PTD 2010 Judgments

2010 P T D (Trib.) 794

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moron, Member (Judicial-II)

Customs Appeal No.K-12 of 2009 (Old Customs Appeal No.K-1105 of 2004), decided on 29th June, 2009.

Customs Act (IV of 1969)---

----Ss. 2(s), 32, 45, 48, 156, 192 & 194-A---Misdeclaration of description of goods---Imposition of penalty---Appeal to Appellate Tribunal---Allegation against the appellant who was the Agent of a foreign concern, was that he misdeclared the description of goods in question and a penalty of Rs.25,00,000 was imposed on him---Validity---Nothing had been brought on record by the department which could prima facie establish that the appellant, in any circumstances, was involved in misdeclaration of the goods on the bill of lading; and was acting in collusion with the importer---In case of misdeclaration the initial burden was on the department to prove the guilt of mis­declaration against the person charged with the allegation---Not a single word was available on record to show that the appellant, in connivance and in collusion with the importer, misdeclared the description of the goods---Appellant clearly established from the contents of the bill of lading; and the disclaimer therein that "the quality, quantity and nature of the cargo stuffed inside the container was unknown to the carrier, shippers load stow and count"---Nothing had been brought on record by the department to disprove that what was stated on the bill of lading was incorrect and the appellant was acting in connivance with and/or in collusion with the importer---Case was of gross miscarriage of justice on the part of the department which malafidely involved the appellants in the case despite the fact that they did not bring any incriminating evidence, either oral or documentary on record; and yet they chose to implicate the appellant along with the Importer---Imposition of penalty on the appellant was illegal and void ab initio---Impugned order imposing penalty was set aside, in circumstances.

Eastern Federal Union Insurance Company v. American President Lines Ltd., PLD 1992 SC 291; Messrs P&O Containers Pakistan v. The Collector of Customs, SBLR 2001 Kar. 93 and Messrs Tariq Sheikh International v. The Additional Collector of Customs, 2005 PTD (Trib.) 10 ref.

Abdul Ghaffar Khan for Appellant.

Zahid Ahmed, Appraising Officer for Respondent.

2010 P T D (Trib.) 832

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Customs Appeal No.K-315 of 2008, decided on 9th October, 2009.

Customs Act (IV of 1969)---

----Ss. 25, 32, 79, 81, 168, 179 & 194-A---Customs Rules, 2001, R.107(a)---Order to deposit the short levied duty and taxes---Appeal against---Appellant imported consignment of System Sensor and sought clearance thereof declaring its total value---Declared value of said imported items were found to be on lower side---Goods, however were released provisionally under S.81 of the Customs Act, 1969 and case was referred to the Directorate General of Customs, which determined the customs value, which resulted into short levy of duty and taxes---Adjudication proceedings were initiated against the appellant and it was ordered to deposit the short levied duty and taxes---Validity---Department had not alleged any misdeclaration in respect of the particulars of the goods including description, quantity, quality, type and specification, which were required to be filed and declared correctly in terms of S.79(1) of the Customs Act, 1969---Only allegation in the show-cause notice was in respect of the declared value of the imported items which was found to be on lower side---Customs Authorities in the case had failed to finalize the assessment of the appellant within the stipulated period as provided by subsection (2) of S.81 of the Customs Act, 1969---Provisional assessment made by the Customs Authorities in terms of S.81(1) of the Customs Act, 1969, in circumstances, had attained finality on the basis of declared value of the goods by the appellant and not in any other manner---After making provisional assessment order-in-original final assessment was issued after lapse of the statutory period, which order was not in accordance with law---Valuation data for enhancement of declared price in terms of Rule 107(a) of the Customs Rules, 2001 was not brought on record before two forums below as well as before the Appellate Tribunal by the department's counsel and the departmental representative---Enhancement of the transaction value of the appellant without any supporting data of contemporaneous imports pertaining to ninety days valuation data, in circumstances was arbitrary and unlawful and against the settled law---Order-in-original issued beyond the stipulated limits of ninety days, was unlawful and coram non judice---Gross miscarriage of justice was done on the part of the department as they had failed to bring any incriminating evidence, either oral or documentary on record---Impugned orders were set aside being without jurisdiction and ab initio void.

Dewan Farooq Motors Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal Karachi 2006 PTD 1276; PLD 1974 SC 284; 2005 PTD (Trib.) 601; PTCL 2005 CL 17; 2005 PTD 9; 2008 PTD 578; Collector Central Excise and Land Customs v. Rahm Din 1987 SCMR 1840; Kamran Industries' case PLD 1996 Kar. 68; 1994 SCMR 2232; Messrs Nishat Mills Ltd. v. Superintendent of Central Excise Circle-II and others PLD 1989 SC 222; 2003 GST P-521; 2004 PTD 2977; 2003 PTD 1797; 2001 SCMR 838; 2003 PTD 1997, 2005 PTD 480; 2004 PTD 714; 2002 PTD 2780; 2000 PTD 1798; Messrs Mansab Ali v. Amir and 3 others PLD 1971 SC 124; Messrs Hassan Trading Company v. Central Board of Revenue and others 2004 PTD 1979; 2002 PTD 2957; 2004 PTD 2993; 2006 PTD 1876; 2007 SCMR 1357; 2006 PTD 232; 2007 PTD 1858; 2008 PTD 1250; 2009 SCMR 438; 2008 PTD 60; 2009 PTD (Trib.) 1263; 2009 PTD 762 and 100-Tax 42 ref.

Sardar Muhammad Ishaque for Appellant.

Ahmed Khan Bugti assisted by Abdul Majeed V.O. for Respondents.

2010 P T D (Trib.) 845

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member (Judicial)

Sales Tax Appeal No.847/LB of 2008, decided on 24th February, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 21 & 46---Blacklisting a registered person---Appeal to Appellate Tribunal---Appellant enterprises were allegedly found involved in mere paper transaction, claiming input tax without backup invoices and issuing output invoices for refund or adjustment purpose---Record had proved that only the appellant had been held responsible for purchasing the saleable goods and that too from the registered persons who were neither suspicious nor false units at the time of transaction---Only the appellant had been blacklisted for the said transaction, while no action had been taken against the seller and no seller had been blacklisted on that ground---Department had not established that allegation levelled in the show-cause notice was beyond shadow of doubt---Benefit of doubt, how slightest it could be, would go to the accused---Department was not interested in defending the case, neither it had complied with the orders of the court for submitting the reply and para-wise comments; nor appeared on the final date of hearing---Impugned order was set aside.

Muhammad Akram Nizami for Appellant.

Nemo for Respondent.

2010 P T D (Trib.) 847

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Custom Appeal No.K-86 of 2006, decided on 2nd June, 2009.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 32, 156, 187 & 194-A---Seizure and confiscation of vehicle alleged to be smuggled one---Appeal to Appellate Tribunal---Vehicle in question was confiscated on the ground that same had been smuggled into the country and had been got registered on the basis of fake and forged documents---Appellant was admittedly a bona fide purchaser of said vehicle and there was no allegation against him for the commission of any customs offence---Case of the department against the appellant was that the vehicle belonging to the appellant entered into the country through unauthorized route avoiding payment of duty and taxes leviable thereon and registered against false customs/bank documents---Appellant was the fourth owner of the vehicle having purchased same after due verifications from the Motor Registration Authority---Original documents regarding the import formalities and payment of customs dues were supposed to be with the Excise and Taxation Department---To bring the case under S.2(s) of the Customs Act, 1969, it was a mandatory requirement of law that either the party concerned had tried to get the release of the vehicle without payment of customs duty and taxes or the goods had been brought in the country from a prohibited route or it was seized within the notified area but in the present case nothing of the sort had been alleged against the appellant---Even otherwise, the goods which were available in the market were presumed to have been brought in the country after payment of customs duty and taxes---Detention of vehicle 1992 model in the year July, 2005, was devoid of force because importers and exporters were bound to maintain record for a maximum period of five years---Evidence of legal import was substantiated by the registration of vehicle---Action of the department, in circumstances, was based on the presumptions and department's contention regarding application of S.187 of the Customs Act, 1969, carried no weight---Appellant purchased the vehicle from the open market which was got registered with the Motor Vehicle Registration Authority---All official acts were presumed to have been done in accordance with law and under authority vested in that regard, unless contrary was proved---Appellant who was the fourth purchaser of the vehicle, produced Registration Book of the vehicle, which was never doubted---Appellant, in circumstances, had discharged the burden cast upon him under S.187 of the Customs Act, 1969---Action taken by the department being not warranted by law, impugned orders suffering from illegality, were set aside, in circumstances.

1995 SCMR 387, 389 and 407; PLD 1975 Kar. 482; PLD 1978 Kar.774; PLD 1979 Kar. 68; Wafaq-e-Pakistan v. Awamunas 1998 SCMR 2041; 2003 PTD 2118 and Collector of Customs (Preventive) Karachi v. Ghulam Muhammad 2008 PTD 525 ref.

Ms. Shomaila Saghir for Appellant.

Junaid Abdul Majeed, I.O. and Syed Azam Shah, A.O. for Respondent.

2010 P T D (Trib.) 857

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member (Judicial)

Sales Tax Appeal No.664 of 2009, decided on 7th September, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 2(14), 4, 7, 8, 10, 21, 23, 26, 46 & 66---Refunds--Rejection of refund claim---Appeal---Refund claim of appellant was rejected, firstly; , on the charge that invoices required verification---Appellant had transacted with the alleged suppliers against proper Sales Tax invoices issued under S.23 of Sales Tax Act, 1990 and also incorporated in his sales tax record---If invoices issued by the said units required any verification, then it should have been conducted first before rejecting the appellant's refund claim and prior to disposal of the case---Legal obligations resting upon the appellant had duly been fulfilled and he could not be confronted with rejection of refund merely for want of verification of invoices issued by their suppliers---Since no verification had been done by the Sales Tax Department in respect of alleged invoices, rejection of refund on that charge was not only premature, unjustified, but also unlawful and illegal---Counsel for the appellant and had produced Sales Tax return for the period Departmental Representative was also found the same satisfactory---Charge of non filer was overruled in circumstances---Appellant's refund claim for period in question had been rejected on the charge of "registration suspended", without any lawful ground as refund against invoices of a person whose registration was suspended, could be rejected upon his black-listing by the Collector of Sales Tax after adhering to due process of law prescribed under S.21 of Sales Tax Act, 1990---Rejection of refund during the currency of suspension of registration was premature, invalid, unwarranted and illegal because no formal order of black-listing under the law had been issued by the competent authority---Whole proceedings culminating in impugned show-cause notice and consequent orders were nullity in the eyes of law---Refund of Sales Tax against invoices was admissible under law--Objection with regard to scrutiny for verification of input tax of appellant's suppliers was generated by the STARR System, having no legal backing by the Sales Tax Act, 1990---No legislative enactment, contravention of Sales Tax laws or notification issued thereunder and any specific instruction issued by the Central Board of Revenue on the subject-matter was mentioned in the show-cause notice and subsequent impugned orders were passed merely on assumption and presumption, which was not warranted under law---Impugned order was set aside in circumstances.

2003 SCMR 1505; 2003 SCMR 501; 2002 SCMR 134; PLD 1989 SC 146; 2004 PTD 868; 2000 PTD 3765; 1993 SCMR 274 and 2002 PTD 2457 ref.

Khubaib Ahmad for Appellant.

Muhammad Akram, Auditor for Respondents.

Date of hearing: 7th September, 2009.

2010 P T D (Trib.) 893

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial-II

Sales Tax Appeal No.K-363 of 2008, decided on 25th June, 2009.

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

----Ss. 10(2), 11(2) & 45-B---Sales Tax Rules, 2002, R.6---Rejection/Sanction of refund---Appeal---Maintainability---Refund sanction order Passed by the competent Authority in terms of subsection (2) of S.10 of the Sales Tax Act, 1990, read with R.6 of the Sales Tax Rules, 2002; and refund rejection order passed by the competent Authority in terms of subsection (2) of S.11 of said Act, were both appealable under S.45-B of the Sales Tax Act, 1990---Orders so passed having attained finality through limitation could not be disturbed at any later stage by any authority including Federal Board of Revenue---Authority who issued the show-cause notice was not competent to reopen such past and closed transaction within the framework of Sales Tax Law--Impugned order-in-original as well as order-in-appeal being palpably illegal and void, passed without jurisdiction and lawful authority, were set aside.

1989 MLD 4310; 2004 PTD 3020, 1990 PTD 155; Appeal Nos. K-2352/99, K-106/03; PLD 1976 SC 37 and PLD 2001 SC 514 ref.

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

----Ss. 45-A & 10---Review power of the Board---Any proceedings under Sales Tax Act, 1990 were subject to review either by the Federal Board of Revenue or by the respective Collector; and that too for satisfying themselves in respect of legality or propriety of any decision or order passed by a subordinate Sales Tax Officer---No other provision was in Sales Tax Act, 1990 authorizing a Sale Tax functionary to review or re-open a past or closed transaction---Act of sanction or rejection of a refund claim fell within the preview of the word "Proceedings "---In general parlance all happenings and events before a Tribunal or an Authority on whose jurisdiction was conferred by law to dispose of contentious matters were covered by the term proceedings.

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

----S. 24---Prospectivity or retrospectivity of orders---Every order or any insertion/amendment, would run prospectively and not retrospectively---Such order, amendment/insertion would run retrospectively in case of remedial legislation or otherwise specified in the order or amendment/ insertion itself.

PLD 1974 SC 180, 1987 PTD 739; 2009 PTD 1; 2009 PTD 16; 1993 SCMR 73 and 2000 PTD 285 ref.

Parvez Iqbal Kasi for Appellant.

M. Saleem Memon, Deputy Collector for Respondent.

2010 P T D (Trib.) 908

[Customs, Excise and Sales Tax Appellate Tribunal of Pakistan]

Before Dr. Riaz Mehmood, Member (Judicial)

C.A. No.575/LB of 2008, decided on 12th February, 2009.

Customs Act (IV of 1969)---

---Ss. 2(s), 168, 171 & 194-A---Seizure of vehicle---Appeal---Vehicle driven by the appellant was seized on the allegation that appellant had failed to produce the documents showing legal import and lawful possession of the vehicle--Voucher, issued by the Army Depot whereby vehicle in question was sold was showing chassis number, engine number and year of manufacturing of said vehicle---Said document was not denied by the department---Validity---If a chassis number, engine number had duly been auctioned by the Army Authorities as reportedly conveyed by them; and later on some alteration was made, the process could not come within the ambit of smuggling---Two Government Agencies i.e. Army Depot and Motor Registration Authority were vitally involved in the process of sale, registration---Allegation of smuggling, could not, in circumstances, be sustained---Appellant, who purchased vehicle, had successfully produced the evidence as to how the chassis frame with the same number had emanated from the Army Authorities and subsequently transferred to one from whom same was transferred to the appellant,, conversion charges were paid and seating capacity was enhanced---Vehicle in question being as old as of 1979 model, any assemblage of spare parts could be of later model could not constitute smuggling---Order-in-original and order-in-appeal being not sustain-able in the eyes if law, were set aside---Vehicle was ordered to be released unconditionally to its lawful owner.

