital of his particular business or part of such money or his other money in the banks and derives income by way of interest it would not be his "income from business" but "other sources"; there was a difference between the objects and the power of activities of assessee in carrying out the object into effect.

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

----S.15---Classification of income---Term "commercial expediency"---Scope---Term "Commercial expediency" is too general a phrase to affect the classification of income as made by law or to change their nature or nomenclature---Issues are not to be decided on the basis of commercial expediency on the part of one assessee, which may not be prudent from the point of view of another assessee but has to be judged on the touchstone of legal provisions.

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

----S.22---Income from business or profession---Phrases "carried on" as used in S.22(a), "Specific services performed" as used in S.22(b) and "exercise of a profession" as used in S.22(c) of the Income Tax Ordinance, 1979 indicate that some kind of continuous physical and/or mental human activity is involved in generation of income from business--'"Business"---Connotation.

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

----Ss.30, 22, 15 & 2(32)---Classification of income---"Income from other sources"---"Income from business"---Income earned by way of interest without engaging in an activity falling under the meaning of business or, where money is not utilized as stock-in-trade, is income from other sources under S.30 of the Income Tax Ordinance, 1979---Neither the assessee's personal status nor the nature of business, profession or occupation, in which he is engaged, would change the nature of such income; similarly, neither the source of the funds generating such interest income nor the purpose for which such funds are obtained by the depositor would have any bearing on the nature of such income---Neither the fact that the assessee is a company incorporated to set up an industrial undertaking, the profits and gains being derived or to be derived wherefrom, are exempt under the Income Tax Ordinance or otherwise, nor the fact that such company or an assessee having any other personal status under subsection (32) of S.2 of the Income Tax Ordinance, 1979 has deposited the funds out of equity or out of borrowed capital, nor the fact that, in the income year during which such funds are deposited, the assessee is engaged or is not engaged in any business or profession, would change the classification of such income under S.15 of the Ordinance.

1988 PTD (Trib.) 369 = 1988 58 Tax 15 not a correct law.

Bokaro Steel Ltd. v. Commissioner of Income Tax (1988) 170 ITR 545 not a correct law.

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

----Ss.30, 22 & 15---Classification of income---"Income from other sources"---"Income from business"---Interest income earned by the assessee on short-term deposit out of the capital borrowed for the establishment of industry is not income from business but is income from other sources and cannot be allowed to be adjusted against the interest paid on the borrowed capital for the simple reason that the interest paid on the borrowed capital is to be capitalized and there is no provision in law whereby income earned under the head "other sources" can be permitted to be adjusted against the expenses which are to be capitalized.

(1988) 58 Tax 15 not a correct law.

Eastern Investment Ltd. v. CIT (1951) 20 ITR 1 (S.C. India); 36 ITR 329; 39 ITR 696; 46 ITR 511; 49 ITR 127; (1978) 115 ITR 519; Motilal Hirabhai Spinning and Waving Mills Ltd. v. CIT (1978) 113 ITR 173 (Gujarat HC); 1988 PTD (Trib.) 369; CIT v. United Wire Ropes Ltd. (1980) 121 ITR 762 (Born. H.C.); Bengal and Assam Investors v. CIT (1976) 33 Tax 8 (S.C. Ind.); CIT v. Liquidators Khulna Bagerhat PLD 1962 SC 128; Trace Cable Co. Ltd. v. CIT (1969) 72 ITR 503; United Commercial Bank Ltd. v. CIT (1975) 32 ITR 688; California Copper Syndicate Ltd. v. Haris, Surveyor of Taxes. 5 TC 159; Mazagaon Dock Ltd. v. CIT (1958) 34 ITR 368 (S.C. Ind.); Bandengwers Ltd. v. Clarke (1935) 31 ITR (Eagles Case) 17; CIT v. A.P. Industrial Infrastructure Corpn. Ltd. (1989) 176 ITR 361; Madhya Pardesh State Industries Corpn. Ltd. v. CIT, (1986) 69 ITR 824 (M.P.); Traco Cable Company Ltd. v. CIT (1969) 72 ITR 503 (Kar. H.C.); Collis Line Pvt. Ltd. v. ITO (1982) 135 ITR 390; Bokaro Steel Ltd. v. C.I.T. 1988 170 ITR 545; CIT v. Bihar Alloy Steels Ltd. 1995 PTD 1189 (H.C. Patna); CIT, N.-W.F.P. v. N.-W.F.P. Forest Development Corporation 1990 PTD 178; CIT, Dacca v. Liquidator, Khulna-Bagerhat Railway Company Ltd. 1962 PTD 415; PLD 1961 Dacca 108; CIT, v. Hindustan Electra Graphites Ltd. 1991 PTD 252; CIT v. Bihar Alloy Steels Ltd., 1994 206 ITR 351; Addl. CIT, Madras v. Madras Fertilizers Ltd. 1990 122 ITR 139; CIT v. Maglam Cement Ltd. 1996 217 ITR 369; Madhya Pradesh State Industries Corporation Ltd. v. CIT M.P. 1968-69 ITR 824; Bokaro Steel Ltd. v. CIT 1988 170 ITR 545; Senairam Doongarmal v. CIT (1961) 42 1TR 392; CIT v. Ludhiana Electric Supply Company Ltd. (1966) 60 ITR 1; Narayan Swadeshi Weaving Mills. v. C. E. P. T (1954) 26 ITR 765; 1988 PTD (Trib.) 369; 1988 170 ITR 545; Commissioner of Income Tax v. Bihar Alloy Steels Ltd. 1995 71 Tax 62; Traco Cable Company Ltd. v. CIT 1969 72 ITR 503 and Collis Line Pvt. Ltd. v. ITO 1982 135 ITR 390 ref.

Nasrullah Awan for Appellants.

Hisamuddin for Respondent.

Dates of hearings: 11th November, 2002 and 11th March, 2003.

2009 P T D 443

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Noor Khan, JJ

Messrs HABIB BANK LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX, KARACHI

I.T.A. No.882 of 1999, decided on 19th December, 2008.

(a) Public Debts Act (XVIII of 1944)---

----S. 17(2)(a)---Notification S.R.O. 745(I)/89, dated 11-7-1989--Government Security---Scope---WAPDA Bonds (Second Issue) are government securities in view of notification S.R.O. 745(I)/89, dated 11-7-1989.

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

----S. 17(2)(a)---Notification S.R.O. 745(I)/89, dated 11-7-1989---WAPDA Bonds (Second Issue), interest on---Exemption---Return on investment made by individuals and bodies corporate in WAPDA Bonds (Second Issue) is exempted from payment of tax.

(c) Interpretation of statute---

----Principal statute and Schedule---Conflict---If there is conflict between principal statute and schedule, the principal statute prevails.

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

----Ss.17(2)(a), 136 & Second Sched. Serial Nos.79-A & 79-B---Notification S.R.O. 745(I)/89, dated 11-7-1989---Government security---Levy of tax---Exemption---Assessee was aggrieved of the decision of Income Tax Appellate Tribunal, whereby assessee was denied exemption on interest earned on WAPDA Bonds (Second Issue)---Validity---Provisions of S.17(2)(a) of Income Tax Ordinance, 1979, would prevail over the provision of Serial Nos.79-A and 79-B of Second Schedule to Income Tax Ordinance, 1979, if there was any conflict between the two statutes---No conflict existed between the two and Notification S.R.O. 745(I)/89, dated 11-7-1989, being later in time had enlarged scope of exemption in accordance with the provisions of S.17(2)(a) of Income Tax Ordinance, 1979---Tribunal was not justified in denying exemption to assessee on interest earned on WAPDA Bonds (Second Issue)---When the Bonds were purchased then in the Bond itself dates had been mentioned when profit / interest on the Bonds would become due to be receivable by purchaser---As the Bonds could not be encashed before maturity and interest was payable on fixed dates, therefore, no interest had become due to be recoverable by purchaser at any time before due dates---Interest on time bond securities, which was not payable before fixed dates accrued on the date those had become due and were receivable---Reference was allowed accordingly.

Molla Ejhar Ali v. C.I.T. PLD 1970 SC 173; C.I.T. v. Sindh Engineering (Pvt.) Limited, Karachi 2002 PTD 419 = 2002 SCMR 527; Commissioner of Income Tax v. Vali Bhai Kamruddin (Sindh) Limited 1973 PTD 410; Seth Lalbahi Dalpatbhai v. Commissioner of Income Tax Bombay North 22 ITR 13; Commissioner of Income Tax v. Eastern Investments Ltd. 1997 PTD 724 and Civil Appeals Nos. 1158-1159 of 2007 ref.

Ikramul-Haq for Appellant.

Muhammad Farid for Respondent.

Date of hearing: 20th November, 2008.

2009 P T D 523

[Karachi High Court]

Before Muhammad Athar Saeed and Syed Mahmood Alam Rizvi, JJ

Agha MASIHUDDIN

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, PREVENTIVE COLLECTORATE, KARACHI and 2 others

Customs Reference Application No. 236 of 2008 and Constitutional Petition No. 1991 of 2007, decided on 23rd January, 2009.

Customs Act (IV of 1969)---

----Ss. 156(89), 168, 171 & 196---Notifications S.R.O. No.574(I)/2005 and S.R.O. No.179(I)/2006---Smuggled vehicle---Imposition of redemption fine---Vehicle in question was seized by customs authorities under S.168 of Customs Act, 1969, and applicant produced fake import documents, therefore, authorities declared the vehicle as smuggled one liable to confiscation---Authorities allowed release of vehicle subject to payment of redemption fine 'equal to 30% of the value of the vehicle---Plea raised by applicant was that he was bona fide purchaser and neither he smuggled the vehicle nor prepared; forged documents---Validity---When applicant purchased costly vehicle he should have inquired into and verified documents of vehicle---Though seller of vehicle in question was available in town but applicant neither lodged any F.I.R. against him nor filed suit for recovery---For last more than three years, applicant did not bother to initiate any proceedings against the seller, which prima facie, showed that applicant had conscious knowledge that vehicle was a smuggled one---High Court declined to interfere with orders passed by customs authorities---Reference was dismissed in circumstances.

Ch. Muhammad Ashraf v. Deputy Superintendent, Anti-Smuggling Squad Central Excise and Land Customs Department PLD 1977 Lahore 300 and Abdul Rauf Khan v. Collector Central Excise and Land Custom 1980 SCMR 114 ref.

Abdul Wahab Baloch for Applicant.

Ghulam Haider Shaikh for Respondent No.1.

Aqeel Ahmed Abbasi, for Respondent No.3.

2009 PTD 642

[Karachi High Court]

Before Muhammad Athar Saeed and Syed Mahmood Alam Rizvi, JJ

Messrs RECKITT BENCKISER PAKISTAN LTD. through Attorney

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance Federal Secretariat Islamabad and 2 others

C.P. No.D-608 of 2007, decided on 24th February, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 45-A, 47-A & 72---General Clauses Act (X of 1897), S.21---Constitution of Pakistan (1973), Art. 199---Constitutional petition--Notice issued by Board of Revenue to re-examine its order passed under S.47-A of Sales Tax Act, 1990 on recommendations of Alternate Dispute Resolution Committee---Validity---Aggrieved person in S.47(4-A) of the Sales Tax Act, 1990 referred only to taxpayers and not to departmental officials for being bound by directions of Board by virtue of S.72 thereof---Board has not issued impugned notice on application from department or taxpayer---Board had power either to accept or reject recommendations of such Committee---Order passed by Board under S.47-A of Sales Tax Act 1990 was in nature of quasi judicial order and not an administrative order or an agreement between parties, thus, same would not fall within purview of S.21 of General Clauses Act, 1897---Both words "decision" and "order" used in S.45-A of Sales Tax Act, 1990 referred to decision and order of officer of Sales Tax and word "or" used between such words was not disjunctive---Board had no power to review its own order either under S.45-A or any other provision of Sales Tax Act, 1990---Department had not objected to such order of Board before Appellate Tribunal while deciding case on its basis---Board having become functus officio in respect of its such order, it had no jurisdiction to issue impugned notice for its re-examination---High Court quashed impugned notice in circumstances.

Nagar Mahapalika v. Ant Ram AIR 1966 All. 32 (V 33 C 8); Bachchu Lal case and anther's case AIR (38) 1951 836; Venkatesh Yeshwant Deshpande v. Emperor AIR 1938 Nagpur 513; Abdul Haque Indhar and others v. Province of Sindh 2000 SCMR 907; Muhammad Sadiq v. Punjab Service Tribunal, Lahore 2007 SCMR 318; Roche Pakistan Ltd. v. Deputy Commissioner of Income Tax and others 2001 PTD 3090; Messrs Oil and Gas Development Company Ltd. v. Collector Customs, Sales Tax and Central Excise (Adjudication) Rawalpindi and 2 others 2003 PTD 1586; Aluminium Processing Industries International (Pvt.) Ltd. v. Federation of Pakistan 2003 PTD 1411; The Chief Settlement Commissioner, Lahore v. Raja Muhammad Fazil Khan and others PLD 1975 SC 331; S. Sharif Ahmed Hashmi v. Chairman, Screening Committee, Lahore 1978 SCMR 367; Sheikh Liaquat Hussain v. The State 1997 PCr.LJ 61; Mir Ghulam Abid Khan v. Pakistan through Secretary and another 2000 CLC 443 and Rehan Hasan Naqvi v. Pakistan Defence Officers' Housing Authority 2000 CLC 1535 ref.

Ms. Danish Zuberi for Pet,joner.

Aqeel Ahmed Abbasi and Raja Muhammad Iqbal for Respondents.

Dates of hearing: 19th January, 3rd and 11th February, 2009.

2009 P T D 662

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Noor Khan, JJ

PAKISTAN PETROLEUM LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX APPEALS, ZONE I, KARACHI and another

I.T.R No. 198 of 2007, decided on 19th February, 2009.

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

----Ss. 133(4) & 221---Income Tax Ordinance (XXXI of 1979), S.156---Workers' Welfare Fund Ordinance (XXXVI of 1971), S.2(f)(vi)---Demand of workers' welfare fund from a company majority shares whereof owned by government---Applicant claimed exemption from such fund for its being falling within exclusionary clause of S.2(f)(iv) of Workers' Welfare Fund Ordinance, 1971---Rectification application against judgment of Tribunal found by majority decision to be maintainable---Validity---Revenue had not challenged impugned order by filing reference before High Court---High Court in advisory jurisdiction under S.133(4) of Income Tax Ordinance, 2001 could not disturb impugned order.

(b) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----Ss. 2(f)(vi), 4 & 5---Income Tax Ordinance (XLIX of 2001), S.133---Reference to High Court---Demand of workers' welfare fund from a company---Company claimed exemption from levy of such fund for 93% shares thereof being owned by Government---Rejection of such claim by Appellate Tribunal on the ground that assessee-company for not being owned by a corporation, in which majority of shares were held by government, was not entitled to exemption---Validity---Where government owned majority shares of a company through its fully owned statutory corporation, such company could not be deemed to have fulfilled requirements of a public company as basic qualification of which was the holding of more than 50% shares thereof by government--Word "or" used between word "concern" and "establishment" in S.2(f)(vi) of Workers' Welfare Fund Ordinance, 1971 was in disjunctive sense---Term "corporation" would include a "company"---If a concern or establishment was owned by a corporation, majority shares whereof were held by Government, then such establishment would be entitled to exemption from levy of such fund---Income of assessee-company as an oilfield industrial establishment though chargeable to such funds under S.4 of Workers' Welfare Fund Ordinance, 1971, but would be exempt from such levy on account of its 93% shares being owned by government---High Court answered reference in favour of applicant and against the revenue.

Dildar and another v. The State PLD 1963 SC 47; Raja Maula Dad Khan Advocate v. West Pakistan Bar Council, Lahore PLD 1975 SC 469; Hussain Bux and others v. The State PLD 2003 Karachi 127; Pakistan through Secretary Finance and others v. Messrs. Lucky Cement and another 2007 SCMR 1367; Syed Matloob Hussan v. Brooke Bond Pakistan Ltd. 1992 SCMR 227; Syed Arif Raza Rizvi v. Messrs Pakistan International Airlines PLD 2001 SC 182; Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs Circle Sheikhupura PLD 1988 SC 370; Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570; Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Iram Ghee Mills Ltd. v. Income Tax Appellate Tribunal 1998 YTD 3835; Islamuddin and 3 others v. The Income Tax Officer and 4 others 2000 PTD 306 and Commissioner of Income-tax/Wealth Tax, Multan Zone, Multan v. Allah Yar Cotton Ginning and Pressing Mills (Pvt.) Limited, Multan Road, Vehari, 2000 PTD 2958 ref.

Messrs Indus Pipe v. CIT 1999 PTD 825 rel.

(c) Interpretation of statutes---

----Words should be read in their plain meanings and no word should be added or deleted to arrive at an interpretation of statute.

Makhdoom Ali Khan for Applicant.

Aqeel Ahmed Abbasi for Respondents.

Dates of hearing: 11th, 18th and 19th December, 2008.

2009 P T D 687

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

KAHOOT INTERNATIONAL

Versus

COLLECTOR OF CUSTOMS and another

C.Ps. Nos.D-601 to 603 and 867 of 2007, decided on 30th May, 2007.

Customs Act (IV of 1969)---

.---Ss. 26 & 79---Constitution of Pakistan (1973), Art.199---Constitutional petition---Place of origin of imported goods---Burden to prove---Constitutional petition---Grievance of petitioner/importer was with regard to public notice issued by the Collector Customs in response to the Circular/letter of the C.B.R. dated 17-2-2007---Grievance seemed to be that said Circular/letter aimed to shift the burden of proof as regards the place of origin of the imported goods upon the importer had been made applicable by the department to their cases retrospectively least realizing the fact that said Circular of C.B.R. itself specified that it would take effect on 1-3-2007 on imports of polyester fabrics from UAE---Petitioner had contended that taking undue benefit of said Circular of the C.B.R., department was asking for the certificate of the manufacturer even from those importers whose consignments had arrived at the port before the target date 1-3-2007 and that as a result, adverse presumption as regards the origin of those goods was being drawn against them, simply due to the non-production of certificate of the manufacturer, which was not the condition earlier imposed by the department in terms of S.79(1) of the Customs Act, 1969---Validity---Only relief that could be granted to the petitioners was in respect of the goods imported by them which had arrived at the Port before target date 1-3-2007---Condition imposed through Circular of C.B.R. dated 17-2-2007 would not be made applicable and consequently the Public Notice issued by the Collector of Customs in response to said Circular of C.B.R., would also have no bearing; it would, however, be open to the department to examine the question of place of origin of such goods in the light of the relevant provisions of law already in force.

Government of Pakistan of through Ministry of Finance and 3 others v. Manzoor Brothers 1995 SCMR 516 and Messrs Shamoon Traders, Quetta v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi and others 2006 PTD 2177 ref.

Suhail Muzaffar and Faisal Siddiqui for Petitioners.

Raja Muhammad Iqbal, Aqeel Ahmed Abbasi and Ghulam Haider Shaikh for Respondents.

2009 P T D 712

[Karachi High Court]

Before Muhammad Athar Saeed and Syed Mahmood Alam Rizvi, JJ

ZEAL PAK INDUSTRIES (PVT.) LTD., KARACHI

Versus

REGIONAL COMMISSIONER, INCOME TAX, KARACHI and 2 others

Constitutional Petition No.D-2206 of 2006, decided on 27th February, 2009.

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

----Ss. 221(1-A) [as inserted by Finance Act (I of 2003) w.e.f. 1-7-2003] & 239(4)---Income Tax Ordinance (XXXI of 1979), Ss.62 & 156---General Clauses Act (X of 1897), S.6---Constitution of Pakistan (1973), Arts. 199 & 264---Constitutional petition---Rectification of mistake---Assessment order for year 2000-2001 finalized on 29-6-2002 under S.62 of Income Tax Ordinance, 1979---Show-cause notice issued on 18-8-2006 under S.221 of Income Tax Ordinance, 2001 for rectification of such assessment order---Plea of assessee was that such assessment was finalized on 29-6-2002 before repeal of Income Tax Ordinance, 1979 on 30-6-2002, thus, after expiry of limitation of four years provided under 5.156 of Income Tax Ordinance, 1979, such assessment could not be rectified in exercise of powers under sub-section (1-A) of S.221 of Income Tax Ordinance, 2001 inserted by Finance Act, 2003 w.e.f. 1-7-2003---Validity---Section 221 of Income Tax Ordinance, 2001 was procedural in nature prescribing procedure to rectify mistakes floating on surface of record---Legislature by legislating S.221(1-A) of Income Tax Ordinance, 2001 intended to empower Commissioner to rectify orders not having become time-barred before 30-6-2003 under S.156 of Income Tax Ordinance, 1979---Provision of S.221(1-A) of Income Tax Ordinance, 2001 would apply retrospectively even to orders passed under Income Tax Ordinance, 1979 before 30-6-2003---No vested right or privilege could be acquired by assessee on basis of assessment order passed under S.62 of Income Tax Ordinance, 1979 till expiry of period of limitation for its rectification---Section 6 of General Clauses Act, 1897 would not apply to rectification of orders passed under Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001---Impugned show-cause notice had been issued under proper jurisdiction vested in Commissioner by S.221(1-A) of Income Tax Ordinance, 2001---Constitutional petition was premature having been filed without replying to show cause notice and pursuing remedies provided under Income Tax Ordinance, 2001---High Court dismissed constitutional petition in limine.

S.M. Aslam and other v. Karachi Building Control Authority 2005 CLC 759; Ghulam Hussain v. Government of Balochistan 2006 PLC (C.S.) 38 and Lt.-Gen. (Retd.) Jamshad Gulzar v. Federation of Pakistan PLD 2006 Lahore 512 ref.

Honda Shahrah-e-Faisal Association of Persons v. Regional Commissioner of Income Tax, Karachi and others 2005 PTD 1316; Messrs Fawad Textiles Mills Ltd. v. Pakistan 2005 PTD 14; I.T.O. and others v. Sulaiman Bhai Jiwa and others 21 (1970) Tax 72 and Messrs Munnoo Industries Limited v. Commissioner of Income Tax, Zone, Lahore 2001 PTD 1525 rel.

(b) Interpretation of statutes---

----Procedural amendment would apply to all pending proceedings and to all cases not having become past and closed transactions.

(c) Interpretation of statutes---

----Intention of legislature---Courts have to interpret statute by trying to arrive at intention of legislature for legislating such statue.

Muhammad Ali Mazhar for Petitioner.

Jawed Farooqui for Respondent.

Date of hearing: 20th February, 2009.

2009 P T D 809

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Noor Khan, JJ

Messrs PIRANI ENGINEERING through Chief Financial Officer

Versus

FEDERAL BOARD OF REVENUE and 2 others

Constitutional Petition No. D-1166 of 2008, decided on 11th February, 2009.

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

----Ss. 122-B, 153(4) & Second Sched., Part-IV, Cl.(46-A)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Maintainability---Auto parts, manufacturer of---Refusal of Commissioner to issue to petitioner exemption certificate under S.153(4) of Income Tax Ordinance, 2001 for not falling such parts within ambit of Cl. (46-A) of Part-IV of Second Schedule., therefore---Plea of Revenue was that alternate remedy of filing review before Director-General against such refusal was available to petitioner---Validity---Director-General being a Reviewing Authority had already expressed his opinion in form of an administrative order---Appeal/revision/review before Director General would be mere illusionary in nature and would not be efficacious remedy---Constitutional petition was, held to be maintainable in circumstances.

(b) Interpretation of statutes---

----Fiscal statute---Language of such law in its natural meaning would be applicable---Controversy in case of doubt would be resolved in favour of taxpayer and not Revenue Department.

(c) Interpretation of statutes---

----Interpretation of words used in a statute---Duty of Court stated.

Court should look at the words of statute and interpret them in the light of the words clearly expressed and not import what is not expressed to support assumed deficiency.

No words should be added or deleted from a statute to arrive at exact meaning and it should be interpreted as a whole on the basis of its plain language.

Collector of Customs (Appraisement), Karachi and others v. Messrs Abdul Majeed Khan and another 1977 SCMR 371 fol.

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

----S. 153(4)(6-A) & Second Sched., Part-IV, Cl. (46-A)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Income from business of manufacture of auto parts---Refusal of Commissioner to issue exemption certificate to petitioner under S.153(4) of Income Tax Ordinance, 2001 for not falling such parts within the ambit of Cl. (46-A) of Part-IV of Second Sched., thereof---Plea of petitioner was that such parts were iron and steel products for being manufactured from iron and steel---Plea of Revenue was that petitioner was not a member of Iron and Steel Dealers Association, but was a member of Auto Parts Manufacturer Association, thus, manufacturer of auto parts would not fall in category of iron and steel manufacturers and auto parts for not being, iron and steel products would not fall within ambit of Cl. 46-A of Part-IV of Second Sched., of Income Tax Ordinance, 2001---Validity---Iron and steel products had not been defined in Ordinance, 2001---Exclusion from purview of S.153(6-A) of Income Tax Ordinance, 2001 had been restricted to manufacturers of iron and steel products, which, in common parlance, could be called iron and steel products and not to all products in which iron and steel being used as raw material including products manufactured by petitioner---Had words "products of iron and steel" been used, then same could have wider connotation encompassing all products manufactured by using iron and steel as raw material---Products manufactured by petitioner under common parlance could not be categorized under head "iron and steel products", but would always be categorized under auto parts or car or vehicle products---High Court dismissed constitutional petition in circumstances.

Central Insurance Co. and others v. Central Board of Revenue, Islamabad, and others 1993 PTD 766 = 1993 SCMR 1232; Collector of Customs (Appraisement), Karachi and others v. Messrs Abdul Majeed Khan and another 1977 SCMR 371; Tahir Mahmood and 3 others v. Khalid Sharif and 9 others PLD 2007 SC (AJ&K) 119; Orient Straw Board and Paper Mills Limited v. Commissioner of Income-Tax, Hyderabad 1993 PTD 306; Messrs Habib Sugar Mills Ltd. v. Additional Collector, Sales Tax, Customs House, Site Hyderabad and 2 others 2007 PTD 171; Commissioner of Income/Wealth Tax v. Messrs Ravi Plastic Industries (Pvt.) Ltd. 2007 PTD 1227; Commissioner of Income Tax v. Krudsons Limited, Karachi (1966) 14 Tax 293 (H.C. Kar.); Commis­sioner of Sales Tax, Lahore v. General Equipment Merchants, Lahore PLD 1982 SC 107; C.A. 1891 Unwin v. Hanson At page 115; Kawther Grain (Pvt.) Limited v. DCIT Guraranwala 80 Tax 262; Collector of Central Excise, Bombay-I and another v. Messrs Parle Exports (P) Ltd. AIR 1989 Supreme Court 644; Messrs Hindustan Aluminum Corporation Ltd., Appellants v. The State of U.P. and another AIR 1981 Supreme Court 1649; Messrs Indian Cable Company Ltd. Calcutta v. Collector of Central AIR 1995 SC 64; Usmania Glass Sheet Factory Limited, Chittogang v. Sales Tax Officers, Chittagong PLD 1971 SC 205; Two Hundred Chests of Tea (1) US 6 Lywer's Edn 430; Messrs Indian Cable Co. Ltd., Calcutta v. Collector of Central Excise AIR 1995 SC 64; Collector of C.E. Bombay v. M.S. Parle Exports (P) Ltd. AIR 1989 Sc 644; Hindustan Aluminium Corpn. V. State of U.P. AIR 1981 SC 1649 and Messrs Premier Mercantile Services (Pvt.) Ltd. v. Commissioner of Income Tax, Karachi 2007 PTD 2521 ref.

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

----S.207---Fiscal statute, interpretation of---Power of Central Board of Revenue or its functionaries---Scope---Correct interpretation of statutes given by Board or its functionaries could not be rejected merely on ground for not having been invested with such powers---Principles.

Central Insurance Co. and others v. Central Board of Revenue, Islamabad, and others 1993 PTD 766 1993 SCMR 1232 ref.

Rehanul Hassan Naqvi along with Ms. Lubna Perwaiz for Petitioners.

Altaf Mun for Respondents along with Dr. Tariq Masood Additional Commissioner of Income Tax.

2009 P T D 841

[Karachi High Court]

Before Muhammad Athar Saeed and S. Mahmood Alam Rizvi, JJ

Messrs NOBLE (PVT.) LTD. through Manager Finance and Administration

Versus

FEDERAL BOARD OF REVENUE through Chairman and 4 others

Constitutional Petition No. D-2210 of 2007, decided on 5th March, 2009.

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

----Ss. 120, 122 & 177---Return finalized under S.120(1) of Income Tax Ordinance, 2001 amended under S.122(5-A) of Income Tax Ordinance, 2001 after detailed scrutiny---Selection of such case by Commissioner for audit under 5.177 of Income Tax Ordinance, 2001 for same reasons on basis of which action under S.122(5-A) thereof had been taken---Validity---Procedure for selecting case for audit was different from procedure adopted for amending order under S.122(5-A) of the Ordinance-Case once selected for audit should be subjected to strong audit and discrepancies in record, if any, should be highlighted for either confirming order passed or taking action for its amendment---Assessment order amended under S.122 of the Ordinance, should be pointed in favour of selecting a case for audit as on basis of amendment of order, assumption would be that return converted into assessment order could not be relied on---Income Tax Ordinance, 2001 did not bar selection of case for audit under S.177 thereof, if for same tax year action had already been taken under S.122 thereof---Selection of case for total audit under S.177 of the Ordinance and action under S.122 thereof being different actions, no bar existed for initiating both actions for same tax year even on identical points---Commissioner had powers to select cases for audit even before promulgation of S.120(1-A) of the Ordinance thus, S.120(1-A) had retrospective effect---Impugned order was legal and with jurisdiction---Principles.

Central Insurance Co. and others v. Central Board of Revenue 1993 SCMR 1232 = 1993 PTD 766 and Premier Mercantile Services (Pvt.) Ltd. v. C.I.T. 2007 PTD 2521 ref.

(b) Interpretation of statutes---

----Duty of Court was first to arrive at intention of legislature and then to arrive on its basis at interpretation of the relevant section.

Rehanul Hassan Naqvi along with M.S. Lubna Perwaiz for Petitioners.

Jawaid Farooqui for Respondent.

2009 P T D 862

[Karachi High Court]

Before Muhammad Athar Saeed and S. Mahmood Alam Rizvi, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-II, KARACHI

Versus

Messrs FAZAL-UR-REHMAN

I.T. Reference No.13 of 1996, decided on 16th March, 2009.

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

----Ss.2(43), 9, 10 & 69(4)(a)---Computation of allowable income to be distributed amongst partners of registered firm---Scope---Both super tax and penalty would be deducted from total income to arrive at such allowable income---Principles.

The words used in section 69(4) with which the proportionate share has to be reduced is "tax" only, whereas the words used in section 9 is "income tax" and in section 10, which directly applies to the registered partnership firm, is "super tax" and "surcharge". If the legislature wanted to restrict the reduction from the allowable income to the extent of tax payable on the income of registered partnership firm then there was no difficulty in using the word "super tax" and "surcharge" in place of the word "tax" used in this section and once the legislature has used the word "tax" without restricting it to any item which is included in the definition of "tax" given in section 2(43) of the Income Tax Ordinance, then to restrict such reduction only to super tax is a violation of the intention of the legislature and is not permitted by the principles of interpretation.

(b) Interpretation of statutes---

----Fiscal statute---More than one interpretation possible---Effect---Interpretation more beneficial to and in favour of taxpayer would be adopted.

Nasrullah Awan for Applicant. None present for Respondent.

Date of hearing: 24th February, 2009.

2009 P T D 891

[Karachi High Court]

Before Mrs. Qaiser Iqbal and Arshad Siraj Memon, JJ

COMMISSIONER (LEGAL DIVISION), KARACHI

Versus

NOVARTIS PHARMA (PAKISTAN) LTD.

I.T.R. No.142 of 2009 and 366/KB of 2003, decided on 20th March, 2009.

(a) Words and phrases---

----"Commission"---Meaning.

Oxford English Dictionary; English Dictionary on historical principles (reprint 1961) and Commercial Dictionary by P.G, Osborn and ST. Grandage (1966) ref.

(b) Words and phrases---

----"Reimburse" and "Reimbursement"---Meaning.

Oxford English Dictionary on historical Principles (1993) and Advanced Law Lexicon (Third Edition) (P. Ramanatha Aiyar) (2005) ref.

(c) Words and phrases---

"--"Commission" and "reimbursed" or "reimbursement", Distinction stated.

The term "commission" denotes remuneration or compensation to a factor or an agent for services rendered in respect of making sale or otherwise. It is generally calculated as a certain percentage on the amount of the transaction or on the profit to the principal. Whereas the term "reimbursed"/"reimbursement" implies payback and in ordinary parlance reimbursement means repayment of what has been spent. Each word denotes a particular and specific concept without the one including other, as such, both have different meaning.

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

----Ss. 50(4A) & 52---Non-deduction of tax on payment made by assessee as reimbursement of expenses to distribution company for distributing its products as per distribution contract---Assessing Officer treated assessee in default after equating such payment as commission---Validity---Word "commission" denoted remuneration or compensation to an agent for services rendered in respect of making sale---Word "reimbursement" would mean repayment of amount spent---Both such words had different meanings---Record showed that distribution company had performed certain functions in connection with distribution of products of assessee---Distribution company for such services was to be paid certain fee for expenses incurred, which , expenses had been reimbursed by assessee---Assessing Officer had not challenged validity of reimbursement---Record showed that distributing company had deducted tax under S. 50 of Income Tax Ordinance, 1979---Such expenses reimbursed by assessee could not be treated as commission---High Court answered question in favour of assessee.

Harihar Cotton Pressing Factory v. Commissioner of Income Tax, Bombay North (1960) 39 ITR 594 and Laxmandas Sejram v. Commissioner of Income-Tax, Gujarat (1964) 54 ITR 763 ref.

Aqeel Ahmed Abbasi for Applicant.

2009 P T D 992

[Karachi High Court]

Before Anwar Zaheer Jamali, C.J. and Faisal Arab, J

KHURRAM FAROOQ SIDDIQUI

Versus

DEPARTMENT OF CUSTOMS AND EXCISE, COLLECTORATE OF CUSTOMS (EXPORT) and another

Constitutional Petitions Nos.D-1243 and D-1244 of 2008, decided on 13th February, 2009.