2002 PTD (Trib.) 3083; 2006 PTD (Trib.) 155 and 2004 PTD 369 ref.

M. Akram Nizami for Appellant:

Dilawar Hussain for Respondent.

2010 P T D (Trib.) 948

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ms. Kausar Sultana Hussain, Member (Judicial-III)

Custom Appeal No.K-731 of 2007, decided on 10th December, 2009.

Customs Act (IV of 1969)---

----S. 194-B---Powers of Appellate Tribunal to modify etc. its order---Scope---Provisions of S.194-B of the Customs Act, 1969 could not be interpreted in any other manner, except that the Appellate Tribunal was competent to confirm, modify, annul as well as to remand an order appealed against---Order dismissing appeal for non prosecution, was recalled and appeal was restored at its original position.

2008 PTD 1958 ref.

Afzal Awan for the Appellant.

2010 P T D (Trib.) 949

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Hafiz Ahsaan Ahmed Khokhar, Chairman/Member (Judicial)

Appeal No.196/CU/IB of 2008, decided on 29th May, 2009.

Customs Act (IV of 1969)---

----Ss. 17, 26, 168 & 171---Seizure and confiscation of goods imported in breach of Ss.15/16 of the Customs Act, 1969---Seizure of vehicle on the ground that requisite documents were fake/forged---Appellant contended that duties and taxes had been deposited in the bank and he possessed the original bank challan---Validity---Paid duty/bills and bank challan could not be a single ground to substantiate the claim, there were other formalities as well which had to be considered, including the record of the vehicle which was with the Collectorate of Appraisement---Verification letters issued from the Collectorate stated that the duty bills of the appellant were fake and forged---Appraising Officer had also disowned his signatures on the original duty bills---Account branch of the Collectorate of Appraisement also did not indicate any entry of the amount and cash number entry---Duty and taxes involved on the seized vehicle as per calculation sheet were Rs.16,26,975 whereas the bill which was produced indicated the deposit of Rs. 8,00,883 which itself showed a big contradiction of applicable duty and taxes at that relevant time---Alleged duty bills, as paid by the appellant. were fake and forged---Record of the vehicle was also not available in the Appraisement Collectorate---Appellant also failed to rebut the contents of letters of Collectorate of Customs Appraisement---Appeal of the appellant was dismissed by the Appellate Tribunal having no merits.

1991 MLD 1182 ref.

Ch. Maqbool Ahmed v. Customs, Federal Excise and Sales Tax Appellate Tribunal and 3 others 2008 PTD 1239 and Collector of Customs, Central Excise and Sales Tax, Multan v. Saeed Ahmed and 3 others 2008 PTD 1346 rel.

Raja Hameed Azam Jah for Appellant.

Agha Sabir Hussain, S.I.O. for Respondent.

2010 P T D (Trib.) 957

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member Judicial

Sales Tax Appeal No.663/LB of 2009, decided on 10th September, 2009.

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

----Ss. 25, 36 & 46---Sales Tax Refund Rules, 2002, R.13---Recovery of tax not levied or short-levied or erroneously refunded---Audit of record---Appeal to Appellate Tribunal--- Authority vide notification S.R.O. 471(I)/2007 dated 9-6-2007 appointed officers of the Directorate General of Intelligence and Investigation to conduct audit of record of appellant and cases falling under S.36 of the Sales Tax Act, 1990 were not included in the said notification---Said officers had no jurisdiction under the notification to conduct audit of record of the appellant---Said officers while conducting audit of the appellant's account had transgressed their jurisdiction in circumstances--Impugned audit report and show-cause notice issued to the appellant on basis of said report and all the subsequent proceedings thereon were illegal and void---None was allowed to act beyond his jurisdiction and all the acts or deeds beyond the scope of jurisdiction were null and void in the eye of law---When basic order was without lawful authority, then the superstructure built on it would have to fall on the ground automatically---Appellant had neither been served with a notice for production of record under R.25 of the Sales Tax Act, 1990 for the purpose of audit nor any audit observation to that effect was issued under S.25(3) of the Act nor it had ever been confronted with any audit report---Appellant could not be burdened with liability merely on the basis of an audit report with which appellant had not been confronted--In the present case, audit scrutiny being based on documents resumed by officers of Directorate of Intelligence and Investigation from the Sales Tax Department, audit being Post Refund Audit, would not fall under ambit of S.25 of Sales Tax Act, 1990---Post refund audit scrutiny could only be conducted under R.13 of Sales Tax Refund Rules, 2002--As post refund audit scrutiny was sole domain of Refund Division working under administrative control of Sales Tax Collectorate, all the proceedings initiated by the officers of Directorate of Intelligence and Investigation, were nullity in the eye of law.

GST 2006 CL 63; 2008 PTD 1032; 2009 PTD (Trib.) 500; 2002 SCMR 122; 2001 SCMR 1835 and 2002 PTD 2780 ref.

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

----Ss. 2(37), 36 & 46---Tax fraud---Proof---Recovery of tax not levied or short-levied or erroneously refunded---Levy of additional tax and penalty---Appeal to Appellate Tribunal---In terms of subsection (1) of S.36 of Sales Tax Act, 1990, it was necessary on the part of department to show that the taxpayer by reason of some collusion or deliberately acted for non-payment of tax---Impugned show-cause notice issued to appellant, had failed to reflect whether alleged act of obtaining of Sales Tax refund was the result of collusion or the same was a deliberate step to deceive the Government---Same, in circumstance was nullity in the eye of law---Onus to prove the allegations of collusion or of a deliberate act lay on the department---Thing required by law to be done in a certain manner, must be done in the same manner as prescribed by law or not at all---No charge of collusion or deliberate act had been levelled in show-cause notice, which was issued beyond period of three years---Said show-cause notice attracted the provisions contained in S.36(2) of Sales Tax Act, 1990 wherein limitation of three years had been provided---Since impugned notice had been issued after expiry of three years, same was illegal, void defective and barred by time---No body should be condemned until and unless a proper charge-sheet or statement of allegation was given to him---Since show-cause notice as per law had not been served on the appellant, no straightforward demand notice for payment of already sanctioned amount of refund could be issued---In absence of the charge of collusion or a deliberate action, the levy of additional tax and penalty was not called for---Impugned order was set aside, in circumstances.

2001 SCMR 838; GST 2006 CL 63; 2008 PTD 1032; 2009 PTD (Trib.) 500; 2009 PTD 1247 SC (S.C. Pak); GST 2002 CL 270; 2007 PTD 2265; 2004 PTD 868; PTCL 1999 CL 162; 1999 PTD 1308; 2004 SCMR 456; 2009 PTD 1112 and 2006 SCMR 626 = 2006 PTD 1132 ref.

Khubaib Ahmad for Appellant.

Muhammad Akmal for Respondent.

Date of hearing: 7th September, 2009.

2010 P T D (Trib.) 975

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Hafiz Ahsaan Ahmed Khokhar, Chairman/Member (Judicial)

Appeal No.53/ST/IB of 2009, decided on 10th June, 2009.

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

----S.73---Certain transactions not admissible---Adjustment of input tax was found inadmissible, because the registered person failed to produce banking instruments in respect of transaction exceeding fifty thousand rupees---Appellant/registered person contended that allegation involved was of a technical nature and there was no allegation against claiming input tax against fake and forged invoices and the provision of S.73 of the Sales Tax Act, 1990 could not be interpreted and applied strictly---Validity---Department had not denied the fact that invoices of supplier were genuine and no allegation had been levelled against the appellant for submitting fake and bogus invoices---Appellant had only failed to produce the record of banking instruments and it was evident from record that there was no allegation of fraud, cheating levelled against appellant for claiming of input tax adjustment against fake and bogus invoices and the department had admitted such fact, that the purchases of the appellant had been made against the valid sales tax invoices issued by the sales tax registered person and which later on, was confirmed in the report of auditor---Allegation against the appellant was of technical nature and the contravention by the appellant was only of non producing banking instruments record---Spirit and objectives of S.73 of the Sales Tax Act, 1990, was to streamline the transactions of registered persons through banks and also to avoid the input tax adjustment from the fake and forged sales tax invoices---Department had verified all the invoices provided by the appellant such as sales tax return, purchase invoices, bill of entry and purchase register, which were declared to be genuine and there was no allegation of fraud or bogus invoices---Appellant neither applied for wrong adjustment of tax to the department, nor made any forged/fake invoice for claiming the adjustment tax, nor tried to submit the bogus claim, nor caused any financial loss to the Government by non-deposit of the amount through banking instrument---Allegation levelled was only of technical nature of the effect that appellant had made payment of the amount exceeding Rs.50,000 in contravention of S. 73 of the Sales Tax Act, 1990---Appellant, on such contravention, was liable to pay only the penalty of 3% of the amount of tax adjustment involved under S.33(1)(16) of the Sales Tax Act, 1990.

Messrs Bestway Cement Limited v. Collector Sales Tax Tax Reference No. 100 of 2008 and Appeal No.49/ST/IB of 2008 rel.

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

----S.73---Certain transactions not admissible---Objects of S.73, Sales Tax Act, 1990---Object of S.73 of the Sales Tax Act, 1990 was to streamline the business transactions of all the registered persons by adopting the banks channels/through banks, so that no fraud, cheating, collusion or bogus claim could take place or succeed and also no wrong adjustment of tax be possible.

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

----Ss.33 & 73---Registered person may not be deprived from his legal money due against the Government when there is particularly no misstatement, forgery, collusion, cheating, fraudulent activity are alleged or any false claim is submitted by a registered person with 'the view to obtain illegal gain or causing loss to the Government.

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

----Ss.33(1)(16) & 73---Offences and penalties---Section 33(1)(16) of the Sales Tax Act, 1990 is relevant, if the contravention of S.73 of the Sales Tax Act, 1990 was made by the registered person.

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

----Ss.73 & 7---Certain transactions not admissible---Contravention of S.73 of the Sales Tax Act, 1990 does not absolutely debar the registered person to claim the input adjustment, if there is no allegation of fraud, cheating, collusion, fake and producing bogus invoices has been levelled against such registered person.

Muhammad Naeem Qazi for Appellant.

Ghulam Husnain, Senior Auditor for Respondent.

2010 P T D (Trib.) 982

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Judicial Member

Sales Tax Appeal No.83/LB of 2002, decided on 13th March, 2009.

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

----Ss. 7, 66, 32-A, 3, 6, 11(2) & 2(4)---Determination of tax liability--Input tax was claimed in the months other than the months during which sales tax invoices was issued---Disallowance of---Appellant contended that input tax adjustment claimed beyond tax period was based upon misinterpretation of relevant provisions as the appellant claimed the input tax, which had been actually paid by it and he held valid sales tax invoice; that input tax paid at the time of purchase of goods had become a vested legal right of the appellant and the same could not be disallowed on any account and that section 66 of the Sales Tax Act, 1990 provided that the input tax paid which could not be claimed in the relevant tax period could be claimed in subsequent one year and the appellant had claimed the input tax in the subsequent tax period within time---Department contended that according to provisions of S.7 of the Sales Tax Act, 1990, the appellant was required to adjust the input tax paid during the tax period from the output of that tax period and the appellant had violated the provisions of S.7 and S.66 of the Sales Tax Act, 1990---Validity---Held, under S.7 of the Sales Tax Act, 1990 the registered person was required to adjust the input tax paid during the tax period from the out period of that tax period and the appellant had violated the provisions of Ss.7 and 66 of the Sales Tax Act, 1990.

Appeal No.748 of 2001; Appeal No.327 of 2001 and W.P. No.2750/2000 ref.

Civil Appeals Nos. 2687 to 2696 of 2001 rel.

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

----S.3---Scope of tax---Disposal of fixed assets---Taxation of---Validity---Fixed assets as had been referred in the case or goods were taxable goods and comes within the ambit of `taxable supply' and liable to levy of sales tax.

Appeal No. 62 of 2001 ref.

Civil Appeals Nos. 2687 to 2696 of 2001 rel.

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

----S.2(46)---Value of supply---Denaturing charges---Taxation of---Sales Tax must be charged and paid by the appellant on denaturing the charges if supplies made in Pakistan shall be deemed to have been taken place at the time of delivery of goods or the time when the payment was received in respect of that supply.

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

----Ss.3 & 13---Scope of tax---Exemption---Sugar Mill---Press mud---Taxation of---Sales Tax on press mud was not exempted from the sales tax and the appellant/registered person was liable to be charged the sales tax.

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

----S.3---Scope of tax---Permit fee and freight charges---Taxability of---Permit fee and the freight charges were liable to sales tax and it was the responsibility of the registered person/appellant to charge the same and deposit in the Government exchequer.

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

----Ss.3(1A) & 2(25)---Further tax---Supplies to unregistered person---Taxation of---Appellant contended that sales were made to the person who were registered as per definition of S.2 (25) of the Sales Tax Act, 1990 prior to amendment through Finance Ordinance 2001 and no further tax was leviable where sales were made to a person who though not registered was liable to be registered---Validity---Held, further tax leviable and payable on supplies made to unregistered person was the basic requirements of law.

Mudassar Shujjah for Appellant.

Sarfraz, Anjum, Auditor, for Respondent.

Date of hearing: 9th February, 2009.

2010 P T D (Trib.) 996

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Hafiz Ahsaan Ahmad Khokhar Chairman/Member (Judicial)

Appeal C. No. 54/CU/ATIB of 2009, decided on 4th August, 2009.

Customs Act (IV of 1969)---

----Ss.32 & 161(1)(14)---Qanun-e-Shandat (10 of 1984)---Customs Clearing Agents Rules, 2001 Rr. 105, 106 & 107---S.R.O. 487(I)/2007 dated 18-8-2007---Untrue statement, error, etc.---Clearing agent---Mis­declaration of goods and attempt to clear foreign origin mobile phones and accessories without payment of duty/taxes fraudulently under the garb of `calcium carbonate'---Adjudicating Officer concluded that the offence against the Clearing Agent had been established, his clearing agency licence was liable to be cancellation but taking a lenient view on account of his cooperation with the Customs Authorities for providing important leads towards the offenders, a penalty was imposed for failing to exercise due diligence in performance of his duties with the warning to improve his working performance with the customs department---Validity---No clear cut finding of involvement of appellant in the commission of offence had been adjudged while passing the order that the appellant was involved intentionally with the business of importer and even no direct or documentary evidence was brought by the Department against the appellant at the time of adjudication, but conduct of the appellant was appreciated on the given cooperation towards the importer---Unless collusion, intentional fraud, mens rea or active connivance was proved against the appellant/agent, or solid evidence had been brought or the charge or allegations were proved according to the provisions of Qanun-e-Shahadat Order, 1984, until then he was absolved from any liability, responsibility and could not be penalized, punished, held responsible and charged on the assumed act of connivance and mis-declaration---No clear cut finding of involvement had been observed against the appellant in the order nor any evidence was brought on the record against the appellant on the collusion or connivance by the department, but the charge was made only on the assumed collusion and connivance with the importer---Charged levelled, against the appellant was not legal, justifiable and sustainable in the eyes of law.

Ports Ways Custom House Agent and another v. Collector of Customs and another 2002 YLR 2651 and 2003 PTD (Trib.) 2264 rel.

Muhammad Naeem Qazi for Appellant.

Faiz Ali, Dy. Collector/D.R. and Pervaiz Awan, Dy. Superintendent.

2010 P T D (Trib.) 1014

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Hafiz Ahsaan Ahmad Khokhar, Member (Judicial)

Appeal C. No.6/FE/IB of 2009, decided on 28th July, 2009.

Central Excise Act (I of 1944)---

----Ss.4(2) & 3---Federal Excise Act, (VII of 2005), Ss.8 & 14(3)---S.R.O. 333(I)/2002 dated 15-6-2002---Determination of value for the purposes of duty---Evasion of duty was alleged on the ground that aerated/non-aerated beverages were cleared on payment of duty on value less than the declared retail price---Re-Conciliation report clearly revealed that the central excise duty had been properly paid by the appellant on retail price, which meant that the department did not have any claim of tax or duty against the appellants, as the central excise duty was already paid on the declared price according to S.4(2) of the Central Excises and Salt Act, 1944---Order accordingly.

Zafar Iqbal, Company Secretary for Appellant.

Irfan Zubair, Senior Auditor for Respondents.

2010 P T D (Trib.) 1049

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial-II

Customs Appeal No. K-237 of 2008, decided on 4th August, 2009.

Customs Act (IV of 1969)---

----Ss. 25, 32, 32-A, 33, 156(1)(45) & 194-A---Constitution of Pakistan (1973), Art.25---Misdeclaration of description and quality of imported goods---Confiscation of goods---Discrimination---Appeal to Appellate Tribunal---Goods imported by the appellant/importer were confiscated on allegation that scrutiny of the goods declaration had revealed that the importer had misdeclared the description and quality of the goods in question---Order-in-original had revealed that the department had deviated from its long standing practice and Examination Manual---Examining Officer had not given a conclusive and fair examination report which had been normally given after examination of the consignment---Examination report was defective inasmuch as it did not confirm that goods were of secondary quality or prime quality, but the Customs Examining Officer had just jotted down his personal opinion without mentioning any parameters or criteria or yardstick to substantiate the same by saying that "in my opinion the goods were of secondary quality"---Adjudicating Officer also acted in violation of principles of natural justice and departmental practice as he had not only ignored that the examination report was deficient, sketchy, vague, unspecific and incomplete, but he overlooked comments of the departmental representative, Principal Appraiser, who had endorsed that the commercial documents suggested that the goods were of prime quality---Adjudicating Officer in haste outrightly confiscated the consignment which had definitely deprived the appellant of his vested right to clear his goods---Facility allowed to one and denied to the other was discrimination---Every citizen was equal in the eyes of law and any deviation from that rule would bring in provisions of Art.25(1) of the Constitution to rescue such citizen---Element of inter discrimination had crept up into the body fabric of the impugned order-in-original in addition to other legal infirmities and discrepancies patently floating on its surface---Facility of release of identical consignments imported by other importers had been extended without adjudication proceedings, despite the fact that their import values were almost at the same level as of the appellant---Impugned orders were not maintainable since those were suffering from patent legal infirmities---Same were set aside and Collector was directed to release the goods of the appellant after realizing leviable taxes against transaction value to be determined in terms of S.25(5) of the Customs Act, 1969.

2005 SCMR 492 ref.

Rana Zahid Hussain Khan for Appellant.

Ghulam Yasin, Appraising Officer for Respondent.

2010 P T D (Trib.) 62

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Abdus Salam Khawar, Chairman

C. No. 69/ST/IB of 2007, decided on 18th March, 2008.

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

----Ss.3(i) (a) & 34---S.R.O. 999(I)/2007 dated 29-9-2007---Scope of tax---Amnesty---Additional tax---Tax period February, 2001---Charged sales tax was not deposited in the government exchequer---Levy of additional tax---Validity---Short payment of Rs.3,000 was only for the period of February, 2001 while the other amounts had been paid--Additional tax was not leviable as laid down under S.R.O. 999(I)/2007 dated 29-9-2007---Principal amount having been paid, amnesty scheme was attracted.

PLD 1991 SC 963 ref.

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

----S.33(3)(b)---Offences and penalties---Levy of Rs.50,000 penalty for not producing record---Validity---Maximum penalty attracted was Rs.10,000---In the show-cause notice it had not been clarified as to what record was held back by the appellant---Allegation was neither according to law nor the orders in this respect was sustainable---No legal justification existed in imposing the penalty which was waived by the appellate Tribunal---Appellant was liable to pay a sum of Rs.3,000 only as short payment during the period in February, 2001.

Danish Ali Qazi for Appellant.

Dr. Sarmad Qureshi, Deputy Collector/D.R. for Respondent.

Date of hearing: 27th February, 2008.

2010 P T D (Trib.) 81

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Maher Muhammad Arif Sargana and Mian Muhammad Hanif Tahir, Members (Judicial)

S.T.A. No. 747/LB of 2006, decided on 2nd September, 2009.

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

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded--Limitation---Provision of law prescribing time limit for revenue to create liability against taxpayer would be deemed mandatory.

2008 PTD 60 rel.

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

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded--Limitation---Show-cause notice was issued on 17-6-2004 and order was passed on 28-1-2006---Limitation period provided under S.36(3) of the Sales Tax Act, 1990 expired on 17-9-2004, as such the order was passed after expiry of the limitation period of 90 days---No evidence was available to show that such period was extended by the Collector---First Appellate Authority observed that "Adjudicating Officer sought extension for finalization of case from Central Board of Revenue which was granted on 1-2-2006 and the orders' were issued on 28-1-2006, thus orders had been issued within extended period and was not time barred"---Limitation period of 90 days expired on 17-9-2004---Collector or the Board of Revenue could extend the period for further 90 days for the reason to be recorded in writing---Adjudication Officer at the most could pass the order by 17-12-2004, whereas the order had been issued on 28-1-2006---If, the Central Board of Revenue granted extension on 1-2-2006, it was beyond its jurisdiction, as the extended period of 90 days had already expired---Such being so, it remained to answer as to why the Government was revising the limitation period from 45 days to 90 days and then from 90 days to 120 days, if such limitation had no legal consequences---Appeal was accepted, Order-in-Original as well as Order-in-Appeal were set aside and the show-cause notice was vacated by the Appellate Tribunal.

2008 PTD 60 and 2008 PTD 1844 rel.

Sales Tax Appeal No. 17/2004 and S.T.A. No. 1229/LB of 2005 ref.

Amjad Javed and Nadeem Ahsan for Appellant.

Nemo for Respondent.

Date of hearing: 27th August, 2009.

2010 P T D (Trib.) 160

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

Appeal No. Cus.141/PB of 2007, decided on 25th March, 2009.

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

---S.1 79---Adjudication proceedings-'Criminal proceedings' and adjudication proceedingsare two different and independent areas with different and independent implications---Both prosecution and adjudication proceedings are concurrent remedies, each is independent of other and cannot be deemed to be mutually exclusive.

PLD 1986 SC 192 rel.

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

----S.179---Criminal proceedings---Conviction in criminal proceedings will have no bearing on adjudication proceedings, which are independent proceedings under the Customs Act, 1969.

1987 SCMR 1840 and 2005 PTD (Trib.) 1470 rel.

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

----S.179---Confiscated goods---Adjudication of seized/confiscated goods exclusively fell within the domain of customs authorities.

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

----Ss.194-A, 2(o) & 3---S.R.O.371(I)/2002 dated 15-06-2002---Appeal to Appellate Tribunal---Filing of appeal by the Deputy Collector of Customs (Hqrs)-Maintainability---Appeal was filed by the Deputy Collector of Customs (Hqrs) on behalf of the Collector of Customs---Under S.194-A(1) of the Customs Act, 1969, an officer of customs aggrieved by an order passed by the Collector (Appeals), may file an appeal to the Appellate Tribunal against such order---Words "or an officer of customs" were inserted by Finance Ordinance, 2000 and according to S.2(o) of the Customs Act, 1969, the words "officer of customs" means an officer appointed under S.3 of the Customs Act, 1969, which also includes a Deputy Collector of Customs---Substituted subsection (2) of S.194-A of the Customs Act, 1969 clearly specify that the minimum level of officer for filing appeals under the authorization of Collector will be Assistant Collector of Customs---Subsection (8) of S.194-A of the Customs Act, 1969 provide legal cover where references or appeals were filed by the officers of lower ranks and were questioned on the point of jurisdiction---Under S.R.O. 371(I)/2002 dated 15-6-2002, against S.194 of the Customs Act, 1969, the appropriate officer shown is Assistant Collector of Customs who is the minimum level of the officer for filing an appeal under the authorization of Collector of Customs.

PTCL 2000 BS 17; PLD 1996 Statute 1578 and PLD 2008 Statute 827 ref.

2006 SCMR 129 distinguished.

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

----S.194-B(1)---Orders of Appellate Tribunal---Jurisdiction---Contention was that Appellate Tribunal could not travel beyond the scope of the subject-matter of the appeal and the 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---Validity---Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against---Appellate Tribunal may record additional evidence and decide the case but shall not remand the case for recording the additional evidence---Word "thereon" apparently con fines the powers of the Appellate Tribunal to the subject matter of appeal and apparently it could not 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 could not be put in a worse position than what he was in earlier---Appellate Tribunal may record additional evidence and then decide the case on merits---Proceedings under the Customs Act, 1969 did not come to an end with the passing of an order---If any of the rival parties filed an appeal, the proceedings were 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 were real but steps in a series of proceedings all connected by an intrinsic unity, were to be regarded as one legal proceeding---Appellate proceedings were the continuation of the original proceedings---In filing of an appeal, the entire matter reopens and becomes sub judice---Appellate Tribunal as the final fact finding authority was obliged to consider the question(s) and fact(s) and that was the reason that Appellate Tribunal had been entrusted with vast powers under 5.194-C(8) of the Customs Act, 1969---Pure question of law can be raised at any stage of the appeal depending upon the facts and circumstances of each case.

2005 PTD (Trib.) 2262; PLD 1969 SC 1; 1999 SCMR 1072 and PLD 1965 SC 900 rel.

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

----S.168---Seizure and investigation proceedings-Scope-Procedural and technical lapses committed during the investigation.

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

----Ss.2(s) & 156(1)(8)---Foreign Exchange Regulation Act, (VII of 1947), S.2(b)---S.R.O. 566(I)/2005, dated 6-6-2005---Smuggling--Recovery of local as well as foreign currency---Contention was that word "currency" listed in S.2(s) of the Customs Act, 1969 and even notified vide S.R.O. 566(I)/2005 means a medium of exchange in the country' and it only means Pakistan currency and not the foreign currency/foreign exchange---Dictionary meaning of the wordcurrency' implies that its mention in S.2(s) of the Customs Act, 1969 or under S.R.O. 566(I)/2005 covers only local currency and not foreign currency and the passenger could not be charged for the offence covered by Cl. (8) of S.156(1) of the Customs Act, 1969---Validity---Word "currency" had neither been defined in the Customs Act, 1969 nor in the General Clauses Act, 1897 but, probably, passenger was unaware of the fact that the word "currency" had been properly defined in S.2(b) of the Foreign Exchange Regulation Act, 1947---Word "currency", which was listed in S.2(s) of the Customs Act, 1969 and also properly notified under S.R.O. 566(I)/2005 covers both Pakistan and Foreign Currency and no adverse implication could be derived therefrom.

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

----Ss.7 & 156(1)(1)---Assistance to the officers of customs---Anti-Narcotic Force officials on duty were empowered and required under S.7 of the Customs Act, 1969 to assist officers of the customs in the discharge of their functions under the Customs Act, 1969 and penalty for omission to do so was clearly provided in Cl. (1) of S.156(1) of the Customs Act, 1969.

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

----Ss.156(1), proviso to Explanation, 187 & 2(s)---Punishment for offences---Recovery of foreign currency---Intention of the accused---Proviso to the Explanation to S.156(1) of the Customs Act, 1969 clearly provides that in the case of accompanied baggage, the offence shall be deemed to have been committed when baggage containing prohibited/ restricted goods entered the customs area---Once baggage foreign currency, which was skillfully concealed inside the zip pockets of one of the two suit-cases of the P Pockets avoid detection, was brought by the passenger inside the customs area, which was an admitted fact, rather material evidence, the offence of attempt to smuggle was deemed to have been committed by him---Under S.156(2) read with S.187 of the Customs' Act, 1969, the burden of proving that no such act had been committed or there was no such intent shall be on the accused passenger, from whose possession the foreign currency, being a specified and notified item under S.2(s) of the Customs Act, 1969, was seized inside the customs area.

1991 PCr.LJ 644 and PLD 186 SC 192 ref.

1980 PCr.LJ 318 rel.

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

----S. 139---Declaration by passenger or crew of baggage---Analysis and interpretation of S.139 of the Customs Act, 1969.

1991 PCr.LJ 644 rel.

(k) Baggage Rules, 2006---

----Baggage Rules, 2006 reveal that the passenger shall file a baggage declaration in the given format in the case of unaccompanied baggage, however, there was no baggage declaration format for accompanied baggage of the passengers arriving into or departing from Pakistan, except that in para. 16 of the said rules.

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

----S.139---Declaration by passenger or crew of baggage---Imports and Exports (Control) Act (XXXIX of 1950), Preamble---Foreign Exchange Regulation Act, (VII of 1947), Preamble---Outgoing passenger was only required to make oral declaration to the effect that no prohibited or restricted items under the Customs Act, 1969 read with Imports and Exports (Control) Act, 1950 and Foreign Exchange Regulation Act, 1947, were being carried by him in his accompanied baggage, before clearing the same, or on his person.

1991 PCr.LJ 644; 1980 PCr.LJ 318 and 1990 ALD 252 rel.

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

----S.139---Declaration by passenger or crew of baggage---Custom General Order 9 of 1983---Customs General Order No.28 of 1983---Customs General Order No.22 of 1984---Customs General Order No.9 of 1985---Procedure to make declaration was made simplified by Customs General Order No.9 of 1983 as amended by Customs General Order No.28 of 1983, Customs General Order No.22 of 1984 & Customs General Order No.9 of 1985 and Form "A" and currency declaration form 'F.M.' were merged into one Form---Passengers were required to make declaration ion the said revised Form, however, the practice to make declaration on the said revised form has been discontinued altogether and no written declaration was ordinarily obtained from any incoming or outgoing passenger.