Customs Act (IV of 1969)---

----S.156(1), clauses (14), (14-A), (16), (17), (77), (84), Ss.32, 32-A, 35, 39, 131, 131-A & 178---Constitution of Pakistan (1973), Art.199---Constitutional petition---Quashing of proceedings---Interim challan in the case was submitted after three years of lodging F.I.Rs.---No provision being in the law for submission of interim challan after three years, it was to be deemed as final challan, which carried no material for connecting the petitioners with the commission of said crimes---Inordinate delay of over three years in the investigation of crimes and submission of interim challan without collecting any evidence against the petitioners was indicative of fact that pendency of such proceedings in the Customs Court would be nothing but an abuse of the process of law which was to be prevented in order to secure the ends of justice---No possibility/likelihood of conviction of the petitioners existed in the two crimes in case the proceedings emanating from the crimes which related to an attempt to defraud the national exchequer by fraudulently claiming the inadmissible duty draw back, were allowed to continue---Proceedings were ordered to be quashed.

Mian Munir Ahmed v. The State 1985 SCMR 257; State through Advocate General N.-W.F.P. and others v. Gulzar Muhammad and others 1998 SCMR 873 and Ch. Perviaz Ellahi v. The Federation of Pakistan through Secretary, Ministry of Interior, Islamabad and 3 others 1995 MLD 615 ref.

Kumail Ahmed Shirazee for Petitioner.

Raja Muhammad Iqbal for Respondent No.1.

Muhammad Ashraf Khan Mughal, D.A.G. for Federation of Pakistan.

Date of hearing: 13th February, 2009.

2009 PTD 1127

[Karachi High Court]

Before Muhammad Athar Saeed and Salman Talibuddin, JJ

COLLECTOR OF CUSTOMS, PORT MUHAMMAD BIN QASIM, KARACHI

Versus

Messrs MIA CORPORATION (PVT.) LTD., ISLAMABAD

Special Customs Reference Application No.66 of 2008, decided on 17th April, 2009.

Customs-Act (IV of 1969)---

----S. 194-C(3-A)---Appeal involving question of law----Tribunal, powers of---Scope---Member Technical of Appellate Tribunal while sitting singly could not decide such matter.

Collector of Customs v. Muzammil Ahmed 2009 PTD 266 rel.

Raja M. Iqbal for Applicant.

Shaukat Hayat for Respondent.

2009 P T D 1158

[Karachi High Court]

Before Faisal Arab and Salman Ansari, JJ

Messrs MEKOTEX (PVT.) LTD., KARACHI

Versus

CHAIRMAN, APPELLATE TRIBUNAL, CUSTOMS, FEDERAL EXCISE AND SALES TAX, KARACHI and 2 others

Special Customs Reference No. 380 of 2007, decided on 2nd April, 2009.

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

----S.33---Contract Act (IX of 1872), S.72---Clearing of imported goods without seeking benefit of exemption of duties and tax under exemption notification--Refund of such duties and tax claimed after 21 months---Validity---Where one party under a mistake of law or fact paid some money to another party including Government department, which was not due by law or contract or otherwise, then same must become repayable in view of S.72 of Contract Act, 1872---Where tax was chargeable and payable by an importer/exporter and due to inadvertence/error/misconstruction, excess amount was paid or recovered than what was actually due and payable, then claim for refund of excess amount must be made within six months---Where duty and tax charged and recovered was not payable at all, then S.33 of Customs Act, 1969 would have no application and refund could be sought even beyond six months period.

Messrs Pfizer Laboratories v. Federation of Pakistan and others PLD 1998 SC 64 ref.

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

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

----S.33---Clearing of goods without seeking benefit of S.R.O.27(I)/98, dated 17-1-1998---Claim for refund of duties and taxes not payable under such S.R.O---Validity---Importer had not produced a certificate from Engineering Development Board that goods mentioned in Customs General Order were not locally manufactured at time of their import---Importer had not produced evidence that minimum average of 50% of production of importer's unit had been exported or value addition of 40% had been made during period so far expired---Importer was not entitled to exemption under the S. R.O.---Refund claim was rejected in circumstances.

Muhammad Afzal Awan for Appellant.

Raja Muhammad Iqbal for Respondent.

2009 P T D 1181

[Karachi High Court]

Before Muhammad Athar Saeed and Salman Ansari, JJ

Messrs SHIRJEEL ENTERPRISES through Proprietor

Versus

COLLECTOR OF CUSTOMS, APPRAISEMENT, KARACHI

Spl. Customs Reference Application No.261 of 2008, decided on 1st April, 2009.

Customs Act (IV of 1969)---

----S.194-C(3-A)-Appeal involving question of law-Decisions of Appeal by Member Technical of the Appellate Tribunal without providing opportunity of hearing to appellant---Validity---Member Technical of the Tribunal while sitting singly could not decide such matter---High Court remanded case to Tribunal for fixing same before appropriate Bench for its decision afresh within specified time after providing opportunity of hearing to both parties.

Collector of Customs Modern, Customs Collectorate of Paces, Karachi v. Muzammil Ahmed 2009 PTD 266 rel.

Junaid Ghaffar for Applicant.

Raja Muhammad Iqbal for Respondent.

2009 P T D 1239

[Karachi High Court]

Before Muhammad Athar Saeed and Salman Ansari, JJ

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF APPRAISEMENT, KARACHI

Versus

Messrs SUPERIOR STEEL, KARACHI

Special Customs Reference Application No.85 of 2008, decided on 1st April, 2009.

Customs Act (IV of 1969)---

----Ss. 32(1), 79(1) & 194-C(3)---Imported goods declared to be of China origin assessed as of Holland origin by Member Technical Appellate Tribunal, sitting singly---Validity---Nothing on record to show that certificate of origin provided by importer was not reliable---Determination of origin of goods to be of Holland on basis of physical inspection was not substantiated with factual evidence---Member Technical of the Tribunal had no jurisdiction to decide such matter---High Court remanded case to Tribunal to decide such matter afresh while observing that if the Tribunal wanted to depart from decision taken by Member Technical, then it would have to give cogent reasons in support of its decisions.

2009 PTD 266; Messrs Zarghoon Zarai Corporation v. Collector of Customs and another in 2006 PTD 534; Collector of Customs, Karachi v. Messrs Ali Enterprises, Karachi 2006 PTD 651; Collector of Customs, Multan v. Muhammad Tasleem 2002 MLD 296 and Messrs Taqiur Rehman, Faisalabad v. Deputy Collector Customs (Import), Dry Port, Faisalabad 2003 PTD 456 ref.

Raja Muhammad Iqbal for Applicant.

Junaid Ghaffar for Respondent.

2009 P T D 1292

[Karachi High Court]

Before Muhammad Athar Saeed and Salman Ansari, JJ

S. FAISAL REHMAN through Duly Authorized Representative/Attorney

Versus

COLLECTOR (APPRAISEMENT) CUSTOMS, KARACHI and 3 others

Special Customs Reference Application No.259 of 2008, heard on 25th March, 2009.

Customs Act (IV of 1969)---

----S.25(1)---Prime Hot Cold Coils, import of-- Declaration of value of such goods by importer at price of US$ 175 to 180 per metric ton---Pre ex-bonding examination of goods revealed same to be of secondary quality and not of prime quality---Prayer of importer for valuing goods at price of US$ 157 per metric ton being transactional value of secondary quality of goods---Validity---Customs duty would be levied on basis of such declared additional value of goods---Importer had suffered due to violation of contract by shipper/Supplier by paying sale price more than sale price of goods actually shipped---Importer for violation of contract and recovery of excess duty could take action against shipper/supplier.

Batala Ghee Mills (Pvt.) Ltd., Lahore v. Collector of Customs P'I'D 2634; Messrs Flying Board and Paper Products v. Deputy Collector Customs Dry Port, Lahore 2006 SCMR 1648 and Messrs Flying Board and Paper Products v. Deputy Collector, Customs 2006 SCMR 864 ref.

Abul Inam for Applicant.

Raja Muhammad Iqbal along with Mr. Tariq Aziz (Appraising Officer) for Respondent.

Date of hearing: 25th March, 2009.

2009 P T D 1303

[Karachi]

Before Mrs. Yasmin Abbasey, J

WASEEM AHMED---Applicant

Versus

THE STATE---Respondent

Criminal Bail Application No.161 of 2008, decided on 17th March, 2008.

Criminal Procedure Code (V of 1898)---

----S.497---Penal Code (XLV of 1860), Ss.302/34---Bail, grant of---Only eye-witness, during her examination in the court, was not able to identify accused stating that they had changed their hulias'; and that due to lapse of time she could not identify other accused present in the court---Said witness though had been produced as eye-witness of the incident, but she had not seen the persons, who had committed the murder of her grandfather, because at that particular moment she was not present in that room---Witness had stated that she just noticed three persons enteringKhankah' of her grand father; and thereafter she heard fire shots---None of the persons who at that particular time were present in `Khankah' had been produced as witness to confirm that accused was amongst those culprits who had committed murder of deceased---After recording examination-in-chief, said witness was not produced again for her cross-examination, as she was reported to have shifted to some unknown place---Prosecution, in circumstances, had not been able to make out a case for rejection, of bail application---In view of discrepancies appearing on record, non-production of eye-witness for the purpose of cross-examination and the way identification parade of accused was held, accused was entitled for the grant of bail--Accused was admitted to bail, in circumstances.

Aamir Mansoob Qureshi for Applicant.

Syed Muhammad Ali Mirza, A.A.-G.

2009 P T D 1314

[Karachi High Court]

Before Mrs. Qaiser Iqbal and Arshad Siraj Memon, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-II, KARACHI

Versus

Messrs ALLWIN ENGINEERING INDUSTRIES LTD., KARACHI

I.T.R. No.10 of 1997, decided on 5th June, 2009.

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

----Ss. 65 & 166---Income Tax Act (XI of 1922), Ss.15-BB & 34---Reassessment under S.65, Income Tax Ordinance, 1979--Limitation--Assessee-company, in the present case, enjoyed exemption from income tax under S.15-BB, Income Tax Act, 1922 for the assessment year 1971-1972---Subsequent to the completion of assessment, notice under S.65, Income Tax Ordinance, 1979 was issued by the Income Tax Officer in June, 1982, 'for the reason that the assessee had not properly utilized the reserve under S.15-BB of the Income Tax Act, 1922 and consequently, the re-assessment was framed---Record showed that no date was mentioned when the assessment under S.65, Income Tax Ordinance, 1979 was passed---Assessee being aggrieved against such action, filed appeal before the Commissioner of Income Tax (Appeals), who annulled the assessment by holding that the period during which corrective action could have been taken by the Income Tax Officer under S.15-BB, Income Tax Act, 1922, had already expired before the promulgation of Income Tax Ordinance, 1979 and that Income Tax Officer had no jurisdiction to take action under the provision of S.65 of Income Tax Ordinance, 1979 for the assessment year 1971-1972---Appellate Tribunal, on appeal, concurred with the Commissioner and referred the question of law for opinion of High Court to the effect that "whether on the facts and circumstances of the cases the learned Income Tax Appellate Tribunal was justified in holding that action under S.65, Income Tax Ordinance, 1979 was not within the time limit."--Held, since different intention appeared from the provision of S.166(2)(c) Income Tax Ordinance, 1979, and no notice under S.34, Income Tax Act, 1922 was issued within contemplated time frame, an assessment could be reopened under S.65 of the Income Tax Ordinance, 1979, however, court had to examine whether the provision of S.65 of the Ordinance, in the present case, had been correctly applied---Limitation for invocation of provision under S.65, Income Tax Ordinance, 1979 was contained in its subsection (3) which stipulated that no order under S.65(1) of the Ordinance shall be made in respect of any income after the expiration of ten years from the end of the assessment year in which the total income of the said income year was first assessable---In the present case, the total income pertained to the previous year which was first assessable to the assessment year 1971-1972, the end of such assessment was 30-6-1972, as such order of reassessment under S.65, Income Tax Ordinance, 1979 could be passed within ten years from the end of assessment year i.e. on or before 30-6-1982---Neither in the statement of the case nor in the paper book there was any mention of date when the order under S.65, Income Tax Ordinance, 1979 was made; in view of such position it was very difficult for the High Court. to answer the question referred for opinion---High Court, in circumstances, remanded the case to the Income Tax Appellate Tribunal to ascertain the date of passing order under S.65, if the order was passed before the date i.e. 30-6-1982, then the re-assessment would be deemed to have been passed within the limitation provided under S.65(3), Income Tax Ordinance, 1979; on the other hand if the said order passed after 30-6-1982, same would be deemed to have been passed beyond the limitation period as contemplated under S.65(3) of the Income Tax Ordinance, 1979---Principles.?

Mannoo Industries Ltd.; v. Commissioner of Income Tax 2001 PTD 1525; Honda Shahrah-e-Faisal Association of Persons v. Regional Commissioner of Income Tax, Karachi and 2 others 2005 PTD 1316; Eastern Federation Union Insurance Company v. Commissioner of Income Tax (1966) 14 Tax 211 and Commissioner of Income Tax v. Eastern Federal Union Insurance Company PLD 1982 SC 247 distinguished.

(b) Interpretation of statutes---

---Non obstante clause is usually used in a provision to indicate that the provision should prevail despite anything to the contrary in the provision mentioned in such non obstante clause---In case there is any inconsistency between non obstante clause and another provision, one of the objects of such a clause is to indicate that it is non obstante clause which would prevail over the other clause.?

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

---S. 6---Repeal---Effect--When there is repeal, the consequences contained in S.6, General Clauses Act, 1897 will follow unless a different intention appears---In case of a simple repeal there would be hardly, any occasion to take contrary view, however where the repeal is followed by fresh enactment on the same subject, court has to examine the new enactment to find out and determine any different intention.?

Shakeel Ahmed holding brief of Nasrullah Awan for Applicants.

Mazhar Jafri for Respondent.

Date of hearing: 19th March, 2009.

2009 PTD 1499

[Karachi High Court]

Before Muhammad Athar Saeed and Syed Mehmood Alam Rizvi, JJ

COMMISSIONER OF INCOME TAX

Versus

ZAHID BASHIR

I.T.A. No.73 of 1999, decided on 20th February, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss.18 & 136---Deduction of Zakat---Appeal to High Court---Question proposed for the opinion of the High Court was "whether the Tribunal was justified in directing the Assessing Officer to allow deduction of Zakat against the income including other head of Income"---Said issue having already been settled by the High Court in case 2003 PTD 1309, question was answered in affirmative in favour of assessee and against the department.

Commissioner of Income Tax, Companies-III, Karachi v. Azlak Enterprises (Pvt.) Ltd., Karachi 2003 PTD 1309 ref.

Javed Farooqui for Appellant.

Khaleeq Ahmed for Respondent.

2009 P T D 1575

[Karachi High Court]

Before Muhammad Ather Saeed and Salman Ansari, JJ

Messrs PARAMOUNT SPINNING MILLS LTD.

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT) GOVERNMENT OF PAKISTAN APPRAISEMENT COLLECTORATE, LAHORE

Customs Appeal No.121 of 2000, decided on 30th June, 2009.

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

----Ss. 156(1)(10-A) & 19---S.R.O.484(I)/92, dated 14-5-1992---S.R.O.791(I)/91, dated 15-8-1991---Exemption---Importers, having voluntarily opted the scheme under S.R.O.484(I)/92, dated 14-5-1992, for the import in question and remaining under the said scheme for considerable time, abiding by its conditions favourable to them, obtained condonation of delay under S.R.O.484(I)/92 and at the time of the clearing of the goods had fulfilled the conditions of S.R.O.484(I)/92 and filed the Indemnity Bond required to be filed under the provisions of said S.R.O., had given up their claim under S.R.O.791(I)/91, dated 15-8-1991---S.R.O.791(I)/91, dated 15-8-1991, in circumstances, would not apply to the case of importers---Principles.

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

----S. 19--S. R.O.484(I)/92, dated 14-5-1992---Exemption---Central Board of Revenue condoned the violation of the conditions of S.R.O.484(I)/92, dated 14-5-1992 issued by the Federal Government, and allowed the importers permission to relocate the machinery from place "S" to place "K"---Validity---Held, no authority had the power to modify any S.R.O. issued by the authority superior to it---If the Central Board of Revenue had permitted to relocate the machinery, Board could not condone the non-following of the conditions mentioned in the S.R.O. or in the Indemnity Bond submitted by the importers for the purpose of exemption and could not allow them the benefit of S.R.O. if they had violated the conditions of the S.R.O.---If the intention of the Board in issuing the letter to importer was to condone the conditions and allow them exemption under the S.R.O., it would be beyond the powers of the Board as Board had no power to allow exemption to machinery, which had been installed at areas other than the areas specified in the subject S.R.O.

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

----Ss. 202 & 19---S.R.O.484(I)/92, dated 14-5-1992---Exemption---Recovery of dues as arrears of land revenue---Limitation---Conditions of S.R.O.484(I)/92, dated 14-5-1992 and Indemnity Bond and undertaking of the importers had made it clear that the exemption allowed to the importers was contingent upon the machinery being installed in the specified area and the importers had undertaken that the machinery will not be removed to another area, or if it is removed to another area, they will not be entitled to concession and will repay the rebate amount and other penalties, and if they do not pay the same, the amount will be recovered as arrears of land revenue under S.202, Customs Act, 1969---Held, since the exemption which was granted was a contingent exemption, it could be assumed that the importers were liable to pay the duties unless they fulfilled the conditions on which the exemption was contingent and not fulfilling the conditions or violation thereof would render them liable to government dues as payable on the day of the clearance and there was no time limit for collection of such government dues---No show-cause notice or order-in-original was needed to collect these dues and a simple demand notice would have sufficed---Action leading to the recovery of the disputed dues was not barred by the period of limitation.

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

----S. 32(2)---Notice under S.32(2), Customs Act, 1969---Limitation---Date on which the department learnt of the violation of S.R.O., Indemnity Bond of the Importers and law, issuance of notice under S.32(2), Customs Act, 1969 within the four years from the date of such knowledge by the department was within time.

A Ghaffar Khan for Appellant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 26th March, 2009.

2009 P T D 1656

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Siraj Memon, JJ

Messrs OCEANIC CONSTRUCTION CO., KARACHI

Versus

COMMISSIONER OF INCOME TAX, ZONE `C', KARACHI and others

Income Tax Appeal No.225 of 1997, heard on 21st May 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss.12(12) & 13(2)---Verifiable transaction, discarding of---Effect---Assessing officer was, not empowered to ignore the sale price in case of verifiable transaction unless it was proved to be sham or of collusive and corroborative nature to deprive exchequer of its lawful dues and taxes---In the present case, not only the assessing officer acted against law by estimating the value of property sold, but he had also failed to bring on record any convincing evidence to prove that there was collusion between the seller and purchaser---Mere reference to some transactions would not ipso facto justify discarding a verifiable transaction---Heavy onus lay on the assessing officer to place evidence on record that the other party (purchaser) to the transaction had paid a higher price than recorded by the seller---Income Tax Appellate Tribunal, in circumstances, had no jurisdiction and power to estimate the sale price of the property and answer the question in affirmative in favour of department---Principles.

Muhammad Farid for Appellant.

Jawaid Farooqui for Respondents.

Date of hearing: 21st May, 2009.

2009 PTD 1776

[Karachi High Court]

Before Muhammad Athar Saeed and Syed Mahmood Alam Rizvi, JJ

Messrs AMERICAN EXPRESS BANK LTD.

Versus

COMMISSIONER OF INCOME TAX

I.T.R. No. 179 of 1997, decided on 8th June, 2009.

Income Tax Ordinance (XXXI of 1979)---

----S. 27---Profit on investment on government securities declared by assessee/Banking Company was a part of its business and revenue profits and was therefore, taxable as business or revenue income.

Messrs Habib Bank Ltd. v. Commissioner of Income Tax I.T.A. No. 882/1999; Punjab Cooperative Bank Ltd. v. Commissioner of Income Tax, Punjab (1940) 8 ITR 635 (PC) and Grindlays Bank Ltd. v. CIT; 1985 PTD 329 distinguished.

2000 PTD (Trib.) 1299; Investment Limited v. C.I.T. (1966) 62 ITR 269 (Madhya Pradesh); Commissioner of Inland Revenue v. The Scottish Automobile and General Insurance Co., 16 TC 381; Grindlays Bank 'Ltd. v. CIT; 1985 PTD 329; 2003 PTD (Trib.) 494 and 2006 PTD (Trib.) 882 ref.

Dr. Farogh Naseem for Applicant.

Muhammad Aqeel Qureshi holding brief for Jawed Farooqui for Respondent.

2009 P T D 1791

[Karachi High Court]

Before Muhammad Athar Saeed and Syed Mahmood Alam Rizvi, JJ

Messrs AMERICAN EXPRESS BANK LIMITED, KARACHI

Versus

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

I.T.R. No. 179 of 1997, decided on 22nd January, 2009.

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

---S. 136---Reference to High Court-Power to reframe the question---High Court has the power to reframe the question, which has not been properly framed.

Commissioner of Income Tax, Central Zone "A" Karachi v. Messrs Karachi Electric Supply Corporation Ltd. 1991 PTD 869 and The Commissioner of Income Tax Karachi v. Messrs Pakistan Refinery Ltd., Karachi 1984 PTD 337 ref.

(b) Income Tax Rules, 1982---

---R. 20---Avoidance of Double Taxation Agreement between Pakistan and United States of America----Deduction of Head Office expenditure in the case of non-resident---Head Office expenses will be dealt with under the provisions of the Treaty between United States of America and Pakistan and not under the provisions, of Income Tax Ordinance, 1979.

Messrs N.C.R. Corporation v. Deputy Commissioner of Income Tax and others I.T.A. No.191 of 1997 fol.

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

---S. 18---Admissible deduction---Penal interest charged by State Bank of Pakistan from a Banking Company, for bursting the credit ceilings under S. 25, Banking Companies Ordinance, 1962 was admissible.

C.I.T. v. Premier Bank Ltd. 1999 SCMR 1213 fol.

Dr. Farogh Naseem for Applicant.

Muhammad Aqeel Qureshi holding brief for Jawed Farooqui for Respondent.

2009 PTD 1902

[Karachi High Court]

Before Muharram G. Baloch, J

IBRAHIM FIBRES LTD. through General Manager (Imports)

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and another

Suit No. 880 of 2001, decided on 16th July, 2009.

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

----S. 30---Protection of Economic Reforms Act (XII of 1992), S.6---S.R.O. No.369(I)/2000, dated 17-6-2000 (as amended by S.R.O.(sic)(I)/2001, dated 29-1-2001)--Customs General Order 12 of 1981, dated 14-9-1981---Specific Relief Act (I of 1877), Ss. 42, 54 & 55---Suit for declaration, mandatory and permanent injunction Maintainability---Suit which was in respect of seeking declaration and other reliefs for the illegal order or issuance of S.R.O. and controversies related thereto could only be decided by way of inquiry and evidence, therefore, Civil Court had the jurisdiction to adjudicate upon such suit---Plea of the department that suit was not maintainable in law was repelled.

K.G. Traders v. Deputy Collector, of Customs PLD 1997 Karachi 541; High Court Appeals Nos. 31, 32 and 33 of 2000 and judgment passed in Suit No.376 of, 2002 rel.

Collector of Customs, Lahore v. Universal Gateway Trading Corporation 2005 SCMR 37; Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881 and The Central Board of Revenue Islamabad v. Sheikh Spinning Mills Ltd., 1999 SCMR 1442 distinguished.

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

---S. 30---Protection of Economic Reforms Act (XII of 1992),, S.6---S.R.O. No.362(I)/2000, dated 17-6-2000 (as amended by S.R.O. (sic)(I)/2001, dated 29-1-2001)---S.R.O.439(I)/2001, dated 18-6-2001---Customs General Order No.12 of 1981, dated 14-9-1981---Constitution of Pakistan (1973), Art.77---Partial shipment of the machinery was made before the amendment of S. R.O.362(I)/2000, dated 17-6-2000, therefore, by virtue of the Protection of Economic Reforms Act, 1992 read with Customs General Order No.12 of 1981. and so also Art.77 of the Constitution, the importer had been protected and had acquired the vested right to clear the consignment in terms of S.R.O.369(I)/2000, dated 17-6-2000 as amended vide S.R.O.I/2000, dated 29-1-2001---Promissory estoppel shall operate against the department as notification in shape of S.R.O.439(I)/2001, dated 18-6-2001 could not override the rights which had been acquired by the importer---Notification S.R.O.439(I)/2001, dated 18-6-2001 was not in accordance with law---Principles.

Celanese Pakistan Ltd. v. Government of Pakistan and others 2002 PTD 2874; Gatron and Bhadelia Industries Ltd. v. Government of Pakistan 1999 MLD 2994.(Kar.); Lucky Cement Ltd. v. The Central Board of Revenue PLD 2001 Pesh. 07; Fecto Belarus Tractors Ltd. v. Pakistan through Ministry of Finance Economic Affairs and another SBLR 2001 SC 109 and Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652 rel.

Messrs Jeewajee (Pvt.) Ltd. v. Federation of Pakistan 2006 PTD 518; Anoud Power Generation Ltd. v. Federation of Pakistan' PLD 2001 SC 340; 1992 SCMR 442; Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881; Collector of Customs Faisalabad v. Shamsul Anwar Khan 2006 SCMR 1382; Zaman Cement Company (Pvt.) Ltd. v. Central Board of Revenue 2002 SCMR 312; Cyanamid Pakistan Ltd. v. Collector of Customs (Appraisement) 2002 CLC 1764; Alhamd Textile Mills Ltd. Pakistan through Secretary, Ministry of Finance and others 2001 SCMR 556 and M.Y. Electronics Industries v. Government of Pakistan 1998 SCMR 1404 distinguished.

Khawaja Shamsul Islam for Plaintiff.

Raja Muhammad Iqbal for Defendants.

Date of hearing: 13th, 14th, 19th and 22nd May, 2009.

2009 P T D 2213

[Karachi]

Before Mujeebullah Siddiqui and Khilji Aril Hussain, JJ

YAZDANI ENGINEERING INDUSTRY

Versus

APPELLATE TRIBUNAL and another

Special Customs Appeal No.214 of 2004, decided on 23rd August, 2005.

Customs Act (IV of 1969)---

----Ss.45(2) & 196---Permission to correct error in import manifest---Appeal to High Court---Name of the appellant was shown in the invoices bill of lading and import permit, however, in the manifest prepared by shipping agent, name other than the appellant was written---On discovery of that mistake, appellant instructed the shipping agent to submit application under S.45(2) of Customs Act, 1969 seeking amendment---Request for amendment was not allowed and the Appellate Tribunal also upheld the refusal of amendment---Appellant had filed appeal to High Court---Validity---In all import documents name of the, appellant was written---Insertion of name of the company other than the appellant was a result of mistake, which fell within the purview of S.45(2) of Customs Act, 1969---Appellate Tribunal was not justified to refuse to allow amendment sought for by the appellant---Appeal was disposed of, copy of the judgment of High Court was sent to the Appellate Tribunal which would modify its order in accordance with the finding of the High Court.

Aiva International v. Assistant Collector of Customs 2004 PTD 997 ref.

Ch. Muhammad Iqbal for the Appellant.

Ahmed Khan Bugti for the Respondents.

2009 P T D 1

[Lahore High Court]

Before Mian Saqib Nisar and Khawaja Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX, GUJRANWALA

Versus

Messrs ALI BRICKS COMPANY, JALALPUR BHATTIAN DISTRICT, HAFIZABAD

P.T.R. Nos. 17, 18, 19, 25, 31, 35, 36, 46, 47, 63, 64, 65, 66, 67, 77, 78, 98, 99, 106, 107, 108, 133, 134, 135, 136, 147, 148, 149, 150, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 206, 207, 226, 227, 228, 229, 230, 231, 250, 252, 253, 260, 264, 265, 266, 267, 268, 274, 316, 317, 318, 320, 323, 325, 327, 330, 331, 333, 334, 335, 338, 339, 348, 384, 399, 400, 409, 432, 433 and 438 of 2008, heard on 23rd September, 2008.

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

----S. 122(5A) [as inserted by Finance Act (I of 2003)]---S.R.O.633(I)/2002 dated 14-9-2002---Notices issued by Income Tax Office in respect of assessments finalized earlier on the basis of provisions of law added by S.R.O. 633(I)/2002 dated 14-9-2002 were void and illegal, same having no sanctity of law being on the basis of a legislation, which was against the law itself and were liable to cancellation.

Kashmir Edible Oils Limited and other's case 2006 SCMR 109 fol.

Constitution Petition No.7788 of 2004 ref.

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

----S. 122(5A) [as inserted by Finance Act (I of 2003)]---Provision of S.122(5A), Income Tax Ordinance, 2001 has not specifically been made retrospective.

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

----S. 122(5A)---Provision of S.122(5A) inserted with effect from 1-7-2003 is not applicable to the assessments finalized before 1-7-2003 because subsection (5A) of S.122 has not been given retrospective effect and therefore, the assessments finalized before 1-7-2003 cannot be reopened/revised/amended in exercise of jurisdiction under S.122(5) of the Income Tax Ordinance, 2001.

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

----S. 122(5)---Income Tax Ordinance (XXXI of 1979), S.65---Amendment of assessment---All the pending matters at the commencement of Income Tax Ordinance, 2001 are required to be decided in accordance with the provision contained in Income Tax Ordinance, 1979 (repealed), but by an Income Tax Authority competent under the Income Tax Ordinance, 2001---Principles.

Commissioner, Sindh Employees Social Security Institution and another v. Ms. E.M. Oil Mills and Industries Limited 2002 SCMR 39; Kashmir Edible Oil Limited's case 2005 PTD 1621; Monnoo Industries Ltd. v. Commissioner Income Tax 2001 84 Tax 26; Fauji Oil Terminal v. CIT 2006 PTD 734 and 2004 PTD 1173 ref.

(e) Words and phrases---

----Pending---Connotation---Pending includes all such issues in which lis has been started.

Messrs Bahria Oil Mills, Vehari v. Commissioner of Income Tax, Zone, Multan 2006 PTD 2421 ref.

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

----S.122(5) [as substituted by Finance Act (I of 2003] & Preamble---Amendment of assessment---Construction of S.122(5), Income Tax Ordinance, 2001---Income Tax Ordinance, 2001, which came into existence on 1-7-2002 applied in respect of tax year that starts from the said date---Provision of S.122(5) of the Income Tax Ordinance, 2001 as existed on that date neither covered the assessments finalized under Income Tax Ordinance, 1979 (repealed) nor the operation of law was made retrospective in various corresponding provisions---Use of new term tax year' in S.122(5) as against earlier phraseassessment' and `tax payer' as against the word assessee also had further tilted the issue in favour of the tax payer and against the Revenue.

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

----Ss. 122(1)(2) & 2(66)---Amendment of assessment---Application of S.122, Income Tax Ordinance, 2001 on finalized assessments---Scope---Section 122(1) of the Ordinance starts with the words "subject to this section" while in subsection (2) it restricts the said amendment only to the assessments, which have been issued on the "taxpayer"---`Tax payer' is a new construction and as per S.2(66) of the Income Tax Ordinance, 2001, means "any person who derives an amount chargeable to tax under this Ordinance"---Term "this Ordinance" used in the definition cannot mean and include any enactment beyond the Income Tax Ordinance, CIT Central Zone, Lahore v. National Security Insurance C. Ltd., Lahore 2001 PTD 814 ref.

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

----S. 122(1) [as amended by Finance Act (I of 2003)]---Words "or issued under Ss.59, 59-A, 62, 63 or 65 of the repealed Ordinance" inserted by Finance Ordinance, 2003 w.e.f. 1-7-2003 in S.122(1) of the Income Tax Ordinance, 2001 cannot have implied effect of retrospectivity, hence its application on the assessments finalized under Income Tax Ordinance, 1979 is not legal.

CIT Central Zone, Lahore v. National Security Insurance C. Ltd., Lahore 2001 PTD 814 ref.

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

----S. 122(5)---S.R.O. 633(I)/2002 dated 14-9-2002---Words "as the repealed Ordinance" added in S.122(5) of Income Tax Ordinance, 2001 and matching amendments in said section through S.R.O. 633(I)/2002 dated 14-9-2002 were illegal and non-existent now---Term "this Ordinance" cannot be extended to include any enactment beyond the Income Tax Ordinance, 2001.

(j) Interpretation of statutes---

----Taxing statute---Language of law should be applied in its natural meanings---Principles.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B. 69 ref.

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

----S. 122 [as amended by Finance Act (I of 2003)]---Interpretation, scope and application of S. 122, Income Tax Ordinance, 2001 (as' amended).

Kashmir Edible Oils Limited and other's case 2006 SCMR 109; Constitution Petition No.7788 of 2004; Commissioner, Sindh Employees Social Security Institution and another v. Ms. E.M. Oil Mills and Industries Limited 2002 SCMR 39; Kashmir Endible Oil Limited's case 2005 PTD 1621, Monnoo Industries Ltd. v. Commissioner Income Tax 2001 84 Tax 26, Fauji Oil Terminal v. CIT 2006 PTD 734; 2004 PTD 1173; Messrs Bahria Oil Mills, Vehari v. Commissioner of Income Tax, Zone, Multan 2006 PTD 2421; CIT Central Zone, Lahore v. National Security Insurance C. Ltd., Lahore 2001 PTD 814; Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B. 69 and Commissioner of Income Tax/Wealth Tax, Zone-C (Legal), Lahore v. Messrs Idrees Cloth House, Lahore 2008 PTD 1420 ref.

Shahid Jamil Khan, Faiz-ur-Rehman, Sajjad Ali Jafri, Muhammad Iqbal Vehniwal, Imdad Ali Nekokara, Ch. Zakir Hussain, Dhothar, Amjad Hussain Malik, Mian Yousaf Umar and" Muhammad Nawaz Waseer for Petitioner.

Nemo for Respondents.

Date of hearing: 23rd September, 2008.

2009 P T D 20

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs HONDA FORT PVT. LTD. through Director

Versus

COMMISSIONER OF INCOME TAX and another

Writ Petitions Nos. 4114 and 4115 of 2008, decided on 15th October, 2008.

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

----S. 120(1)(A) [as inserted in 2005]---Provision of S. 120(1)(A) having been inserted in 2005, cannot be considered as retrospective.

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

----S. 177(7)-Audit---Provision of S.177(7), Income Tax Ordinance, 2001 deprives the department from issuance of notices in respect of the earlier years after having proceedings in respect of the subsequent year.