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

----Ss.139 & 142---Declaration by passenger or crew of baggage---Possession of any imported article which was dutiable or which was prohibited or restricted was not an offence so long as a true declaration had been made under S.139 of the Customs Act, 1969.

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

----S.142---Temporary detention of baggage---Section 142 of the Customs Act, 1969 only speaks of imported goods, and not exported goods, which were not imported with the intention of consumption in Pakistan.

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

----Ss.156(1) & 2(s)--- Punishment for offences---Attempt to smuggle---Proviso to explanation to S.156(1) of the Customs Act, 1969 provides that in the case of accompanied baggage or any un-manifested goods meant for export, the offence shall be deemed to have been committed when such baggage or goods enter the customs area or delivered to the carrier or the conveyance---By virtue of such amendment incorporated therein, the bringing in or taking out of any prohibited or restricted goods to or from the customs area by any incoming or outgoing passenger will fall within the ambit of attempt to smuggle.

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

----S.139---Declaration by passenger or crew of baggage--- `No intention of declaration'---In absence of any legal documentation regarding carriage of huge quantity of foreign currency, skillfully concealed in the baggage in a manner so as to avoid detection, it was abundantly clear that there was no intention of declaring the same.

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

----Ss. 139, 152(2) & 187---Declaration by passenger or crew of baggage---Declaration under S.139 of the Customs Act, 1969 could be made only where goods were capable of being declared and the foreign currency seized was of such huge quantity, which was skillfully concealed in one of the two suit-cases of the passenger in a manner so as to avoid detection, that it could by no stretch of imagination be declared by him---Accused passenger was a frequent traveller abroad which was evident from his passport and he was supposed to be fully aware of the prohibitions and restrictions from taking out such a huge quantity of foreign currency without legal authority and it was whimsical to presume that the person who was caught red-handed with huge amount of foreign currency, having a valid ticket, visa and passport at the time of checking in and then subsequently boarding a flight bound for Dubai did not really intend to smuggle the same out the country, particularly, when the law i.e. S.152(2) read with S.187 of the Customs Act, 1969, clearly mandates a presumption against him and specifically lays down the onus upon him.

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

----S.139--Declaration by passenger or crew of baggage-Outright confiscation of foreign currency---Opportunity for filing declaration---One of the prosecution witnesses i.e. the Seizing Officer conceded before Trial Court to the effect that the Customs Staff on duty did not provide the accused passenger an opportunity for filing declaration of the contents of his baggage---Filing of declaration means written declaration and not oral declaration---Practice of making written declaration had since long been discontinued altogether, however, the passenger had ample opportunity for making oral declaration, which he failed to do, as required under S.139 of the Customs Act, 1969---Adjudicating authority outrightly confiscated the foreign currency strictly in accordance with law and as such, the finding of Order-in-Original could not be disturbed even if the prosecution witnesses conceded at such belated stage before Trial Court, because these were independent proceedings to each other.

2002 SCMR 1527 rel.

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

----S.139---Declaration by passenger or crew of baggage---Outright confiscation of foreign currency---Affidavit of close relatives---Pleas and affidavits of close relatives regarding handing-over currency for business abroad and taking back the excess currency, were apparently an afterthought as the same pleas/contentions had not been taken in the bail application and even during the arguments before the Trial Court at the time of grant of bail to the accused passenger---Specifically, pleas/contentions like the ones taken/raised by the passenger, before Appellate Tribunal and even before the lower forums must also to be taken specifically in bail application or before the Trial Court at the time of grant of bail.

Messrs Waqar Hussain and Sajid Hussain v. Collector of Customs, Central Excise and Sales Tax, Peshawar in Appeal No. 44 of 1995, decided on 17-10-1995 rel.

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

----S.6---Entrustment of functions of the customs officers to certain other officers---Confiscation of foreign currency---Accused passenger contended that act of seizure was done by the Anti-Narcotic Force Staff on duty, who were not entrusted with the powers of Customs Officers under S.6 of the Customs Act, 1969 and since it was an illegal seizure, the subsequent proceedings were null and void in the eyes of law and seized foreign currency was required to be restored---Validity---Assistant Director, Anti-Narcotic Force while narrating the factual proceedings of the initial detection of the carriage of foreign currency by the accused passenger he categorically denied the accusation by the passenger that the foreign currency was seized by the Anti-Narcotic Force Staff in violation of the mandatory provisions of the Customs Act, 1969---Anti-Narcotic Force staff, after initial detection of concealment of foreign currency, referred accused passenger along with his baggage containing foreign currency and other non-offending goods; etc., to the Customs Staff on duty for initiating proceedings under the Customs Act, 1969; they never took the physical possession of the foreign currency as alleged by the passenger---Initial detection of concealment of foreign currency was made by Anti-Narcotic Force Staff and thereafter, legal formalities for effecting the seizure were undertaken by the Customs Staff under the relevant provisions of Customs Act, 1969.

PLD 1968 Kar. 599 and PLD 1977 Lah. 1318 distinguished.

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

----S.194-A---Appeal to Appellate Tribunal---Appreciation of evidence--Assistant Director of Anti-Narcotic Force was a Gazetted Officer and natural witness; his statement before the Appellate Tribunal narrating the actual proceedings of initial detection of the foreign currency could be termed as reliable and trustworthy---Witnesses were weighed and not numbered and Court had to go deeper and discover quality of evidence---Assistant Director, being one of the Detecting Officers was an important and natural witness to the initial proceedings and as such, Appellate Tribunal examined him properly in order to go into deeper appreciation of the evidence provided by him in this behalf.

1991 MLD 2459 rel.

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

----Ss. 168(2), 2(s) & 180---S.R.O. 487(I)/2007 dated 9-6-2007---Seizure of things liable to confiscation---Foreign currency-Show-­cause notice---Notification No. S.R.O. 487(I)/2007 dated 9-6-2007 was issued by the Board, which clearly referred to smuggled goods falling under Cl. (s) of S.2 of Customs Act, 1969---Goods or class of goods either listed or notified under the said section including currency clearly fell within the ambit of smuggled goods, and such goods did not warrant issuance of show cause notice within 60 days as envisaged in the Proviso to S.168(2) of the Customs Act, 1969.

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

----Ss. 168 & 180---Issue of show-cause notice before confiscation of goods or imposition of penalty---Limitation---Irrespective of the fact that period prescribed under S.168 of the Customs Act, 1969 had expired, Customs Officer under S.180 of the Customs Act, 1969 could issue notice for confiscation of goods and imposition of penalty.

Messrs Sikandar and Brothers v. Government of Pakistan and others PLD 1986 Kar. 373 and M/s. Saima Enterprises v. Deputy Collector and others 1996 MLD 1522 rel.

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

----S.2(s)---'Smuggling'---Scope---Rare perusal of definition of `smuggling' suggests that even attempt, abetment or connivance for taking away currency in breach of any prohibition or restriction, like any other items, specified in the law, constitutes an act of smuggling---Scope of smuggling was very wide, encompassing all possible factors which may connote attempt, abetment or connivance for bringing in or taking out of country any of the specified goods including currency.

1991 MLD 228 and Ehsan Elahi Malik v. State 1980 PCr.LJ 186 rel.

Civil Appeal No. 757 of 2005; PLD 1981 Quetta 1; 2002 PTD (Trib.) 3083; 2002 PTD (Trib.) 3083; Liaquat Ali and others v. Special Judge (Customs) and others 1988 PCr.LJ 449; Asghar Ali v. State PLD. 2003 SC 250; Ehsan Elahi Malik v. State 1980 PCr.LJ 186; Waqar Hussain v. State 1981 PCr.LJ 958; C.B.R. and others v. Khan Muhammad PLD 1986 SC 192; Tamas Khan v. State 1988 PCr.LJ 2277; 1991 MLD 228 and Abdul Salam v. State 1984 PCr.LJ 1133 ref.

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

----S.168---Overt act---Unlawful possession of foreign currency---Accused passenger was intercepted within the customs area and found to be in unlawful. possession of huge quantity of foreign currency without any legal document for its transfer abroad---Same was an overt act and the adjudicating authority rightly upheld the charges framed against him.

Siraj Din and others v. Custodian, Evacuee Property, Punjab, Lahore PLD 1975 Lah. 1270 rel.

Asghar Ali v. State PLD 2003 SC 250 and Abdul Salam v. State 1984 PCr.LJ 1133 ref.

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

----S.2(1)---Foreign Exchange Regulation Act (VII of 1947), Preamble---Goods---Foreign currency---Currency was included in the expression `goods" as defined in S.2 (1) of the Customs Act, 1969---Where an attempt was made to export currency in contravention of Foreign Exchange Regulation Act, 1947, the offender was liable to the penal action under the Foreign Exchange Regulation Act, 1947 as well as under the Customs Act, 1969.

1996 SCMR 727 ref.

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

----Ss.168 & 156(1)---Punishment for offences---Confiscation of goods---Foreign currency---If a person is found in possession of concealed currency, the confiscation of such contraband currency is authorized---Where it was found that goods not declared were found concealed in, in such a case not only the goods not so declared but also the goods so declared would also be liable to confiscation.

AIR 1960 Kar. 170; PLD 1967 SC 1 and 19 DLR (SC) 157 rel.

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

----Ss.139, 156(8)(89), 156(1)(70), 2(s) & 16---Declaration by passenger or crew of baggage---Non-invoking of S.139 of the Customs Act, 1969 in the show-cause notice---Effect---Provision of S.139 of the Customs Act, 1969 were mandatory---Bare reading of S.139 clearly specified that it was obligatory on the owner of any baggage to make a correct declaration of his baggage to the appropriate officer of customs and to answer such questions as may be put to him with respect to his baggage--Failure to make such declaration was made punishable under S.156(1)(70) of the Customs Act, 1969---In the present case section 139 of the Customs Act, 1965 had not been invoked in the show-cause notice but it had been dilated upon in the findings of the Order-in-Original---Passenger having been charged in the show cause notice for violation of provisions of S.2(s) read with S.16 of the Customs Act, 1969 for unlawful possession and attempt to illegally transfer huge amount of foreign currency out of country and his act was punishable under Cls.(8) and (89) of S.156(1) of the Customs Act, 1969 irrespective of whether in the commission of the offence, his act was also punishable under S.156(1)(70) of the Customs Act, 1969---Non-invoking of S.139 of the Customs Act, 1969 in the show-cause notice would not have any adverse impact on the prosecution case in circumstances.

PLD 1991 Kar. 268 rel.

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

----Ss.156 (1)(70) & 139---Punishment for offences---Mandatory upon the passenger to make true declaration and failure whereof was punishable under S.156(1)(70) of the Customs Act, 1969---Customs Act, 1969, nowhere provided to extend "opportunity" for making declaration as mandatory upon the Customs Staff and lack of providing "opportunity" to the passenger for making declaration of contents of its baggage could not be viewed by any adverse implications.

1980 PCr.LJ 318 rel.

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

----Ss.156 (1)(8) & 2(s)---S.R.O. 556(I)/2005, dated 6-6-2005---Punishment for of offences---Cls.(8) of S.156(1) of the Customs Act, 1969 relates to smuggling of any goods into or out of Pakistan---Word `smuggle" had been defined under S.2(s) of the Customs Act, 1969 and as such , the provisions of Cl.(8) of S.156(1) of the Customs Act, 1969 will be attracted to the goods specified therein or duly notified thereunder---Foreign goods smuggled into or taken out of Pakistan brought the accused within penal provision of S.156(1)(8) of the Customs Act, 1969---Word "goods" had been defined under S.2(1) of the Customs Act, 1969 which means all moveable goods and also includes baggage, currency and negotiable instruments---Exporting of Pakistan currency and foreign currency in illegal manner amounts to smuggling---Currency had been clearly specified for the purpose of Ss.2(s) and 156(2) of the Customs Act, 1969 and also notified under S.R.O. 566(I)/2005 dated 6-6-2005.

PLD 1985 Pesh. 82 and PTC 186 CL 29 (sic) rel.

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

----Ss.156(1)(89) & 156(1)(8)--Punishment for offences--Section 156-(1) (89) of the Customs Act, 1969 was applicable to goods as covered by the definition of `smuggle' under S.2(s) of the Customs Act, 1969; in other words, Cl.(89) applies to the conscious possession of the smuggled goods, when the process of importation was complete, whereas, offence under Cl.(8) of S.156(1) of the Customs Act, 1969 applies to such goods while in the process of importation and exportation Cl. (89) was distinguishable from Cl.(8) of S.156(1) of the Customs Act, 1969.

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

----Ss.156(1)(89) & 156(1)(8)---Punishment for offences---Expression with lawful excuse' appearing, in S.156(1)(89), Customs Act, 1969---Meaning---Expressionwith lawful excuse' appearing in Cl. (89) of S.156(1) of the Customs Act, 1969 carries the meaning that it was for that person to prove that he had come by its possession in a lawful manner, that was in a manner which did not involve a breach of any provision of law---Expression `the proof of which shall be on such person' distinctly places the burden of proof of lawful possession on such person.

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

----S. 156(1)(89)---Punishment for offences---Ingredients of offence---In order to constitute the offence, four ingredients of the offence have to be established; firstly, it was necessary for the prosecution to show that the goods in question were goods which were chargeable with a duty which had not been paid or with respect to the importation of which there was any prohibition or restriction for the time being in force;, secondly, that the accused was carrying those goods---Thirdly, that the accused was doing so knowingly, that is to say, he knew that the goods were chargeable with a duty which had not been paid or that there was any prohibition or restriction with respect to the importation of those goods and fourthly, that the accused was carrying the goods with the intent to defraud the Government of any duty payable thereon or to evade the prohibition or restriction which was for the time being in force with respect to their importation.

AIR 1964 Bom. 103 (DB); AIR 1962 SC 496 and AIR 1965 SC 481 rel.

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

----S.156(1)(89)---Punishment for offences---Direct evidence---No direct evidence on the point whether the requirements of S.156(1)(89) had Been fulfilled could be available, but all the facts and circumstances of a particular case were to be gone into.

AIR 1961 Punj. 21 and 1961 (1) Cri. LJ Jour. 150 rel.

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

----S.156(1)(89)---Punishment for offences---Foreign currency--Importation of---Proper importation of foreign currency notes or coins into Pakistan by any person without any limit or lawful possession of such foreign currency notes and coins with lawful authority will not be Punishable under S.156(1)(89) of the Customs Act, 1969.

PLD 1986 SC 192 rel.