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

----S. 177---Constitution of Pakistan (1973), Art.199---Constitutional petition---Maintainability---Audit---Initiation of the proceedings against notice under S.177 of the Income Tax Ordinance, 2001 was not enough for invocation of constitutional jurisdiction under Art.199 of the Constitution.

I.C.A. No.125 of 2007, decided on 10-9-2008 fol.

Zulifqar Khan for Petitioner.

Muhammad Ilyas Khan for Respondents.

2009 P T D 41

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs BISMA TEXTILE MILLS LTD. through Chief Executive

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division/Chairman F.B.R. and 2 others

Writ Petition No. 4200 of 2008, heard on 10th October, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S. 177---Constitution of Pakistan (1973), Art.199---C.B.R. Circular No.1(1)S(ITAS)/2004---Constitutional petition---Audit---Cases which have been revised under C.B.R. Circular No.1(1)S(ITAS)/2004 or otherwise if the return has been revised and payment has been made by the assessee, no further action shall be taken against him---Assessee, in the present case, having revised its return under the C.B.R. Circular, it was specifically covered by the same---No proceedings, therefore, could be initiated for auditing the assessee under S.177, Income Tax Ordinance, 2001---Proceedings initiated against the assessee were declared to be as against law and were therefore, cancelled.

Writ Petition No.9266 of 2004 fol.

Ch. Muhammad Hussain and others v. Commissioner of Income Tax 2005 PTD 152 ref

Sajjad Ijaz Hotiana for Petitioner.

Mian Yusuf Umar for Respondent.

Date of hearing: 10th October, 2008.

2009 P T D 75

[Lahore High Court]

Before Mian Saqib Nisar and Khawaja Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX

Versus

METAL FORMING LTD.

P.T.R. Nos.102 and 104 of 2004, decided on 8th October, 2008.

Income Tax Ordinance (XXXI of 1979)---

----S. 136(2)---Reference to High Court under S.136(2)---Income Tax Ordinance, 1979---Precondition---After a question has been proposed by the Income Tax Appellate Tribunal. directly, there is no legal sanction behind filing another reference application---Precondition to file a reference under S.136(2), Income Tax Ordinance, 1979 is refusal to refer the question by the Tribunal---Income Tax Tribunal, in the present case, had not refused to send the case, it had rather approved that a question of law did arise, however not the one proposed by the department---Department had still option to file another reference which, on the face of it, was misconceived--In fact after refusal by the Income Tax Appellate Tribunal, the aggrieved party may, apply to the High Court and High Court may if it was not satisfied with the correctness of the order of the Tribunal, frame a question of law which meant that after rejection by the Tribunal, appellant may apply and propose but the question was to be framed by the High Court---High Court besides refusing same, may also reframe some other question if it was so minded.

CIT v. Muhammad Arshad 2002 PCTLR 882 fol.

Shahid Jamil Khan for Petitioner.

2009 P T D 157

[Lahore High Court]

Before Syed Hamid Ali Shah and Malik Saeed Ejaz, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs PAK ARAB FERTILIZER (PVT.) LTD. MULTAN

T.R. Nos. 3, 4, 5, 6, 7 & 8 of 2008, heard on 15th April, 2008.

Income Tax Ordinance (XXXI of 1979)---

----Ss.65, 62, 80-C & 80-D---Reopening of case---Definite Information---Additional assessment---Additional assessment was formulated and the claim of the assessee, having relationship of "seller and purchaser" between the two companies (one manufacturing and the other marketing company) was rejected---Revenue had reopened the case of the assessee (manufacturing company) for the reasons that Ministry of Production had made a representation to the Central Board of Revenue for exemption of the marketing company from levy of turn-over tax under S.80-D, Income Tax Ordinance, 1979 on the grounds that marketing company had obtained exemption from levy of tax under S.80-D of the Income Tax Ordinance, 1979 on the point that it was not selling any product on profit and that marketing company was operating on "no profit no loss basis" making the sales on behalf of its associated companies which were engaged in the manufacturing; that Central Board of Revenue granted exemption to the marketing company from charging minimum tax under S.80-D on its turn-over that department considering this to be "definite information" to invoke S.65 of the Ordinance held that relationship of manufacturing company and marketing company was not a "seller and purchaser" but of a "principal and agent" and thus show cause notice was issued under S.62 of the Ordinance and assessment order was passed accordingly---Assessment under Ss.62/65, Income Tax Ordinance, 1979 was set aside in appeal and the appeal before the Appellate Tribunal also met the fate of dismissal---Validity---Held, Income Tax Appellate Tribunal had rightly found that provisions of S.80-C of the Income Tax Ordinance, 1979 were attracted to the facts of the present case and the reopening of the assessment for completion of additional assessment under Ss.62/65, Income Tax Ordinance, 1979 was not legally justified---Principles.

Central Insurance Company v. Central Board of Revenue 1993 PTD 766 SC; Messrs Pak-Saudi Fertilizer Limited v. Commissioner of Income Tax and others 2005 PTD 1607 and Ahmad Khan v. Rasul Shah and other PLD 1975 SC 311 ref.

Syed Khalid Javed Bukhari for Appellant.

Nemo for Respondent.

Date of hearing: 15th April, 2008.

2009 P T D 201

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs SAFE WAY through Proprietor

Versus

DEPUTY COLLECTOR CUSTOMS, (APPRAISEMENT GROUP-I), LAHORE and others

W.P. No.9155 of 2008, decided on 30th July, 2008.

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

----S. 32---Untrue statement, error etc.---If the element of mens rea was not apparent in the case, mentioning of different head, was not necessarily to cheat.

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

----S. 32---Untrue statement, error etc---Simple mentioning of a head when there were circumstances warranting different possibilities, would not amount to intentional or dishonest act.

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

---S. 32---Untrue statement, error-etc.---Classification of actual PCT---Case being that of one item, further investigation could be continued with its sample and seizure of the consignment was not justified.

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

----S. 32---Constitution of Pakistan (1973), Art.199---Constitutional petition---Untrue statement, error etc.----If the goods imported were appraised and assessed by the Customs authorities and duties/taxes were duly deposited, the Customs authorities were not entitled to retain them although the department was at liberty to take appropriate action in accordance with law if they had adequate material for initiation of proceedings under S.32, Customs Act, 1969.

Messrs Zeb Traders through Proprietor v. Federation of Pakistan 2004 PTD 369 fol.

Mian Abdul Ghaffar for Petitioner.

Ehsanullah Cheema, Advocate/Legal Advisor for Respondents.

2009 P T D 224

[Lahore High Court]

Before Syed Hamid Ali Shah and Malik Saeed Ejaz, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, MULTAN ZONE, MULTAN

Versus

MUHAMMAD ZULFIQAR

T.R. No.1 of 2008, decided on 14th April, 2008.

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

----S. 62---C.B.R. Letter C. No. 1(49)-II/76 dated 16-9-1976---C.B.R. Letter C. No.1(23), IT-1/77 dated 1-1-1977---No account case---Rejection of declared version---Notice to assessee for estimated income--Necessity---Held, although notice under S.62, Income Tax Ordinance, 1979 was not mandatory in "no account case", yet Deputy Commissioner of Income Tax was bound to hear the assessee and confront him on his proposed estimate---Principles.

C.I.T. v. Sher Muhammad Tax Ref. 3 of 2006; Seth Gurmukh Singh and another v. Commissioner of Income Tax Punjab (1994) 12 ITR 393 H.C. Lahore; Gunda Subbayya v. C.I.T. Madras (1939) 7 ITR 21 and Commissioner of Income Tax v. Khemchand Ramdas (1940) 8 ITR 159 Lah. ref.

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

----S. 62---General Clauses Act (X of 1897), S.24-A--No account case---Rejection of declared version---Notice to assessee for estimated income---Necessity----Held, power to pass an order or give any direction conferred on authority, has to be exercised reasonably, fairly, justly and for the advancement of the purpose of the relevant enactment---Order passed against an assessee, detrimental to his interest without providing him an opportunity of presenting his case can, in no manner be termed as having passed fairly and justly---Income Tax Appellate Tribunal, in circumstances, was justified in holding that specific notice under S.62, Income Tax Ordinance, 1979 was to be issued in no account case---Principles.

C.I.T. v. Sher Muhammad Tax Ref. 3 of 2006; Seth Gurmukh Singh and another v. Commissioner of Income Tax Punjab (1944) 12 ITR 393 H.C. Lah.; Gunda Subbayya v. C.I.T. Madras (1939) 7 ITR 21 and Commissioner of Income Tax v. Khemchand Ramdas (1940) 8 ITR 159 ref.

Ch. Muhammad Asghar Saroha for Petitioner.

2009 P T D 244

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs AUTOCRAFT through Proprietor

Versus

DEPUTY COLLECTOR OF CUSTOMS and 6 others

Writ Petition No. 7395 of 2008, decided on 11th November, 2008.

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

----S. 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Where the value declared by the importer was less than the value of the raw material used in the product, the importer having come to the High Court with unclean hands, was not entitled to any favour.

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

----S. 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Provisional valuation---Such valuation can neither deprive the department nor the assessee for adopting lower or a higher value---No estoppel was available in tax proceedings especially when the importer had made the payment under protest for getting his goods released as an interim arrangement---Provisional settlement is subject to the final decision.

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

----S. 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Rejection of declared value by the customs department---Scope---Principles.

The department is at liberty to reject the declared value where it has got reason to believe that the same is not correctly declared. However, it cannot proceed beyond the prescribed procedure under S.25 of the Act. It may be true that the section 25(10), after amendment therein, has brought slight change in procedure, but it cannot be accepted that it has granted any unlimited or unbridled powers to the assessing authorities for adopting the value. Moreover, the valuation ruling, which has been held to be an unlawful, cannot be applied for determining the value of any consignment. Department was directed to. determine the value as per law and rules after issuance of notices to the importer within one month from the communication of present order to him.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Petitioner.

Ehsan Ullah Cheema with Ahmad Kamal, Deputy Collector.

2009 P T D 246

[Lahore High Court]

Before Ali Akbar Qureshi, J

Messrs ZIBTEC (PVT.) LTD through Director and another

Versus

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTOR and 3 others

Writ Petition No. 5368 of 2008, decided on 16th September, 2008.

Customs Act (IV of 1969)---

----S. 195---Power of Boards or Collector to pass certain orders---Scope---Order passed by Principal Appraiser (Customs) can only be re-opened by Collector of Customs while exercising jurisdiction under 5.195, Customs Act, 1969---Collector of Customs can only revise the order, if any illegality or irregularity is committed by Principal Appraiser or its subordinate---Any such order by Deputy Collector of Customs against the order of Principal Appraiser was without jurisdiction, illegal and without lawful authority qua the rights of the importer.

Mian Abdul Ghaffar for Petitioner.

Miss Kausar Parveen for Respondents.

2009 P T D 263

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs GENUINE IMPORT IMPEX through Proprietor

Versus

DEPUTY COLLECTOR CUSTOMS, (APPRAISEMENT GROUP-III), LAHORE and 4 others

Writ Petition No.6804 of 2008, decided on 7th August, 2008.

Customs Act (IV of 1969)---

----Ss. 25, 25A & 25-I---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Third reappraisal of goods by customs department and following a valuation ruling which was set aside by High Court---High Court recorded its displeasure and made observations on the issue and cancelled the appraisement order on the basis of valuation ruling with remarks that department was allowed to reappraise the same in strict compliance of law and procedure provided in S.25, Customs Act, 1969.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Petitioner.

Ehsan Ullah Cheema for Respondents.

2009 P T D 281

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs SUNNY TRADERS through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division (FBR), Islamabad and 4 others

Writ Petition No. 15822 of 2008, heard on 24th November, 2008.

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

----Ss. 25-A, 25 & 32---Constitution of Pakistan (1973), Art.199---Constitutional petition---Valuation Ruling---Scope---Valuation Ruling can not be considered as a valid document for cancellation of an appraised assessment---Valuation Ruling, if issued by an authority which did not figure anywhere in S.25-A the issuance, of same was illegal, void and of no legal effect.

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

----S. 32---Scope and extent of application of S.32.

Section 32, Customs Act, 1969 has been inserted to correct an error, modify an assessment and to recover the refund issued inadvertently. This obviously means review or correction of the error in a finalized matter. Once a consignment is out of charge after due consideration of relevant facts it becomes a past and closed transaction to the extent of its value etc. The same, therefore', should not be invoked only on the basis of the mere estimate, gosips, personal whims or feelings that the value could have been enhanced or it could fetch more taxes etc. The opening of an appraisement for the purposes of re-valuation of an earlier estimate or adopted figure would require reason to believe' and notreasons to suspect'. For example, if one subsequently, finds that the description''-of the imported goods was different, H. S. Code applied was wrong as a result of mis-representing or the number of items mentioned in GD and accepted by the Department incorrectly, etc., nobody will have any objection on the application of provisions of section 32. However, if one feels that more revenue could have been generated and thus invokes the provisions of section 32, said course was not justified. The valuation ruling cannot be considered a piece of evidence unless the same is based upon sound footings. However, on the basis of a valuation ruling, the provisions of section 32 cannot be invoked.

Writ Petition No. 8400 of 2008 fol.

2006 PTD 2237 ref.

Mian Abdul Ghaffar for Petitioner.

Sarfraz Ahmad Cheema for Respondent.

Date of hearing: 24th November, 2008.

2009 P T D 316

[Lahore High Court]

Before Syed Hamid Ali Shah and S. Ali Hassan Rizvi, JJ

FAUJI KABIRWALA POWER COMPANY

Versus

COLLECTOR OF CUSTOMS AND SALES TAX

S.T.R. Nos.20 of 2007 and 2 of 2008, heard on 9th April, 2008.

Sales Tax Act (VII of 1990)---

----S. 2(41)---Special Procedure for Collection and Payment of Sales Tax (Electric Power) Rules, 2000, Rr.2(1)(h) & 4---Electricity produced by the generation company, supplied for self-consumption and utilized in non-business use, will be taxable activity and its supply for self-consumption will be subject to levy of Sales Tax.

Haji Sultan Ahmed v. Chairman, C.B.R. Islamabad and 5 others 2008 PTD 103; Sheikhoo Sugar Mills Ltd. v. Government of Pakistan and others 2001 SCMR 1376 = 2001 PTD 2097 and Karachi Development Authority v. Central Board of Revenue and another 2005 PTD 2131 ref.

Hafiz Muhammad Idrees for Petitioner.

Khawaja Noor Mustafa for Respondent.

Date of hearing: 9th April, 2008.

2009 P T D 328

[Lahore High Court]

Before Nasim Sikandar, J

Messrs MAJID & CO. through Proprietor

Versus

DISTRICT MANAGER, PIA and 4 others

Writ Petition No. 1260 of 2008, decided on 1st December, 2008.

Customs Act (IV of 1969)---

----S. 203---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Charging full demurrage/storage charges---Case of the petitioner was that despite having been issued the requisite delay and detention certificate under the Customs Act, 1969, authorities were insisting on charging full demurrage/storage charges---Contention of the petitioner was that where a delay and detention certificate was issued by the Customs Authorities, the demurrage was to be charged at minimum rate---Constitutional petition, in circumstances was allowed and authorities were directed by High Court to charge the demurrage/storage charges at the minimum tariff rate.

Aftab Ahmed Saeed v. Federation of Pakistan and others 1993 CLC 2022 and Messrs Adam Holding Ltd. v. A.C. Customs 1994 CLC 1198 ref.

Mian Abdul Ghaffar for Petitioner.

Ms. Kausar Parveen for Respondents Nos. 3 and 4.

2009 P T D 431

[Lahore High Court]

Before Mian Saqib Nisar and Hafiz Tariq Nasim, JJ

Messrs GUJRANWALA STEEL FURNACE, SIALKOT through Authorized Representative

Versus

CHAIRMAN, FEDERAL BOARD OF REVENUE, ISLAMABAD and 4 others---Respondents

I.C.As. Nos. 489, 437, 438, 440 to 443, 463 to 466 and 474 to 485 of 2008, decided on 29th January, 2009.

(a) Interpretation of statutes---

----Fiscal statute---Charging provision of a fiscal statute must be strictly construed and applied.

(b) Taxation---

----No tax can be imposed, levied and recovered beyond the scope, ambit and the parameters of the charging provisions of a particular fiscal statute.

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

----Ss.3, 2(46) & 7---Taxable supply',taxable activity' and value of the supply'---Provision of S.3, Sales Tax Act, 1990 enables the charge of sales tax on the "taxable supply" made by a registered person in the course of furtherance of any "taxable activity" carried on by him upon the "value of supply"---Melting and the conversion of the scrap into ingots/billet is a "taxable activity" on, part of the melters and when such product is supplied, it falls within the purview oftaxable supply' and there is no reason to give any other meaning to the value of supply' as defined in S.2(46) of Sales Tax Act, 1990---Notwithstanding the sales, etc, of the scrap and that of manufactured item by the registered person as an independent taxable activity, one fails to comprehend the argument that on account of the, above, the tax should be charged from them only on the basis of value addition---No provision of the Sales Tax Act, 1990 exists on the basis of which it can be held that if the sales tax has been paid on the raw material of whatever nature it may be the sales tax on the final/finished product shall be minus the value of the material, meaning thereby that the tax shall be restricted tovalue addition' only---Procedure for determining tax liability' is provided by S.7 of the Act, which clearly specifies that a registered person shall be entitled to deduct input tax from output tax, that is due from him in respect of the tax period---Neither S.7, Sales Tax Act, 1990 nor any other provision of the Act allows that in case any taxable supply is charged at zero rate and is used as a raw material for another taxable supply, the value of the later supply shall be restricted to the value addition only--Zero rated tax cannot be equated to the actual payment of tax, but is notional in nature---Present case thus does not fall within the purview of S.7A of Sales Tax Act, 1990 which envisages the concept ofvalue addition'---Contention that since the scrap is generated out of a finished taxable supply, upon which the sales tax already stands paid, therefore, to impose tax on the product manufactured from it shall amount double taxation, does not fall within legal concept---Double taxation means, "if the tax has already been charged on a subject, it cannot be subjected to tax again"---Scrap itself being independent tax supply, irrespective as to how it generates, when no tax has been paid upon it, it cannot be considered to be a case of a double taxation.

(d) Sales Tax Special Producer Rules, 2007---

----R.58MA [as inserted by S.R.O. 862(I)/2008 dated 20-8-2008]---Option to pay sales tax on ad valorem basis---Impact of R.58MA, Sales Tax Special Procedure Rules, 2007 from the aspect of decision of Supreme Court in Civil Appeals Nos.120 to 257 and 289 of 2008 dated 27-5-2008 stated.

Kh. Saeed-uz-Zafar and Mian Mehmood Rasheed for Appellant.

Izhar ul Haq Sheikh, Ahmer Bilal Soofi and Ms. Kausar Parveen for Respondents.

Date of hearing: 14th January, 2009.

2009 P T D 467

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs S.T. ENTERPRISES through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, (Revenue Division/FBR), Islamabad and 4 others

Writ Petitions Nos.15767 to 15776 of 2008, heard 24th November, 2008.

Customs Act (IV of 1969)---

----S. 32---Object, requirements, interpretation and scope of application of S.32, Customs Act, 1969---Phrases "reason to believe" and "material particular"-Connotation.

Section 32 Customs Act, 1969 applied where someone makes or causes to make or signs or causes to deliver to an officer of customs any declaration, notice, certificate and other documents whatsoever. This obviously means that it only speaks of a document which has been signed by him or which he has caused to sign or makes any statement to any question which he has reason to believe that such document and statement is false in any material particular, he shall be guilty of an offence under this section.

Section 32 is a penal clause. It completely speaks of a declaration, notice, certificate or other document or a statement given by the importer on the basis of which a consignment is released. In the show-cause notice when the Deputy Collector speaks of the appraisement it only states that some importers with the active connivance of their clearing agents are evading the government dues by getting their items assessed at a very low rate.

After the assessment has become out of charge invoking the provision of section 32 on the basis of another ruling apparently does not find any support from the language of S.32.

Section 32 has been inserted to correct an error, modify an assessment and to recover the refund issued inadvertently. This obviously means review or correction of the error in a finalized matter. Once a consignment is out of charge after due consideration of relevant facts it becomes a past and closed transaction to the extent of its value etc. The same, therefore, should not be invoked only on the basis of the mere estimate gosips, personal whims or feelings that the value could have been enhanced or it could fetch more taxes etc. The opening of an appraisement for the purposes of re-valuation of an earlier estimate or adopted figure would require reason to believe' and notreasons to suspect'. For example, if one subsequently, finds that the description of the imported goods was different, H.S. Code applied was wrong as a result of misrepresenting or the number of items mentioned in GD and accepted by the Department were incorrect etc, nobody will have any objection on the application of provisions of section 32. However, if one feels that more revenue could have been generated and thus invokes the provision of section 32 such understanding was not agreeable. The valuation ruling cannot be considered a piece of evidence unless the same is based upon sound footings. However, on the basis of a valuation ruling, the provisions of section 32 cannot be invoked.

The plain reading of S.32(1)(2)(3) of the Customs Act, 1969, in the light of the golden principle of remaining within the language of law, gives a very clear impression. The provision applies on a person who, in connection with any matter of customs, makes or signs or causes to be made or sign, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other document in any form or gives a statement in reply to a question before the customs authorities knowingly and intentionally having the reasons to believe that such document or statement is false in any material particular, he shall be guilty of an offence under this section.

Moreover, the language of this section can only be applied on the basis of the document delivered, furnished by the importer or the statement given by him before the customs authorities. Whether a valuation advice in any form can be considered as a document furnished by him or a reply in answer to a query raised by the customs authorities by the importer, does not need much to discuss. One may argue that the said valuation ruling having been prepared under section 25 by virtue of section 25-A subsection (2) is an applicable customs value for assessment of the relevant imported and exported goods, but, whether the same can be used subsequently after the consignment is out of charge by applying section 32 apparently does not find support from the language of S.32(1)(2)(3) of the Customs Act, 1969.

Section 32 does not speak of ignorance of the applicable value at all. It is totally in relation to the document furnished by the importer as well as the statement given by him. The matter does not end there. Section 32(1)(b) further adds that knowingly or having reason to believe that such document or statement is false in any material particular. These words make the requirements as more stringent and difficult to apply contrary to the said requirement. The show-cause notice very clearly indicates that neither any effort has been made to determine falsehood of the documents nor any of the statements given by the importer is proved to be as falsely given.

Still further, the said subsection (b) of section 32(1) through addition of phrase "in any material particular" totally shuts the doors of gosips, estimate, surmises or apprehensions. The phrase "reason to believe" and later "in any material particular" cannot give room to any vague estimate howsoever strong it may be. It only applies if the documents are furnished or the statements have been given knowingly that the same are wrong and incorrect.

Phrase "material particular" again is very restrictive. The term "material" used here Means pertaining to the subject matter' whileparticular' is synonymous to accurate, appropriate, definite, detailed, distinct, exact etc. The phrase, therefore, can only be used where definite and positive belief can be established with regard to the submission of the incorrect documents or wrong statement.

Before invoking the provision of section 32 the prime responsibility of the competent authority is to establish that the document furnished and the statement given by the importer or his representative is wrong and that it was well within his knowledge. The application of section 32 directly without establishing incorrectness of the document available on the record with evidence is beyond the scope and power of the concerned authorities.

Valuation ruling especially in the manner that they are being prepared are still estimates and if the same are not followed at the time of earlier appraisement, it cannot be used against an importer which has already appraised and has been made out of charge by the customs authorities.

Writ Petition No. 8400 of 2008 decided on 28-7-2008 fol.

Toyo International Motorcycle v. Federation of Pakistan through Secretary, (Revenue Division) Central Board of Revenue, Islamabad and 3 others 2008 PTD 1494; 2006 PTD 2237; Pooran Lal v. Director of Inspection (Investigation) (1974) 93 ITR 505 (S.C.) and L.R. Gupta v. Union of India (1992) 194 ITR 32 (Delhi) ref.

Mian Abdul Ghaffar for Appellant.

Ch. Muhammad Zafar Iqbal and Sarfraz Ahmad Cheema for Respondent.

2009 P T D 481

[Lahore High Court]

Before Nasim Sikandar and Khawaja Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX

Versus

J.D. SUGAR MILLS LTD.

Income Tax Appeals Nos. 643-644 of 2000 and P.T.R No.20 of 2001, decided on 10th April, 2008.

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

----Ss.50(4) & 80-C---Loan obtained from Modaraba Company through sale and lease back of assessee's machinery on paper without transfer of possession to company---Deduction of tax by company under S.50(4) of Income Tax Ordinance, 1979 while paying loan amount to assessee---Treatment of such tax as full and final discharge under S.80-C of Income Tax Ordinance, 1979 by Assessing Officer---Validity---Section 50(4) of Income Tax Ordinance, 1979 would not apply to such case for not being a contract with government or case of supply of service---Provision of S.80-C of the Ordinance, in case of recipient would apply only when he was liable to deduction of tax under S.50(4) thereof, but otherwise not---Neither such machinery fastened to earth could be called as goods nor there was transfer of possession by assessee to Modaraba Company---Such sale and lease back arrangement being a financial arrangement to secure loan transaction could not be considered as a supply---Relationship of Bank with borrower in similar transaction was on basis of providing security in terms of pledging of property, thus, there was neither a relationship of buyer and seller nor of demand and supply---if a person was not liable to charge of tax for an activity in normal course, then deduction of withholding tax and considering same as full and final discharge under presumptive tax regime would be nothing more than showing muscles by revenue authorities---Provision of S.50(4)(b)(i) as amended by Finance Ordinance, 1998 had redressed grievance of persons obtaining loan and cured inconvenience being caused to them by authorities by deduction of tax and treating same as tax payable on revenue transaction---Such amendment being remedial and curative would apply to all pending cases---Principles.

Black's Law Dictionary p.1439; Words and Phrases Vol. III of 1996; 2002 PTD (Trib.) 2210 and Kawther Grain (Pvt.) Ltd. v. Deputy Commissioner of Income Tax/Wealth Tax, Circle-I, Companies Zone, Gujranwala 1999 PTD 4028 ref.

(b) Interpretation of statutes---

----Particular connotation not defined in original law---Adopting ordinary dictionary meanings would always be safe.

Handbook of Legal Terms and Phrases Judicially Defined By M. Ilyas Khan rel.

(c) Interpretation of statutes---

----Remedial and curative legislation, unless made prospective in clear and unambiguous terms, would always be retrospective and would apply to pending cases---"Pending cases" defined.

Remedial and curative legislation, unless the law makes it prospective in clear and unambiguous terms, is always retrospective.

The only exception to the principle that curative and remedial legislature is retrospective, is that the same applies only on the pending cases. "Pending" would mean and include at any stage of the proceedings starting from Assessing Officer to the Supreme Court. This obviously means that it would not apply on the cases wherein the concerned persons have not challenged the action of the Revenue authorities before any higher forum and the same is not pending adjudication.

Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73; Messrs Army Welfare Sugar Mills Ltd. v. Federation 1992 SCMR 1652; Anound Power Generation v. Federation PTCL 2001 CL 277 SC and Government of Pakistan v. Village Devt. Organization 2005 Tax Review 75 SC rel.

(d) Income Tax---

----"Pending cases"---Definition.

Khadim Hussain Zahid for Appellant.

Siraj-ud-Din Khalid, Shahbaz Butt, Ijaz Ahmad Awan and M.M. Akram for Respondent.

Date of hearing: 14th February, 2008.

2009 P T D 497

[Lahore High Court]

Before Nasim Sikandar, J

Messrs LEATHERWARE (PVT.) LTD:, SIALKOT through Chief Executive

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 2 others

Writ Petition No. 3013 of 2001, decided on 14th November, 2008.

Finance Act (V of 1989)---

----S.7(2)(a) [as amended by S.12 of Finance Act (VII of 1990) and omitted by S.15 of Finance Act (IV of 1999) w.e.f. 1-7-1999]---General Clauses Act (X of 1897), S.6(c)---Levy of capital value tax on transfer of property measuring 11 Kanals through lease deed dated 27-7-1999---Omission of S.7(2)(b) of Finance Act, 1989 by Finance Act, 1999 w.e.f. 1-7-1999---Effect---Such omission would have effect of withdrawal of tax on property exceeding 250 square yards w.e.f. 1-7-1999---Charge of capital tax on transfer of property was well in field at the time of execution of such lease deed---Such omission would not obliterate liability of lessee to pay tax on property acquired through such lease deed.

J.M. Shelat v. Bhargave, C.A. Vaidialingam, K.S.M Hedge AIR 1970 SC 494 and .Abdul Azeez v. Commissioner of Income Tax Karnataka-I (1981) 128 ITR 547 ref.

Dad Muhammad v. Addl. District Judge-I, Quetta 1996 SCMR 1688 fol.

Jawahar A. Naqvi for Petitioner.

2009 P T D 519

[Lahore High Court]

Before Khawaja Farooq Saeed, J

FARHAN-UD-DIN

Versus

PAKISTAN TELECOMMUNICATION COMPANY LTD. through Chairman and 2 others

Writ Petition No. 978 of 2007, heard on 3rd November, 2008.

Federal Excise Act (VII of 2005)---

---S.7---Central Excise Act (I of 1944), S.3(1)---S.R.O. 617(I)/2000---S.R.O. 503(I)/2004---S.R.O.648(I)/2005, dated 1-7-2005---S.R.O. 550(I)/2006, dated 5-6-2006---Excise duty included in telephone bills for year, 2006-2007---Domestic consumer's liability to pay such excise duty---Scope---S.R.O.617(I)/2000 was superseded by S.R.O. 503(I)/2004, which was again superseded by S.R.O. 648(I)/2005, dated 1-7-2005 confirming such charge on telephone services---Federal Government in exercise of powers under S.7 of Federal Excise Act, 2005 through S.R.O.550(I)/2006, dated 5-6-2006 under its Heading 98.02 and in supersession of S.R.O. 648(I)/2005 levied such duty on telecommunication services---Excise duty levied through S.R.O. 550(I)/2006 would apply to all users of telecommunication services including domestic consumer.

Dr. Hameed Ahmad Rana for Petitioner.

Khawar Ikram Bhatti for Respondent No.2.

Zubair Khalid, Standing Counsel.

Date of hearing: 3rd November, 2008.

2009 PTD 536

[Lahore High Court]

Before Nasim Sikandar and Khawaja Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, FAISALABAD ZONE, FAISALABAD

Versus

MUHAMMAD SHARIF

P.T.R. 350 of 2003, decided on 10th November, 2008.

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

---Ss.133(4) & 136---Reference to High Court against order of Tribunal refusing to rectify claimed mistake---Not maintainable.

Messrs Hong Kong Chinese Restaurant Main Boulvevard Gulberg, Lahore v. Assistant Commissioner of Income Tax Circle 6 Lahore and another 2002 PTD 1878 and Commissioner of Income Tax Madras V.O. RM. SV Sevugan (1948) Vol. XVI ITR 59 rel.

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

----Ss.133(4) & 136---Application for rectification of original order of Tribunal, acceptance or rejection---Reference to High Court---Limitation---Rejection of such application could not give life to limitation provided in law for filing reference against original order of Tribunal---When Tribunal either accepted such application of itself suo motu amended its original order, then rectification order would become a part of original order---Reference could be filed against original order of Tribunal, if same gave rise to question of law.

Commissioner of Income Tax v. Ateed Riaz 2002 PTD 570 rel.

Nemo.

2009 P T D 538

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs RUPALI POLYESTER LTD., LAHORE through Director

Versus

COLLECTOR OF CENTRAL EXCISE AND SALES TAX, LAHORE and 6 others

Writ Petition No. 1459 of 2008, decided on 10th November, 2008.

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

----Ss. 36 & 47-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Reopening of assessment by authority on account of under valuation of product by assessee---Pendency of appeal in Supreme Court against acceptance of assessee's constitutional petition by High Court declaring reopening of assessment to be illegal---Assessee's application to Alternate Dispute Resolution Committee presuming pendency of appeal and passing of stay order therein by Supreme Court---Dismissal of appeal by Supreme Court before disposal of application by the Committee----Assessee's claim for refund of tax on the ground that after dismissal of appeal by Supreme Court, order of High Court attained finality; and that proceedings before such Committee were illegal---Validity---Jurisdiction of such Committee could be invoked during pendency of appeal---Neither department nor assessee was aware of dismissal of appeal by Supreme Court---Proceedings continued against assessee despite dismissal of appeal by Supreme Court were illegal---Proceedings initiated on a wrong legal presumption would become totally unlawful---After such order of High Court having attained finality on dismissal of appeal by Supreme Court, department was required to refund excess amount of tax to assessee---High Court directed department to do the needful within specified time.

Friendship Textile Mills (Pvt.) Ltd., and others v. Government of Balochistan through Secretary, Local Government and Rural Development, Quetta and others 1898 CLC 1767 and Khan Iftikhar Hussain Khan of Momdot v. Messrs Ghulam Nabi Corporation Ltd., Lahore PLD 1971 SC 550 ref.

Syed Allah Dost v. Haji Muhammad Alam and others PLD 1987 Quetta 235; Mansib Ali v. Amir Ali PLD 1971 SC 124; Muhammad Yousaf Khattak v. S.M. Ayub and others PLD 1972 Pesh. 151; E.A. Evans v. Muhammad Ashraf PLD 1964 SC 536 and Mir Dost Muhammad v. Govt. of Baluchistan and 3 others PLD 1980 Quetta 1 rel.

(b) Administration of Justice---

----Proceedings initiated on a wrong legal presumption would become totally unlawful---Principles.

Proceedings initiated on a wrong legal presumption become totally unlawful.

"A wall raised on a tilted brick shall remain tilted, take it to any height." Meaning thereby that the superstructure raised on wrong foundation remains defective and the whole of it is likely to crumble due to said defect.

Syed Allah Dost v. Haji Muhammad Alam and others PLD 1987 Quetta 235; Mansib Ali v. Amir Ali PLD 1971 SC 124; Muhammad Yousaf Khattak v. S.M. Ayub and others PLD 1972 Pesh. 151; E.A. Evans v. Muhammad Ashraf PLD 1964 SC 536 and Mir Dost Muhammad v. Govt. of Baluchistan and 3 others PLD 1980 Quetta 1 rel.

Muhammad Ilyas Khan for Petitioner.

Ms. Kausar Parveen for Respondents.

Muhammad Nawaz Waseer, Standing Counsel.

2009 P T D 690

[Lahore High Court]

Before Syed Hamid Ali Shah, J

BAYER CHEMICALS through Partner and another

Versus

FEDERATION OF PAKISTAN through Law, Justice and Human Rights Division, Government of Pakistan and 3 others

Writ Petition No.17294 of 2005, decided on 9th May, 2008.

(a) Sales tax---

----Illegal order---Scope---Action of authorities was based upon audit report which was not conducted by an unauthorized person and had emanated from illegal raid which was not permissible under law---Such action could not legally sustain.

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

----Ss. 38 & 40---Constitution of Pakistan (1973), Art.199---Constitutional petition---Recovery of tax---Show-cause notice---Tax evasion---Proof---Authorities entered premises of assessee without any notice or information to her and got conducted audit on the basis of record removed from premises---Appellate authority on appeal filed by assessee, allowed re-audit by independent team---Validity---Audit team issued notices for re-audit and subsequently such proceedings were dropped and authorities issued show-cause notice on the basis of earlier audit---Re-audit proceedings were required to be completed, once it had commenced---Non-appearance or non-cooperation of party could result into ex parte proceedings against such party but dropping proceedings for re-audit was not justified, thus authorities had ignored such aspect of controversy---Representation of assessee was decided without any valid reason and reasons justifying raid were in conflict with principles laid down in judgments passed by Supreme Court in various cases---Representation of assessee was decided ignoring law settled by Supreme Court and it lacked element of valid reasoning, such order was declared having been passed without lawful authority and with no legal effect---High Court, in exercise of constitutional jurisdiction, directed the authorities to proceed with fresh audit through independent team of auditors, as directed by Collector---Petition was allowed accordingly.

Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Pvt.) Ltd. 2005 SCMR 1166; Federation of Pakistan v. Messrs Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; Messrs Ihsan Yousuf Textile Mills (Pvt.) Ltd. v. Federation of Pakistan 2003 PTD 2037; Messrs N.P. Water Proof Textile Mills (Pvt.) Ltd., Karachi v. Federation of Pakistan and another 2004 PTD 2952; Muhammad Siddique v. Federation of Pakistan and 3 others 2005 YLR 2859; Nagina Silk Mill, Lyalpur v. The Income Tax Officer, A-Ward Layalpur and others PLD 1963 SC 322 and Messrs Ahmed Hassan Textile Mills Ltd. through Chairman v. Federation of Pakistan 2005 PTD 2455 ref.

Salman Akram Raja for Petitioners.

Qamar Zaman Qureshi, Dy. A.-G. for Respondents.

2009 P T D 722

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs SHAHEEN STEEL FURNACE, GUJRANWALA through Proprietor

Versus

GOVERNMENT OF PAKISTAN, MINISTRY OF FINANCE through Secretary and 4 others

Writ Petitions Nos.7950 to 7954, 8118, 8233, 9883, 9884, 10290 to 10292, 10327, 10349, 10361 to 10368, 10461, 10462, 10665, 12362 to 12389, 12497 to 12500 and 12531 of 2008, decided on 4th November, 2008.

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

----Art. 189---Obiter dicta in judgment of Supreme Court---Effect---Decisions of Supreme Court are binding even to the extent of obiter dicta in judgments---Authority to explain judgment of Supreme Court is also with Supreme Court.

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

----Ss.2 (41), 4 & 13---Supply, taxable and exempted---Scope---Anything produced in Pakistan if supplied is covered within the definition of "taxable supply" but it does not include supplies which have specifically been exempted or which have been declared to be as "zero rated"---Basic difference between "exempt" and "zero rated" supply is that though both of them do not pay any sales tax on their supplies but the person who is making supply as zero rated is entitled to credit for tax paid on his business purchases, whereas person making exempt supply is not entitled to seek refund or adjustment of input tax.

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

----S.4 & Sched. 5---Customs Act (IV of 1969), S.24---"Zero per cent"--Connotation---Phrase "zero per cent" is nothing more than declaring a supply to be practically as exempt from sales tax---Meaning of expression as contained in S.4 of Sales Tax Act, 1990, is exactly that goods specifically mentioned in 5th Schedule or goods which are specified in S.24 of Customs Act, 1969, for consumption abroad or those which are notified in official Gazette by Federal Government are all exempt---Such concept appears to have been introduced only for the purpose of claiming adjustment or refund of input tax which a supplier may have paid on his purchases.

(d) Interpretation of statutes---

----Fiscal statute---One has to look merely at what is clearly said; there is no room for any intendment and there is no equity about a tax---Nothing is to be read in, nothing is to be implied---One can only look fairly at the language used.

Messrs Elahi Cotton Mills and others v. Federation of Pakistan through Secretary M/O Finance, Islamabad and 6 others PLD 1997 SC 582 fol.

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

----Ss.3, 4 & 7(2)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Deduction of input tax from output tax---principle---Petitioners were manufacturers and dealers of steal ingots prepared from scrap purchased from unregistered scrap dealers---Plea raised by petitioners was that there was exemption for scrap for charge at zero rate, therefore, the same should be equated with actual payment of tax and their amount should be reduced from supply for determination of sales tax---Validity---For entitlement of reduction of input tax from output tax in addition to actual payment, there should be documentary evidence in terms of either tax invoice or a treasury challan of payment bearing registration number---Where there was neither any physical payment or transfer of possession of something nor there was any documentary evidence regarding tax paid by registered person, in absence of any such legislative intent, adjustment was beyond question---Use of word "actually" had made the situation very obvious---Since there was neither any physical transfer or deposit of tax in case of scrap dealers nor they were registered treating it as tax paid would be being naive---Petition was dismissed in circumstances.

Messrs Usmani Associates, Sub Proprietary Firm v. Central Board of Revenue and another 2001 PTD 2982; Fauji Sugar Mills v. Assistant Collector Sales Tax and others 2005 PTD 662; Deputy Collector, Central Excise and Land Customs, Lahore and 2 others v. Tyrex Pakistan (Ltd.), Lahore and another PLD 1992 SC 364; Habibullah Jan and 3 others v. Muhammad Hassan Khan and 6 others PLD 1991 SC 93; Amreti Steels (Pvt.) Ltd. and others v. Federation of Pakistan and others 2004 PTD 2930; Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881; Collector of Customs, Lahore and others v. Messrs Universal, Gateway Trading Corporation and another 2005 SCMR 37 = 2005 PTD 123; A.R. Khan v. P.N. Boga through Legal Heir PLD 1987 SC 107; Mian Shaukat Ali and another v. Secretary, Irrigation, Government of Punjab, Lahore and 13 others 2003 MLD 1231; Muhammad Waris and 3 others v. Province of Punjab through Secretary, Co-operative Department, Lahore and 16 others PLD 2003 Lah. 242; Adeel-ur-Rehman and others v. Federation of Pakistan and others. 2004 PTD 534; Hyundai-Hidco-Hakas Joint Venture v. Water and Power Development Authority PLD 2003 Lahore 714 and Funfair (Pvt.) Limited and another v. Karachi Development Authority and 2 others PLD 2004 Karachi 170 ref.

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

----S.7---Term "actually paid" and "paid"---Distinction---If one needs to claim input tax of output tax, such person must have in its mind that the same is "actually paid" only then it can be claimed subsequently---Use of prefix "actually" has added emphasis on the word "paid"---Term "paid" means actually passing on something physically (specially money) from one hand to another and there is no room for notional position---Handing over of possession (money) is pre-condition for payment---In certain special circumstances word "payable" may be considered as paid as the same speaks of future transfer of something (money etc.)

Webster Comprehensive Dictionary, International Edition, Volume Two ref.

(g) Interpretation of statutes---

----Fiscal statutes---Exemption---Object and scope---Tax statutes are framed for creation of charges and exemption are granted as a special facility---Such facilities are always in contradiction to the spirit and philosophy of payment of taxes i.e. equitable distribution are also never liberally granted---Provisions granting exemption are always given a restrictive meaning as against normal method of interpretation of fiscal statutes and in case of doubt, it is decided in favour of taxpayer.

Kh. Saeed-uz-Zafar, Mian Mehmood Rasheed, Zafar dsIqbal Chohan and Miss. Shazia Hassan for Petitioners.

Ahmar Bilal Sufi, Kausar Parveen and Izhar-ul-Haq Sheikh for Respondents.

Date of hearing: 26th September, 2008.

2009 P T D 744

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs IMPERIAL BUILDERS through Manager

Versus

PROVINCE OF PUNJAB through Secretary Legal Government and another

Writ Petition No.1686 of 2002, heard on 15th October, 2008.

(a) Punjab Government (Tax on Transfer of Immovable Property) Rules, 2001---

----R.4(1)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Transfer tax rate---Applicability---Dispute between parties was with regard to rate of transfer tax---Petitioner-company contended that rate on the date of registration of conveyance deed was applicable, while authorities demanded rate prevalent on the date of purchase of property--Validity---Transfer Tax had become due when sale-deed was registered within the contemplation of R.4(1) of Punjab Government (Tax on Transfer of Immovable Property) Rules, 2001---In case of transfer, it became due when mutation was sanctioned and in case transfer was not made either through registered deed or through oral transfer / mutation the same would become due when sale took place---As transfer in question took place through registered sale-deed, therefore, case of petitioner fell in first category, i.e. R.4 (1) of Punjab Government (Tax on Transfer of Immovable Property) Rules, 2001, and tax had become due on the date when sale deed was registered---Decision of authorities that transfer tax was payable at rate prevalent on date of auction and not on date when sale-deed was registered was without lawful authority having no legal effect---High Court, in exercise of Constitutional jurisdiction declared that transfer tax from petitioner was to be levied and collected under R.4 (1) of Punjab Government (Tax on Transfer of Immovable Property) Rules, 2001, at the rate which prevailed on the date on which sale deed was registered---Petition was allowed in circumstances.

Ghulam Shabbir v. Commissioner, Rawalpindi Division, Rawalpindi and 4 others 2003 YLR 2640 and Municipal Committee, Tehsil Talagang through Chairman v. Ghulam Shabbir PLD 2006 SC 302 ref.

(b) Interpretation of statutes---

----Meaning of any provision of law---Principles---Nothing can be imported to assign a different meaning to provision of law and it has to be applied and interpreted in the manner as is prescribed by law.

Muhammad Ilyas Sh. for Petitioner.

Hafiz S.A. Rehman for Respondent.

Syed Husnain Kazmi, A.A.-G.

Date of hearing: 15th October, 2008.

2009 PTD 762

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs TANVEER WEAVING MILLS through Director Finance

Versus

DEPUTY COLLECTOR SALES TAX and 4 others

Writ Petition No. 16171 of 2008, decided on 29th January, 2009.

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

----S.36(1)(3)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Issuance of show-cause on 23-3-2005---Passing of order­-in-original on 28-3-2006 after extension of time limit by C.B.R. on 12-12-2005---Plea of assessee was that order-in-original was not valid for having been passed after expiry of 90 days provided under S.36 of Sales Tax Act, 1990; and that C.B.R. had no power to grant an extention---Validity---Period of passing order-in-original after such notice was 90 days, which period could be extended by Collector for proper reasons for another 90 days before expiry of original 90 days---Impugned order was without jurisdiction for having been passed after expiry of one year of issuance of such notice---High Court set aside impugned order in circumstances.

Federation of Pakistan through Secretary, Establishment Division, Government of Pakistan, Islamabad v. Muhammad Tariq Prizada and others 1999 SCMR 2189; Messrs Ahmed Hassan Textile Mills Ltd. through Chairman v. Federation of Pakistan through Secretary of Law, Justice and Human Right Division, Islamabad and 4 others 2005 PTD 2455 ref.

Super Asia v. The Additional Collector and others Writ Petition No.16270 of 2000 rel.

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

----Art. 199---Constitutional petition---Alternate remedy available to petitioner has to be adequate and efficacious.

M.M. Akram for Petitioner.

Ms. Kausar Parveen for Respondents.

2009 P T D 774

[Lahore High Court]

Before Khawaja Farooq Saeed, J

AHSAN UL HAQ BHATTI

Versus

FEDERAL BOARD OF REVENUE through Chairman and 5 others

Writ Petition No.14360 of 2008, heard on 22nd January, 2009.

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

----S.3---Income Tax Ordinance (XLIX of 2001), S.235---Constitution of Pakistan (1973), Art.199---Constitutional petition---Withholding tax, charging of---Minimum fixed charges of electricity connection---Grievance of petitioner was that authorities could not charge with-holding tax under Sales Tax Act, 1990 and Income Tax Ordinance, 2001, on electricity bill for the months when no electricity was consumed---Validity---Sales tax could only be charged on manufacturing and supply of goods and goods supplied in furtherance of business---Even if electricity supply was considered to be "goods", petitioner had not consumed even a single unit of the same---There was no concept of actual supply of electricity to petitioner or any additional transfer in furtherance thereof---Charge of withholding tax was not covered within the provisions of Sales Tax Act, 1990--Deduction of withholding tax was confiscatory and not within the mandate provided by Sales Tax Act, 1990---Withholding tax collected from petitioner under S.235 of Income Tax Ordinance, 2001, was also not within the mandate provided therein---Deduction from fixed bill of electricity was unlawful and unjust so long as petitioner did not consume electricity---High Court, in exercise of constitutional jurisdiction, declared that charge of minimum charges by authorities was justified and needed no interference---High Court directed the authorities to delete with-holding tax in terms of ' General Sales Tax and Income Tax from electricity bills of petitioner, as the same was against Sales Tax Act, 1990 and Income Tax Ordinance, 2001---Petition was allowed accordingly.

Water and Power Development Authority and another v. M.N Steel Re-rolling Mills and 23 others 1999 SCMR 494 and Collector Sales Tax and Central Excise, Rawalpindi v. Messrs Wah Nobel Chemical Ltd, Wah Cantt 2008 PTD 1693 ref.

(b) Interpretation of statutes---

----One should remain within the mandate of law and not to go beyond its language.

Kh. Saeed-uz-Zafar for Petitioner.

Muhammad Nawaz Waseer Standing Counsel.

Dr. Muhammad Irtaza Awan for Respondent No.5.

Date of hearing: 22nd January, 2009.

2009 P T D 943

[Lahore High Court]

Before Ali Akbar Qureshi, J

Messrs M.A.H. TRADERS through Proprietor

Versus

DEPUTY COLLECTOR CUSTOMS and 4 others

Writ Petition No.14779of 2008, decided on 2nd February, 2009.

Customs Act (IV of 1969)---

----Ss.25(1) & 25-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Enhancement of value of imported goods against its declared value on ground of receipt of new valuation advice---Validity---Such advice did not show method of its preparation, but was repetition of method being applied earlier---Such advice did not find mention of unit price or its retail price in market---Such advice should have been based upon proper discussion and reference to value of disputed items---High Court set aside impugned order in circumstances.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Petitioner.

Ch. Zafar Iqbal for Respondent-Department.

2009 P T D 955

[Lahore High Court]

Before Syed Zahid Hussain, C. J. and Raja Muhammad Shafqat Khan Abbasi, J

Messrs SAHIB JEE

Versus

REGIONAL COMMISSIONER OF INCOME TAX and others

Writ Petition No. 11983 of 2005, decided on 20th March, 2009.

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

----S. 32---President, while performing his function under S.32 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, acts in quasi judicial and not in administrative capacity---Scope of such function of the President----Section 32 of the Ordinance provides that aggrieved party, by recommendation of the Federal Tax Ombudsman may, within 30 days of the recommendation, make representation to the President who may pass such order thereon as he may deem fit---Recording of reasons while setting aside the recommendations of Ombudsman is minimum requirement under the law which is in consonance with the principles of natural justice---Representation under S.32 of the Ordinance can be made against the recommendations and not against the order on review application--.Principles.

Commissioner of Income Tax and others v. Messrs Media Network and others 2006 PTD 2502; Federation of Pakistan through Secretary Education, Islamabad v. Prof. Dr. Anwar and 2 others 2006 SCMR 382; Commissioner of Income Tax, Faisalabad Zone, Faisalabad and another v. Akhlaq Cloth House, Faisalabad and another 2008 PTD 965; Hafiz Muhammad Arif Dar v. Income Tax Officer PLD 1989 SC 109; Federation of Pakistan through Secretary, Establishment Division, Government of Pakistan, Islamabad v. Muhammad Tariq Peerzada and 2 others 1999 SCMR 2744; Federation of Pakistan through Secretary, Establishment Division, Government of Pakistan, Islamabad v. Muhammad Tariq Peerzada and 2 others 1999 SCMR 2189 and Case No.1743 of 2001 of Specialty Printers (Pvt.) Ltd. ref.

(b) Administration of justice---

----Similarly placed persons in similar circumstances have to be treated and dealt with identically without any discrimination unless there be any differentiation.

Nizamuddin and another v. Civil Aviation Authority and 2 others 1999 SCMR 467; Shrin Munir and others v. Government of Punjab through Secretary Health, Lahore and another PLD 1990 SC 295 and Aman Ullah Khan and others v. The Federation Government of Pakistan, through Secretary, Ministry of Finance, Islamabad and others PLD 1990 SC 1092 ref.

(c) Administration of justice---

----Judicial notice---Scope---Court can take judicial notice of the changed situation/circumstances of the case which have taken place after the institution of the case and can mould relief accordingly.

Mst. Amina Begum and others v. Mehar Ghulam Dastagir PLD 1978 SC 220; Federation of Pakistan through Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad and others v. Aftab Ahmad Khan Sherpao and others PLD 1992 SC 723 and Prof. (Retd.) Masoodul Hassan v. Muhammad Iqbal PLD 1998 Lah. 177 ref.

Siraj-ud-Din Khalid for Petitioner.

Shahid Jamil Khan, Legal Advisor for Income Tax Department.

Aamir Rehman, Deputy Attorney-General for Pakistan for Respondent.

Date of hearing: 13th March, 2009.

2009 P T D 1147

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs ASIAN TRADERS through Proprietor and another

Versus

MUHAMMAD AKBAR KHAN MAGSI and 3 others

Writ Petition No. 17903 of 2008, heard on 6th May, 2009.

Customs Act (IV of 1969)---

---S.32---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Untrue statement, error in connection with matter of customs---Issuance of demand notice---Petitioners imported textile material and sought its clearance---Since the material was apparently not within the earlier classifications mentioned in PCT Heading, it was sent to the laboratory and on the basis of the report, it was classified under PCT Beading 5407.6100 and was made out of charge on payment of leviable duty and tax as assessed by the Customs Authorities---Subsequently, the petitioners received the impugned demand notices alleging therein that goods were classified under PCT Heading 5407.6100 whereas the same should have been classified under PCT Heading 5903.9000 which attracted higher rate of duty---Since the demand notices issued to the petitioners were without any proceedings subsequent to the delivery of goods to the petitioners having been declared out of charge, it was illegal on the face of it---Authorities could proceed on the basis of provisions of S.32 of the Customs Act, 1969 after fulfilling the parameters thereof and complying with the legal requirements---Demand notice issued to the petitioners was set aside.

Mian Abdul Ghaffar for Petitioners.

Izhar ul Haque Sh. for Respondents.

Date of hearing: 6th May, 2009.

2009 P T D 1167

[Lahore High Court]

Before Nasim Sikander and Khawaja Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES ZONE FAISALABAD

Versus

Messrs CRESCENT FLOUR MILLS (PVT.) LTD., FAISALABAD

P.T.R. No. 175 of 2001, heard on. 14th January, 2009.

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

----Ss. 50(4) & 52---Deduction under section 50(4), Income Tax Ordinance, 1979 is clearly on the goods which a recipient has received as supply and it is not on counter-purchases or other purchases made from open market against payment of cash or even through credit---Word "cash purchase" cannot be equated with the word "supply" for the purpose of S.50(4), Income Tax Ordinance, 1979, in the case of persons declared to be deducting authority---Terms "sale" aid "supply"---Connotation and distinction between the two terms illustrated.

The deduction under section 50(4), Income Tax Ordinance, 1979 is clearly on the goods which a recipient has received as supply and it is not on counter-purchases or other purchases made from open market against payment of cash or even through credit.

A supply, be that in consideration of cash or credit, is undoubtedly subject to withholding, tax. It is the payment on account of "supply of goods" on which the tax is to be deducted.

Provision of section 52, Income Tax Ordinance, 1979 applied on failure of an assessee to deduct tax under section 50(4).

Since the default under section 52 starts from non-deduction of tax under section 50(4) of Income Tax Ordinance, 1979 its language is the most relevant factor. Under section 50(4) a recipient of goods, infer alia, has been assigned the responsibility to deduct withholding tax while making payment to supplier of the goods.

The term "supply" has not been defined in Income Tax Ordinance, hence, normal dictionary meanings have been adopted. In general parlance the "supply" is attached with the "demand", be that in any form. It is a different connotation than the term "purchase". Purchase and sale obviously are of wide import. All supplies are sales while all sales are not supplies. The term "supply" as used in income tax proceedings is something which has a kind of permanence or a perpetuity in the relationship in the supply and the recipient. Supply is of the items demanded. If there is a demand there shall be a supply.

"Supply" is of something needed, desired or demanded before hand and is subsequently provided. It has to be a continuation for satisfaction of a requirement or the demand. While the sale on one hand includes all these means and shall also include the items purchased by a person from road sides from counters and any other place. The difference between two is very thin but they definitely are not interchangeable. The "sales" and "supply" therefore, should not be mixed with each other. They are not even synonymous in their meaning.

The "sale" as against "supply" is transfer of property or title for a price. In supply normally the demand is with specification as well as predetermined quantity and price etc. In sale one can pay and take possession of item or negotiate and refuse. In supply since it is on the basis of a before hand contract it obviously cannot be later negotiated or refused. In sale the contract of transfer is subject to payment or commitment to pay while in supply it is a continuation of an already existing contract/commitment.

Similar distinction exists in the terms supplier and salesman. "The supplier is a person engaged, directly or indirectly, in the business of making a product available to consumers". While a salesman is a person who sells items on behalf of his master and may be on his own behalf. It means he holds the status of a representative of the owner i.e. his master in the former case.

Furthermore, the supplier is mostly a person registered for the purpose of supply with the organization and is always a known person having some creditworthiness with such organization. A salesperson in most of the cases is an unknown third person having no earlier contractual relations with the buyer except to the extent of the goods sold.

The two terms are different. The supply is the action of furnishing what is wanted or a thing yielded or afforded to need. So it is a very specific and controlled transaction and remains within the parameters of demand and supply specifically. While the sale is an exchange for money and is co-related to purchase. It is definitely a wider connotation and in fact as already mentioned would include the transaction of a supply, but, however, all transactions of sale are not supplies.

One can make a purchase without demand just because the same is eye catching or one feels that it can be of some use to him but the same would not become a supply being not in compliance to its desire. The word "supply" should be given a limited and qualified sense.

(b) Words and phrases---

----"Sale" and "supply"---Connotation and distinction between the two terms illustrated.

Adnan Afzal v. Capt. Sher Afzal PLD 1969 SC 187; Black's Law dictionary Seventh Edition; Oxford English Dictionary; Commissioner of Income/Tax Wealth Tax v. Messrs Ellcot Spinning Mills Ltd. 2008 PTD 1401 and AIR 1954 Pat 14 (D.B.) ref.

Mian Yousaf Umar for Petitioner.

Ch. Shehram Sarwar for Respondent.

Date of hearing: 14th January, 2009.

2009 P T D 1220

[Lahore high Court]

Before Umar Ata Bandial, J

Messrs DAWOOD TEXTILE PRINTING INDUSTRIES (PVT). LTD., FAISALABAD through Chief' Executive

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, F.B.R. and 4 others

Writ Petition No. 3932 of 2009, decided on 2nd March, 2009.

Sales Tax Act (VD of 1990)---

----Ss.46 & 48---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Recovery of arrears of tax---Appeal to Appellate Tribunal---Appellate Tribunal granted interim relief which lapsed after the expiry of six months in terms of S.46(4) of the Sales Tax Act, 1990, rendering the petitioner liable to coercive recovery-- Petitioner prayed that pending decision of the petitioner's appeal on merits, the pre-mature recovery of impugned dues, was harsh as an assessee was entitled to adjudicate in respect of his disputed tax liability by at least one independent forum outside the hierarchy of the department---High Court directed that the petitioner would appear before the Appellate Tribunal through an appropriate application seeking final adjudication of his pending appeal and Appellate Tribunal would endeavour to decide petitioner's appeal within a specified period---During such period the Authority would not press for recovery of impugned dues through coercive process.

Sunrise Bottling Company (Pvt.) Ltd. v. Federation of Pakistan 2006 PTD 535; Z.N. Exports (Pvt.) Ltd. v. Collector of Sales Tax 2003 PTD 1746 and Mehram Ali and others v. Federation of Pakistan and others PLD 1998 SC 1445 ref.

Mian Abdul Ghaffar for Petitioner.

Miss Kausar Parveen for Respondent.

2009 P T D 1274

[Lahore High Court]

Before Mian Saqib Nisar and Ali Akbar Qureshi, JJ

Messrs SHAIKII SALIM ALI (PVT.) LTD. through Managing Director

Versus

COLLECTOR OF CUSTOMS, LAHORE and another

C.As. Nos.532 and 536 of 2003, decided on 13th May, 2009.

Customs Act (IV of 1969)---

----S. 16 Agricultural Pesticides Ordinance (II of 1971), S.4--Import of product as pesticide----Pesticide registration placed on record showed the generic name of the product and it was not established that the "trade name" of the product had been registered in the country of export as the requisite certificate to that effect had not been placed on record -Held, until the trade name of the manufacturer was registered in the country of manufacture, the product could not be imported as per the law---On account of any earlier permission of import, which had not been detected at the relevant time and was cleared for certain reasons, the department was not bound to necessarily follow the same footsteps and was to grant the import when it was not permissible under the law.

Oxford Dictionary; ICA No.375/2003; Government of Pakistan through Ministry of Finance and 3 others v. Manzoor Brothers 1995 SCMR 516; Messrs Dada Soap Factory Ltd. v. Pakistan through Secretary, Government of Pakistan, Ministry of Finance and 2 others PLD 1984 Kar. 302; Messrs Muhammad Anwar Muhammad Iqbal Brothers !Ad Karachi v. Collector of Customs and 3 others PLD 1976 Kar; 253; Syed Ghulam Ali Shah v. The State through A.D.M. and Tribunal, Sanghar PLD 1970 SC 253; Mst. Zahida Sattar and others v. Federation of Pakistan and others PLD 2002 SC 408 and Black's Law Dictionary Eighth Edition ref.

Mian Dilawar Mehmood for Appellant.

Sh.Ilzhar-ul-Haq and Ms. Yasmeen Sehgal, DAG, for Respondent.

Date of hearing: 1st April, 2009.

2009 P T D 1298

[Lahore High Court]

Before Mian Saqib Nisar and Ali Akbar Qureshi, JJ

ALL PAKISTAN TEXTILE MILLS ASSOCIATION through Secretary

Versus

FEDERATION OF PAKISTAN through Secretary Commerce, Ministry of Commerce, Islamabad and 2 others

I.C.A. No.549 of 2008, heard on 13th May, 2009.

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

---Art. 199---Civil Procedure Code (V of 1908), O.VII, R.7---Constitutional petition--Moulding of relief---Theory of subsequent event---Applicability---Scope---Court seized of a matter, which is competent and maintainable before it, can always mould the relief as is warranted by the facts of the case, even taking into account the subsequent developments occurring during the pendency of the lis---Such rule, however, is subject to important limitations; that no prejudice is caused to the defendant/respondent by doing so; such events must have nexus with the cause of action or the defence of the case and should not amount to setting up a new case by the parties; either side must get a chance of meeting the effect of the subsequent events, which, in ordinary course should be incorporated by appropriate amendment of the pleadings.

Ch. Riyasat Ali, Advocate v. Returning Officer and 2 others 2003 CLC 1730; Capt. S.M. Aslam and others v. Karachi Building Control Authority through Chief Executive Nazim-e-Aala and others 2005 CLC 759; Mehrab Khan through Attorney v. Province of Sindh through Secretary, Irrigation and Power Department, Government of Sindh and 5 others 2005 CLC 441; Ardeshir Cowasjee v. Province of Sindh 2002 CLC 684; Marghub Siddiqi v !amid Ahmad Khan and 2 others 1974 SCMR 519 and Salahuddin and 2 others v. Fronteir Sugar Mills and Distillery Ltd. Tokht Bhai and 10 others PLD 1975 SC 244 ref.

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

----Art. 199---Constitutional petition---Theory of subsequent event, applicability of Moulding of relict --Scope -Vices of specific order of the Commission had not been challenged in the constitutional petition, rather no ground, at all, had been set out on the basis of which it could, especially by the court, be ascertained, assessed, determined and adjudicated as to what was the illegality or vices (legal or factual) of the Commission's order, not only the court shall he in disadvantageous position to examine the order in this behalf, even the respondent shall not he in a position to defend the case on the basis of the present pleadings.

(c) Maxim---

----Ubi jus ibi remedium---Lex semper dabit retnediurn---No concept of a wrong without a remedy---Principles.

According to the maxim ubi jus ibi remedium there is no concept of a wrong without a remedy and the "remedium" may be defined to be the right of action, or the means given by law, for the recovery or assertion of a right; besides, in view of another maxim lex semper debet remedium, if a man has a right, he must have means to vindicate and maintain it, and should have a remedy if he is injured in the exercise and enjoyment of it; and indeed, it is a vain thing to imagine a right without a remedy, for want of right and want of remedy are reciprocal, thus, it appears, that "remedium" in the above maxims has a more extended signification than the word "action" in its modern sense and an "action" is, in fact, one peculiar mode pointed out by the law for enforcing a remedy, or for prosecuting a claim or demand in the court of law.

Broom's Legal Maxims 10th Edn. P. 118 ref.

(d) Constitution of Pakistan (1973)---

----Art. 199--Anti-Dumping Duties Ordinance (LXV of 2000), S.64(5)---Non-establishment of Appellate Tribunal by Federal Government under S.64 of Anti-Dumping Duties Ordinance, 2000---Remedy---Maxims ubi jus ibi remedium and lex semper debet remedium---Applicability---In the present case, Association of Textile Manufacturers, subject to its locus standi undoubtedly had a right of appeal under the statute, which was the most sacred right, however, if for any reason the thrum of appeal had not been established enabling the exercise of such valuable right, the right, could not be allowed to be frustrated or stultified, for the lapse on part of the Federal Government as it was the fundamental principle of law that the rights and the remedies of the parties could not be left in vacuum, thus, in the situation the Association (Subject to its locus standi) shall have an independent right to challenge any such order under Art.199 of the Constitution, if it had been passed by a forum which could be construed to he a forum against which a writ of certiorari would lie, otherwise before the courts of plenary civil jurisdiction under S.9, C.P.C.

(e) Constitution of Pakistan (1973)---

---Art. 199(4), (4-A)---Constitutional jurisdiction---Interim injunction, grant of----Scope---Provisions of Art.199(4) or(4-A) of the Constitution would only be relevant, if a case for the grant of interim injunction is made out on the basis of the contents of the main petition Where however, the statutory body was not under challenge in the petition, how could the interim injunction beyond the scope of pleadings be granted against the said body even ignoring the rule that. Civil Procedure Code was applicable to the proceedings under Constitutional jurisdiction.

Hussain Bakhsh v. Settlement Commissioner, Rawalpindi and others PLD 1970 SC 1 and Marghub Siddiqi v. Hamid Ahmad Khan and 2 others 1974 SCMR 519 ref.

(f) Anti-Dumping Duties Ordinance (LXV of 2000)---

----S. 64---Constitution of Pakistan (1973), Art.199---Constitutional petition---Cause of action and entire structure of the case was rested upon one single grievance i.e. for the constitution of the Appellate Tribunal within the parameters of S.64, Anti-Dumping Duties Ordinance, 2000 which could not be granted particularly when the Bill for amendment of the same section of the Ordinance had been approved by the Standing Committee and also for the reason that as per the decision of the National Judicial Policy Making Committee dated 18/19-4-2009, may be the retired Judge of the Supreme Court could not be appointed as the Chairman of the Appellate Tribunal---If any such direction was given by the High Court, it shall be difficult to cope with and reverse a situation, which might emerge on account of the amendment.

Majid Ali Wajid for Appellant.

Ch. Aamir Rehman, D.A.G., Muhammad Nawaz Waseer, Standing Counse-1, Shahzad A. Elahi and Ahmed Sheraz for Respondents.

Date of hearing: 13th May, 2009.

2009 P T D 1463

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs NAZMAFK (PVT.) LTD. through Chief Executive

Versus

FEDERATION OF PAKISTAN, through Secretary (Revenue Division/FBR) and 3 others

Writ Petitions Nos. 18776 to 18778 of 2008, heard on 6th May, 2009.

Customs Act (IV of 1969)---

---Ss. 32 & 195---Provisions of Ss.32 & 195 of Customs Act, 1969---Applicability---Where information from other sources and outside record of proceedings highlighted incorrect disclosure of value of goods, then provision of S.32 of Customs Act, 1969 would apply--Proceedings under S.195 of Customs Act, 1969 could be initiated on basis of inspection of record itself and not for reason of information collected from outside---Value of goods determined earlier on basis of documents submitted by assessee, if found to be low subsequently, then provision of S.32 of Customs Act, 1969 would apply with full force---Section 32 of the Act wide enough to cover under-statement or submission of wrong documents by assessee regarding value of goods---Departmental hierarchy was competent' to consider whether information with department was good enough for reappraisal of value or not---Assessee in such case would have chance to avail alternate remedy of regular appellate jurisdiction---Principles.

Messrs S.T Enterprises through Proprietor v. Federation of Pakistan through Secretary (Revenue Division F.B.R.). Islamabad and 4 others 2009 PTD 467; Messrs Zibtec (Pvt.) Ltd. through Director and another v. Collector of Customs, Model Customs Collector and 3 others 2009 PTD 246; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250; Gatron (Industries) Limited v. Government of Pakistan and others 1999 SCMR 1072; Maple Leaf Cement Factory Limited v. Collector, of Customs House, Faisalabad 2000 YLR 1989 and Messrs Toyo International Motorcycle through Proprietor v. Federation of Pakistan through Secretary (Revenue Division) Central Board of Revenue, Islamabad and 3 others 2008 PTD 1494 ref.

Mian Abdul Ghaffar and Malik M. Arshad for Petitioners.

Sh. Izharul Haq for Respondents.

Date of hearing: 6th May, 2009.

2009 P T D 1473

[Lahore High Court]

Before Sh. Azmat Saeed, J

INDUS JUTE MILLS LTD. through Chief Executive

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Islamabad and 3 others

Writ Petition No. 8872 of 2008, decided on 15th May, 2009.