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

---Ss.156(1), proviso to Explanation, 2(s) & 139---Punishment for offences--After insertion of proviso to Explanation to S.156(1) of the Customs Act, 1969 the principles pronounced in the judgments before July, 1982 relating to attempt under S.2(s) of the Customs Act, 1969 and making declaration under S.139 of the Customs Act, 1969 did not hold good thereafter---By virtue of said insertion/amendment, bringing of any prohibited or restricted goods into the customs area by any person amounted to attempt to smuggle.

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

----S. 156(1)(89)---Punishment for offences---Foreign currency---Huge quantity of foreign currency, which was skillfully concealed by the accused passenger in zip pockets of one of his two suit-cases carried by him as accompanied baggage and that too, in a manner so as to avoid detection and the number of visits made by him in short span of two years were sufficient to raise a presumption against him, which he had not rebutted at all---Burden lies upon him to prove otherwise.

Muhammad Rafiq v. State 1980 PCr.LJ 318; State v. Umar Hayat PLD 1992 SC 393; Syed Pir Walayat Shah v. State PLD 1991 Kar. 268 and Bakht Jamal v. State 2003 PCr.LJ 1123 rel.

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

----S.156 (2)---Punishment for offences---Section 156 (2) of the Customs Act, 1969 had not been invoked in the show-cause notice or dilated upon in the Order-in-Original---Effect---Section 156(2) of the Customs Act, 1969 raises a legal presumption against the offender, in the light whereof cases were to be decided---Said section did not create a separate or distinct offence so as to be mentioned in the show-cause notice; on the contrary, it had to be read in every circumstance falling within its ambit and it will be quite whimsical to expect the entire Customs Act, 1969 to be reproduced in the show-cause notice or deliberated upon in the Order-in-Original---As a departmental practice, only the enabling and penal provisions were invoked in the show-cause notice and accordingly deliberated upon in the Order-in-Original so as to arrive at the correct decision of the case.

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

----S.156(1),(8) & (89)---Punishment for offences---Seizure of foreign currency---Foisting of huge quantity of foreign currency on the passenger was unimaginable due to the fact that proper identity of accompanied baggage carried by the passenger was made and recovery of such huge quantity of foreign currency therefrom, which was skillfully concealed therein in a manner so as to avoid detection, was properly made under the provisions of the Customs Act, 1969 and no enmity existed between the seizing staff and the accused passenger at the time of seizure of the foreign currency---Seizing and investigating staff had duly implicated the accused passenger in case for the offence of smuggling and no material contradiction existed in their evidence on case file relating to seizure of foreign currency, which could shake their credence---Defence version had not inspired confidence for carriage and possession of such huge quantity of the foreign currency in the absence of documentation relating to legal transfer/lawful possession of the same by the accused passenger---Presumption, in such circumstances, would be that the provisions of S.156(1)(8) and (89) of the Customs Act, 1969 were clearly attracted.

1991 SCMR 54; 1988 PCr.LJ 435 and 1992 MLD 1496 rel.

(oo) Words and phrases--

---"Packages"---Word "package" had not been defined in Customs Act, 1969---Word "package" had no peculiar or unusual meaning attached by the legislature---Word "package" must be treated in its literal and ordinary meaning---Dictionary meaning of "Package" was a bundle or things packed up and contained in a receptacle.

AIR 1961 Bom. 48 and Muray's Dictionary Vol. VII, 352 rel.

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

----S.187---Burden of proof as to lawful authority, etc.---Seizure of foreign currency---Burden of proof---Evidential and tactical burden of proof, in such a situation, is cast upon the accused while the legal burden to bring home the allegations remain with the prosecution.

1987 MLD 316 and Younus Khan v. State 1986 PCr.LJ 1993 rel.

(qq) Foreign Exchange Regulation Act (VII of 1947)---

----S. 8(1)(2)(3)---State Bank of Pakistan Notification No. F.E.-3/92-SB, dated 10-11-1992---State Bank of Pakistan Notification No.F.E.-4/92-SB, dated 28-12-1992---State Bank of Pakistan Notification No. F. E. -2/98-SB, dated 21-07-1998---Seizure of foreign currency---Limit of foreign exchange/currency---Provisions of Foreign Exchange Regulation Act, 1947 fully attracted in the present case in the light of pronouncement by the Supreme Court.

Criminal Appeal No. 519-527 rel.

(rr) Imports and Exports (Control) Act, (XXXIX of 1950)---

----S.3(1)(3)--Customs Act (IV of 1969), S.16---Seizure of foreign currency---Government may prohibit or restrict or otherwise control the import or export of goods of any specified description by issuing a notification---Seized currency stands notified as such its export was prohibited---Section 3(3) of the Imports and Exports (Control) Act, 1950 provide that provisions of S.16 of the Customs Act, 1969 shall apply to such goods whose import or export was prohibited under Sub. S. (1) of S.3 of the Imports and Exports (Control) Act, 1950---Provisions of S.3 of the Imports and Exports (Control) Act, 1950 were attracted in the present case.

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

----S. 168--- Seizure of foreign currency---Judicious and speaking order---Passenger contended that Order-in-Original was not a judicious and speaking order as the adjudicating authority even did not call for comments from the seizing agency on the reply to show-cause notice filed by the passenger and failed to rebut the points raised by the accused; therefore, order by the adjudicating authority was not a judicious and speaking order---Validity---Adjudicating authority had given its findings in the wake of arguments, written as well as oral, advanced by the passenger, who himself appeared---Adjudication proceedings were conducted by the adjudicating authority by observing the doctrine of natural justice---In adjudication proceedings, the adjudicating authority was not legally bound to call for parawise comments from the seizing agency---Full opportunity was provided to the accused to rebut the material evidence placed on record---Accused also did not avail the opportunity to cross-examine the witnesses---On the principle of res ipsa loquitur, the seizing agency discharged its burden on the reasonable plea that the foreign currency was attempted to be smuggled---Order-in-Original was a speaking and judicial order as no illegality, irregularity, impropriety, misreading or misappreciation was apparently evident on the face of it---Objection was repelled.

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

----S.194A---Appeal to Appellate Tribunal---Appellate Tribunal--jurisdiction-When an appeal was filed to the Appellate Tribunal against the Order-in-Appeal, the Tribunal had to satisfy itself as to the legality or propriety of the Order-in-Appeal passed by the Collector of Customs, Sales Tax & Federal Excise (Appeals), and after giving rival parties an opportunity of being heard, it may pass such order thereon based on factual and legal footing, confirming modifying or annulling the order appealed against.

(uu) Customs, Federal Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006---

----S.194A---Powers of Appellate Tribunal---Appellate Tribunal had been empowered under the Customs, Federal Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006 to remand the case to the authority from whose order the appeal had been preferred or if the appeal is preferred as the second appeal to the original adjudicating authority, then it shall remand the case to the original adjudicating authority for de novo consideration.

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

----S. 194-A-7-Appeal to Appellate Tribunal---Additional evidence---Appellate Tribunal may record additional evidence, as and when required, during the proceedings pending before it.

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

----S. 193---Appeal to Collector (Appeals)---Seizing of foreign currency---Principle of "Audi Alteram Partem "---Applicability---Department requested for adjournment on the plea that the seizing officer, who was well conversant with the facts and circumstances of the case, was on training and the original file was in his custody---Plea was not accepted and hearing was not adjourned--- Validity---No body should be condemned unheard---Quasi judicial proceedings should provide fair hearing and opportunity of defence to the rival parties, which were essential ingredients of the principles of natural justice---On filing of appeal under 5.193 of the Customs Act, 1969, rival parties were to be afforded an opportunity of fair hearing with regard to subject matter of appeal---If the appellate authority fails to give proper and fair opportunity of hearing to the rival parties, the order so passed was in fact no order in the eyes of law in as much as it was made in total disregard of the principles of natural justice---Appellate, authority, having denied the department an opportunity of being heard and dis­allowed to produce or rebut any evidence in the course of proceedings, in fact, acted in haste and exhibited undue expedition, which tantamount to patent illegality in the eyes of law.

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

----S. 193---Appeal to Collector (Appeals)---Collector (Appeals) had not secured attendance of the Detecting, Seizing and Investigation Officers to properly examine them in order to bring the actual facts to surface, While deciding the case, which smacked of undue expedition of the case, and such undue haste could have been avoided.

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

----S. 193---Appeal to Collector (Appeals)---Personal appearance---Right of hearing inter alia includes personal appearance and hearing besides providing opportunity to defend and rebut the material to be used against the person concerned.

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

----S. 193---Appeal to Collector (Appeals)---Confiscation of foreign currency---Order not based on evidence---Collector (Appeals) had erred in reaching the conclusion that the contention of the passenger was correct to the extent that he first approached the Anti-Narcotic Force counter and inquired regarding the limit of foreign currency, which he could take with him, without any justification, the accused along with foreign currency was handed-over to the Customs Staff; which confirmed that before making any declaration by the passenger, the search was made by the Customs Staff---Assistant Director, Anti-Narcotic Force appeared before the Appellate Tribunal and vehemently controverted the finding by the Collector (Appeals)---Finding of Collector (Appeals) to such extent was not based on evidence, it was fanciful, rather he had drawn wrong inference in this behalf from the evidence on record, which was not tenable in the eyes of law.

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

----S. 139---Declaration by passenger or crew of baggage---Section 139 of the Customs Act, 1969 creates an obligation upon every passenger or a member of crew to make declaration of his baggage and to answer questions with respect to his baggage---Failure to do so is liable to penalties and confiscation.

Pir Walayat Shah v. State PLD 1991 Kar. 268 rel.

(bbb) Customs Act (IV. of 1968)---

----S. 194-A---Appeal to Appellate Tribunal---Reasons for distinguishing the judgments cited by the Collector (Appeals) recorded.

1980 PCr.LJ 663 and 1984 PCr.LJ 1133 distinguished.

Collector of Customs v. Khud-e-Noor and others Criminal Appeals No. 519-527 of 2005 rel.

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

----S. 194-A---Appeal to Appellate Tribunal---Finding on facts by the Appellate Tribunal and comments on order of First Appellate Authority recorded.

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

----S. 194-A---Appeal to Appellate Tribunal---Per incuriam judgment--Where the earlier decision of the Bench of the Appellate Tribunal was per incuriam, it did not at all bind, even a single Bench of the Appellate Tribunal---Decision per incuriam did not bind either the same forum or "even a lower forum.

Collector of Customs v. Abdul Majeed 2001 CLC 1461 and Abdul Razzak v. Collector of Customs 1995 CLC 1453 rel.

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

----Ss. 193---General Clauses Act, (X of 1897), S.24-A---Appeal to Collector (Appeals)---Order-in-Appeal must contain the contentions raised before, the appellate authority by the rival parties and its reasoning based on evidentiary substance for passing a reasoned order in accordance with the relevant provisions of the Customs Act, 1969 read with S.24-A of the General Clauses Act, 1897.

Collector of Customs v. Khud-e-Noor and others Criminal Appeals Nos. 519 and 527 of 2005; Gul Khan and others v. The Collector of Customs, Rawalpindi in Appeal C. Nos. 61 of 2003, 128, 129, 130, 131, 132, 134, 135 of 2004 and 79 of 2006 and Hon'ble Supreme Court of Pakistan in Criminal Appeal No. 212 of 2006 rel.

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

----Ss. 193, 194-A & 156(1), Proviso to Explanation---Appeal to Appellate Tribunal---Confiscation of foreign currency---Order by the First Appellate Authority---Finding of Collector (Appeals) was based an incorrect facts, circumstances and irrelevant and inadmissible evidence and in support of his arbitrary and fanciful findings, he had placed his reliance on irrelevant and inapplicable judgments, which were irrelevant in view of proviso to Explanation to S.156(1) of the Customs Act, 1969---Appellate Tribunal had gone into deeper appreciation of the factual and legal issues of the case, like making declaration under S.139 of the Customs Act, 1969, skillful concealment of the foreign currency in the zip pockets of one of two suit-cases of the passenger in a manner so as to avoid detection, applicability of various provisions of the Customs Act, 1969 invoked by the department and citations of various relevant judgments of the Superior Courts in support of their observations/findings thereon---Appellate Tribunal found that Order-in-Appeal was perverse, arbitrary fanciful, improper, unfair and based on wrong inference drawn by the First Appellate Authority, from the material evidence on record and the said Order-in-Appeal was considered by the Appellate Tribunal as non judicious and non-speaking order in view of the stated cogent reasoning, facts and circumstances of the case and relevant citations of the Superior Courts, which lent credence to the observations/findings in this behalf---Appeal of the department was accepted---Order of First Appellate Authority was set aside and the Order-in-Original was restored by the Appellate Tribunal, however, non-offending goods involved were ordered to be returned to the accused, if not required in any other case.

Syed Mudassir Ameer, Barrister-at-Law, Yousaf Haider Orakzai, D.R. and Muhammad Zahid, Superintendent for Appellants.

Irshad Ahmad Durrani for Respondents.

Dates of hearing: 17th, 19th November, 2008 15th December, 2008, 5th, 19th January, 2009, 3rd, 4th and 9th February of 2008.

2010 P T D (Trib.) 258

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial)

Appeal No.S.T. 252/PB of 2003, decided on 26th January, 2009.

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

----Ss.13(1), 66 & Sixth Sched., S. No. 3, Cl. (vii)---Special Procedure for Supply of Food Rules, 1999, R.3(1)(8)---Sales Tax Refund Rules, 2000, R.6---Federal Board of Revenue Letter C. No. 1/33-STB/ 2005 dated 6-6-2005---S.R.O. 698(I)/98---Exemption---Refund---Restaurant business---Supply of food product/food stuff along with catering services for running a canteen located inside the premises of an industrial concern---Sales tax was charged, which on recovery was deposited in the Government Treasury---Subsequently, refund was claimed of such tax on the ground that supply of food products to such industrial canteen fell under the exemption from the charge of sales tax, in terms of S.13(1) of the Sales Tax Act, 1990 read with item-3(vii) of the Sixth Schedule of the Sales Tax Act, 1990---Refund claim was rejected on the ground that appellant was separate registered person under Food Rules and not being part of such industrial canteen and whereas under R.3(1) of the Special Procedure for Supply of Food Rules, 1999, every person supplying food, in or from the premises of Clubs, Caterers, Canteen, Hotels or Rest House, shall be liable to charge and pay sales tax irrespective of the fact whether food was consumed in that premises or supplied or catered outside or supplied as take away and Sales tax had rightly been charged and deposited in the Government Treasury---Validity---Appellant had claimed the exemption under item No.3(vii) of the Sixth Schedule of the Sales Tax Act, 1990 but that exemption could be availed by the management of those industrial canteens which cooked or prepared food with every arrangements inside the industrial concern without involving third party for the supply of the food stuff, whereas in the case in hand, third party i.e. appellant was an independently registered tax person and tax payer in terms of R.2(b) and R.2(i) of the Supply of Food Rules, 1999 read with Notification No. SRO.1039(1)/99 dated 14-9-1999 had been involved for the supply of food stuff/food products, thus could not avail the exemption from the- charge of sales tax on such an activity falling within the scope of taxable activity between two registered sales tax persons.