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

----S. 235---Constitution of Pakistan (1973), Art.199 & Fourth Schedule Federal Legislative List, Item 47---Constitutional petition---Vires of S.235, Income Tax Ordinance, 2001.--Three stages of imposition of tax i.e. declaration of liability; assessment and recovery---Said three stages need not necessarily occur in any particular order---Recovery of tax whether directly from the assessee or indirectly through collection from expenditure or deduction from receipts, as the case may be, did not amount to assessment of tax, nor created any liability to pay said amount---Advance tax was merely a provisional payment---Mode of recovery of tax was not the sole determining factor in ascertaining the subject-matter of tax---"Collection of tax" and "its levy or chargeability", distinguished---Mode of collection of tax through advance tax was valid and legal, challenge thereto on the grounds of being violative of fundamental rights/or beyond the legislative competence of the Parliament was rejected---Provision for collection of advance tax was within legislative competence of Parliament in view of Fourth Schedule Item 47 of Federal Legislative of the Constitution---Collection of advance tax on the amount of bills did not affect the essential subject-matter of tax which remained tax on income, however, in case of companies subject-matter of the tax remained the income of the assessee and not the electricity bill---Principles.

Whiteny v. Inland Revenue Commissioners AIR 1926 AC 37; Elahi Cotton Mills Ltd. PLD 1997 SC 582; Call Tel and another v. Federation of Pakistan and others 2005 PTD 833 and Call Tel Pvt. Ltd. v. Federation of Pakistan 2004 PTD 3032 ref.

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

----Ss. 235 & 169---Companies---Contention was that some companies may be entitled to final discharge under S.169, Income Tax Ordinance, 2001; hence, S.235 of the Ordinance could not be applied to them---Held, in case of presumptive tax regimes where there was a final, discharge of liability under S.169 of the Ordinance, said discharge was limited to the transaction or the income covered by such provision of the presumptive tax regimes which were enunciated in S.169 of the Ordinance; it did not extend to any other income of the assessee under the same or different head---Tax collected under S.235 of the Ordinance thus could be adjusted against any tax due with regard to other income of the assessee not covered under the separate presumptive tax regime, and where no such liability of tax existed, then the amount collected under S.235(1) of the Ordinance would be refunded to the company under S.235(4) of the Income Tax Ordinance, 2001---So far as applicability of S.235 of the Income Tax Ordinance, 2001 qua companies was concerned, no exception could be taken thereto, as said provision did not offend against any fundamental right of the assessee and was also well within the legislative competence of the Parliament.

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

---Ss. 235 & 169---Treatment being meted out by S.235, Income Tax Ordinance, 2001 with reference to persons other than companies, is dramatically different---Presumptive minimum tax has been levied on the basis of the electricity bill which is an expenditure and is valid especially as there is a direct nexus between the energy consumed, and the economic activity conducted resulting in generation of income or the capacity to earn and pay---Mere fact that the basis of the levy is the electricity bill; does not detract from the essential nature of the tax i.e. a tax on the income of the assessee---Contention of the assessees was that some of such assessees which were not companies, were subject to other presumptive tax regimes envisaged by the Ordinance, in terms whereby, collection made on deductions effected were a complete discharge of their tax liability under S.169, Income Tax Ordinance, 2001, whereby, recoveries effected under the provisions mentioned therein were treated as final tax, and therefore, the assessees could not be subjected to S.235 of the Ordinance---Validity---Held, in this regard, it was for the assessees to establish on a case to case basis as to which of such assessees was subject to which particular presumptive tax regime of the Ordinance mentioned in S.169 of the Ordinance and therefore, there existed a final discharge of liability---Such information supported and substantiated by verifiable material was conspicuous by its absence in the present case---In such an eventuality, the collections made under S.235 of the Ordinance in respect of persons other than companies would at best encroach into the territory of double taxation and there was no constitutional guarantee against double taxation, nor was there a constitutional bar upon the legislative for imposing the same---Principle applicable merely was that double taxation should not be presumed in the absence of clear, express and unequivocal provision---Provisions of S.235, Income Tax Ordinance, 2001 were crystal clear leaving no room for doubt as to its applicability with the rate leviable spelt out in Part-IV of the First Schedule of the Ordinance---Contention of the assessee was repelled---Principles.

Elahi Cotton Mills and others v. Federation of Pakistan through Secretary Ministry of Finance Islamabad and 6 others PLD 1997 SC 582 and Pakistan Industrial Development Corporation v. Pakistan through Secretary Ministry of Finance 1992 PTD 576 ref.

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

----S. 235---Provision of S. 235, Income Tax Ordinance, 2001 is not confiscatory, in view of the quantum of tax levied---Reasons.

Elahi Cotton Mills and others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad PLD 1998 SC 582 ref.

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

----S. 235---Constitution of Pakistan (1973), Arts.4 & 24---Surplus advance tax---Surplus amount after adjustment of minimum tax in case of persons other than companies in law and in fact belongs to and vests in the assessee and is the property of the assessee which can only be appropriated by the department if the said amount can be brought within the mischief of a charging provision in respect whereof---By virtue of S.235(4) of the Income Tax Ordinance, 2001, in case of persons other than companies, the department is retaining and the assessess are being deprived of the funds and the properties in violation of the law---Such act of the department is not only violative of Art.4 of the Constitution, it manifestly offends against the fundamental rights of the assessees as guaranteed under Art.24 of the Constitution---Section 235, inasmuch as it purports to deal with the surplus advance tax after the adjustment of the minimum tax up to a bill of Rs.20,000 per month it is ex facie in violation of the Constitution and the fundamental rights of the assessees---Principles.

Commissioner of Income Tax v. Asbestos Cement Industries Ltd. and others 1993 PTD 342 and Lt. Col Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty, Government of Pakistan Karachi and another PLD 1962 SC 335 ref.

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

----S. 235---Constitution of Pakistan (1973), Art.199---Constitutional petition---Vires of S.235, Income Tax Ordinance, 2001---Section 235, Income Tax Ordinance, 2001, to the extent that it applies to companies, is intra vires the Constitution, however, tax collected from the person other. than a company under S.235(1) of the Income Tax Ordinance, 2001 after deduction of minimum tax charged/levied under S.235(4) of the Ordinance, though in the custody of the department, in law and in fact, is the property of the assessee, and is available for adjustment against any other charge under the Income Tax Ordinance, 2001 and the surplus, if any, thereafter is liable to be refunded to the assessees---Principles.

Elahi Cotton Mills and others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad PLD 1997 SC 582 ref.

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

----S. 234-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Vires of S.23-A, Income Tax Ordinance, 2001---Section 234-A, Income Tax Ordinance, 2001 is intra vires the Constitution and no exception can be taken thereto---Principles.

Mian Ashiq Hussain, Ch. Anwar ul Haq-I, Mr. Muhammad Ajmal Khan, Mian Tabasam Bashir, Mr. Shahbaz Butt, Mian Mehmood Rashid, Mr. Siraj ud Din Khalid, Musthaq Ahmed Mughal, Muhammad Aslam Khan Dhakar, Sardar Muhammad Hussain Khan, Javed Iqbal Qazi, Akbar Ali Sheikh, Zafar Iqbal Chuhan, Shehzad Ahmed Durrani, Rana Muhammad Afzal, Sh Naveed Masud, Shafqat Mehmood Chuhan, Muhammad Naveed, Barrister Zargam Lakhser, Ch. Mumtaz ul Hasan, Muhammad Farooq Sheikh, Ijaz Ahmed Awan, Shahbaz. Siddique, Waqar Azeem, Shahid Mehmood Bhatti, Shahzada Mazhar, Javed Mazhar Dhoon, Ijaz ul Ahsan, Ustad Muhammad Iqbal, Muhammad Akram Shahid, Ch. Mumtaz ul Hasan, Qamar uz Zaman Akhtar Tarar, Rana Munir Hussain, Muhammad Akhtar Rana, Khalid Nawaz Ghuman, Malik Imran Nazir Awan, Kh. Saeed uz Zafar, Rana Muhammad Arshad Khan, Ijaz Ali Bhatti, Irtaza Ali Naqvi Muhammad Arif Yaqub Khan, Muhammad Jamil ur Rehman, Muhammad Waseem, Aamir Umar Khan, Zahid Farani Sheikh, Abdul Razaq Mirza, Asif Masud Khan, Ali Mansur Malik, Muhammad Nadeem, Umar Alvi, Abdul Qadoos Mughal, Ghulam Abbas Sandhu, Aamir Ali Khan, Agha Sarfraz, Muhammad Saqib Sheikh, Muhammad Hussain Chutia, Tariq Saleem Sheikh, Muhammad Aamir Malik and Muhammad Shahzad Shaukat for Petitioners.

Muhammad Ilyas Khan, Senior Legal Advisor Income Tax, Shahid Jamil Khan, Jan Muhammad Chaudhri, Tahir Mehmood Khokhar and Fayyaz Sangera for Respondents.

Muhammad Ashraf Khan, DAG and Nawaz Waseer Standing Counsel.

Date of hearing: 11th, 12th, 13th, 30th and 31st March, 2009, 1st 2nd, 3rd, 6th, 8th and 10th April, 2009.

2009 P T D 1491

[Lahore High Court]

Before Khawaja Farooq Saeed, J

RIZWAN AHMED

Versus

COMMISSIONER OF INCOME TAX, AUDIT DIVISION-II and 2 others

Writ Petitions Nos. 11025 to 11027 and 9851 of 2008, heard on 14th October, 2008.

Investment Tax Scheme, 2008---

----Income Tax Ordinance (XLIX of 2001), S.120-A--C.B.R. Circular No.3 of 2008 dated 1-7-2008---C.B.R. Circular No.7 of 2008 dated 19-7-2008---C.B.R. Circular No.8 of 2008, dated 5-9-2008----Investment Tax scheme--Applicability--Scope---Investment Tax Scheme, 2008 which was made for allowing the undisclosed income by payment of tax thereon was "subject to the provisions of Income Tax Ordinance, 2001" which meant that said clause was not a non obstante clause---All the provisions of Income Tax Ordinance, 2001 shall remain intact while making any scheme---Investment scheme would not apply 'on the income which had not escaped assessment and was still subject-matter of the proceedings in some assessment---Phrase "but was not so charged" had made the position very clear---If an amount had already been charged or was subject to charge and the proceedings were pending in respect thereto, the Investment Tax Scheme, 2008 could not be extended on such income---Even if the Board had not issued C.B.R. Circular No.8 of 2008 dated 5-9-208, the Investment Tax Scheme, 2008, because of the definition of "undisclosed income" given therein, could not have been allowed in respect of the income for which department had already issued notices or that the same was in respect of an income which pertained to tax year 2008---Scheme had to remain within the parameters fixed by S.120-A, Income Tax Ordinance, 2001---Principles.

Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917; Federation of Pakistan and others v. Ch. Muhammad Aslam and others 1986 SCMR 916 and Commissioner of Income Tax v. Bhanwarlal 1997 ITR 870 ref.

Naveed A. Andrabi, Siraj-ud-Din Khalid and Shahbaz Butt for Petitioners.

Jan Muhammad Chaudhry and Shahid Jamil Khan for Respondents.

Date of hearing: 14th October, 2008.

2009 P T D 1503

[Lahore High Court]

Before Khawaja Farooq Saeed, J

HAMEEDA INDUSTRIES (PVT.) LTD. through Director

Versus

ADDITIONAL COMMISSIONER OF INCOME TAX/ WEALTH TAX, SIALKOT

Writ Petition No.8683 of 2003, heard on 29th May, 2009.

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

----S. 80DD---Provision of S.80DD, Income Tax Ordinance, 1979 is independent---Tax withheld at the time of import shall be minimum amount payable---If subsequently on making assessment of the said importer the tax calculated exceeds amount of the said deduction, the same shall be allowed only as an adjustment---Said adjustment does not create any bar or gives any right of separate charge.

2009 PTD (Trib.) 782 and Rima Cooking Oil, Industries (Pvt.) Ltd. v. Federation of Pakistan and others 2002 PTD 1023 ref.

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

----S. 122---Constitution of Pakistan (1973), Art.199---Constitutional petition---Maintainability---Amendment of assessment---Constitutional jurisdiction of High Court would be exerciseable where the matter related to exercise of jurisdiction under S.122 of the Income Tax Ordinance, 2001.

Baluchistan Textile Mills Ltd. Central Board of Revenue and others NLR 1983 Tax 153 and Syed Allah Dost v. Haji Muhammad Alam and others PLD 1987 Quetta 235 ref.

Mian Ashiq Hussain for Petitioner.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 29th May, 2009.

2009 P T D 1507

[Lahore High Court]

Before Irfan Qadir, J

MOHSIN RAZA

Versus

CHAIRMAN, FEDERAL BOARD OF REVENUE and others

Writ Petitions Nos. 4630, 4398, 4631, 4673, 4810, 4811, 5073, 5192, 5216, 5537, 5583, 5752, 5825, 5946, 5947, 5997, 6004, 6030, 6037, 6038, 6127, 6128, 6129, 6143, 6157, 6175, 6240, 6241, 6290, 6333, 6334, 6383, 6384, 6385, 6386, 6387, 6388, 6389, 6390, 6520, 6521, 6666, 6667, 6694, 6769, 6771, 6779, 6780, 6781, 6816, 6931, 6948, 6953, 7093, 7101, 7241, 7398, 7423, 7424, 7425, 7443, 7499, 7505, 7550, 7551, 7664 of 2009, 3667, 4022, 4200 and 4673 of 208, decided on 14th July, 2009.

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

----Art. 199---Income Tax Ordinance (XLIX of 2001), S. 177---Constitutional jurisdiction of High Court---Scope---Audit---Selection of petitioners' cases for audit with specific reference to S.177(4), Income Tax Ordinance, 2001---Roving inquiries and fishing expeditions and those too in violation of the statutory provisions not only cause the subject of such inquiry to become an "aggrieved person" but such a course of action was also violative of due process of law thereby entitling the aggrieved person not only to claim damages in a court of civil jurisdiction but also through invocation of constitutional jurisdiction---Petitioners had called in question the letters whereby their income tax affairs had been selected for audit on the ground that said letters of the department were violative of statutory provision viz. S.177 of the Income Tax Ordinance, 2001---Held: Question involved in the constitutional petitions was purely a legal question falling within the ambit of Art.199 of the Constitution and thus such constitutional petitions were maintainable.

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

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

----S. 177---Constitution of Pakistan (1973), Arts.199 & 25---Constitutional petition---Audit---Selection of cases for audit by Commissioner---Law and procedure analysed---Criteria, an essential pre-requisite---Commissioner of Income Tax could not select a case for audit, unless criteria provided had been duly fulfilled as laid down in terms of S.177(1) of the Income Tax Ordinance, 2001 by the Federal Board of Revenue because Commissioner could only select cases for audit in addition to selection for Audit referred to in S.177(2), Income Tax Ordinance, 2001 but he could not select cases for audit in substitution or in isolation thereof---Selection of cases in violation of such procedure was illegal---Prior notice to the assessee whose case was selected for audit, was of immense significance and absence thereof in such cases was sufficient to render the letters to the assesses by the department, about selection of cases for audit, to be devoid of any legal justification---High Court, in circumstances, accepted the constitutional petitions and the impugned orders passed by the Commissioner Income Tax (Audit) were declared to have been issued without lawful authority having no legal effect---Direction was issued by the High Court to the Federal Board of Revenue to lay down criteria in compliance with the mandate of S.177 of the Income Tax Ordinance, 2001 whereafter de novo proceedings be initiated with regard to the Income Tax affairs of such person who come within the purview of the said criteria while ensuring that persons similarly placed were treated alike in furtherance of Article 25 of the Constitution and selection of cases for audit on the basis of whimsical pick and choose at random resulting in discrimination ought to be avoided---Principles.

Clause (1) of section 177, Income Tax Ordinance, 2001 countenances that Central Board of Revenue (now Federal Board of Revenue) may lay down criteria for selection of any person for an audit of his income tax affairs by the Commissioner. It is clear that the competent authority to select a case for audit is the Commissioner whereas the criteria are to be laid down by the Central Board of Revenue. Clause (2) of section 177 makes it obligatory that Commissioner shall strictly follow the criteria laid down by the Central Board of Revenue (now Federal Board of Revenue) in selecting a person for audit. Reading clauses (1) and (2) together the word "may" appearing in clause (1) can have no other meaning except the word "shall" for the simple reason that if we read the same otherwise, then clause (2) of section 177 will be rendered redundant and Commissioner of Income Tax shall either not select a case for audit or if he selects a case for audit in the absence of such criteria, clause (2) of section 177 will be rendered meaningless, ineffective and futile. Unless and until such criteria are laid down by the Central Board .of Revenue the scheme of section 177 shall remain incomplete and Commissioner will have no guidelines for selection of cases for audit.

The confidentiality of criteria cannot be stretched to mean absence thereof or the scope of this secrecy can be enlarged to an extreme degree of absolving the Federal Board of Revenue from laying down the criteria in question. In the absence of such criteria, the issue of its confidentiality would not arise. If the criteria are to remain confidential from all concerned including the persons to be subjected to the same then such non-disclosure of criteria in itself would nullify the basic object and purpose for which subsections (1) and (2) have been enacted.

In the absence of the said criteria which are essentially vital and relevant for the selection of cases by Commissioner, any audit would be rendered violative of the letter and spirit of section 177 of the Income Tax Ordinance, 2001. It was contended that the selection for audit had been made by Commissioner under clause (d) of subsection (4) of section 177. This argument with specific reference to clause (d) is not well founded because clause (d) makes no mention of the person to be selected for audit, rather, it refers to any other matter which in the opinion of the Commissioner is to be taken into account for determination of correct income of the persons selected for audit under subsection (4) having regard to persons mentioned in clauses (a), (b) and (c) especially when the word `person' has been expressly excluded from clause (d) by the legislature in its wisdom. There is no denying the fact that Commissioner under subsection (4) has been empowered to select cases of only those persons [in addition to persons enumerated in subsections (1) and (2)] who are specifically mentioned in clauses (a), (b) or (c) of subsection (4) while taking such matters into consideration which, in the opinion of the Commissioner, are material for determination of correct income.

In the present cases, as regards the impugned selection for audit, neither any reference is made to the criteria envisaged in subsection (1) nor to the persons mentioned in clauses (a), (b) and (c) of subsection (4). Besides, the Commissioner has not formed any opinion qua the material for the determination of correct income in terms of clause (d).

There was yet another contention that in selection of cases of persons for audit, clause (d) of section 177(4) can be invoked independently of all the preceding clauses and subsections of section 177. In order to comprehend the true scope of sub-clause (d) of section 177(4) a careful scrutiny of the same needs to be done. Sub-clause (d) has direct nexus to subsection (4) of section 177. In fact sub-clause (d) is controlled by clause (4) of section 177. According to sub clause (d) the Commissioner may also select a person for an audit of the person's income tax affairs having regard to any other matter, which, in the opinion of the Commissioner, is material for determination of correct income. In other words the Commissioner has to form an opinion by identifying other matters which will enable him to determine the correct income prior to selection of a person for an audit of his income tax affairs. Such opinion cannot be formed unless the Commissioner arrives at a definite conclusion that the income declared by such person is incorrect. The requirement of formation of opinion in itself suggests that opinion must be based on cogent reasons and not on pick and choose. In the present cases, the Commissioner has not made any determination that the income declared by the assessees was incorrect. The Commissioner has merely proceeded to select cases at random by simply mentioning in his notice certain matters which, according to the Commissioner, may be material for audit purposes but the same is completely silent respecting any nexus or relevance to the determination of correct income. In all the impugned notices issued under clause (d) of section 177(4), there is not even the slightest hint that the income declared by assessees was not correct especially when the Commissioner should have formed an opinion qua the incorrectness of income declared before resorting to clause (d) wherein it is further binding on the Commissioner to furnish opinion as regards any other matter which is relevant for the determination of correct income of the person enumerated in clauses (a), (b) and (c) of subsection (4) of section 177.

A comparison of section 177 as it stood prior to the substitution of the new section by the Finance Act, 2004 and the amended section 177 as it presently stands will make it clear that the relatively wider or seemingly unbridled discretion available earlier to the Commissioner as regards the selection of any person for an audit of his income tax affairs is no longer available to him now.

If the old and new section 177 are placed in juxtaposition it becomes unambiguously clear that subsection (1) of earlier section 177 has been materially altered. In the earlier subsection (1) no limitations were placed on the authority of the Commissioner to select person's case for audit of his income tax affairs. However in the amended section the Commissioner can only invoke clause (d) after fulfillment of the following conditions:--

(i) The Commissioner can select a person for audit in accordance with the criteria laid down by the Board under subsection (1).

(ii) The persons' history for compliance or non compliance with this Ordinance.

(iii) The amount of tax payable by the person.

(iv) The class of business conducted by the person.

The four conditions mentioned above are essential pre-requisites provided by subsection (4) of amended section 177 of the Income Tax Ordinance, 2001. It is clear from the introductory word of subsection (4) that in addition to the selection referred to in subsection (2), the Commissioner may also select a person for an audit of his income tax affairs. The words "in addition to" do not mean in substitution to or in isolation of or that these words can by any stretch of imagination be construed to absolve the Federal Board of Revenue from laying down the criteria or the Commissioner from adhering to the same having regard to clauses (1) and (2) of section 177 of the Income Tax Ordinance, 2001.

Perusal of the impugned letters would show that in all of these letters no reasons what-so-ever have been mentioned as to why the petitioner's case was selected for audit except that in some of the cases It is mentioned that all the declared expenses seem to be inflated and require verification with regard to their admissibility and genuineness in terms of section 21 of Income Tax Ordinance, 2001. As regards other impugned orders no reason what-so-ever has been mentioned qua the selection of case for audit. Even if the contents of these notices for the sake of argument is taken to be the material relevant for the determination of correct income, the same has no nexus to the contents enumerated in the preceding sub clauses of subsection (4) of section 177 or the other preceding clauses of section 177. (If clause (d) of sub-section (4) is to be interpreted in isolation of the remaining provisions of the same even then the opinion of Commissioner envisaged in clause (d) of subsection (4) of section 177 of Income Tax Ordinance is non-existent. Any opinion formed in violation of section 24-A of the General Clauses Act is no opinion in the eye of law).

Of course clause (d) of subsection (4) will not apply in isolation of the preceding clauses or sub-sections of section 177 in as much as clause (d) is to apply in addition to such preceding clauses. Even if the court had agreed with the argument that clause (d) confers independent power upon the Commissioner to select a person for audit the latter is by no means absolved of forming an opinion that the matters enumerated in the impugned letters are necessary for determination of correct income. Such opinion cannot be formed unless the Commissioner concludes on the basis of valid grounds that the income declared by the person concerned is incorrect. Once such a conclusion is reached the Commissioner is then required to form an opinion as regards the matters which are relevant and necessary for the computation or determination of correct income. In none of the impugned letters or even in the parawise comments furnished by the department any opinion has been formed qua incorrectness of the income declared by the assessees or as regards the matters which, according to the Commissioner, are material for the determination of correct income. Mere mention of such matters in the absence of formation of opinion that such matters are also material for determination of correct income, is not enough. The formation of an opinion qua relevance' of such matters vis-a-vis the determination of correct income is undoubtedly an essential condition of sub-clause (d) of clause (4) of section 177 of the Income Tax Ordinance, 2001 even if this sub clause is read in isolation of its preceding clauses.

Laying down of criteria for selection of any person for his income tax affairs in terms of subsection (1) of section 177 is an essential pre-requisite for the Commissioner to select a person for audit. Once the Commissioner has selected a case for audit in accordance with the criteria laid down by the Central Board of Revenue in terms of clause (1) of section 177 then additionally, the Commissioner can also select a person for an audit of the person's Income Tax affairs having regard to the factors enumerated in clauses (a), (b) and (c) of sub-section (4) of section 177. It would be seen that subsection (4) will come into play only when the Commissioner, in the course of proceeding with the audit of a person under subsection (2) of section 177 discovers that in addition to the selection of person in subsection (2) the Commissioner now requires to select another person for audit of Income Tax affairs. This is exactly what is envisaged in subsection (4) of section 177 wherein it is clearly mentioned that in addition to the selection referred to in subsection (2), the Commissioner may also select a person for an audit of income tax affairs. As such subsection (4) of section 177 is secondary in character in relation to subsections (1) and (2). It therefore follows that if subsection (4) is not capable of being isolated from subsections (1) and (2), then clause (d) of subsection (4) cannot also be detached from its preceding clauses or subsections.

Different clauses of section 177 are inter related and the sequence or order in which these have been mentioned by the Legislature in its wisdom must be observed by the executive authorities in letter and spirit as an obligation since each clause augments the other. Clause (d) of subsection (4) of section 177 cannot be isolated from its preceding clauses or subsections in a manner that primary part of section 177 becomes redundant in view of such isolation thereby paralyzing the main body of the provision in question in order to make the residual or secondary clause extra potent.

The question as regards the issuance of a notice prior to the selection of a case for audit, section 177 of the Income Tax Ordinance is completely silent on this aspect. Similar was the position with regard to section 177 of the Income Tax Ordinance 2001 prior to the coming into force of Finance Act 2004. Before proceeding with the audit of an assessee, a prior notice is an essential requirement since audit of person's income tax affairs results in prejudice being caused to the assessee, who becomes subjected to scrutiny and that the return filed by him is re-opened.

It is, therefore, not correct to contend that the impugned letters are not prejudicial to the interests of the assessees. The selection of a case for audit in itself is tantamount to an adverse order since it undermines the sanctity of an assessment order issued by the Commissioner of Income Tax in terms of clause (b) of subsection (1) of section 120 of the Income Tax Ordinance, 2001. An adverse order made without affording an opportunity of personal hearing is to be treated as a void order. The principles of audi alteram partem in particular are to be read into every statute.

Prior notice to the assessees qua selection of their cases for audit is of immense significance and the absence thereof in the cases in question is sufficient to render the impugned letters to be devoid of any legal justification.

Commissioner of Income Tax cannot select a case for audit under clause (d) of subsection (4) of section 177 of the Income Tax Ordinance, 2001 unless criteria provided has been duly laid down in terms of subsection (1) of section 177 by the Federal Board of Revenue, because Commissioner can only select cases for audit in addition to selection of audit referred to in subsection (2) of section 177 but he cannot select cases for audit in substitution or in isolation thereof. The import of the words "in addition to appearing at the beginning of subsection (4) of section 177 of the Income Tax Ordinance, 2001 is significant.

The words "in addition to" mean moreover, additionally, also. In the context of section 177 of the Income Tax Ordinance, 2001 or otherwise these words convey that something is to be done moreover or additionally with reference to that thing which is being done prior thereto. These words have a tilt towards something other than the usual. In these words there is a tinge of something which is relatively exceptional or which is in contradistinction to what is usually or generally to be accomplished in routine. To the contrary the Commissioner of Income Tax is not selecting cases for audit in addition to the selection referred to in subsection (2) of section 177 but in fact the Commissioner is selecting these cases as a matter of routine because scores of cases have been picked up by the Commissioner under clause (d) of subsection (4) of section 177 but not a single case has been selected by him in terms of the selection referred to in subsection (2) of section 177. The impugned selection of cases on this score alone is illegal.

All the writ petitions were accepted by the High Court and the impugned orders passed by the Commissioner Income Tax (Audit) were declared to have been issued without lawful authority and as such the same were of no legal effect. Consequently a direction was issued to the Federal Board of Revenue to lay down a criteria in compliance with the mandate of section 177 of the Income Tax Ordinance 2001 whereafter de novo proceedings be initiated with regard to the income tax affairs of such persons who come within the purview of the said criteria while ensuring that persons similarly placed were treated alike in furtherance of Article 25 of the Constitution of Islamic Republic of Pakistan, 1973 and selection of cases for audit on the basis of whimsical pick and choose at random resulting in discrimination ought to be avoided.

1998 SCMR 2268; 1997 SCMR 1804; Commissioner of Income Tax and others v. Fatima Sharif Textile Mills Kasur and others 2009 SCMR 344 = 2009 PTD 37; Muhammad Hussain's case 2005 PTD 152; PLD 2002 SC 630; 2007 SCMR 1367 = 2007 PTD 1656; 2007 PTD 1800; 2009 PTD 284; 2008 PTD 1440; 2006 PSC 9; 1991 PTD 968; PLD 1997 SC 582; PLD 1976 Lah. 1626 = 1976 PTD 347; 1978 67 ITR 11; 1995 PTD 393; 2000 SCMR,1017; Assistant Collector of Customs v. Khyber Electric Lamps and others 2001 SCMR 838; PLD 2008 SC 663; 2007 SCMR 330; 2005 SCMR 678; 2005 SCMR 1814 and PLD 2004 SC 441 ref.

Syed Ali Imran Rizvi, Dr. Ilyas Zafar, Shahbaz Butt, Tahir Mehmood Butt, Aamer Umer Khan, Asghar Ahmad Khan Kharal, Siraj­-ud-Din Khalid, -Inam-ul-Haq, Yunus Khalid, Mian Mehmood Rashid, Nadeem, Ch. Mumtaz-ul-Hassan, Ikram-ul-Haq, Muhammad Arif Malhi, Tariq Saleem, Rana Muhammad Afzal, Muhammad Ajmal Khan, Sajid Ijaz Hotiana for Petitioner.

Muhammad Ilyas Khan and Abdul Razzaq Raja, Deputy Attorney General for Respondents.

Tahir Mehmood Khokhar, Shahid Jamil Khan and Mian Yousaf Umer for Department.

Date of hearing: 24th April, 2009.

2009 P T D 1541

[Lahore High Court]

Before Irfan Qadir, J

MUHAMMAD SHAHID

Versus

FEDERATION OF PAKISTAN and 3 others

Writ Petition No.6104 of 2009, heard on 24h April, 2009.

(a) Interpretation of statutes---

----While interpreting fiscal instruments, benefit of the same must go to the subject.

(b) Personal Baggage, Transfer of Residence and Gift Scheme Import of Vehicles Rules, 2007---

----R.3 (i)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Word "import"---Connotation---When petitioner booked vehicle in question for import in Pakistan, it was not more than three years old but at the time of arrival of vehicle into Pakistan, period of three years had elapsed---Effect---Word "import" was not to be taken in the context of merely the date of import but entire process of import---Process of import involved number of stages and all stages of import had been completed at a time when vehicle was not more than 3 years old---High Court directed the authorities to determine age of vehicle of petitioner by counting number of years from the date of its manufacturing till the date of its shipment after due verification of relevant documents establishing both the dates---If age of vehicle in question was not more than three years on the day of its shipment, the same should be released provided evidence regarding the information was found genuine---Petition was disposed of accordingly.

Mian Abdul Ghafoor for Petitioner.

Miss Kalmar Parveen for Respondents.

Date of hearing: 24th April, 2009.

2009 P T D 1557

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs RUPAFIL LTD. and 2 others

Versus

TAXATION OFFICER/DEPUTY COMMISSIONER OF INCOME TAX, LAHORE

Writ Petition No. 1363 of 2003, heard on 29th May, 2009.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 122 & 221---Application of S.122, Income Tax Ordinance, 2001---Scope---Provisions of S.122 of the Ordinance are inapplicable on any proceedings which are initiated before its operation---Principles.

Provisions of section 122, Income Tax Ordinance, 2001 are inapplicable on any proceedings which are initiated before its operation.

The main reason, inter alia, behind is that it talks of and deals with "tax year" which is a new connotation as against "assessment year" used prior to the Income Tax Ordinance, 2001. Moreover, tax year has a different charging period from that assessment year. Furthermore, under the new Ordinance of 2001, the rectification of mistake is from an order passed by him which by virtue of the said new Ordinance means the new assessing authority, "the Commissioner". Meaning thereby he can rectify an order passed by a Commissioner.

Since the Commissioner was not an assessing authority in the old law and the order was passed by "Taxation Officer" it is not an order passed by him. The same, therefore, cannot be rectified by the Commissioner. This hardly needs any mentioning that even after delegation of power by him to a subordinate officer, the said officer does not figure within the language of section 221 as he also was not an authority under erstwhile Income Tax Ordinance and the order is not passed by him.

Writ Petition No.8683 of 2003 (FARPTD177-9.DOC) ref. Commissioner of Income Tax/Wealth Tax, Zone-C (Legal), Lahore v. Messrs Idrees Cloth House, Lahore 2008 PTD 1420 rel.

Mian Ashiq Hussain for Petitioner.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 29th May, 2009.

2009 PTD 1602

[Lahore High Court]

Before Khawaja Farooq Saeed, J

PAKISTAN TELECOMMUNICATION COMPANY LIMITED (PTCL) through Regional General Manager, Lahore

Versus

GOVERNMENT OF PUNJAB through Chief Secretary, Lahore and 3 others

Writ Petition 42 of 2009, decided on 19th June, 2009.

(a) West Pakistan Urban Immovable Property Tax Act (V of 1958)---

----Ss. 3, 7 & 10---Notification No.(11)2004 I inv-LL, dated 20-4-2004---Constitution of Pakistan (1973), Art.199---Constitutional petition---Levy of tax in terms of reduced rates etc.---"Industrial unit"---Connotation---Telephone Exchange is an "industrial unit", fully covered within the classifications provided by the Provincial Government, and is entitled to all the benefits in terms of reduced rates etc. of taxation, provided therein---Any building unit in which articles are manufactured, altered, cleaned, repaired, ornamented, finished, broken up or demolished, or in which materials are transformed including shipbuilding, and generation, transformation and transmission of electricity, telegraphic and telephonic installation and motive power of any kind is carried out, is an "industrial unit"---Principles.

Messrs City Bank N.A., Karachi v. The Commissioner of Income Tax, Central Zone-C, Karachi 1994 PTD 1271; Hafeezuddin and 2 others v. Badaruddin and 2 others PLD 2003 Kar. 444; Wali-ud-Din v. Muhammad Tufail and others 1994 MLD 159; Law Lexicon the Encyclopedia Law Dictionary, Reprinted Edition, 2006 by Wadhwa; Hudabiya Engineering (Pvt.) Ltd. v. Pakistan through Secretary, Ministry of Interior, Government of Pakistan and 6 others PLD 1998 Lah. 90; English Dictionary and K.G. Old, Principal, Christian Technical Training Centre, Gujranwala v. Presiding Officer, Punjab Labour Court, Northern. Zone and 6 others PLD 1976 Lah. 1097 ref.

(b) Words and phrases----

----"Industry"---Meaning.

(c) Words and phrases---

----"Industrial"---Meaning.?