Messrs Pfizer Laboratories Ltd. v. Federal of Pakistan and others PLD 1998 SC 64 and Shikhoo Sugar Mills Limited v. Government of Pakistan and others 2001 SCMR 1376 = 2001 PTD 2097 ref.

Hashwani Hotels Limited v. Government of Pakistan and others 2007 SCMR 1131 = 2007 PTD 1473 rel.

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

----S.3-B---Collection of excess tax, etc.---Sales tax once charged and deposited in the Government Treasury whether genuinely or under misconception of law, could not be refunded under S.3.B of the Sales Tax Act, 1990.

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

---Sixth Sched., S. No.3, Cl. (vii)---Exemption---Cooked or prepared food stuff served in messes run on the basis of mutuality and industrial canteens for workers of a particular class---Any canteen inside the Factory, if run by the Factory Management itself or with the help of nominated body of the workers for service of food to the workers and that too, to a particular class of workers, i.e. the labourers would stand exempted from the sales tax.

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

----S. 13(1) & Sixth Sched., S. No. 3, Cl.(vii)---Exemption---Food stuff was supplied by the appellant to an industrial canteen of another registered tax person and where the same was cooked/prepared for the workers and that way, such a deal or transaction fell within ambit of taxable activity between the two taxable registered persons and could not seek the exemption on supply of such food stuff.

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

----S.13---Exemption---'Taxability', liability' andpayability' were the terms which must be taken into in its true essence and the provisions for exemption of an item from the charge of sales tax must be strictly construed in view of the prevailing practice where the charging provision of a taxing statutes, no doubt, were construed in favour of the assessee but the provisions relating to the exemptions were to be construed in favour of the Revenue and that way the assessee had to prove his entitlement for such an exemption.

(f) Interpretation of Statutes---

----Grants or concession in the nature of exemption from payment of duties/taxes were to be given a rigid interpretation against the t(Ix payer and in favour of the taxing power.

Shikhoo Sugar Mills Limited v. Government of Pakistan and others Hashwani Hotels Limited v. Government of Pakistan and others 2007 SCMR 1131 = 2007 PTD 1473 rel.

Barrister Farrukh Jawad Panni for Appellant.

Abdul Latif Yousafzai, Dost Muhammad, Sharifullah, Shuaib Sultan, Senior Auditors and Zubair Shah, Asstt. Collector (Legal) for Respondents.

Date of hearing: 22nd January, 2009.

2010 P T D (Trib.) 275

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Khalid Naseem, Member (Technical)

Custom Appeal No.39/LB of 2009, decided on 30th July, 2009.

Customs Act (IV of 1969)---

----Ss.25(5)(d), 32(1), 32(3-A), 156(1), 9 & 14---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1) & 3(3)---S.R.O. 574(I)/2005 dated 6-6-2005---Value of imported and exported goods---Import of "Taurus Brand Pistols "---Value was declared 40$ per piece---Department adopted 215$ per piece---Appellant contended that same goods were being declared at 40$ and was assessed at 100$ and still being done at 100$ but only in the five cases the value of 215$ had been applied which was unfair and not justified---Departmental representative confirmed that the goods were still being cleared at 100$ under the order of High Court and 215$ had never been applied to any case except in said five cases---Validity---No doubt 37 pieces of Taurus Brand Pistols were cleared on 215$ but the same had never been applied on any one---GD of higher value of 215$ was filed on 25-8-2005 but in the subsequent period also it had not been applied and constantly clearance had been allowed at US$ 100 as admitted by the departmental representative on the plea that High Court had decided to allow release at 100$---Discriminatory treatment having been meted out in view of majority clearances at US$100, there was no reason to interfere with the order in appeal which was upheld and the appeal of the department was rejected by the Appellate Tribunal.

Shahzad Malik, Appraiser for Appellant.

Mian Abdul Ghaffar for Respondent.

Date of hearing: 20th July, 2009.

2010 P T D (Trib.) 283

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Judicial Member

Customs Appeal No.1466/LB of 2008, decided on 25th August, 2009.

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

---S.18(2)---S.R.O. 482(I)/2007 dated 9-2-2007---Goods dutiable---Regulatory duty---Past and closed transaction---Regulatory duty was imposed @ 25% on export of unwrought lead, lead waste and scrap and its articles---Information was received that goods were being exported at highly under-invoiced value in order to evade the regulatory duty---scrutiny of record revealed that exporters evaded huge amount of duty by misdeclaring FOB value of Lead Ingots---Adjudication proceedings culminated in passing of order-in-original against which appeal was filed before First Appellate Authority, who had accepted the appeal by setting aside order-in-original---Validity---In the absence of valuation advices on the basis of which demand for payment of regulatory duty was created were. set aside---Demand was not according to law, advices being illegal---Adjudication proceedings and subsequent demand raised in respect of past exports were arbitrary, void and without any legal effect as no final value had been determined and exports in question had attained the status of past and closed transactions and had become legally exported---No objection was ever raised by the department at the time of filing of shipping bills---Subsequent determination of value will have no nexus with the past transactions---Appeal of the department was rejected having no merits and order passed by the First Appellant Authority was upheld by the Appellate Tribunal.

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

----S.18(2)-Past and closed transaction---Once a consignment was out of the charge after due consideration of relevant documents it becomes a past and closed transaction to the extent of value and thus the entire action taken by the department was illegal and without jurisdiction.

Ehsan Ullah Cheema for Appellant.

Malik Muhammad Arshad for Respondent.

Date of hearing: 20th August, 2009.

2010 P T D (Trib.) 292

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Tahir, Mehr Muhammad Arif Sargana, Judicial Members and Khalid Naseem, Member (Technical)

S.T.A. No.828/LB of 2009, decided on 28th September, 2009.

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

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

----Ss.38, 40 & 40A---Authorised officer to have access to premises, stocks, accounts .and records;-Search under warrant and without warrant---Information received by the Department with regard to massive tax evasion by way of concealed supply of taxable goods without payment of sales tax and issuance of fake/flying invoices and 'records relating to business activity were presently kept at the premises---Authorized team of audit staff visited the premises as there were reasons to believe that duplicate/private business record may be removed if action was delayed---Finding no time for complying with the provision under S.40 of the Sales Tax Act, 1990, action was initiated under S.40-A of the Sales Tax Ad, 1990 and notice was served on Chief Accountant for examination/search of business records and stocks---Registered taxpayer/appellant contended that factory premises was raided by a large number of Officers/Officials without obtaining search warrants under S.40 of the Sales Tax Act, 1990 or preparing statement containing grounds of belief under S.40-A of the Sales Tax Act, 1990; that preparation of memo. under S.38 of the Sales Tax Act, 1990 on the same date and time and entering name of appellant in pre-typed form clearly showed that said form was filled in after conducting raid on the office/factory premises and as such the raid, search and seizure of record and other articles were illegal as having been conducted in violation of mandatory requirement of Ss.40 and 40A of the Sales Tax Act, 1990 and that entire record and other articles recovered and seized in illegal raid could neither be used against the appellant nor any demand could be raised on the basis thereof---Validity---Condition precedent for carrying out search under S.40-A of the Sales Tax Act, 1990 was that if any officer of sales tax not below the rank of Assistant Collector had reasons to believe that any documents or things were concealed or kept in any place and there was a danger that they may be removed before search could be conducted under S.40 of the Sales Tax Act, 1990 he may after preparation of statement in writing of grounds of his belief for which search was to be made, search, cause search to be made for such documents or things---Such statement was to be prepared before conducting the raid on any premises---Statement of Assistant Collector could not be termed as statement containing grounds of belief because the said statement was not written by the Assistant Collector, as it was pre-typed form in which the name of appellant was only entered---If such statement was missing the essential requirement that the appellant had taken or was about to take any step for removal of record and other articles or that obtaining of search warrant would consume time or that Magistrate was not available---Recovery memo. and statement clearly showed that the name of appellant was entered in the pre-typed form white the raiding party was present in the factory premises---Law did not permit to prepare such statement after entering in the private property of any person---Collector should have prepared the statement containing his grounds of belief prior to raid and carrying out search that appellant had taken certain steps or he was about to take such steps and if time was consumed in obtaining warrant, the record and other articles would be removed---Notice under S.38 of the Sales Tax Act, 1990 showed that raiding party visited the factory premises and asked the Chief Executive to sign the same and on his refusal another pre-typed form was filed just by entering the name of the appellant in order to make it statement under S.40-A of the Sales Tax Act, 1990 remotely---Raid, search and seizure conducted without complying with the mandatory provisions of Ss.38, 40 and 40-A of the Sales Tax Act, 1990 was illegal and proceedings and actions taken in consequence of such raid, search and seizure including issuance of show-cause notice passing of order in original raising of demand/recovery had no legal effect---Order-in?original as well as order in appeal were set aside by the Appellate Tribunal and appeal was accepted.

?

Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz PLD 1991 SC 630; Federation of Pakistan through Ministry of Finance, Islamabad v. Master Enterprises (Pvt.) Limited and 4 others 2003 PTD 1034; Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Pvt.) Limited 2005 PTD 1933; Messrs Ahsan Yousaf Textile Mills (Pvt.) Limited, Faisalabad v. Federation of Pakistan through Ministry of Finance, Islamabad and 4 others 2003 PTD 2037; Messrs Food Consultants (Pvt.) Limited, Lahore and other v. Collector (Central Excise and Sales Tax), Lahore: and 2 other 2004 PTD 1731, Messrs Zakeria Enterprises v. Muhammad Musharafa and 7 other 2005 PTD 1200 and Collector of Sales Tax and others v. Food Consultants (Pvt.) Limited and Messrs Depilex Beauty Clinic and others 2007 PTD 2356 rel.

Collector of Customs, Lahore and another v. Universal Gateway Trading Corporation and other 2005 SCMR 37; Collector of Sales Tax and others v. Food Consultants (Pvt.) Limited and Messrs Depilex Beauty Clinic and others 2007 PTD 2356; Messrs N.P Water Proof Textile Mills (Pvt.) Limited through Director Karachi v. Federation of Pakistan through Secretary Revenue Division/Chairman Central Board of Revenue, Islamabad and another 2004 PTD 2952 and A.R.K Textile through Proprietor v. Federation of Pakistan through Ministry of Finance, Islamabad and 4 others 20061 PTD 494 ref.

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

----Ss.40 & 40-A---Search under warrant and without warrant---All searches under Ss.40 & 40-A of the Sales Tax Act, 1990 shall be carried out in accordance with the provisions of Code of Criminal Procedure (V of 1898) and it was mandatory to comply with the requirement of S.40-A of the Sales Tax Act, 1990 for conducting raid without warrant.?

Federation of Pakistan through Ministry of Finance, Islamabad v. Master Enterprises (Pvt.) Limited and 4 others 2003 PTD SC 1034 rel.

Per Khalid Naseem, Member Technical---[Minority view].

?

Mian Abdul Ghaffar and Malik Muhammad Arshad for Appellant.

Muhammad Nawaz Cheema for Respondent.

Date of hearing: 15th September, 2009.

2010 P T D (Trib.) 315

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial)

C. A. No.1023/LB of 2005, decided on 13th April, 2009.

Customs Act (IV of 1969)---

----Ss.2(s), 16 & 156(1)(80)(89)---Imports and Exports (Control) Act (XXXIX of 1950), S. (1) & (3)---Smuggle---Confiscation of seized vehicle on the ground-of tampered/manipulated chassis number and being smuggled one brought into the country through unauthorized route without payment of duty/taxes---Appellant had placed on record catena of documents that the vehicle had duly been imported and sold from hand to hand and the appellant was a bona fide purchaser for value without notice---Copy of bill of Entry had been placed on record according to which vehicle had been imported---All the documents issued by the Port Trust were also placed on record---Application for registration certificate was made and relevant document in connection with registration were produced---Vehicle was sold to different persons as explained in the reply to show-cause notice and all the documents were on record---Motor Registration Authority before registration got it confirmed from Customs House, as to. whether any vehicle of said description had earlier been registered---Letters were addressed to all Motor Registration Authorities in all four Provinces and when authorities gat satisfied that the vehicle had not been registered anywhere else prior to it, the registration was made---Such was sufficient safeguard to avoid machination---No suppression of facts all along--No evidence that there was any other vehicle plying in the country with such description---Appellant had not been confronted with any laboratory report which had been obtained at his back---In the presence' of plethora of record regarding vehicle, appellant could not be non suited merely . on the report of Forensic Science Laboratory---Department having disposed of vehicle in violation of injunctive order, vehicle was to be retrieved---Appeal was accepted---Order was set aside and it was directed by the Tribunal that vehicle in question be returned to its lawful owner, the appellant---Customs department may return the consideration obtained against such vehicle from the Pak PWD for retrieval of the vehicle for onward handing over to the appellant.

Salooka Steel Mills, Limited v. Director-General, Coast Guard Karachi Pakistan PLD 1981 Quetta 1 and Muhammad Farooq v. Muhammad Mubeen, Inspector Collectorate of Customs Multan 2004 PCr.LJ 1958 rel.

Malik Muhammad Arshad for Appellant.

Muhammad Farooq, Inspector for Respondent.

Date of hearing: 24th March, 2009.

2010 P T D (Trib.) 324

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

C. A. No.638/LB of 2009, decided on 5th October, 2009.

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

----Ss. 156(1), Cls. (9), (14) & (14-A)---Punishment for offences--Confiscation of seized goods---Option was given to redeem the goods on payment of redemption fine equal to 30% of the customs value to be appraised and to pay penalty of Rs. 5,00,000---Validity---Order-in-Original was set aside by the Appellate Tribunal so far as it related to the demand of duty and tax in respect of goods which were neither available nor seized---Redemption fine was reduced to 15% of the customs value to be re-determined as ordered by adjudicating officer---Penalty was also reduced to Rs.2,00,000.

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

----Ss. 18, 79, 80 & 156(1)(43)---Goods dutiable---Levy of duty and taxes on the goods already removed though neither available nor seized, on the ground that all goods imported or brought into Pakistan were liable to customs duty and such goods were also part of the seized consignments as stated by the prosecution on the basis of statement of Manager of Bond---Validity---Recovery memo. prepared by the department in respect of seized goods, which contained the details and particulars of each item, whereas no such description and detail of the goods allegedly taken away by the appellant was available on record---Demand of duty and taxes raised by the department in respect of goods, which were neither available nor seized nor details and description thereof had been brought on record was unjustified and illegal.

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

----S.156(1)(43)-Punishment for offences---Removal of goods from Port by third persons and subsequently sold to the appellant---Punishment---Validity---Clause (43) of S.156(1) of the Customs Act, 1969 was not applicable so far as the appellant was concerned as admittedly he never got any goods cleared illegally from the Port.

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

----S.156(1)(43)---Punishment for offences---Show-cause notice---Appellant contended that duty and taxes in respect of goods which were neither available nor seized had been demanded in term of Cl. (43) of subsection (1) of section 156 of the Customs Act, 1969, whereas he was never charged under the said provision of law in the show-cause notice and as such the adjudicating authority had travelled beyond the scope of the show-cause notice which was not permissible under law; such provisions of law even otherwise were not applicable as the appellant never removed the goods from any customs area---Validity---Contention that duty and taxes in respect of goods which were neither available nor seized had been demanded in terms of Cl.(43) of S.156(1) of the Customs Act, 1969, which was not invoked in the show-cause notice was correct-Adjudicating Officer could not travel beyond the show-cause notice---Said clause even otherwise was not applicable, as it was the case of department itself that goods were illegally removed from the Port by third persons---Department was unable to show any document filed by the appellant for clearance of goods in question at Port---Nothing was available on record to establish that the appellant had ever visited the Port---Entire case of the department was based on the statement of third co-accused recorded by the Investigating Officer while they were in custody---Such statements were not admissible in evidence under the law.

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

----S.179(3)---Power of adjudication---Limitation---Directory or 'mandatory provisions---Order' was passed after expiry of limitation---Department contended that although the original order was passed after expiry of limitation prescribed under S.179(3) of the Customs Act, 1969, yet it would not render the same order illegal as the provisions contained in S.179(3) of the Customs Act, 1969 were directory in nature---Validity---Contention that provisions as contained in S.179(3) of the Customs Act, 1969 were directory in nature was not tenable, because where any liability was created the said provision would be mandatory in nature---Orders creating liability passed after expiry of limitation prescribed by law for deciding the case would be illegal.

Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector Sales Tax Gujranwala and another 2008 PTD 60; Messrs Hanif Straw Board Factory through Proprietor v. Additional Collector. (Adjudication) Customs Central Excise and Sales and 2 others 2008 PTD 578 and S.T.A. No. 42/LB/2007, decided on 4-6-2008; 2000 PTD (Trib.) 1263 cal.

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

----S.194-A---Appeal---Limitation---Contention of the Department that delay was caused in passing order due to pendency of writ petition was not tenable, as admittedly the adjudication proceedings were not stayed in the case.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Appellants.

Saleem Ullah SIO and Mushtaq Ahmad, D.S. for Respondents.

Date of hearing 17th September, 2009.

2010 P T D (Trib.) 335

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member Judicial

Customs Appeals Nos.409/LB to 413/LB of 2009, decided on 31st July, 2009.

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

----Ss. 32(1)(2)(3)(3A) & 25(1)(5)(6)(7)(8)(9)(15)---S.R.O. 482(I)/2007, dated 9-6-2007---Untrue statement, error, etc.---Value of imported and exported goods---Imposition of regulatory duty---Export of ferrous waste and scrap re-melting scrap ingots of iron and steel---Allegation of under-invoiced value in order to evade the regulatory duty on the ground that value declared was ranging between US$ 400 to 600 per metric ton as compared to similar/identical goods exported from Karachi during the same period were exported at the rate of US$ 1450 per metric ton---Matter was adjudicated and order in original was passed against the appellant and appeal was also dismissed by the First Appellate Authority by holding that in case of uniform scrap items, such unusual value differences were not acceptable for taxation purpose---Validity---Neither the contract nor any other shipping document was doubted or found false at export stage nor such allegation was levelled in the show-cause notice---Lot of difference existed in law of valuation in respect of import and export---Neither there was difference in description, quantity, weight, classification of the goods nor there was any allegation regarding falsity of documents--No case of misdeclaration was made out---Neither the goods were physically compared nor any laboratory test of both the consignments i.e. the consignment exported by the appellant and the one exported at Karachi was carried out---Both the consignments could be said to be consisting of same type of scrap---Department had made out case on the basis of mere evidential GDs without physical comparison of goods by alleging that the value of exported goods would have been higher without any cogent material---Making case of misdeclaration against appellant was a result of illegal exercise of jurisdiction---Appeal was accepted and orders passed by the lower forum were set aside by the Appellate Tribunal.?

Messrs S.T. Enterprises through Proprietor v. Federation of Pakistan through its Secretary (Revenue Division-FBR), Islamabad and 4 others 2009 PTD 281 and Messrs Atlas Tyres (Pvt.) Ltd. Sheikhupura v. Additional Collector (Adjudication) Collectorate of Central Excise Lahore and another 2003 PTD 1593 rel.

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

----S.155-L---Export processing authorities which examined, assessed and allowed exportation of the goods were not authorized to carry out post clearance audit and issue show-cause notice.

Messrs Pak Suzuki Motors Co. Ltd. through Senior General Manager (Corporate Plying and Logistic) Karachi's case 2006 PTD 2237 rel.

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

----Ss.18 & 25---Once the consignment is out of charge it becomes past and closed transaction so far its value is concerned.?

Messrs A.S. Enterprises and Messrs Sunny Trader's 2009 PTD 281 rel.

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

----Ss. 32(2) & 32(3A)---Untrue statement, error, etc. ---Provisions of subsections (2) and (3-A) of S.32 of the Customs Act, 1969 could not be invoked together.?

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

----S.25---Value of imported and exported goods---Valuation of exported goods on the basis of value of identical or similar goods could not be assessed as such methods were only prescribed for import.

?

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

----S.32(2)---Untrue statement, error, etc.---Limitation---Contention that S.32(2) of the Customs Act, 1969 authorized the Department to raise demand within 5 years was without merit when there was no allegation of falsity of documents or misstatement or any collusion of the appellant with customs authorities.?

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

----S.25---Scrap---Gradation of---Contention that there was no terminology of grades in scrap was without force because there was lot of difference in value of scrap of various types like magnetic and non-magnetic scrap.?

Mian Abdul Ghaffar and Malik Muhammad Arshad for Appellants.

Fayyaz Ahmad, D.S. for Respondent.

Date of hearing: 28th July, 2009.

2010 P T D (Trib.) 408

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

S.T.A. No.2769/LB of 2001, decided on 28th October, 2008.

Sales Tax Act (VII of 1990)---

----Ss.3, 11, 33, 34, 36 & 46---Assessment of Sales Tax---Raising demand of Sales Tax on the basis of units of electricity consumed by assessee--Imposition of penalty---Appeal to Appellate Tribunal---Appellant had assailed order-in-original passed by Additional Collector whereby demand of Sales Tax had been raised on the basis of units of electricity consumed by the appellant---Assessment on the basis of consumption of electricity was hardly a safe rule and yardstick to assess the production---Textile mills had different departments and electricity was variedly utilized in each of them---Audit report and the show-cause notice had absolutely not mentioned as to how many spindles were there in the relevant mills---Said report was also silent about the type of frame as to whether it was auto cone frame or ring frame and there was no count of yarn---Audit report was very much flimsy in respect of assessment, it was definitely a self-styled assessment---Auditor had wrongly showed the number of finishing goods and the quantity of raw material in the light of the previous audit report---Use of electricity in the office was definitely meant for furtherance of taxable activity---Appellant during the comments had admitted its liability towards the electricity charges; such being not definitely a willful default, there was no occasion to charge additional tax or impose penalty.

Muhammad Akram Nizami for Appellant.

Imran Tariq, D.R. and Shaukat Hayat, Auditor for Respondents.

2010 P T D (Trib.) 417

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial)

C.A. No.421/LB of 2008, decided on 10th July, 2008.

Customs Act (IV of 1969)---

----Ss.2(s), 168 & 194-A---Smuggling---Confiscation of goods---Appeal to Appellate Tribunal---Appellant had assailed in the appeal the order­-in-appeal, which had upheld the order-in-original, whereby 22389 yards of cloth, had been confiscated---Anything smuggled could be apprehended at the border or even in interior of the country, provided it was smuggled---At the border, it was very easy to say that anything was being smuggled within the purview of S.2(s) of Customs Act, 1969---Heavy onus lay for the prosecution to prove that a thing was smuggled, if apprehended from inland--If a cloth bore some stamp of foreign country on it, then it could be said that it was smuggled cloth---If no stamp found was on any fancy or silk cloth, then it could not be said that such cloth could not be made in Pakistan as Textile Industry was quite advanced in Pakistan---Prosecution was to prove that cloth in question was smuggled cloth because no stamp was on it of its make--Invoice produced by the appellant was of local Cloth House, which had shown that cloth in question was sold to the appellant by said local Cloth House---Stamp of said Cloth House was on cash memo, name, address and telephone number of the Proprietor of said Cloth House, was also there---It was fallacy on the part of the department to say that the cash memos were not import documents and spurned them---Said Invoices were not import documents, but were documents regarding local purchase---Adjudicating authority should have ascertained from said local Cloth House regarding authenticity of the cash memos---Cloth in question did not fall in banned or restricted items, it could be released against redemption fine---Appeal was accepted and impugned orders were set aside and the concerned authorities would release the, cloth against payment of redemption fine, accordingly.

Muhammad Iqbal v. State 1983 PCr.LJ 1351 and 2005 PTD (Trib.) 779 ref.

M. Aslam Zaeem for Appellant.

Anwar Hassan, S.I.O. for Respondent.

2010 P T D (Trib.) 443

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Custom Appeal No.K-9 of 2009, decided on 25th April, 2009.

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

----Ss.156 & 2(kka)---Import Policy Order (2008-09), Appendix G---GGO 11/2007---S. R.O.575(I)2005, HS Codes 8414.3010 & 8418.6990--Punishment for offences---Documents---Exemption---Discriminatory treatment---Outright confiscation of goods without any option to pay fine in lieu of confiscation whereas the consignment of other importers from the same source and supplier had been released, by the Department prior to the import of appellant's and even subsequent to adjudication proceedings---Validity---Definition of customs documents transpired that invoice and Bill of Lading had been defined as customs documents and they could not be discarded---Since, scrutiny of such documents and specifically the invoice submitted on the date of hearing it was established that identical goods supplied by the same source and origin had been released by the Department as such the Department could not now resile from same---Department was estopped by their own conduct and appellants were entitled to release of their goods on the same terms and conditions---Appellants had been discriminated by the Department by whimsical exercise of discretion as the Appellant's case was identical to other importers who had been allowed release of their consignments of identical machinery imported from India and as such the Appellants were entitled for the release of their consignment on same terms 'and conditions as had been applied to in other cases---Orders were set aside, appeal was accepted and the Department was directed by the Appellate Tribunal to release the consignment.

1989 SCMR 353; 2004 PTD 2516; 2002 PTD 955; 2008 PTD 1475 and PLD 1970 SC 453 rel.

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

----S.156---Where the department had followed a particular practice over a period of time whether right or wrong, it will be extremely unfair to make a departure from it.

PLD 1970 SC 453 rel.

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

----S.156---Revenue could not be allowed shifting of versions in respect of the same product with mere change in the law to the taxability of product.

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

----S.156---Indiscipline in realm of taxation---Assessee should know his status or the character and status of his product vis-a-vis, the chargeability of the tax and the revenue should not be allowed to take inconsistent and changing versions since indiscipline in realm of taxation was always injurious and hazardous to the health of economy, industry and business.

Junaid Ghaffar for Appellants.

Ghulam Yasin for Respondents.

2010 P T D (Trib.) 449

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Khalid Naseem, Member (Technical)

Sales Tax Appeal No. 139/LB of 2008, decided on 16th September, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 10(4), 11(2), 7, 8, 26 & 33---S.R.O. 555(I)/2006 dated 5-6-2006, R.28 (1)---Excess amount to be refunded---Limitation---Department observed that appellants did not file refund claim along with supporting documents within sixty days of filing of refund---Refund claimed being time barred was liable for rejection---Registered person was charged with violation of Ss. 7, 8, 10 and 26 of the Sales Tax Act, 1990---Adjudication proceedings culminated in passing of Order-in-Original for rejection of refund claimed-'--Validity---Appellate contended that the only issue involved was filing of supporting documents late by 38 days---Withholding of citizen's money by a public functionary on the plea of limitation or on any other technical plea if it was not legally payable by him was deprecated---Department accepted the position and also the arguments of the appellant that in similar cases the refund had been allowed in many cases by the department and by the First Appellate Authority---Plea of the appellate was accepted and the orders were set aside by the Appellate Tribunal.

PLD 1998 SC 64 rel.

Khubaib Ahmad for Appellant.

Abdul Nasir, Auditor for Respondent.

Date of hearing. 26th August, 2009.

2010 P T D (Trib.) 451

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member Judicial

Sales Tax Appeal No.43/LB of 2008, decided on 7th September, 2009.

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

----S.10---Excess amount to be refunded---Charge of non filing against invoices of issuing unit was levelled in the show-cause notice---Adjudication order provided for rejection of refund on the charge of abnormal tax profile---Validity---Rejection of refund was beyond scope, stance and contents of the show-cause notice---No such charge as adjudged in the adjudication order was primarily levelled in the show-cause notice which rendered same null and void in the eye of law---Order passed by the First Appellate Authority did not suffer from any legal infirmity and the same was upheld by the Appellate Tribunal and the appeal filed by the department being devoid of any merit was rejected.

Collector Central Excise and Land Customs v. Rahim Din 1987 SCMR 1844; Messrs Aftab Industries Oil Mills, Kehror Pacca v. The Collector Sales Tax Multan GST 2002 CL 210; Messrs 'Excide Pakistan v. The Deputy Collector 2004 PTD 1449 and Messrs B.P. Industries, Karachi v. The Additional Collector of Customs, Sales Tax and Central Excise (Adjudication) and another 2008 PTD (Trib.) 36 rel.

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

----S.10---Show-cause notice---Charge which was not framed in show-cause notice could not be adjudged through an adjudication order.

Collector Central Excise and Land Customs v. Rahim Din 1987 SCMR 1844 rel.

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

----S.10---Show-cause notice---Department cannot go beyond the allegations mentioned in the show-cause notice.

Messrs B.P. Industries, Karachi v. The Additional Collector of Customs, Sales Tax and Central, Excise Adjudication and another 2008 PTD (Trib.) 36 rel.

Muhammad Ashraf for Appellant.

Khubaib Ahmad for Respondent.

Date of hearing: 7th September, 2009.

2010 P T D (Trib.) 456

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mher Muhammad Arif Sargana, Member (Judicial)

S.T.A. No.1525/LB of 2002, decided on 2nd September, 2009.