(d) Interpretation of statutes---

----Understanding the real import of a term used in a statute---Where the term was not defined in the statute, the same shall be defined in the context it had been used---In order to understand the real import of a term used in a statute, it was necessary-to examine the statute itself as an aid to its interpretation.?

Messrs City Bank N.A., Karachi v. The Commissioner of Income Tax, Central Zone-C, Karachi 1994 PTD 1271 and Hafeezud?din and 2 others v. Badaruddin and 2 others PLD 2003 Kar. 444 ref.

(e) Interpretation of statutes---

---Dictionary meanings of word not defined in the statute itself---Principle---Where no statutory definition of a word is available, dictionary meanings should be adopted, however, it being never safe to adopt them strictly as the same in enactments are controlled by language as a whole and are not to be read in isolation.?

(f) Interpretation of statutes---

----Statute carrying no definition of a word---Borrowing definition from some other statute is never safe, however, words and phrases should be understood by its reference to the law and its construction in the said statute.?

English Dictionary and K.G. Old, Principal, Christian Technical Training Centre, Gujranwala v. Presiding Officer, Punjab Labour Court, Northern Zone and 6 others PLD 1976 Lahore 1097 ref.

Ch. Anwar ul Haq-I for Petitioner.

Ch. Rizwan Mushtaq and Rana Ameer Ahmad Khan, A.A.-Gs. Muhammad Nawaz Waseer, Standing Counsel.

Akram Ashraf Gondal, Director Excise and Taxation, Lahore Region-A.

2009 P T D 1628

[Lahore High Court]

Before Khawaja Farooq Saeed, J

SABIHA BEGUM

Versus

FEDERAL BOARD OF REVENUE through Chairman and 2 others

Writ Petition No. 2654 of 2009, heard on 15th May, 2009.

(a) Income Tax Rules, 2002---

----Rr. 158 & 194---Income Tax Ordinance (XLIX of 2001), Ss. 237 & 239(7)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Tax payable by company demanded from its Director through recovery notice---Validity---Such company was a family company as husband, wife and other family members were sponsors-cum-Directors thereof---Entire management, assets, calculation and disbursement was in hands of petitioner-Director---Petitioner, unless protected by law, could not be allowed to run away from his liability to pay tax---Petitioner had alternate remedy of appeal under R.194 of Income Tax Rules, 2002 against recovery notice issued under S.158 thereof---Appellate Authority could look into validity of such notice and adjudge its legality and propriety---High Court dismissed constitutional petition in limine.

(b) Interpretation of statutes---

----Provision providing benefit and removing some apparent injustice would always be treated as welcome relief and generally would be treated retrospective in effect.

Imran Anjum Alvi, for Petitioner.

Afzaal Ahmed Hashmi for Respondents.

Date of hearing: 15th May, 2009.

2009 P T D 1664

[Lahore High Court]

Before Syed Asghar Haider and Imtiaz Rashid Siddiqui, JJ

Messrs PAKISTAN OIL FIELDS

Versus

CUSTOMS CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, ISLAMABAD

Tax Appeals Nos. 27 to 29 of 2005, heard on 26th May, 2009.

Central Excise Act (I of 1944)---

----Ss.35C & 36C---Appeal to High Court---Order which disposes of an appeal by the Appellate Tribunal and served on the parties thereof under S.35C(3) of the Central Excise Act, 1944 is the one which can be challenged under S.36C of the said Act before the High Court---Appeals directed against the order passed under S.35C(2) of the Central Excise Act, 1944 are incompetent in terms of S.36C of the said Act---Principles detailed.

Farhat Nawaz Lodhi for Appellant.

Rizwan Akhtar Awan for Respondent.

Date of hearing: 26th May, 2009.

2009 P T D 1697

[Lahore High Court]

Before Ch. Naeem Masood, J

Messrs LYALLPUR CHEMICALS LTD. through Chief Executive

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division and 4 others

Writ Petition No.4099 of 2007, decided on 14th July, 2009.

(a) Sales Tax Rules, 2006---

----R. 28---Filing of refund claim beyond statutory period of two months being time-barred was rightly rejected by Collector of Sales Tax.

(b) Sales Tax Rules, 2006---

----R. 28---Vires of R.28---Sales Tax Rules, 2006 having been framed by the Central Board of Revenue, a competent authority, were not ultra vires.

Messrs Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others PTCL 2002 CL 115; Messrs Pfizer Laboratories Ltd., v. Federation of Pakistan and others PLD 1998 SC 64 distinguished.

Mian Abdul Ghaffar for Petitioner.

Muhammad Nawaz Waseer, Standing Counsel for Pakistan.

2009 P T D 1707

[Lahore High Court]

Before Muhammad Khalid Alvi and Khawaja Farooq Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES ZONE, FAISALABAD

Versus

Messrs MASOOD TEXTILE MILLS LTD., FAISALABAD

P.T.R. Nos. 218 to 222 of 2005, heard on 27th May, 2009.

(a) Interpretation of statutes---

----Fiscal statute---Literal meaning would prevail.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B.69; Government of Pakistan and others v. Messrs Hashwani Hotel, Ltd. PLD 1990 SC 68 and Messrs Mehran Associates Limited v. The Commissioner of Income Tax Karachi 1993 SCMR 274 ref.

(b) Words and phrases---

----Aggregate---Definition.

Concise Oxford English Dictionary and Mushtaq Textile Mills Ltd. v. Karachi Metropolitan Corporation 1994 CLC 1516 ref.

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

----Ss. 80-D, 80-C & 80-CC---Tax on turnover---Scope---Section 80-D, Income Tax Ordinance, 1979 cannot be applied on each and every source of income of a tax-payer separately and it has to be on aggregate of the turnover of the taxpayer from all sources---Direction of the Income Tax Appellate Tribunal to charge it on the aggregate of S.80-C or 80-CC of the Ordinance, after inclusion of the turnover from other sources like local sale etc., which is not subject to withholding tax, needs no excep­tion---Principles.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582; Messrs Pakistan Refinery Ltd. v. Commissioner of Income Tax Companies-V Karachi 2005 PTD 2216; Messrs Pakistan Refinery Ltd. v. Commissioner of Income Tax Companies-V Karachi and 2005 PTD 2216 and Messrs Baig Spinning Mills Ltd. V. Federation of Pakistan and others 2005 PTD 1102 ref.

Khadim Hussain Zahid, Syed Sajjad Ali Jaffri, Shahbaz Butt, Shahid Jamil Khan, Rana Muhammad Afzal and Syed Naveed Andrabi for Appellant.

Syed Ibrar Hussain Naqvi for Respondent.

Date of hearing: 27th May, 2009.

2009 P T D 1715

[Lahore High Court]

Before Irfan Qadir, J

Messrs AIDY VEE & CO. (PVT.) LTD. through Director, Versus

TAXATION OFFICER OF INCOME TAX, LAHORE and 4 others

Writ Petition No.7594 of 2009, decided on 24th April, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 137 & 127---Constitution of Pakistan (1973), Art.199---Constitutional petition---Recovery proceedings pending appeal---Contention of the assessee/petitioner was that entire process of filing the appeal would be rendered infructuous in case the recovery proceedings were not stayed especially when the appeal of the assessee/petitioner was pending adjudication before the Commissioner before whom an application for interim relief was also pending---Validity---Held, Department, in circumstances,- shall not effect the impugned recovery till the application for interim relief or appeal in question was finally decided.

Siraj-ud-Din Khalid for Petitioner.

2009 P T D 1785

[Lahore High Court]

Before Syed Hamid Ali Shah, J

MULTAN ENTERPRISES (PVT.) LTD.

Versus

DIRECTOR-GENERAL (INTELLIGENCE & INVESTIGATION) SALES TAX, MULTAN and 3 others

Writ Petition No.4094 of 2008, decided on 8th June, 2009.

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

----S. 38---Authorised officers to have access to premises, stocks, accounts and record of registered person---Department had addressed a number of letters and required from the registered person original record for the purpose of completion of audit---Registered person had failed to respond to said letters of the department---Registered person's reply placed on record showed his inability to provide record on the basis that same had been misplaced and could not be located---Department had been authorised by the Federal Board of Revenue to conduct audit and department, for the purpose of inquiry and investigation, could requisition the record and take the same into their custody---Registered person was bound to furnish such information or explanation as may be asked by the authorised officer, as envisaged by S.38(2), Sales Tax Act, 1990-Letters issued by the department being in accordance with law and within contemplation of S.38, registered person was bound to answer the queries and provide requisite information.

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

----S. 25(2)---Audit---Access to record, documents etc.---Registered person had failed to join the proceedings of audit on the ground that "audit could be conducted once in year"---Validity---Restraint imposed on the conduct of audit once a year was with regard to the audit conducted by "officer of the Sales Tax"---Registered person had placed on record certificate of audit conduct by Audit Officer of the Revenue Receipts Audit, said officer was not the officer of Sales Tax and audit by him would not bar the audit by Sales Tax Department---Language employed in S.25(2), Sales Tax Act, 1990, was "may, once a year, conduct audit"-Use of word "may" made the provision directory and not mandatory---Said provision when read in conjunction with proviso to S.25(2) of the Act, left hardly any restraint on the authorised officer to conduct a second audit, when there was sufficient evidence or information of a tax fraud or evasion of tax.

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

----S. 40---Searches under warrant--Authorised Officer had not removed goods or other record from the premises of the registered person---Requirement of a warrant from Magistrate within the contemplation of S.40, Sales Tax Act, 1990, was mandatory only when the officer of Department enters the place of a registered person to cause a search---Officer of the department neither procured any record from the premises of the registered person nor searched the premises; he had throughout been issuing letters for the delivery of record---Section 40 of the Act could be invoked only when the document or other material was obtained through search of the premises---Registered person, could not assail the procurement of record, which the officer of department had obtained from his Sole Agent firstly for the reason that said Sole Agent had not assailed the procurement of record at any forum and secondly, the General Manager of the registered person was one of the witnesses of the inventory, who accompanied the officer of the department for the procurement of record.

Chairman, Central Board of Revenue and others v. Messrs Haq Cotton Mills (Pvt.) Ltd., Burewala and others 2007 PTD 1351 distinguished.

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

----S. 25(2)---Audit---Department was bound to issue show-cause notice, which could be replied and contested by Registered person who also had the remedy to assail the proceedings subsequent to audit, in the hierarchy of department, under law.

Shahid Jameel Khan for Appellant.

Ahmad Raza along with Gulsher Auditor for Respondent.

Date of hearing: 5th June, 2009.

2009 P T D 1828

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs S.S. TANNERIES through Proprietor

Versus

ASSISTANT COLLECTOR (AUDIT & ENFORCEMENT DIVISION-II), LAHORE and 2 others

Writ Petition No.4171 of 2006, decided on 5th May, 2006.

Sales Tax Act (VII of 1990)---

---Ss. 46(4), second proviso & 48---Constitution of Pakistan (1973), Art.199---Constitutional petition---Recovery of tax pending appeal before Appellate Tribunal in case of lapse of six months period of interim injunction---Validity---Contention of the petitioner was that pursuant to provisions of S.46(4) of the Sales Tax Act, 1990, any interim injunction granted by the Tribunal expired on the lapse of six months and said period having expired in its case, department had commenced recovery proceedings through issuance of notice under S.48 of the Sales Tax Act, 1990---Held, petitioner/assessee shall appear before the Appellate Tribunal through an appropriate application seeking final adjudication of his pending appeal; Appellate Tribunal shall endeavour to decide the petitioner's appeal within a period of three months from the date of receipt of certified copy of present order of the High Court, during such period the department shall not press for recovery of the impugned dues through coercive process---Order accordingly.

Sunrise Bottling Company (Pvt.) Ltd. v. Federation of Pakistan 2006 PTD 535; Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax 2003 PTD 1746 and Mehram Ali and others v. Federation of Pakistan and others PLD 1998 SC 1445 ref.

Mian Abdul Ghaffar for Petitioner.

Izharul Haq Sheikh for Respondents.

2009 P T D 1835

[Lahore High Court]

Before Irfan Qadir, J

Messrs YOUNAS GROUP OF INDUSTRIES through Proprietor

Versus

COLLECTOR OF CUSTOMS, SAMBRIAL, SIALKOT and 2 others

Writ Petition No. 4719 of 2009, decided on 20th March, 2009.

Customs Act (IV of 1969)---

----Ss.20, 25 & 26---S.R.O. 410, dated 18-6-2001---Constitution of Pakistan (1973), Art.199---Constitutional petition---Import of goods---Application for concession of customs duty---Issuance of notice to importer regarding recovery of outstanding amount---Petitioner imported one consignment and for the clearance of the same filed bill of entry and also applied for the concession of customs duty in terms of S.R.O. 410, dated 18-6-2001---Post dated cheque amounting to Rs.8,56,000 along with indemnity bond in connection with duty and taxes of the consignment was also duly furnished by the importer according to the condition of said S.R.O.---Subsequently importer/petitioner received a notice, whereby a demand of Rs.150533 was made---Impugned notice for recovery, did not contain any detail regarding the amount outstanding against the petitioner, he, in response to said notice, requested the department to recall the same as nothing was outstanding against him---Notice, however, had not been withdrawn, which according to the petitioner, was tantamount to perpetuating an illegality---Very essence of any notice, was to enable any person affected thereby to know the particulars of the amount mentioned in the notice---In the present case, the basis of such outstanding amount was not known to the petitioner and he was in no position, either to respond to the said notice or to have resort to other legal remedies available to him under the law---Constitutional petition was allowed and notice issued to the petitioner was declared to be illegal with the direction to the department to supply the necessary particulars of the amount outstanding against the petitioner by means of a fresh notice according to law---Till the needful was accomplished by the department, the recovery of the amount in question, would continue to be without any lawful authority.

Muhammad Akram Nizami for Petitioner.

Miss Kausar Parveen for Respondent.

2009 P T D 1854

[Lahore High Court]

Before Jawwad S. Khawaja, J

Messrs GULZAR ENGINEERING CO. through Manager

Versus

ASSISTANT COLLECTOR, SALES TAX AND CENTRAL EXCISE, GUJRANWALA

Writ Petition No. 7839 of 2002, heard on 17th May, 2002.

Sales Tax Act (VII of 1990)---

----S. 46(4)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Contention of the petitioner was that even though the petitioner's appeal was 'still pending before the Appellate Tribunal and despite the fact that Tribunal considered it fit to stay the recovery of the amount of Sales Tax, Appellate Tribunal was not in a position to extend the interim order because of the express provision of S.46(4) of the Sales Tax Act, 1990---Petitioner, in circumstances, sought an order of High Court under Art.199 of the Constitution, directing the stay of the recovery of said amount---Validity---High Court allowed the constitutional petition and directed that the amounts impugned by the petitioner in its appeal before the Appellate Tribunal, shall not be recovered from the petitioner during the pendency of the appeal.

Jowahar A. Naqvi for Petitioner.

A. Karim Malik and Sohail Akhtar for the State.

Date of hearing: 17th May, 2002.

2009 P T D 1860

[Lahore High Court]

Before Umar Ata Bandial, J

Mrs. SHAHIDA ANWAR

Versus

DEPUTY COLLECTOR CUSTOMS, LAHORE and 4 others

Writ Petition No.18251 of 2005, decided on 17th April, 2009.

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

----Ss. 15, 16 & 17---S.R.O.634(I)/2004, dated 22-7-2004--S.R.O. 734(I)/2005, dated 21-7-2005---S.R.O. 564(I)/2005, dated 6-6-2005---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Import of a vehicle under general manifest dated 7-6-2005 and bill of entry dated 12-6-2005---Petitioner (Importer) declared the year of manufacture of vehicle to be 2003 and claimed its importability under Gift Scheme vide Import Policy ' Order 2004 published as S.R.O.634(I)/2004, dated 22-7-2004---Said Scheme/notification allowed the import of vehicles which were. not more than two years old---Authorities did not allow clearance of the imported vehicle and in due course referred verification of its year of manufacture, which finding disqualified the imported vehicle from the benefit of the Gift Scheme, resultantly petitioner's vehicle was not importable on 7-6-2005 and therefore, it became liable to be confiscated for violating the prohibition contained in Import Policy of 2004-2005 (S.R.O.634(I)/2004, dated 22-7-74)---Show-cause notice was issued by authorities to the petitioner--By, S.R.O.734(I)/2005, dated 21-7-2005, Government announced its Import Policy Order, 2005-2006 whereunder vehicles that were three years old rather than two years became importable under the Gift Scheme---Question arose whether in the circumstances, the petitioner was entitled to avail the enlarged concession given in the Import Policy Order, 2005-2006 and, therefore, to save the imported vehicle from confiscation"---Contention of the authorities was that beneficial S.R.O. could not operate retrospectively to reopen a past and closed transaction---Validity---Held, rule of past and closed transaction would apply when all proceedings on the question in issue, namely, importability of the petitioner's vehicle had concluded--In the present case, no proceedings had commenced on that question when the beneficial S.R.O. came into the field on 21-7-2005, not even the impugned show-cause notice dated 5-10-2005 had been issued to the petitioner thus, proceedings for the clearance of petitioner's imported vehicle still remained pending and could not be termed as being past and closed at the time when the beneficial dispensation under Import Policy Order 2005-2006 came into the field---Petitioner's imported vehicle arrived 18 days prior to the date of effectiveness of the beneficial S.R.O. viz. the Import Policy Order, 2005-2006 which enlarged the right to import vehicles under Gift Scheme; at the time of promulgation of said Policy Order, no action whatsoever had been taken by the authorities on their allegation of non-importability' of the petitioner's vehicle---Issue of importability of the said vehicle was therefore, a case under process and apending proceedings' at the time---No clearance or charging order having been passed on or before 21-7-2005, the matter of importability of the said vehicle was not a `past and closed transaction' on the said date---Benefit of enlarged concession under Import Policy, 2005-2006 should be made available to the petitioner---Principles.

Collector of Customs Lahore and others v. Messrs World Traders C.A.No.1882-2002; Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan and others PLD 1997 SC 587; Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 and Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 ref.

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

----Ss. 15, 16 & 17---Constitution of Pakistan (1973), Art.199---Constitutional jurisdiction of High Court---Scope---Constitutional petition calling into question the date of effectiveness of a statutory instrument---Constitutional jurisdiction constituted an appropriate remedy for the purpose---Principles.

Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250 and Messrs Usmania Glass Sheet Factory Limited, Chittagong v. Sales Tax Officer, Chittagons PLD 1971 SC 250 ref.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Petitioner.

Sultan Mahmood on behalf of Izharul Haque for Respondents.

2009 P T D 1868

[Lahore High Court]

Before Khawaja Farooq Saeed, J

AVARI HOTELS LIMITED through Controller

Versus

DEPARTMENT OF EXCISE AND TAXATION GOVERNMENT OF THE PUNJAB, through Secretary and 5 others

Writ Petitions Nos. 11094 and 14349 of 2003, decided on 29th April, 2009.

(a) Interpretation of statutes---

---Interpretation given in one statute of a particular connotation is not to be used or made applicable for other law unless it has been so adopted in the said law.

(b) Interpretation of statutes---

---Where a particular word is not interpreted by a statute the ordinary dictionary meanings are applicable---Courts have never considered it safe to import the meaning from the other statutes while dealing with some issue under another statute.

(c) Interpretation of statutes---

----Courts while interpreting the provision of a statute are required to remain within the intention of law-makers and remaining within the literal meanings.

(d) West Pakistan Urban Immovable Property Tax Act (V of 1958)---

----S. 3---Constitution of Pakistan (1973), Arts.148, 149 & 199---Constitutional petition---Scope of Arts.148, 149 of the Constitution---Property tax, levy of---Contention of the petitioner was that Government of Pakistan through its Circular No.1-129/99-INV-IV, dated 2-8-1999 had declared "tourism" as an "industry" with all such facilities/ concessions which were and are available to the industries; hotel to be as a necessary ingredient of the same, was an "industrial unit" for all practical purposes---Provinces, by virtue of the provision of Art.149 of the Constitution, were bound to make their policies in harmony with the directions of the Federal Government---Petitioner further contended that "hotel" be treated as an "industry" for the purposes of determining the levy of property tax---Validity---Articles 148/149 of the Constitution applied on the laws which were in Federal List and in the Concurrent List as a domain of the Federation---Property tax, being a provincial law and not in, conflict with the Federal law, there was no doubt that the legislation, especially when it deals with the foreign investors, should be attractive and rather luring and provincial as well as local laws should also be, harmonious to the Federal Laws---Question, in the present case, being the application of the provisions of West Pakistan Urban Immovable Property Tax Act, 1958 to the hotel, the principle that the law should be applied in its literal meanings was applicable with full force and there was no question of treating a "hotel" to be an "industry" for the purposes of the determination of property tax for the reason that the same had been so treated by the Federal Government through its Circular---Hotel declared as industry by the Federal Government if was not being given the said treatment under the West Pakistan Urban Immovable Property Tax Act, 1958, it was the provisions of the said Act which shall prevail---Property Tax having been created as a result of the charge under West Pakistan Urban Immovable Property Tax Act, 1958, no exception could be made---High Court, however, granted an interim respite to the petitioner and directed that no coercive measures for recovery of the arrears of property tax shall be adopted for fifteen days---Article 149 of the Constitution was to ensure the due compliance of the enforcement of Federal laws and in fact it was not an authority to regulate the Provincial law.

Messrs' Tures Hotel, Islamabad and others v. Capital Development Authority and others 2006 SCMR 1738; Commissioner of Income Tax Companies-II, Karachi v. Messrs Muhammad Usman Hajrabai Trust Imperial Courts, Karachi 2003 PTD 577; Arabian Sea Enterprises Ltd. v. Government of Sindh through Chief Secretary, Karachi and 3 others 2007 CLC 1215; Mst. Farah Zahra v. Board of Governors of the Area Study Centre for Africa and North and South America, Quaid-i-Azam University, Islamabad through Chairman, Vice-Chancellor and another 2005 PLC (C.S.) 216; Commissioner of Income Tax Zone 8, Lahore v. Muhammad Shahbaz Khan 1996 PTD 1138; Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B. 69; Farooq Ahmed Siddiqi v. The Province of Sindh PLD 1996 Kar. 267; Mohtarma Benazir Bhutto v. President of Pakistan PLD 1998 SC 388; Iftikhar' Hussain Shah v. Pakistan through Secretary, Ministry of Defence, Rawalpindi 1991 SCMR 2193; Sanofi Aventis Pakistan Limited and others v. Province of Sindh through Secretary Excise and Taxation Department, Karachi and 2 others PLD 2009 Kar. 69 and Zawar Petroleum v. O.G.D.C. and others 2003 YLR 1450 ref.

(e) Interpretation of statutes---

---Taxing statute---Court in case of a taxing statute had to look merely at what was clearly said; there was no room for any intendment; there was no equity about a tax; there was no presumption as to a tax; nothing was to be read in, nothing was to be implied and one could only look fairly at the language used.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B. 69 quoted.

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

----Arts. 148 & 149--- West Pakistan Urban Immovable Property Tax Act (V of 1958), S.3---Levy of tax by Provincial Government---Scope of application of Arts.148 & 149 of the Constitution---Charge and recovery of property tax is in the exclusive domain of Provincial legislature as the Constitution has provided full authority to all the Provinces to charge the same and to make laws and rules for the said charge and recovery---Provisions of Arts.148 & 149 of the Constitution have no bearing on unbridled rights of the Province for charging the property tax---Principles.

Iftikhar Hussain Shah v. Pakistan through Secretary, Ministry of Defence, Rawalpindi 1991 SCMR 2193; Sanofi Aventis Pakistan Limited and others v. Province of Sindh through Secretary Excise and Taxation Department, Karachi and 2 others PLD 2009 Kar. 69 ref.

Aitzaz Ahsan and Faisal Hassan Naqvi for Petitioner.

Ch. Rizwan Mushtaq, A.A.-G., Rana Amir Ahmed Khan, A.A.-G., M. Nawaz Waseer, Standing Counsel; Akram Ashraf Gondal, Director Excise, Lahore Region "A", Syed Riaz Hussain, Incharge, Legal Cell, Excise Department, Lahore for Respondents.

Date of hearing: 10th April, 2009.

2009 P T D 1880

[Lahore High Court]

Before Syed Hamid Ali Shah, J

YASIR ENTERPRISES through Proprietor

Versus

MODEL CUSTOMS COLLECTORATE through Collector Customs, Multan and 2 others

Customs Criminal Appeal No.1 of 2009, decided 8th June, 2009.

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

----Ss. 168 & 15---Pakistan Petroleum (Refining Blending and Marketing) Rules, 1971, R.38---Seizure of imported consignment of petroleum product (Waste Oil/petroleum residue)---Classification of petroleum products---Determining factor---Consignment was allegedly found to be misdeclared and restricted/banned item---Reports of all the recognized laboratories indicated that flash point of the product in the imported consignment was more than 54% which made the petroleum product as HSD---Importer at the time of the import, was aware of the product which he imported, he had classified the consignment under wrong head, to escape duty and get the consignment cleared, without being an industrial importer and without the approval of the Ministry of Petroleum---Held, importer had imported as substandard product (HSD), misdeclared the goods, imported the consignment without being eligible for such import and had failed to seek approval of the Ministry of Petroleum---Consignment, in circumstances, was rightly seized and impugned action of the Customs Department was unexceptionable---Principles.

Nasir Ahmed v. The State 1981 PCr.LJ 594 and Central Board of Revenue and another v. Khan Muhammad PLD 1986 SC 192 ref.

(b) Administration of justice---

----Court proceedings---Presumption of correctness---Scope---Presumption of correctness was attached to the court proceedings---Court proceedings could not be nullified merely because the party or its counsel had recorded statement to the contrary or filed an affidavit.

Fayyaz Hussain v. Akbar Hussain and others 2004 SCMR 964 fol.

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

----S. 168---Seizure report---Requirements---Law requires that time, date and place be mentioned in the seizure report----Principles.

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

---Ss. 168 & 15---Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1971, R.38---Import of consignment as waste oil (petroleum residue)---Seizure of imported consignment---Classification of petroleum product---Determining factor---Consignment was allegedly found to be misdeclared and restricted/banned item---Contention of the importer was that samples of the petroleum product for analysis were drawn in the absence of the importer---Samples, in fact, were drawn in presence of Clearing Agent and same were sealed according to law---Matter being still pending before Special Judge Customs and to rule out the chance of improper sampling of the consignment, High Court directed the Authorities to draw fresh samples from each container, as per R.38, Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1971 in presence of the Importer or his Clearing Agent and Deputy Registrar of the High Court and after taking the samples to deliver one sample from each container to the Court of Special Judge Customs and any relevant authority of the Customs Department may join in the process of sampling and any party may get the samples analysed from the recognized laboratories for comparison with the earlier analysis done---High Court, in circumstances, declined to interfere in the impugned order, same being devoid of illegality or legal infirmity, having been passed, keeping in view the laboratory reports as well as consenting statement of the importer.

Ch. Saghir Ahmad for Appellant.

Muhammad Akhtar Qureshi, Ghulam Sarwar Shah, Deputy Collector (I&P) and Syed Muhammad Ali Rizvi, Dy. Superintendent for Respondents.

Dates of hearing: 29th May and 3rd June, 2009.

2009 P T D 1891

[Lahore High Court]

Before Maulvi Anwarul Haq, J

GHAZI BAROTHA CONTRACTORS, ATTOCK

Versus

DISTRICT OFFICER EXCISE AND TAXATION, GOVERNMENT OF PUNJAB, ATTOCK and others

Writ Petition No.992 of 2005, heard on 29th July, 2009.

Capital Value Tax Rules, 1990---

----Rr.4 & 8---Finance Act (V of 1989), S.7 (7)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Additional Capital Value Tax (CVT)---Notice of recovery---Petitioner was aggrieved of notice issued by District Officer Excise and Taxation for recovery of additional CVT---Validity---Where for any reason CVT was not collected under R.4 of Capital Value Tax Rules, 1990, Deputy Commissioner Wealth Tax appointed under Wealth Tax Act, 1963, and having jurisdiction over the case of purchaser or transferee might declare under R.8 of Capital Value Tax Rules, 1990, Registration Authority, manufacturer, purchaser or transferee, as assessee in default and could proceed to collect tax as an officer designated under S.7 (7) of Finance Act, 1989, by Central Board of Revenue in such behalf---Role of District Officer Excise and Taxation in the matter was non-existent when Deputy Commissioner Wealth Tax had decided to proceed in the matter under R.8 of Capital Value Rules, 1990---Matter involved adjudication by competent authority i.e. successor-in-office of Deputy Commissioner Wealth Tax, to determine as to whether additional tax was liable to be paid, if so by whom and quantum thereof---Notice issued by District Officer Excise and Taxation was declared to be without lawful authority and void---High Court directed that matter of liability to pay additional tax should be adjudicated by successor-in-office of Deputy Commissioner Wealth Tax after giving opportunity of hearing to petitioner as well as District Officer Excise and Taxation---Petition was disposed of accordingly.

Farrukh Jawad Panni for Petitioner.

Razzaq A. Mirza, Addl. A.-G. with Shaukat Mehmood, E.T.O. for Respondents.

Date of hearing: 29th July, 2009.

2009 P T D 1894

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs G.M.H. TRADERS AND MANUFACTURERS through Proprietor/Chief Executive

Versus

DEPUTY DIRECTOR/INVESTIGATING OFFICER DIRECTORATE OF INTELLIGENCE/INVESTIGATION, LAHORE

Writ Petitions Nos. 8323 and 2049 of 2009, heard on 17th June, 2009.

Sales Tax Act (VII of 1990)---

----S. 8B---Constitution of Pakistan (1973), Art.199---Constitutional petition---Allegation of adjustment of input tax on the basis of fake invoices against the petitioner---Department pressed the petitioner to pay Rupees one million in order to save himself by showing muscles of the Revenue---Validity---Matter involved, in the present case, was of criminal nature, the invoices the petitioner had used for the purposes of availing input tax being fake, the Revenue had the tight to probe into the matter and finally find out the culprit behind---High Court, however, observed that nobody could be asked to pay taxes before completing adjudication proceedings---Demand/collection of tax, in circumstances, was totally illegal, being without an adjudication order---Direction was issued to the department by the High Court to complete the inquiry with regard to the fake invoices and illegal adjustment of input tax etc., expeditiously, strictly as per law and rules and no harassment be caused to the petitioner.

Waqar Azeem for Appellant.

Muhammad Nawaz Cheema for Respondent.

Date of hearing: 17th June, 2009.

2009 P T D 1949

[Lahore High Court]

Before Khawaja Farooq Saeed, J

IRSHAD AHMED and another

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division (FBR), Islamabad and 6 others

Writ Petition No.13293 of 2008, decided on 24th June, 2009.

(a) Appeal---

----Right of appeal is a vested right which is generally provided by all statutes.

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

----S.193---Right of appeal, exercise of---Pre-condition---Order passed by Collector---Precondition to file an appeal by a person excluding Custom Officers is that decision or order should be under Ss.79, 80 and 179 of Customs Act, 1979 and authority passing the same should not be below the rank of Assistant Collector---Judgment or order under appeal has to be by a person above the rank of Assistant Collector---No bar exists in entertaining appeal against order passed by Collector either---Appeal against order of Collector can be entertained and decided by Collector (Appeals).

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

----Ss.193 & 195---`Appeal' and 'revision'-Distinction-Appeal has been provided against any order or judgment passed by any authority equal or above the rank of Assistant Collector while revision is only against order of subordinate officer.

(d) Constitution of Pakistan (1973)---

----Art. 199--- Constitutional petition--- Maintainability--- Factual controversy---Scope---Arms of extraordinary jurisdiction under the provision of Art.199 of the Constitution cannot be extended to factual controversies.

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

----Ss.2 (kk), 2 (rr), 17, 168 & 186---Constitution of Pakistan (1973), Art.199--Constitutional petition---Terms "detain" and "seize"---Distinction---Non-issuance of notice---Customs authorities conducted raid on the premises owned by .petitioners and seized large quantity of imported paper, for which petitioners could not produce any documentary proof---Plea raised by petitioners was that authorities could not detain and seize the goods without issuance of statutory' notice---Validity---Term "detain" meant to prohibit disposal or use of goods pending finalization of any proceedings, while "seizure" started after the end of such proceedings---Seizure, therefore, started after the goods were taken into possession by Customs authorities as per provisions of S.168 of Customs Act, 1969---Requirement of issuance of notice under S.168 of Customs Act, 1969, started from the date of seizure---Detention or seizure of goods of petitioners did not suffer from any illegality or even irregularity---Law was amended in years 2004 and 2005 and detention had become permissible under Ss.17 and 186 of Customs Act, 1969---High Court declined to interfere in proceedings conducted by authorities against petitioners---Petition was dismissed in circumstances.

Haji Noor-ul-Haq v. Collector of Customs and others 1998 MLD 650; Collector of Customs, Lahore and others v. Haji Noor-ul-Haq PTCL 2003 CL 716; Syed Muhammad Razi v. Collector of Customs (Appraisement), Customs House, Karachi and 2 others 2003 PTD 2821; Assistant Collector of Central Excise and Land Customs v. Mst. Siddiqan Afzal and others 2007 SCMR 1149; Messrs Sohrab Global Marketing (Pvt.) Ltd. through Director v. Deputy Collector of Customs, Lahore and 4 others 2005 PTD 67; Messrs Punjab Arms Co, Lahore through Proprietor v. Deputy Collector of Customs (Group-IV) Lahore and 4 others 2005 PTD 86; Messrs Julian Hshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250; Gatron (Industries) Limited v. Government of Pakistan and others 1999 SCMR 1072 and Maple Leaf Cement Factory Limited v. Collector of Customs, Customs House, Faisalabad 2000 YLR 1989 ref.

Mian Abdul Ghaffar and Malik M. Arshad for Appellants.

Ehsanullah Cheema for Respondents.

Date of hearing: 21st April, 2009.

2009 P T D 1978

[Lahore High Court]

Before Khawaja Farooq Saeed, J

LEO ENTERPRISES

Versus

PRESIDENT OF PAKISTAN and 2 others

Writ Petition No. 17416 of 2008 decided on 25th May, 2009.

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

----S.11(4)---Assessment order---Limitation---Competent Officer could decide a case within 90 days from the date of issuance of a notice---Law had provided for extension of such time through a formal order for another 90 days meaning thereby that it had to be finalized within 180 days after obtaining extension from the higher competent Authority duly mentioning reasons therein---Order-in-original having been passed after delay over 19 months was barred by time.

Messrs Hanif Straw Board Factory through Proprietor v. Additional Collector (Adjudication) Customs, Central Excise and Sales Tax Gujranwala and 2 others 2008 PTD 578; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. through Chief Executive v. Collector of Sales Tax, Gujranwala and another 2008 PTD 60; Federation of Pakistan through Secretary Establishment Division, Government of Pakistan, Islamabad v. Muhammad Tariq Pirzada and 2 others 1999 SCMR 2744 and Federation of Pakistan through Secretary, Establishment. Division, Government of Pakistan, Islamabad v. Muhammad Tariq Pirzada and others 1999 SCMR 2189 rel.

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

----S.32---Representation to the President---Recording of valid reasons while looking into the legality, vires or the application of law of an order of the Ombudsman by the President, required application of legal principles consistent with the principles of natural justice---While deciding an appeal against the order of Ombudsman, application of judicious, mind was also equally necessary.

(c) Natural justice, principles of---

----Non-providing an opportunity of being heard had never been appreciated by the courts---Even if the law did not provide a hearing to a person before condemning him or deciding the matter in which he became an aggrieved party, principle of natural justice would be considered to be as part of law.

Commissioner of Income Tax, Faisalabad Zone, Faisalabad and another v. Akhlaq Cloth House, Faisalabad and another 2008 PTD 965 and Syed Allah Dost v. Haji Muhammad Alam and others PLD 1987 Quetta 235 rel.

Umar Ahmed Khan for Petitioner.

Kausar Parveen for Respondents.

2009 P T D 2004

[Lahore High Court]

Before Sh. Azmat Saeed and S. Ali Hussain Rizvi, JJ

Messrs MERAJ DIN through Partner

Versus

COLLECTOR CUSTOMS, EXCISE AND SALES TAX (APPEALS), LAHORE and 2 others

S.T.R. No.42 of 2006, decided on 25th'May, 2009.

Sales Tax Act (VII of 1990)---

----Ss.36(3) & 472---Determination of amount of tax on charge---Reference to High Court---Only question requiring expression of opinion by the High Court was; "whether Customs, Excise and Sales Tax Appellate Tribunal concerned was justified in holding that Adjudicating Authority could pass order under S.36(3) of the Sales Tax Act, 1990 beyond the time limit prescribed under the said section"---Counsel for the appellant contended that in the present case order under S.36(3) of the Sales Tax Act, 1990 was passed beyond the prescribed period---Held, order under S.36(3) of the Sales Tax Act, 1990 must be passed within the period prescribed in proviso to S.36(3) of the Sales Tax Act, 1990---Question raised was answered in negative in favour of the taxpayer.

Messrs Tanvir Weaving Mills through Director Finance v. Deputy Collector Sales Tax and 4 others 2009 PTD 762 ref.

Rao Tahir Shakeel for Petitioner.

Qaiser Javed Awan for Respondent No.2.

2009 P T D 2006

[Lahore High Court]

Before Irfan Qadir, J

Messrs IBRAHIM FIBRES' LIMITED through Secretary

Versus

COMMISSIONER OF INCOME TAX (AUDIT), LARGE TAXPAYER UNIT, LAHORE and 3 others

Writ Petition No. 6700 of 2009, decided on 13th April, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S. 146-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Recovery proceedings---Notwithstanding the pendency of appeal the stay granted by the Commissioner had lapsed---Assessee moved an application for extension of stay order but department, pending said application, was adamant to effecting .the recovery in question---Validity---Held, in case such an application was pending, department shall not effect the impugned recovery till the application for extension of time or appeal in question was finally decided---High Court directed the Commissioner (Appeals) to decide the appeal at his earliest preferably within next two months---Order accordingly.

Shahbaz Butt for Petitioner.

2009 P T D 2139

[Lahore High Court]

Before Nasim Sikandar and Syed Zulfiqar Ali Bukhari, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, MULTAN

Versus

KHALID ADREES BHATTI

Tax Reference No.84 of 2008, decided on 9th July, 2009.

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

----S.221---Income Tax Ordinance (XXXI of 1979), S.156---Original appellate order, rectification of---Successor-in-office of Appellate Authority having entertained grounds of attack not only against assessment order, but against such original appellate order by overlooking reasons stated therein---Validity---Addition in question had been considered in detail by Appellate Authority---Original appellate order was not suffering from any error to justify its rectification by successor-in-office of Appellate Authority---Rectified order was clearly out of contours of section 221 of Income Tax Ordinance, 2001---High Court set aside rectified order in circumstances.

Commissioner of Income Tax, Karachi v. Abdul Ghani PLD 2007 SC 308 2007 PTD 967 rel.

Ch. Muhammad Asghar Saroha.

2009 P T D 2159

[Lahore High Court]

Before Khawaja Farooq Saeed, J

Messrs RANA ASHFAQ RICE MILLS, NAROWAL through Managing Partner

Versus

DIRECTOR-GENERAL OF INCOME-TAX, SIALKOT and 2 others

Writ Petitions Nos.5681, 5485, 5523, 5628, 5207, 5753 and 5172 of 2009, heard on 19th June, 2009.

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

----Ss.120, 122(3)(a)(b) & 177---Constitution of Pakistan (1973), Art.199---Constitutional petition---Agreement between parties for making assessment at a particular figure after earlier deemed assessment order was modified---Filing of revised return on basis of such agreement---Denial of Revenue to treat revised return a normal assessment and carry forward losses earlier approved by Revenue---Issuance of notice under S.177 of Income Tax Ordinance,.2001 to determine income of assessee as per law and rules---Validity---Parties once having agreed would morally be bound to follow same---Such agreement, though not provided by law, was supported by factum of creation of alternate resolution committees in fiscal laws---Such agreement had not barred carrying forward such losses, which being mandatory could not be ignored after determination of income---Agreement of income would not bind Revenue, if some other information came to its knowledge regarding under assessment or concealment---Revenue under normal circumstances could not be allowed to review such agreement as same would be against principle of consistency and requirements provided for further audit---Repeated audit was not barred, but such agreement showed an element of satisfaction, which could not be allowed to be revisited under garb of claim that same had not generated revenue to satisfaction of department---High Court set aside impugned notice in circumstances.

(b) Interpretation of documents---

----Principle of interpretation of an agreement more or less is the same as are in respect of interpretation of statutes.

Cantonment Board, Sialkot Cantonment through Executive Officer, Cantonment Board, Sialkot Cantonment v. Sheikh Nazir Ahmad PLD 1953 Lah. 400; Gulzar Khan v. Shahzad Bibi and another PLD 1974 SC 204; Amanullah and 2 others v. Muhammad Hassan and 3 others PLD 1994 Pesh. 211 and Zarqa Haq v. Government of Baluchistan through Secretary, Health, Quetta and 2 others PLD 1994 Quetta 47 rel.

(c) Interpretation of documents---

----Document would be considered in its plain and simple language without paying any premium to achieve an object for which no provision had been laid down.

Cantonment Board, Sialkot Cantonment through Executive Officer, Cantonment Board, Sialkot Cantonment v. Sheikh Nazir Ahmad PLD 1953 Lah. 400; Gulzar Khan v. Shahzad Bibi and another PLD 1974 SC 204; Amanullah and 2 others v. Muhammad Hassan and 3 others PLD 1994 Pesh. 211 and Zarqa Haq v. Government of Baluchistan through Secretary, Health, Quetta and 2 others PLD 1994 Quetta 47 rel.

Syed Ali Imran Rizvi for Petitioner.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 19th June, 2009.

2009 PTD 16

[Peshawar High Court]

Before Tariq Pervaiz Khan and Zia-ud-Din Khattak

COMMISSIONER OF INCOME TAX (LEGAL)

Versus

Messrs FRONTIER SUGAR MILLS

Civil Revision Tax Reference No.61 of 2007, decided on 22nd October, 2008.

Income Tax Ordinance (XLIX of 2001)---

----S.122(5A) [as inserted by Finance Act (I of 2003)]---Amendment of assessment---Section 122(5A), Income Tax Ordinance, 2001 brought into the statute through Finance Act, 2003 was not applicable to the assessments completed before the promulgation of Income Tax Ordinance, 2001---Principles.

2005 PTD 1621 and 2005 PTD 1316 ref.

Rehman Ullah Khan for Petitioners.

Mahmood Mirza for Respondents.

Date of hearing: 22nd October, 2008.

2009 P T D 164

[Peshawar High Court]

Before Tariq Pervez Khan, C.J. and Shahji Rehman Khan, J

Haji NASEEM UR REHMAN

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX and others

S.A.O. No.1 of 2008, decided on 5th November, 2008.

Wealth Tax Act (XV of 1963)---

----Ss. 2(2)(10), 27 & 45-A---Income Tax Ordinance (XLIX of 2001), Ss.2(65) & 208---Assessment of wealth tax---Authority to make assessment---Appeal---Legal point agitated in the case was that the assessment under the Wealth Tax Act, 1963 could only be made by a Deputy Commissioner appointed as Deputy Commissioner Wealth Tax under S.9 of Wealth Tax Act, 1963; and that assessments made by a Taxation Officer who was appointed under S.208 of Income Tax Ordinance, 2001 which included Deputy Commissioner, would not automatically be construed or taken to Deputy Commissioner under the Wealth Tax Act, 1963---Section 9 of Wealth Tax Act, 1963 empowered the Central Board of Revenue to appoint Deputy Commissioner for the assessment of wealth tax, whereas Taxation Officers, which also included a Deputy Commissioner Income Tax, were appointed under S.208 of Income Tax Ordinance, 2001---Authorities could not produce any document showing that Taxation Officers of the Income Tax were given additional authority to act as Deputy Commissioner under Wealth Tax Act, 1963---Held, that Taxation Officer would not have assessed appellant for the wealth tax, but it should have been a Deputy Commissioner appointed under the Wealth Tax Act, 1963 and thus matter would go back before the appropriate authority for proceedings in accordance with law---Order accordingly.

Ghulam Shoaib Jally for Appellant.

Eid Muhammad Khattak for Respondents.

2009 P T D 1799

[Peshawar High Court]

Before Ejaz Afzal Khan and Dost Muhammad Khan, JJ

ADDITIONAL COLLECTOR SALES TAX

Versus

Messrs ASSOCIATED INDUSTRIES LTD.

Sales Tax Reference No.55 of 2007, decided on 2nd June, 2009.

(a) Customs Rules, 2001---

----Rr. 302-A & 307-B---S.R.O.450(I)/2001, dated 18-6-2001---C.B.R. Letter No.3(15)STP Val.I, dated 11-7-2002---Refund or input adjustment of Sales Tax paid on packing material and chemical used in DTRE Scheme---Scope---Held, refund or input adjustment of Sales Tax paid on packing material and chemical used in DTRE Scheme, cannot be refused---DTRE approved person can claim refund or input adjustment under R.302-A and not under R.307-B of Customs Rules, 2001---Principles.

Central Board of Revenue Islamabad v. Sheikh Spinning Mills Ltd. Lahore and others 1999 SCMR 44 ref.

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

---Ss. 196, 194-A, 179, 193 & 195---Appeal---Assistant Collector when can be considered to be an "aggrieved person" with the approval of Collector or Additional Collector to file an appeal---Principles.

Answer to the question whether with the approval of Collector or Additional Collector, an Assistant Collector can be considered as an aggrieved person and can file appeal on behalf of them, would be in the affirmative. If this question refers to an appeal before the Appellate Tribunal, because under section 194A of the Customs Act, 1969 an officer of Customs, aggrieved by an order passed by an Officer of Customs as an Adjudicating authority under section 179 of the Act, can file appeal before the Appellate Tribunal. Similarly an Officer of Customs aggrieved by an order passed by the Collector (Appeals) under section 193 or an order passed by the Board or Collector under section 195 of the Act, can file an appeal before the Appellate Tribunal, if authorized by the Board in the official Gazette. But if the question relates, to filing of an appeal in High Court under section 196 of the Customs Act, the answer would be in the negative. So long as an appeal is not filed and verified by Collector, it cannot be held to be competent.

Shahid Qayum Khattak for Petitioner.

Isacc Ali Qazi for Respondent.

Date of hearing: 2nd June, 2009.

2009 P T D 303

[Quetta High Court]

Before Amanullah Khan Yasinzai C.J. and Akhtar Zaman Malghani, J

FAZAL QADIR QALBANI and others

Versus

COLLECTOR OF CUSTOMS and another

Customs Reference No.25 of 2007 and C.P. No. 101 of 2008, decided on 10th September, 2008.

Customs Act (IV of 1969)---

----Ss.171 & 187---Seizure and confiscation of vehicle on allegation of being smuggled one---Non-service of notice upon owner of vehicle as required by S.171 of Customs Act, 1969---Effect---Such charge was within knowledge of owner, thus, no prejudice had been caused to him by non-service of such notice---Owner had neither raised such plea before Adjudication Officer nor asked for supply of copy of seizure memo, containing such allegation---Non-compliance of S.171 of Customs Act, 1969 held, was not fatal in circumstances.

1980 SCMR 114; PTCL 2004 CL 592 (sic); 1989 PCr.LJ 631; 2005 PTD 23; 2003 PTD 2821; 2004 PTD 369; 1983 CLC 786; PLD 1986 Kar. 28; PLD 1981 Lah. 1318 and 1993 SCMR 311 ref.

1980 SCMR 114 and 1993 SCMR 311 rel.

Syed Ayaz Zahoor for Appellants.

Qahir Shah for Respondent.

Ch. Mumtaz, Standing Counsel.

2009 P T D 1763

[Quetta High Court]

Before Amanullah Khan Yasinzai, C.J. and Mehta Kailash Nath Kohli, J

Messrs Syed MUHAMMAD QASIM

Versus

ADDITIONAL COLLECTOR CUSTOMS (ADJUDICATION) and another

Customs Reference Application No.16 of 2006, decided on 30th March, 2009.

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

----S. 187---Person who was in possession of a vehicle had to show that the vehicle was properly and legally imported and Customs duty and taxes had been paid.

Abdur Rauf Khan v. Collector, .General Excise & Land Customs, Peshawar and 3 others 1980 SCMR 114 ref.

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

----Ss. 168 & 196---Reference to High Court---Seizure of things liable to confiscation---Issuance of notice---In the present case, the vehicle was taken into custody by police and thereafter, it was handed over to customs authorities, and customs authorities, after receiving the vehicle issued notice in the terms provided under S.168, Customs Act, 1969, within a period of two months---High Court declined interference.

Muhammad Qahir Shah for Applicant.

Chaudhry Mumtaz Yousaf, Standing Counsel assisted by Muhammad Azam, Law Officer, Customs Department for Respondents.

2009 P T D 37

[Supreme Court of Pakistan]

Present Iftikhar Muhammad Chaudhry, C.J., Faqir Muhammad Khokhar and Mian Shakirullah Jan, JJ

COMMISSIONER OF INCOME TAX and others

Versus

FATIMA SHARIF TEXTILE, KASUR and others

Civil Appeals Nos. 1962 to 2205 of 2005, decided on 1st March, 2006.

(On appeal from judgment and order of the Lahore High Court, Lahore, dated 21-7-2004 and 4-10-2004 in Writ Petitions 7800, 8047, 8121, 8294, 8398, 8410, 8481, 8483, 8494, 8516, 8614, 8616, 8623, 8627, 8662, 8682, 8688, 8710, 8736, to 8739, 8743, 8751, 8758, 8759, 8761, 8777, 8797, 8822, 8830, 8838, 8840, 8841, 8895, 8898, 8923, 8930, 8935, 8938, 8940, 8959, 8983, 9001, 9023 to 9026, 9036, 9037, 9042, 9048, to 9053, 9064, 9065, 9075, 9080, 9114, 9135, 9151, 9152, 9166, 9171, 9173, 9174, 9187, 9188, 9193, 9194, 9202 to 9204, 9208, 9209, 9926, 10056 to 10059, 10104, 10108, 10124, 10126, 10148 to 10150, 10238, 10498, 10502, 10503, 10577 to 10579, 10591 to 10601, 10667, to 10676, 10875, 10876, 10878, 10686, 10874, 10925, 10927, 10929, 11032, 11082 to 11084, 11091 to 11107, 11123, 11255 to 11270, 11348 to 11350, 11354 to 11366, 11373, 11374, 11381 to 11383, 11432, 11562, 11726 to 11731, 11799, 11800, 12053, 12056, 12066 to 12070, 12279, 12081 to 12083, 12159, 12280, 12493 to 12498, 12590, 12627, 12635, 12720, 12927 to 12930, 13807, 13851, 13852, 13854 to 13868, 14252, 15022 and 15027 of 2004).

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

----S. 177---C.B.R. Circular No. 1(1)S(ITAS)/2004---Filing of return under self assessment scheme---Reopening of assessment---Absence of specific provision in Income Tax Ordinance, 2001 requiring issuance of notice to assessee before proceedings against him---Effect---Law provided that such return filed by assessee would amount to an assessment order---General audit of assessment would result in prejudice to assessee making him subject to scrutiny---No one could be condemned unheard---Provision of notice to a person against whom department proposed to proceed would be read in every statute irrespective of absence of such provision therein---Notice to assessee would be given before proceedings against him inspite of absence of its provision in Income Tax Ordinance, 2001---Principles.

Mst. Sattan and others v. Group Captain Masroor Hussain. Officer Commanding, P.A.F. Station Sargodha Cant. PLD 1962 Lah. 151; Abdul Rashid v. Government of the Punjab through the Chief Conservator of Forests Lahore and 2 others 1985 CLC 199; Mst. Abeda Begum v. Government of Pakistan and others 1985 CLC 2859; Muhammad Tufail v. Government of Punjab (1990) Law Notes Lah. 138; Gul Muhammad and 8 others v. Buxal and 2 others 1991 CLC 229; Messrs Murree Brewery Company Limited v. Director-General, Excise and Taxation and 3 others 1991 MLD 267; Fateh Muhammad v. Mushtaq Ahmad and 9 others 1981 SCMR 1061 and Mst. Zahida Sattar and others v. Federation of Pakistan an others PLD 2002 SC 408 rel.

(b) Income tax---

----Press-release issued by Federal Board of Revenue subsequent to filing of return by assessee---Validity---Such could not work retrospectively and would be of no legal consequence for same not being in knowledge of assessee while filing return.

Sadiq Brothers Poultry, Rawalpindi v. Appellate Additional Commissioner I.T./W.T. Rawalpindi 2003 PTD 1780 and 2004 PTD 122 rel.

Makhdoom Ali Khan, Attorney General of Pakistan Raja Muhammad Irshad D.A.G., Muhammad Zafar Iqbal, Advocate-on-Record, Sh. Shaukat Ali, C.I.T., LTU, Lahore for Appellants.

Muhammad Naeem Shah, Latif Ahmad Qureshi, Shahbaz Butt, Dr. Ilyas Zafar, Shahzad Shaukat, Muhammad Iqbal Hashmi, Mian Ashiq Hussain, Zaeem ul Farooq, Siraj-ud-Din Khalid, Advocate Supreme Court, for Respondents.

Dates of hearing: 28th February and 1st March, 2006.

2009 P T D 63

[Supreme Court of Pakistan]

Present Saiyed Saeed Ashhad and Muhammad Moosa K. Leghari, JJ

Messrs AHMED BROTHER TRADE INTERNATIONAL, GILGIT

Versus

COLLECTOR CUSTOMS, CUSTOM HOUSE, RAWALPINDI/ISLAMABAD and others

Civil Petition No.1116 of 2008, decided on 18th September, 2008.

(On appeal from the judgment, dated 16-6-2008 passed by Islamabad High Court, in C.R. No.5 of 2008).

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

----Ss. 32(1), 180 & 168---Imports and Exports (Control) Act (IX of 1950), S.3(1)---Drugs Control Act (XXXI of 1976), Preamble---Constitution of Pakistan (1973), Art.185(3)---Seizure of goods---Show­-cause notice---Goods on importation were lying at the dry port area pending clearance without any seizure having been effected, and the matter of the imported goods being banned for import in the country was being inquired into---Goods were formally seized after providing enough opportunity to the importer to submit the proof of import authorization, even the agency on whose behalf the importer claimed to have imported the goods, did not respond to the query made by the Customs authorities despite lapse of 1-1/2 months---Importer was accordingly issued a show-cause notice after effecting formal seizure of the goods but no satisfactory reply was received from the importer---Show-cause notice issued to the importer, in circumstances, was within time---Petition for leave to appeal was dismissed.

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

----Ss. 32(1), 168 & 180---Constitution of Pakistan (1973), Art.185(3)--Import of banned injections---Seizure of goods---Show-cause notice---Report from Health Ministry was, available on the record to show that the goods, so imported by the importer, were not only unregistered but banned in Pakistan since 2006 on account of causing adverse effects to human beings--Effect---Drugs in question having adverse effect on human health and being already banned in the country could, in no case, be released or returned---Contention raised by the petitioner (importer) having sufficiently been discussed and properly dealt with by the Tribunal as well as by the High Court in a legal and valid manner, petition for leave to appeal against the judgment of the High Court was dismissed.

Malik Manzoor Hussain, Advocate Supreme Court for Petitioners.

Nemo for Respondent.

Date of hearing: 18th September, 2008.

2009 P T D 77

[Supreme Court of Pakistan]

Present: Sardar Muhammad Raza Khan and M. Javed Buttar, JJ

Ch. MAQBOOL AHMED

Versus

CUSTOMS, FEDERAL EXCISE AND SALES TAX, APPELLATE TRIBUNAL and 3 others

Civil Petition No. 657 of 2007, decided on 24th September, 2008.

(On appeal from the judgment of the Lahore High Court, Multan Bench, dated 1-4-2008 passed in C.R.A. No. 7 of 2007).

Customs Act (IV of 1969)---

----S. 156(1), Cl. 89---S.R.O. No.574(I)/2005 dated 6-6-2005---Constitution of Pakistan (1973), Art.185(3)---Smuggled vehicle with proved tampered chassis frame and not a smuggled vehicle with non-tampered chassis frame---Held, outright confiscation of the vehicle through order-in-original under Cl.89 of S.156(1) of the Customs Act, 1969 read with S.R.O. No.574(I)/2005 dated 6-6-2005 was lawfully passed and did not suffer from any illegality---Petition for leave to appeal against judgment of the High Court upholding said order was dismissed---Principles.

Muhammad Naeem Qazi, Advocate Supreme Court and M.A. Zaidi, Advocate-on-Record for Petitioner.

M. Bilal, Sr. Advocate Supreme Court with Mehmood A. Sheikh, Advocate-on-Record for Respondents.

Date of hearing: 24th September, 2008.

2009 P T D 676

[Supreme Court of Pakistan]

Present: Rana Bhagwandas and Saiyed Saeed Ashhad, JJ

DEPUTY CONTROLLER OF CUSTOMS VALUATION and others

Versus

ABDUL SHAKOOR ISMAIL KALOODI and others

Civil Petitions Nos.859-K, 860-K and 889-K of 2004, decided on 10th November, 2008.

(On appeal from the judgment, dated 22-2-1994 passed by High Court of Sindh, Karachi in C.P. Nos. D-446/94 and D-520/94).

Customs Act (IV of 1969)---

----S. 25---Constitution of Pakistan (1973), Art.185(3)---Determination of price of imported consignment---Grievance of Customs Department was with regard to the observation of the High Court that value of 400 metric tons of the consignment, bills of entry in respect of which were filed were to be determined as per the price quoted by a company in the Prevailing Price Report in pursuance of the valuation of Imported Goods Rules, 1990---Both the department and importers feeling aggrieved and dissatisfied with the pronouncement of the High Court assailed the same by way of two petitions for leave to appeal---Said petitions were dismissed inadvertently and by oversight---Order of dismissal of two petitions, was recalled and office was directed to refix the petitions for re-hearing whenever a Bench was available.

Muhammad Sharif, Advocate Supreme Court (Absent) and Suleman Habibullah, Advocate-on-Record for Petitioners.

Nemo for respondents.

2009 P T D 799

[Supreme Court of Pakistan]

Present: Sardar Muhammad Raza Khan, Syed Sakhi Hussain Bokhari and Sheikh Hakim Ali, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES ZONE-II, LAHORE

Versus

Messrs LAHORE CANTT. COOPERATIVE HOUSING SOCIETY, LAHORE and 7 others

Civil Appeals Nos.1.477 to 1484 of 2000, decided on 7th November, 2008.

(On appeal from the judgment, dated 23-5-2000 of the Lahore High Court, Lahore passed in I.T.As. Nos.297, 303, 311, 472 of 1999, 439 of 199.8, 501, 511 and 508 of 2000).

Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(16)(b) & 80-B---Cooperative Societies Act (VII of 1925), S.23---Corporate body formed by or under any law---Scope---Cooperative society---Status---Interest/profit from bank deposits---Plea raised by cooperative societies was that they were not companies in terms of S.2(16)(b) of Income Tax Ordinance, 1979, therefore, interest/ profit from bank deposits was covered by S.80--B of Income Tax Ordinance, 1979---Validity---Only those bodies corporate were covered under S.2 (16)(b) of Income Tax Ordinance, 1979, which were created by some law for the time being in force---Such were only those societies which were directly established, constituted and created by relevant statue itself---Body formed by private individuals and subsequently registered under some law was not a body formed under that law, rather it was a body formed otherwise but registered under law---Formation, creation and constitution of a body under law was therefore, altogether different from a body required merely to be registered under some law---Respondent societies were not creation of any law but whatever be their mode of creation, they were required to be registered with Registrar of Cooperative Societies under Cooperative Societies Act, 1925---Respondent societies were not covered by the definition of company as provided in S.2 (16)(b) of Income Tax Ordinance, 1979 and could not be taxed as claimed by income tax authorities, therefore, Supreme Court upheld the judgment passed by High Court---Appeal was dismissed.

Black's Law Dictionary, 6th Edition, New Lexicon Webster's Dictionary, Words and Phrases Permanent Edition, Stroud's Judicial Dictionary, 5th Edition ref.

M. Ilyas Khan, Advocate Supreme Court, M. Bilal, Senior Advocate Supreme Court, Mumtaz A. Sheikh, Member Legal F.B.R. for Appellant (in all cases).

Raja Abdul Ghafoor, Advocate-on-Record for Appellant (in C.A. No.1482 of 2000).

Zia Haider Rizvi, Advocate Supreme Court for Respondents (in C.As. Nos.1477 and 1478 of 2000).

Kh. Ibrar Majal, Advocate Supreme Court for Respondents (in C.As. Nos.1479 and 1480 of 2000).

Iqbal Hashmi, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Respondents (in C.As. Nos.1481 and 1482 of 2000).

Respondents in other case: Ex parte.

Date of hearing: 7th November, 2008.

2009 P T D 1247

[Supreme Court of Pakistan]

Present: Zia Perwez, Sarmad Jalal Osmany and Ghulam Rabbani, JJ

Messrs DEWAN CEMENT LTD.

Versus

COLLECTOR OF CUSTOMS AND SALES TAX and another

C.P.L.As. Nos.319-K and 320-K of 2008, decided on 8th May, 2009.

(On appeal from judgment of High Court of Sindh, Karachi dated 16-1-2008 passed in Special C.R.As. Nos.29 of 2002 and 10 of 2006).

Central Excise Rules, 1944---

----R. 10-Central Excise Act (I of 1944), S.4(2)---Central Excise General Order 23 of 1969---Recovery of duty short-levied-Application and scope of R.10, Central Excise Rules, 1944---Word "error" used in R.10 denotes one of fact as well as of law-Where there was nothing on the record to demonstrate any misdeclaration, false information or collusion and short levy of duty was by reason of misconstruction of the law, the case fell within the ambit of R.10(1), Central Excise Rules, 1944 in which event show-cause notices were time-barred---Supreme Court having held the show-cause notices as time-barred, declined to discuss the merits of the case---Principles.

A plain reading of Rule 10(1), Central Excise Rules, 1944 would amply denote that it would be applicable in the cases where due to no fault either of the assessee or the Department any charge has not been levied or has been short levied or erroneously refunded. The thrust of the Rules, therefore, is that there should have been some inadvertent error or misconstruction in the process of payment of duty due to no fault of either party which led to the short levy, refund etc. The word error denotes one of fact as well as of law.

On the other hand sub-rule (2) contemplates a conscious act on the part of the assessee i.e. an clement of mens rea is involved since the words misdeclaration, false information or collusion are in fact a state of mind in which the actor knows what he is doing and purposely does something i.e. either misdeclares a product in question or gives any false information in connection thereof or colludes with anyone in order to avoid payment of the duty or pays lesser duty than that mandated by the law and the rules. In the present case, assessee had written to the Department seeking its concurrence for supply of Cement to the Army at the contractual rate which was -lesser than the normal retail price and hence implied payment of lesser excise duty. Such permission was granted by the Department provided the conditions laid down in CEGO No.23 of 1969 were followed and a declaration was made that the Cement was not meant for sale in the open market. The exchange of, further correspondence between the parties also denoted that the permission remained intact but subject to CEGO No.23 of 1969 which provided in sum that "where excisable goods are supplied in bulk to Government Organizations at contracted prices, the retail price should also be printed on the containers/packages". Consequently both the parties were under the genuine impression that excise duty could be charged at the contractual price otherwise there was no occasion for the assessees to seek the permission from the Department. Admittedly such permission was granted, be it under a mistake of law, which was the moot question in this matter. Nevertheless, there is no escaping the fact that acting on such permission the assessees had cleared the goods in question at a lower rate and hence paid duty accordingly. It is the Department's case throughout that the law did not mandate (section 4(2)) of the Act and subsequent notification) any clearance of the goods at a rate which was below that what was printed on the cartons in question. However, it was not their case that the goods were cleared at a lower rate due to the assessees' misdeclaration, false information or collusion with the Government functionaries. In fact this could not be the case as the assessee had, even before signing the contract with the Army, sent it to the Department for approval. There was also nothing on the record to demonstrate any such misdeclaration; false information or collusion. In the circumstances, indeed the levy of the duty in question was by reason of misconstruction of the law, which squarely brings the case within the ambit of Rule 101) of the Central Excise Rules, 1944 in which even the show-cause notices are time-barred. 'Supreme Court, in circumstances, allowed the appeal of assessee and declined the necessity of discussing the merits of the case. ?

Commissioner of Sales Tax v. Kruddsons Ltd. PLD 1974 SC 180; Mollasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan 1993 SCMR 1905; Atlas Battery Ltd. v. Superintendent Central Excise and Land Customs Circle "C" Karachi PLD 1984 SC 86; Messrs Radaka Corporation v. Collector of Customs 1989 SCMR 353; Al-Samrez Corporation v. Federation of Pakistan 1986 SCMR 1917; Yunnan Corporation v. Collector, Central Excise 2001 PTD 661; State Cement Corporation v. Collector of Customs 2002 MLD 180 and Collector of Sales Tax and Central Excise v. Zamindara Paper and Board Mills 2007 PTD 1804 ref.

Dr. Muhammad Farough Naseem, Advocate Supreme Court and K.A. Wahab, Advocate-on-Record for Petitioners.

Aqeel Ahmed Abbasi, Advocate Supreme Court and A.S.K. Ghori, Advocate-on-Record for Respondents.

Date of hearing: 24th April, 2009.

2009 P T D 1392

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C J, Raja Fayyaz Ahmad and Ch. Ijaz Ahmed, JJ

Civil Appeal No.778 of 2005

COMMISSIONER OF INCOME TAX

Versus

Messrs ELI LILLY PAKISTAN (PVT.) LTD:

(On appeal from the judgment dated 30-3-2005 passed by the High Court of Sindh, Karachi in C.P. No. D-652 of 2004)

C.As. Nos. 876 to 879 of 2005

COMMISSIONER OF INCOME TAX

Versus

Messrs HONDA SHAHRA-E-FAISAL (AOP) and 3 others

(On appeal from the judgment dated 2-3-2005 passed by High Court of Sindh, Karachi in C.Ps. 643 to 646 of 2004)

C.As. Nos. 1601 to 1625 of 2006

COMMISSIONER OF INCOME TAX

Versus

Messrs AERO ASIA INTERNATIONAL (PVT.) LTD. and others

(On appeal from the judgment dated 5-10-2006, 24-1-2006, 26-1-2006, 16-3-2006, 24-3-2006, 12-4-2006, 29-3.2006, 30-3-2006, 214-2006, 7-4-2006, 28-3-2006, 9-5-2006, 10-8-2006, passed by High Court of Sindh, Karachi in C.P. No.379/05, C.Ps. Nos. D-378/05, 1707/05, ITRAs Nos.245 to 247/06, 169/06, ITRs Nos.177 to 179/06, ITRAs Nos.196-196-A/06, 197 to 198/06, 256/06, 203/06, 26/06, 225/06, 224/06, 235/06, 239/06, 230 to 231/06, 264/06, D-652/04 and C.P. No.643/04)

C.As. Nos. 2670 to 2687 of 2006

COMMISSIONER OF INCOME TAX

Versus

Messrs B.P. INDUSTRIES LTD. and others

(On appeal from the judgment dated 22-8-2006, 31-5-2006, 15-9-2006, 26-9-2006, 22-9-2006, 28-9-2006 passed by High Court of Sindh, Karachi in ITRs Nos. 404 to 406, 492/06, 272/06, 436 to 439/06, 450 to 452/06, 512 to 513/06, 263/06, 298/06 and 307 to 308/06)

C.As. Nos. 585 to 595 of 2007

COMMISSIONER OF INCOME TAX

Versus

Messrs EVIAN FATS AND OIL (PVT) LTD. and others

(On appeal from the judgment dated 19-10-2006, 28-11-2006, 14-11-2006, 13-10-2006, 26-9-2006, 10-10-2006, 17-10-2006, 17-11-2006, passed by High Court of Sindh at Karachi in ITRAs. Nos.490/06, 49/06, 555/06, 559/06, 539/06, 510 and 511/06, 536 and 537/06, 541/06 and 558/06)

C.As. Nos. 706 to 707 of 2007

COMMISSIONER OF INCOME TAX

Versus

DAUD AHMED

(On appeal from the judgment dated 21-11-2006 and 24-01-2007, passed by High Court of Sindh, Karachi in ITRAs Nos.472 and 473/06)

C.As. Nos. 1369 to 1404 of 2007

COMMISSIONER OF INCOME TAX

Versus

Messrs WAKEN HUT (PVT.) LTD. and others

(On appeal from the judgment dated 24-1-2007, 11-1-2007, 20-2-2007, 21-5-2007, 6-2-2007, 12-9-2007, 18-5-2007, 26-4-2007, 22-10-2007, passed by High Court of Sindh, Karachi in ITRAs Nos.603/06, 590/06, 23 & 24/07, 613 & 614/06, 5 to 7/07, 604/06, 211/06, 73/07 and 92 to 115/07)

C.As. Nos. 459 to 501 of 2008

COMMISSIONER OF INCOME TAX

Versus

Messrs S.C. JHONSON & SONS (PVT.) LTD. and others

(On appeal from the judgment dated 22-10-2007, 30-11-2006, 26-10-2007, 31-10-2007, 17-12-2007, passed by High Court of Sindh, Karachi in ITRs Nos.233 to 265/07, 576-577/06, 578/06, 197/07, 230 to 232/07 and 380 to 382/07)

C.As. Nos. 783 to 791 of 2008

COMMISSIONER OF INCOME TAX

Versus

Messrs NATIONAL HIGHWAY AUTHORITY and another

(On appeal from the judgment dated 3-4-2008, 2-4-2008, passed by Islamabad High Court, Islamabad in RAs. Nos. 50 to 52, 56 to 58/07, 62/07 and 63/07)

C.As. Nos. 803 to 1039 of 2008

COMMISSIONER OF INCOME TAX

Versus

KHALID JAVED and others

(On appeal from the judgment dated 3-4-2008, 2-4-2008, 7-4-2008, 14-4-2008, 10-4-2008, passed by Lahore High Court, Multan Bench in PTRs Nos. 10/07, 10/06, 27/06, 35/06, 04/07, 64/07, 11-12/07, 23-25/07, 30-33/07, 47-52/07, 61/07, 63/07, 16/08, 19/08, 42/08, 09/07, 17/07, 18/07, 54-56/07, 76/07, 59/07, 26-27/08, 30/08, 386/06, 372/07, 405-406/07, 531/07, 533/07, 550-51/07, 612-14/07, 661 to 63/07, 674/07, 698/07, 849/07, 880-81/07, 532/07, 534/07, 540/07, 1-3/08, 513/07, 629/07, 635/07, 707-10/07, 816/07, 821/07, 469-471/07, 630-33/07, 773/07, 777-780/07, 805-808/07, 830-831/07, 886-888/07, 334-339/07, 511-12/07, 625-26/07, 636-39/07, 715/07, 123/07, 202/07, 206/07, 221-22/07, 241-42/06, 251-52/07, 355/06, 360/06, 374-375/07, 413/06, 464/07, 505-507/07, 580-584/07, 593-596/07, 679/07, 841/07, 882-885/07, 208/06, 356/06, 592/07, 172-173/07, 289-290/07, 347-348/07, 359/07, 415/07, 418-421/07, 459/07, 461/06, 465/07, 446/07, 467-468/07, 495-499/07, 519-520/07, 640/07, 642-644/07, 684/07, 793/07, 823-824/07, 837-838/08, 842-844/07, 852-864/07, 37/07, 78/08, 114/07, 151-154/07, 166-171/07, 174/07, 248-250/07, 262-263/05, 118/06, 23-24/07, 34 and 36/07, 102/07, 177-179/07, 183-184/07, 189/07, 244/07, 294/07, 358/07, 391-92/07, 462-63/07, 734/07 and 4/08).

C.As. Nos.1148 to 1150 of 2008

COMMISSIONER OF INCOME TAX

Versus

QAMAR-UZ-ZAMAN

(On appeal from the Judgment dated 12-3-2008 passed by Lahore High Court, Rawalpindi Bench in TRs. Nos.60/07 and 100-101/06).

Civil Petition No.1245 of 2008

COMMISSIONER OF INCOME TAX

Versus

Messrs ATTOCK REFINERY LTD, MORGAH, RWP.

(On appeal from the judgment dated 13-3-2008 passed by Lahore High Court, Rawalpindi Bench in T.R. No.110 of 2006).

C.As. Nos.1492-1509 of 2008

COMMISSIONER OF INCOME TAX

Versus

Messrs JHELUM VALLEY COAL (PVT.) LTD. and Others

(On appeal from the judgment dated 10-4-2008 passed by Lahore High Court, Lahore in PTRs Nos. 460-61/06, 453/06, 500/07, 617-18/07, 817-818/07, 832-833/07, 868-70/07 and 889-93/07)

C.As. Nos.1847 to 1849 of 2008

COMMISSIONER (LEGAL DIVISION)

Versus

CHERAT ELECTRIC LTD. KARACHI

(On appeal from the judgment dated 17-9-2008 passed by Lahore High Court, Lahore in I.T.R.As. Nos.230-32/07).

C.As. Nos. 2257-2281, 2283-2311 of 2008

COMMISSIONER OF INCOME TAX

Versus

ZAMEER PARVEZ SHAH and others

(On appeal from the judgment dated 23-9-2008 passed by Lahore High Court, Lahore in PTRs Nos. 35-36/08, 106-108/08, 207/08, 316-18/08, 338-39/08, 438/08, 47/08, 63-67/08, 98-99/08, 133-36/08, 163/08, 165-74/08, 253/08, 274/08, 348/08, 409/08, 432-33/08, 25/08, 175-76/08, 250/08, 252/08, 320/08, 323/08, 325/08, 327/08, 330-31/08, 333/08 and 335/08).

C.A. No. 1322 of 2007

C.B.R. through Chairman and others

Versus

Messrs SIARA INDUSTRIES

(On appeal from the judgment passed by Lahore High Court, Lahore in W.P. No. 3474/03)

C.As. Nos. 115 to 118 of 2008

COMMISSIONER OF INCOME TAX

Versus

Messrs MUHAMMAD ALAM FERTILIZERS

(On appeal from the judgment dated 24-9-2007 passed by Peshawar High Court, Peshawar in TRs. Nos. 32 to 35/07)

C.A. No. 1491 of 2008

COMMISSIONER OF INCOME TAX

Versus

Messrs SULTAN TRADING COMPANY

(On appeal from the judgment dated 10-4-2008 passed by Lahore High Court, Lahore in PTR No.147/05)

C.As. Nos. 7 to 9 of 2008

COMMISSIONER OF INCOME TAX

Versus

Messrs FRONTIER SUGAR MILLS

(On appeal from the judgment dated 22-10-2008 passed by Peshawar High Court in TRs. Nos.61-63/07)

C.As. Nos. 1984 to 2046 of 2007

COMMISSIONER OF INCOME TAX

Versus

A.C.B. (PVT.) LTD. and others

(On appeal from the judgment dated 18-5-2007 passed by High Court of Sindh at Karachi in ITRAs. Nos. 42-70/07, 126-128/07, 129-140/07, 142-147/07, 170-171/07,187-195/07 and 120-121/07).

C.As. Nos. 291 to 292 of 2008

COMMISSIONER OF INCOME TAX

Versus

Messrs ISLAM OIL MILLS

(On appeal from the judgment dated 31-10-2007 passed by High Court of Sindh, Karachi in ITRAs. Nos.149-150)

C.As. Nos. 1099 to 1101 of 2008

COMMISSIONER OF INCOME TAX

Versus

Mst. NUSRAT SULTANA

(On appeal from the judgments dated 10-4-2008 passed by Lahore High Court, Multan Bench in PTRs Nos.9-11/08

Civil Petitions Nos. 12 & 13 of 2009

COMMISSIONER OF INCOME TAX

Versus

Hakim ABDUL WAHEED AFGHANI DAWAKHANA

(On appeal from the judgment dated 23-9-2008 passed by Peshawar High Court, Peshawar in TRs Nos. 33-34/08)

C.As. Nos. 30 to 32 of 2009

COMMISSIONER OF INCOME TAX

Versus

Messrs LAHMAYAR INTERNATIONAL and another

(On appeal from the judgment dated 31-10-2008 .passed by High Court of Sindh, Karachi in ITRAs Nos. 985-86/08 and 397/07)

C.As. Nos. 33 to 57 of 2009

COMMISSIONER OF INCOME TAX

Versus

Messrs ALI BRICKS COMPANY and others

(On appeal from the judgment dated 23-9-2008 passed by Lahore High Court, Lahore in PTRs. Nos.17-19/08, 31/08, 77-78/08, 147-150, 206/09, 226-31/08, 264-68/08, 384/08. and 399-400/08).

C.As. Nos. 112 & 113 of 2009

COMMISSIONER OF INCOME TAX

Versus

JACK & JELL PUBLIC SCHOOL

(On appeal from the judgment dated 4-11-2008 passed by Peshawar High Court, Peshawar in TRs Nos.108-109/07)

C.As. Nos. 122 & 123 of 2009

COMMISSIONER OF INCOME TAX

Versus

Haji MUHAMMAD AMIN and another

(On appeal from the judgment dated 6-11-2008, passed by Peshawar High Court, Peshawar in TRs. Nos.84, 98/06)

C.As. Nos. 163 & 164 of 2009

COMMISSIONER OF INCOME TAX

Versus

Messrs AGRICULTURE DEVELOPMENT BANK and another

(On appeal from the judgment dated 9-4-2008 passed by Islamabad High Court in ITRs. Nos.842-843 of 2008)

C.As. Nos.281-283 of 2009

COMMISSIONER OF INCOME TAX

Versus

Messrs ALLIED PAK INDUSTRIES (PVT.) LTD. and another

(On appeal from the judgment dated 1-12-2008 and 19-11-2008 passed by Peshawar High Court, Peshawar in TRs. Nos. 21/07 and 74-75/07).

C.As. Nos.1102 to 1110 of 2008

COMMISSIONER OF INCOME TAX

Versus

Sheikh ASGHAR MEHMOOD and another

(On appeal from judgment dated 10-4-2008, passed by Lahore High Court, Multan Bench in PTRs Nos. 12/08, 1/08, 14-16/08, 25/07, 127/07, 175-176/07, 9-10/08 and 11/07)

Civil Appeals Nos.778, 876 to 879 of 2005, 1601 to 1625, 2670 to 2687 of 2006, 585 to 595, 706, 707, 1369 to 1404 of 2007, 459 to 501, 783 to 791, 803 to 1039, 1148 to 1150, 1245, 1492 to 1509, 1847 to 1849, 2257 to 2281, 2283 to 2311 of 2008, 1322 of 2007, 115 to 118, 1491, 7 to 9 of 2008, 1984 to 2046 of 2007, 291, 292, 1099 to 1101 of 2008, Civil Petitions Nos.12, 13 of 2009 Civil Appeals Nos.30 to 32, 33 to 57, 112, 113, 122, 123, 163, 164, 281 to 283 of 2009 and 1102 to 1110 of 2008, heard on 19th May, 2009.

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

----S. 122(5A)---Constitution of Pakistan (1973), Art.185(3)---Amendment of assessment---Leave to appeal was granted by Supreme Court, inter alia, to examine whether provision contained in subsection (5A) of S.122, Income Tax Ordinance, 2001 inserted w.e.f. 1st July, 2003 was procedural in nature and was retrospective in operation or otherwise.?

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

----S. 122---Amendment of assessment---Brief survey of the legislative process through which S.122, Income Tax Ordinance, 2001 had passed in taking its present shape.?

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

----S. 122 [as amended from time to time]---Amendment of assessment--Powers of Commissioner to amend an assessment order by making such alterations or additions as he considered necessary---Scope and extent.

A perusal of the overall provisions of section 122, Income Tax Ordinance, 2001 as amended from time to time, shows that the Commissioner is empowered to amend an assessment order by making such alterations or additions as he considers necessary. The power .of amendment is to be exercised in the manner provided in section 122, which stipulates certain restrictions on the exercise of such power. The 'power of amendment can be exercised in respect of an assessment order treated as issued under section 120 or issued under section 121, or issued under section 59, 59A, 62,63 or 65 of the Income Tax Ordinance, 1979 (since repealed). The assessment order can be amended within five years after the Commissioner has issued or is treated as having issued the assessment order on the taxpayer while an amended assessment order can be amended or further amended within a period of one year after the Commissioner has issued or is treated as having issued the amended assessment order to the taxpayer. The time limit provided in section 65 of the repealed Ordinance would be available in respect of an assessment order passed under that section. Under subsection (5), an assessment shall only be amended, or. an amended assessment shall only be further amended on the basis of definite information acquired from an audit or otherwise, where the Commissioner is satisfied that any income chargeable to tax has escaped assessment, or total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund, or any amount under a head of income has been misclassified. So, there has to be definite information with the Commissioner, e.g. information on sales or purchases of any goods made by the taxpayer, receipts of the taxpayer from services rendered or any other receipts that may be chargeable to tax under the Ordinance and on the acquisition, possession or disposal of any money, asset, valuable article or investment made or expenditure incurred by the taxpayer. Such information must have been received from a certain source. Such information must stipulate a case of escaped assessment, under-assessment, assessment at too low a rate, excessive relief or refund, or misclassification of a head of income. Subsection (5A) also empowers the Commissioner to amend, or further amend an assessment order if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of revenue, but before doing that, he shall provide the taxpayer with an opportunity of being heard. Power to amend or further amend an assessment order is also subject to the time-limit of five years or one year.?

(d) Interpretation of statutes---

----Savings clause---Purpose---Held, in the context of transition to a new phase of law, particularly where an existing law is repealed, the savings clause is always of pivotal nature, inasmuch as it serves as a bridge to make the transaction smooth.?

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

----S. 239 [as amended by Finance Ordinance (XXVII of 2002)]---Income Tax Ordinance (XXXI of 1979), Ss.59, 59A, 61, 62 & 63---Authority competent to make an assessment in respect of a tax year ending on or before the 30th day of June, 2002 under the Income Tax Ordinance, 2001 was empowered to make an assessment in respect of a tax year ending on any date after the 30th, day of June, 2002, in accordance with the procedure specified in S.59, 59A, 61, 62 or 63 of the repealed Income Tax Ordinance, 1979---Imposition or charge of any penalty, additional tax or any other amount, under the repealed Ordinance would also be governed by aforesaid provisions---In subsection (2) of S.239 of Income Tax Ordinance, 2001, assessments under S.59, 59A, 62 or 63 of the repealed Ordinance were referred to [whereas in subsection (1) of S.122 of the Income Tax Ordinance, 2001, apart from the assessments under S.59, 59A, 62 or. 63 of the repealed Ordinance, assessment under S.65 of the repealed Ordinance was also included].?

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

----S. 122---Income Tax Ordinance (XXXI of 1979), S.65---Income Tax Act (XI of 1922), S.34---Amendment of assessment---Three provisions were juxtaposed with the help of comparative chart to facilitate an easy analysis.?

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

----S. 122---S.R.O. No.633(I)/2002, dated 14-9-2002---Amendment of assessment---Pending cases---Effect of Supreme Court decision in Commissioner of Income Tax v. Kashmir Edible Oils Ltd. 2006 SCMR 109---Proceedings initiated in pursuance of the amendments of S.R.O. No.633(I)/2002, dated 14-9-2002 during the period 14-9-2002 to 30-6-2003 would abate, inasmuch the very provisions of the Ordinance under which the proceedings were initiated were declared ultra vires and rendered null and void ab initio, however, the proceedings initiated on the basis of provisions of the Ordinance, as amended from time to time, minus the provisions of the S.R.O. No.633(I)/2002, dated 14-9-2002 period, would be in the field and subject to the decision of appeal before the Supreme Court--Principles.?

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

----S. 122---Income Tax Ordinance (XXXI of 1979), S.65---Amendment of assessment---Introduction of time limit within which an assessment can be amended in both the Ordinances (S.65 of Income Tax Ordinance, 1979 and S.122 of the Income Tax Ordinance, 2001), is a statutory recognition of the protection against arbitrary power of reopening or amending an assessment after the expiry of the prescribed period---Held, it could not be said that in reopening the assessments already completed no right of the assessee/taxpayer was involved.?

(i) Interpretation of statutes---

----Fiscal statute---"Provisions which impose taxes" and those "which provide 'for the machinery by which tax is assessed and realized"---Distinction---Provisions relating to imposition of tax are to be strictly construed in favour of the subject so that if there be any substantial doubt, it has to be resolved in his favour---Machinery sections are to be liberally construed---Principles.

There is a distinction between provisions which impose tax and those which provide for the machinery by which tax is assessed and realized. The provisions relating to imposition of tax are to be strictly construed in favour of the subject so that if there be any substantial doubt, it has to be resolved in his favour. But the machinery sections are to be liberally construed. If the incidence of tax be clear, the machinery sections should be so construed as to make the realization of the proper tax possible. They should not be so construed as to defeat the intention of the Legislature and to prevent the realization of the tax that is in fact due.?

Mahaliram Ramjidas's case AIR 1940 Privy Council 124; Khan Bahadur Amiruddin v. West Punjab Province PLD 1956 FC 220 and Muhammad Amir Khan v. Controller of Estate Duty PLD 1961 SC 119 ref.

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

----S. 122---Amendment of assessment---Scope. and application of S.122, Income Tax Ordinance, 2001---Provision of S.122, Income Tax Ordinance, 2001 is impregnated with an essential attribute, which affects an accrued right of an assessee or a taxpayer that after efflux of a certain period of time, his assessment will not be opened or amended---Section 122 of the Income Tax Ordinance, 2001, therefore, cannot be applied retrospectively unless the Legislature intended to give it retrospective effect---Section 122 having the potential of adding to the liability of the taxpayer, the same was not a mere matter of procedure and taxpayers/assessees have a right that their assessments will not be opened after the expiry of the statutory period of five years.?

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

----Ss. 122 & 239(1)---Amendment of assessment---Held, had the unamended provision of S.239(1) of the Income Tax Ordinance, 2001 continued on the statute book no difficulty would have arisen regarding the treatment of assessment order passed in respect of the assessment year ending on 30th June, 2003; in such eventuality the assessments upto the said period would have been governed under the Income Tax Ordinance, 1979 (repealed), while the assessments of the post enforcement period of the Income Tax Ordinance, 2001 would be governed under the latter Ordinance---Principles.?

(l) Constitution of Pakistan (1973)---

----Art. 185---Income Tax Ordinance (XLIX of 2001), Ss.122, 122A, 122B, 221 & Preamble---Appeal to Supreme Court---Question was as to how the Supreme Court could come to the rescue of the draftsman of a legislation who had left so much to be desired in the legislation (Income Tax Ordinance, 2001)---Held, in the course of interpretation of statute, Supreme Court while ascertaining the manifest, undoubted and true will and intent of the legislationis fully competent and empowered not only to fill the lacuna or supply the omissions, but also to point to the deficiencies or the excesses that have crept into the legislation due to the unskilfulness of the draftsman against the legislative will--Supreme Court, while pointing out the deficiencies in drafting the legislation observed that there was a need to review the language, content and scope of the power to amend and further amend an assessment, the power to revise an assessment and the power to rectify mistakes envisaged in these sections of the Income Tax Ordinance, 2001, so as to make it in line with the legislative intent of consolidating the law relating to income tax so as to make it easily comprehensible to the convenience of the taxpayers---Principles.?

Muhammad Amir Khan v. Controller of Estate Duty PLD 1961 SC 119 quoted.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), S.65---Initiation of proceedings for additional assessment in the cases of escapement of income from assessment---Time limit---Scope---Held, keeping in view the repealed Income Tax Ordinance, 1979 and the present Income Tax Ordinance, 2001, irresistible conclusion was that assessments completed under the repealed Ordinance ought to be governed by the old law while the assessments of the post-enforcement period of the present Ordinance were to be governed by the present law---Such treatment of the two sets of assessments would also overt the anomaly that would be created if the assessments of the period of 30th June, 2003 were -excluded from the operation of the previous law on account of its repeal, and not included in the new law on account of its being prospective in application---If the cases of assessees did not fall within the ambit of provisions of S.122, Income Tax Ordinance, 2001 on account of the same being prospective, they could not exclude their assessments from the purview of S.65, Income Tax. Ordinance, 1979 merely because of the lapse of the draftsman who omitted subsection (1) of S.239 of the present Ordinance at the amendment stage---Had the provision of subsection (1) of S.239 of the present Ordinance continued on the statute book, there would have been no ambiguity and no difficulty at all; in that eventuality, the assessments upto the period ending on 30th June, 2002 would be governed by the relevant provisions of the repealed Ordinance as if Ordinance of 2001 had not come into force.?

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

----S. 122---Constitution of Pakistan (1973), Art.199---Constitutional jurisdiction of High Court---Scope---Availability of statutory remedy---Principles---Held, tendency to bypass the remedy provided in the relevant statute and to press into service constitutional jurisdiction of the High Court was to be discouraged, though in certain cases invoking of such jurisdiction instead of availing the statutory remedy was justified e.g. when the impugned order/action was pulpably without jurisdiction and/or mala fide---Once a party opted to invoke the remedies provided for under the relevant statute, he could not, at his sweet will, switch over to constitutional jurisdiction of the High Court in the mid of the proceedings in absence of any compelling and justifiable reason---Rule that the High Court would not entertain a Constitutional petition when other appropriate remedy was yet available, was not a rule of law barring jurisdiction, but a rule by which the court regulated its jurisdiction---Where a statutory functionary acted mala fide or in a partial, unjust and oppressive manner, the High Court, in the exercise of its writ jurisdiction, had power to grant relief to the aggrieved party---In the present case, the jurisdiction of Income Tax Authorities to issue the impugned show-cause notice was successfully brought under challenge before the High Courts and it was found that the notices were not competently issued in view of the prospective application of S.122, Income Tax Ordinance, 2001---No factual controversy having been involved in the constitutional petitions, constitutional petitions filed by the taxpayers in such matters, were justified and objection to filing the petitions in circumstances, raised by the department was overruled by the Supreme Court.?

Commissioner of Income Tax v. Hamdard Dawakhana (Waqf) PLD 1992 SC 847 and Murree Brewery Co. Ltd v.' `Pakistan PLD 1972 SC 279 ref.

Pak Arab Fertilizers (Pvt.) Ltd. v. Deputy Commissioner Income Tax 2000 PTD 263 distinguished.

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

----Ss. 122 & 239(1)---Income Tax Ordinance (XXXI of 1979), S.65---Amendment of assessment---Provisions of S.122, Income Tax Ordinance, 2001 are prospective in their application and do not apply to the assessment of a year ending on or before 30th June, 2002---Provisions of S.65 of the repealed Income Tax Ordinance, 1979 provided a period of five years for additional assessment and such assessments were to be dealt with under S.65 of the repealed Ordinance in accordance with original and unamended S.239(1) of Income Tax Ordinance, 2001; High Courts having failed to take into consideration such aspect of the matter, Supreme Court, by filling said lacuna in the impugned judgments, directed that the assessment of any year ending on or before 30th June, 2002 would be governed by the repealed Ordinance of 1979 and shall be dealt with as if the Ordinance of 2001 had not come into force---Where rights and procedure are dealt with together, the intention of the Legislature may well be that the old rights are to be determined by the old procedure, and that only the new rights under the substituted section are to be dealt with by new procedure.?

Passage from the Maxwell on Interpretation of Statutes 10th Edn. (1953) p.228 ref.

(p) Interpretation of statutes---

----Rights and procedure dealt with together in an enactment-Principle--Where rights and procedure are dealt with together, the intention of the Legislature may well be that the old rights are to be determined by the old procedure, and that only the new rights under the substituted section are to be dealt with by new procedure.?

Passage from the Maxwell on Interpretation of Statutes 10th Edn. (1953) p.228 quoted.

Per Ch. Ijaz Ahmed, J agreeing with Iftikhar Muhammad Chaudhry, C.J.---

(q) Constitution of Pakistan (1973)---

----Preamble, Arts.4, 5(2), 9, 14, 25 & 2-A---Constitution of Pakistan is based on trichotomy: Legislator to legislate the laws; Executive to implement; Judiciary to interpret the law and Constitution---Scope and limits of the three organs---Constitution has to be read as an organic whole for the purpose of maintaining balance in every sphere of life such as opportunities of job, social justice, distribution of wealth etc.---Framing of taxing laws in such a manner that people themselves voluntarily pay the taxes encouragingly and honestly---Obligation of the State to provide atmosphere based on honesty by providing equal protection of law---Every citizen must be treated equally, dignity of human being life should be maintained, and liberty of life and honour must be guaranteed as envisaged in the Articles 9, 14 & 25 of the Constitution---Procedure for enacting laws under the Constitution e.g., deliberations and the recommendations of the Committees, the proceedings of the drafting Committees and the speech of the mover at the time of introducing the draft along with the reports of these Committees on all available material---Objections of the Assembly, the manner in which they meet any criticism, the resultant decisions taken thereon, amendments proposed, speeches in favour or against them and their ultimate adoption or rejection, will be helpful in throwing light on the particular matter in issue---Supreme Court desired that law making body shall frame the laws after deliberations which is an additional duty cast upon the law making body in terms of Art.2-A of the Constitution which is in accordance with the Injunctions of Islam and doctrine of expectation of consultations---Principles.?

Zia ur Rehman's case PLD 1973 SC 49, Mian Muhammad Nawaz Sharif's case PLD 1993 SC 473; Hakim Ali's case PLD 1992 SC 595; PLD 1957 SC 219; Chaudhry Zahoor Elahi's case PLD 1975 SC 383; Zahid Akhtar's case PLD 1995 SC 530; Agha Shorish Kashmiri's case PLD 1969 SC 14; Fauji Foundation's case PLD 1983 SC 457; R.V. Secretary of State for Transport's case (1985) 3 All ER 300 and Re Liverpool Taxi Owners' Association's case (1972) 2 All ER 589 ref.

Pak Arab Fertilizers (Pvt.) Ltd. v. Deputy Commissioner Income Tax 2000 PTD 263 approved.

(r) Democracy---

----Meaning.?

Black's Law Dictionary Revised Fourth Edition; International Encyclopedia of the Social Sciences Volumes 3 and 4; Webster comprehensive Dictionary Encyclopedic Edition and The World Book Dictionary Volume one ref.

Sardar Muhammad Latif Khan Khosa Attorney General for Pakistan assisted by Sardar Muhammad Ghazi, D.A.-G. Zubair Khalid, Advocate Supreme Court, Abdul Waheed, Advocate Supreme Court and Sardar Shahbaz Khosa, Advocate for Appellants/Petitioners.

Muhammad Ilyas Khan, Sr. Advocate Supreme Court for Appellants/Petitioners (in C.As. Nos.803-864, 912-1039, 2251-2311 and 874-894/2008).

M. Bilal, Sr. Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Appellants/Petitioners (in C.As. Nos.163-164/ 2009).

Raja Muhammad Bashir, Sr. Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Appellants/Petitioners (in C.As. Nos.291-292, 1149 and 1150/2008).

Akhtar Ali Mehmood, Advocate Supreme Court for Appellants/Petitioners (in C.As. Nos.876-79/05, 1602/06, 1617-1619/06, 587-593/07 and 1381-1395/07).

A.S.K. Ghauri, Advocate-on-Record for Appellants/Petitioners (in C.As. Nos. 778/05, 1601/06, 1608-1614, 1616, 1624, 1625, 2670-73, 2686-87/06, 585-86, 1369-1377, 1379-1404, 1984-2046/07 and 459-501/08).

Shahid Jameel, Advocate Supreme Court for Appellants/Petitioners (in C.As. Nos.707/07, 33-57/09 and C.Ps. Nos.12-13/09).

M.S. Khattak, Advocate-on-Record for Appellants/Petitioners (in C.As. Nos. 707/07, 112-113, 122-123/09 and C.Ps. Nos. 12-13/09).

Muhammad Farid, Advocate Supreme Court for Appellants/Petitioners (in C.As. Nos. 1620 to 1624/2006).

Syed Arshad Hussain, Advocate Supreme Court for Appellants/Petitioners (in C.A. No.2673/2006).

Hafiz Muhammad Idrees, Advocate Supreme Court for Appellants/Petitioners (in C.A. No.355/09).

Raja Abdul Ghafoor, Advocate Supreme Court/Advocate-on-Record for Appellants/Petitioners (in C.P. No. 1245/2008 and C.As. Nos. 1322/2007 and 115-118 and 1491-1513/2008).

Mehmood A. Sheikh, Advocate Supreme Court/Advocate-on-Record for Appellants/Petitioners (in C.As. Nos.7-9/2009).

Ch. Akhtar Ali, Advocate-on-Record for Appellants/Petitioners (in C.As. Nos.1604-1607, 1615, 2677-2682/06, 590,591, 594/07 and 783-791/08).?????

Mumtaz Ahmed, Member (Legal), F.B.R. Nemo. (in the remaining cases)

Mansoor-ul-Arifin, Senior Advocate Supreme Court for Respondents (in C.As. Nos.876 to 879/2005).

Israr-ul-Haq, Advocate Supreme Court for Respondents (in C.A. No. 32/09).

Rehan Hassan Naqvi, Advocate Supreme Court and Ms. Lubna Pervez, Advocate Supreme Court for Respondents (in C.As. Nos.1611 to 15/06 and 587/07).

Badar Villani, Advocate Supreme Court for Respondents (in C.A. No.459/08).

Umar Mehmood Kasuri, Advocate Supreme Court for Respondents (in C.As. Nos.865, 901, 902 and 914/08).

Salman Akram Raja, Advocate Supreme Court and Ejaz Muhammad Khan Advocate-on-Record for Respondents (in C.As. Nos.50-54/09).

Sirajuddin Khalid, Advocate Supreme Court for Respondents (in C.As. Nos.826, 837-839 and 1025 to 1027/08).

Dr. Farough Naseem, Advocate Supreme Court for Respondents (in C.A. No.1602/06).

Muhammad Rashid Qamar, Advocate Supreme Court for Respondents (in C.A. No.163/09).

Noor Muhammad Chandio, Advocate Supreme Court for Respondents (in C.As. Nos.895 to 900/08).

Kh. Ibrar Majal; Advocate Supreme Court for Respondents (in C.As. Nos.966 to 968/08).

Zaeem-ul-Farooq Malik, Advocate Supreme Court for Respondents (in C.A. No.926/08).

Hamid Shabbir Azar, Advocate Supreme Court for Respondents (in C.A. No.848/08).

Qari Abdur-Rashid, Advocate Supreme Court and Ch. Muhammad Akram, Advocate-on-Record for Respondents (in C.A. No.2261/08).

Syed Naveed Andrabi, Advocate Supreme Court and Faizur Rehman, Advocate-on-Record for Respondents (in C.As. Nos.778/05 and 941 to 944/2008).

Shafqat Mehmood Chohan, Advocate Supreme Court Mian Muhammad Akhtar, Advocate Supreme Court for Respondents (in C.As. Nos.669, 670, 919, 928, 962, 2263/08 and 38, 39/09).

Farhat Nawaz Lodhi, Advocate Supreme Court for Respondents (in C.P. No.1245/2008).

Hakam Qureshi, Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Respondents (in C.A. No.1149/08).

Fauzi Zafar, Advocate Supreme Court for Respondents (in C.As. Nos.921, 952 to 960/08).

Abdul Rehman Siddiqui, Advocate Supreme Court and Arshad Ali Chaudhry, Advocate-on-Record for Respondents (in C. As. Nos.475-77 and 89/08).

Muhammad Shoaib Abbasi, Advocate Supreme Court and G.N. Gohar, Advocate-on-Record for Respondents (in C.As. Nos.115 to 118/08).

Irfan Ahmad Sheikh, Advocate Supreme Court for Respondents (in C.As. Nos.923-924/2008).

Iqbal Suleman Pasha, Advocate Supreme Court for Respondents (in C.As. Nos.1625, 2684/06 & 592-93, 1369, 2007-2010, 2016-18/07 & 1847-1849/08).

Shahbaz Butt, Advocate Supreme Court for Respondents (in C.As. Nos.841, 856-858, 891, 911, 916, 971, 972, 1002, 1003, 1099, 1100, 1502, 1505-1512, 2281, 2292, 2114-2115/2008, 36/09 and C.P. No.12/09).

Muhammad Iqbal Hashmi, Advocate Supreme Court and Faizur Rehman, Advocate-on-Record for Respondents (in C.As. Nos.825, 854, 1008-1010, 1013-15, 1111, 1491, 1500, 1501, 2264 and 2304/08).

Ms. Edwina Williams (in person) (in C.As. Nos.112-113/09).

Nemo. (in the remaining cases).

Dates of hearing: 15th, 16th, 17th, 21st, 22nd and 28th April & 4th, 5th, 11th & 19th May, 2009.

2009 P T D 1544

[Supreme Court of Pakistan]

Present: Tassaduq Hussain Jillani, Muhammad Akhtar Shabbir and Ghulam Rabbani, JJ

SHAHTAJ SUGAR MILLS LTD. through Chief Executive

Versus

ADDITIONAL SECRETARY, GOVERNMENT OF PAKISTAN, MINISTRY OF FINANCE, KARACHI and others

Civil Petition No.1295-L of 2004, decided on 1st June, 2009.

(On appeal from the judgment of the Lahore High Court, Lahore, dated 12-2-2004 passed in Writ Petition No.1283 of 1989).

(a) Central Excise Rules, 1944---

----R.11---Contract Act (IX of 1872), S. 72---Customs Act (IV of 1969), S.33---Sales Tax Act (VII of 1990), S.66---Excise duty, tax, charges deposited by the tax payer by mistake, error under coercion, or misconstruction, can be refunded to him--Period for refund of claim of deposit of the duty or other taxes or charges, having been provided, which would be reckoned from the date of deposit of said duty or charge.

Colony Thai Textile Mills Ltd. v. Assistant Collector, Central Excise and Land Customs, Faisalabad and another PLD 1980 Lah.377 ref.

(b) Central Excise Rules, 944---

----R. 11---Constitution of Pakistan (1973),, Art.185(3)--Levy of Regulatory Excise Duty on manufacture of sugar---Manufacturer by depositing the Regulatory Duty without challenging the levy of the duty or any protest and not claiming the refund within one year, was estopped to agitate the claim after six years, and the principle of laches and waiver would also come into play against the manufacturer---Principles.

Income Tax Officer, Central Circle II, Karachi and another V. Cement Agencies Ltd. PLD 1969 SC 322; Octavius Steel and Company Ltd. v. The Commissioner of Income Tax, Dacca PLD 1960 SC 371; Mst. Attiyya Bibi Khan and others v. Federation of Pakistan 2001 SCMR 1161 and Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73 fol.

Central Board of Revenue and others v. Colony Thal Textile Mills Ltd. 1981 SCMR 303 and Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan PLD 19998 SC 64 distinguished.

Ijaz-ul-Ahsan, Advocate Supreme Court and Mahmood-ul-Islam, Advocate-on-Record for Petitioners.

Izhar-ul-Haq Sh., Advocate Supreme Court for Respondent No.3.