Sales Tax Act (VII of 1990)---

----Ss.46, 31, 20 & 23---S.R.O. 392(I)/2001 dated 18-6-2001---S. R. O. 124(I)/2000 dated 15-3-2000---Natural Gas Rules, 1999---Appeal to Appellate Tribunal---Filing of appeal by Assistant Collector without authorization---Validity---No authorization or general delegation of powers giving the specific authorization to file the appeals had been given to the Assistant Collector in the absence of which, it shall be safe to presume that the Assistant Collector had not been delegated the powers of filing the appeals before the Tribunal---Assistant Collector at the relevant time was not competent to file the appeal on behalf of the Sales Tax Department---Appeal was held to be filed by un-authorized person and not maintainable under the provisions of S.46 of Sales Tax Act, 1990 as it stood at the relevant time---Appeal was rejected by the Appellate Tribunal.

Abdul Rashid, S.A. for Appellant.

Khubaib Ahmad for Respondent.

Date of hearing: 12th August, 2009.

2010 P T D (Trib.) 460

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Shaukat Ali, Member

Appeal No.2054 of 2009, decided on 30th September, 2009.

Customs Act (IV of 1969)---

----Ss. 25, 79, 81, 156, 171, 179, 181 & 194-A---Customs value of goods---Determination---Misdeclaration of actual value of the goods--Confiscation of goods---Appeal to Appellate Tribunal---Appellants electronically filed Goods Declaration at total invoice value of US Dollar 15912---Appellants determined their tax liability on their own and sought clearance thereof under S.79(1) of the Customs Act, 1969---Scrutiny of the Goods Declaration in the light of examination report, had revealed that appellants had misdeclared the actual value of the goods--Declared value was alleged to be as low as 33.37% of the actual value---Appellants were alleged to have committed an offence by filing false and forged documents and attempted to defraud the Government from legitimate revenue amounting to Rs.101,356---Charges levelled against the appellants, having been established it was ordered that contravened items be confiscated under Ss.81 and 156 of the Customs Act, 1969---Departmental representative, had contended that method of working out the quantum of loading which was not relevant for the purposes of the case, because it was not the quantum of loading, but the quantum of under-invoicing that was required to be determined---Threshold for taking punitive action in case of under-invoicing was 30% and the extent of under-invoicing in the case was 25.02%---Case fell outside the purview of the relevant Notification---Case record showed that Assistant Collector was not authorized to adjudicate upon the matter, as Assistant Collector under S.179(1) of the Customs Act, 1969 was not authorized to adjudicate cases where the amount of duty/taxes involved was more than Rs.300,000 whereas the amount of duty/taxes involved in the present case was Rs.535,345---Adjudicating Officer/Assistant Collector had passed the impugned order with least application of mind---Redemption fine was remitted and the penalty imposed on the goods and the appellants respectively, was also remitted---Impugned order was modified to the said extent only and appeal was disposed of accordingly.

Malik Muhabbat Hussain Awan for Appellant.

Abdul Hameed, Appraising Officer for Respondents.

2010 P T D (Trib.) 472

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Humayun Khan Sikandari, Member (Technical)

Appeal No. Cus.192/PB of 2008, decided on 9th June, 2009.

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

----S. 195---Revisional powers of the Board or Collector---Scope and extent---Collector or the Federal Board of Revenue could exercise powers under S.195 of Customs Act, 1969 for the purpose of satisfying himself or itself as to the correctness, legality, propriety of any order passed by a subordinate officer---Federal Board of Revenue or the Collector could, thereupon pass any appropriate order, but any order which had sought to raise the level of punishment already sanctioned, could only be passed after affording an opportunity to the person affected thereby---Said suo motu powers, however, could only be exercised within a period of two years from the date of the impugned decision or the order---Power of revision was analogous to power of superintendence and was sometimes, exercised without being moved by a party---Object of revision was to keep the authority subordinate to the revisional authority, within the bounds of their jurisdiction-Provisions of S.195 of the Customs Act, 1969 had invested a power in the Collector or the Federal Board of Revenue to re-open the proceedings, where such proceedings suffered from any "illegality" or "impropriety"---Said revisional powers, did not authorize an officer to examine issues not falling within- the scope of terms "illegality" and "propriety"---Such powers in circumstances were limited, as compared to an appeal before the competent authority---Concept of the revisional authority, was that it would examine the original order, for determining whether, it ought to have been passed in accordance with the law, that was applicable, however, in some exceptional cases, an order could be passed by the revisional authority in view of some facts, which had occurred, after the original order was passed---Re visional authority was not empowered to pass an order on the ground, on the basis of which the original forum could not have proceeded---Adjudication per se would imply an original decision on the merits of a case, both legal as well factual---Revisional jurisdiction, on the other hand was vested in an authority higher in the hierarchy; and the purpose of such jurisdiction was to supervise the functions performed by a lower authority---Section 195 of the Customs Act, 1969, had provided a peculiar procedure which was sui generis; and powers conferred under said section, were more or less analogous to the powers conferred upon the High Court and Court of Session under Code of Criminal Procedure---Revisional authority would refrain from substituting its own conclusion on an elaborate consideration of evidence and must give a speaking order.

Mughal Tobacco C.C.O.C.'s case 1986 MLD 790; Mordia Corp Ltd. v. C.B.R. 1988 MLD 2420; Hussain Sons v. Federation Government 1988 MLD 2507; Indos Automobilies v. CBR PLD 1988 Kar.99; Azmat Bros v. Collector of Customs 1989 CLC 1639; Altaf and Sons v. Collector of Customs 1989 MLD 1451; Mor Bros v. Assistant Collector 1989 (sic) 370(2); Zulfiqar Brothers v. Member Judicial 1990 ALD 125(2); Sterling Phyworl v. Collector of Customs 1990 CLC 834; G. Arshad v. Federal Government ALD 138(2)(sic); Messrs Kagan Impex and others v. Deputy Collector 1993 CLC 1838; 1990 MLD 2291; Counsel Civil Service Union v. Minister for the Civil Service (1985) AC 374 and 410; M.M. Isphahani Ltd. v. Haji Muhammad Sultan PLD 1961 SC 76; Bakulbai v. Gangaram (1988)1 SCC 537 and Swastik Oil Mills Ltd. v. H.B. Munshi (1968) 21 STC 383 (SC) ref.

(b) Words and phrases---

----"Revision "---Meaning.

(c) Words and phrases---

----"Illegal"---Meaning.

(d) Words and phrases---

----"Improper", defined and explained.

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

----S.195---Revision---Scope---Giving reasons was an essential element of administration of justice---Right to reason, was an indispensable part of judicial review---Reasoned decision would show that the aggrieved person had received justice and the revisional authority had functioned with discipline---Duty to record reasons would also indicate the duty to communicate such reasons to the affected party---Revisional authority must give a speaking order.

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

----S. 195---Suo motu revisional power---Scope---Service of order passed in revision---Mode---Suo motu powers under S.195 of the Customs Act, 1969 could only be exercised within period of two years from the date of the impugned order/direction---Order would be deemed to have been served/dispatched, as soon as it was sent by the registered post---Actual delivery was not the essence of Customs Act, 1969 and where the assessment order could not be dispatched through post, it could be served by fixation of the same on the notice Board of the Customs House---Assessment order would always be construed to have been served as soon as it was sent by a registered post to the concerned person or duly displayed on the notice board---Order/direction issued by the Deputy Collector of Customs, being non-sustainable in the eyes of law, were set aside and the matter was remanded by the Collector of Customs for fresh consideration of the points factually and legally urged before him by the appellants---Opportunity of hearing and production of material evidence was to be provided to the appellants and after hearing the parties a speaking and judicious order to be passed in accordance with law.

Chowgule and Co. v. Union of India AIR 1971 SC 2021; Mannoo Gul v. Government of Pakistan PLD 1989 SC 605; Abid Khan v. Additional Secretary, Government of Pakistan PLD 1994 Pesh. 264 and 2003 PTD (Trib.) 2527 ref.

Isaac Ali Qazi for Appellants.

Karamatullah, Inspector for Respondents.

Dates of hearing: 25th November, 2008, 20th, 28th and 29th January, 2009.

2010 P T D (Trib.) 485

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Khalid Naseem, Member (Technical)

Sales Tax Appeal No.1137/LB of 2008 decided on 3rd June, 2009.

Sales Tax Act (VII of 1990)---

----S.10---Excess amount to be refunded---Standing Order No.3/2006---Provisional objection---First Appellate Authority found that refund was admissible if the appellant produces documents as laid down in Standing Order and the department was directed to scrutinize the same within thirty days from the date of receipts of such order---Appellant contended that the case was based on the objection of STARR which was required to be further verified manually also and the objections were of provisional nature and not finalized i.e. subject to scrutiny for verification of input tax---Validity---Case should have been progressed under final objection and not on provisional objection---Field formation should avoid issuing show-cause notice on the basis of scrutiny of the invoices for input verification; it should be verified first and after rejection by the department it should be converted into show-cause notice---Case was remanded to the original adjudicating authority after setting aside the order of First Appellate Authority by the Appellate Tribunal with the direction that the case should be decided within one month from the date of receipt of the orders.

Khubaib Ahmed for Appellant.

Muhammad Khurshid, Auditor for Respondent.

Date of hearing. 3rd June, 2009.

2010 P T D (Trib.) 601

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

Appeal No. S.T.136/PB of 2007, decided on 8th June, 2009.

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

----Ss.10(4), 4, 8(1) (a), 13(2)(a) & Fifth Sched., Entry No.5---Sales Tax Rules, 2005, Chapter VII---S.R.O. 1035(I)/2005, dated 13-10-2005---S.R.D. 575(I)/2002, dated 31-8-2002, R.8---Excess amount to be refunded---Exemption---Zero rating supplies--International tender---Refund was claimed on the basis of supplies made to International Committee of the Red Cross being exempt, as supplies to approved voluntary non-government organizations or welfare bodies by registered manufacturers for free distribution amongst earthquake victims were exempted and also claimed zero-rating of such supplies made against international tender---Claim of refund was rejected by the assessing authority on the ground that requirement for international tender had not been fulfilled by the claimant as the tender should be properly advertised in a leading daily and subsequently the supplier will be chosen by the purchasing party from against many contenders; inadmissible refund was claimed---First Appellate Authority observed that the Collectorate of Customs had already sanctioned rebates of customs duty on raw materials used in the manufacturing of goods reported that certificate showing "purchase order" had clearly been mentioned on the face of GD-1, meaning thereby that the tender of the appellant was accepted as International Tender that Appellant had made all the remittances to the government and that it was against the natural justice to keep two different criteria with the appellants which would amount to discrimination, if equal treatment was not given to the appellants, appeal was accepted and order-in-original was set aside---Validity---Claimant was registered person under Sales Tax Act, 1990 while the International Committee of the Red Cross to whom supplies had been made was neither the registered person nor involved in any taxable activity in Pakistan ---Supplies against International Tender could only be construed if the International Tender had been floated by the registered person under the Sales Tax Act, 1990 and against which supplies had been made by another registered person or the Federal Government/Board specifically notified supplies against International Tender under the Sales Tax Act, 1990---Stance of the claimant that they were unable to compel the International Committee of the Red Cross to float the international tender in the leading newspapers was irrelevant as the supplies were not covered by International Tender and these supplies were apparently covered under the signed contract---Certificate issued by the International Committee of the Red Cross revealed that it was purchase order rather than an International Tender---Purchase order was supplied to those tenderers/bidders whose tenders/bids were accepted/approved for supply of procurements---Goods were supplied against a signed contract and no formal tender was floated in the press, it could not be termed as a International Tender by any stretch of imagination---Supplies made by the claimant to International Committee of the Red Cross did not fall within the purview of International Tender---Had the tender been floated on an international level covering at least two or more than two countries, purpose of provision would have been served if it had been published in a leading daily having circulation in Pakistan and some other countries---Such vital requirement was totally missing, it did not fulfil the requirements of item 4 of the 5th Schedule to the Sales Tax Act, 1990---Whenever a registered person claims an exemption from the general scheme of a fiscal statute, it was his responsibility to the hilt that it had fulfilled all the requirements of exemption/concessionary provisions---Claimants had failed to prove that their supplies fell within the ambit of item 4 of the Fifth Schedule to the Sales Tax Act, 1990---Claim of refund was liable to be rejected---Exempt supplies to International Committee of the Red Cross were covered under the signed contract as such taxable supplies were made locally within the country as a relief operation and the same could not be construed as zero-rated supplies against the International Tender under Entry No.4 of the Fifth Schedule to the Sales Tax Act, 1990---Neither such supplies were notified by the Federal Government nor by the Federal Board of Revenue under the provisions of Sales Tax Act, 1990, as notified by the Federal Board of Revenue in the case of repayment of customs duty under S.R.O.1211(I)/2005 dated 9-12-2005, issued under the provisions of Customs Act, 1969---Stance that remittances were received from International Committee of the Red Cross, their supplies will qualify for zero-rating under the International Tender had no substance in the eyes of law as the remittances were received against a consideration for performing contractual obligation of supplies of goods in the wake of the contract---In order to qualify for claiming zero-rated supplies against International Tender, the same will not be construed as such unless and until the Federal Government or Federal Board of Revenue notified such supplies---Appeal of the Department was accepted---Order-in-appeal was set aside and the order-in-original was upheld by the Appellate Tribunal.?

Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 and Messrs Engro Chemical Pakistan Ltd. v. Additional Collector of Customs 2003 PTD 777 ref.

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

----Ss.13 & 4---Exemption---Zero-rating---Distinction---Exempt supplies were covered under S.13 of the Sales Tax Act, 1990 while zero-rated supplies were covered under S.4 of the Sales Tax Act, 1990---Both zero-rated and exempt supplies did not carry any tax liability, but they were different in the sense that in the case of zero-rated supplies, the person making the supplies is entitled to a credit for tax paid on his taxable purchases used or to be used in the taxable supplies whereas the person making exempt supplies is not entitled to seek refund/adjustment of input tax credit under S.8(1)(a) of the Sales Tax Act, 1990.?

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

----Ss.13 & 4---Sales Tax Ruling/Instruction No.16 of 2002---C.B.R. Letter No.3(15)STP/99 dated 25-2-2002---Exemption---Zero-rating---Goods which were exempt from sales tax under S.13 of the Sales Tax Act, 1990 could not be zero-rated under S.4 of the Sales Tax Act, 1990 on their export.?

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

----Ss.13, 3, 10 & Sixth Sched: Entry No.24---Exemption---Edible Oils and Vegetable Ghee, including Cooking Oil, on which Federal Excise Duty was charged, levied and collected as if it were a tax payable under S.3 of the Sales Tax Act, 1990 were exempt from sales tax---Registered person having made supplies of vegetable ghee to International Committee of the Red Cross, the same were covered under Entry No.24 of the Sixth Schedule of the Sales Tax Act, 1990 and such supplies were not liable to sales tax and as a consequence refund/input tax adjustment was not admissible under the Sales Tax Act, 1990.?

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

----S.46---Appeal before Appellate Tribunal---Points of facts and law can be raised at any stage during the appeal proceedings.?

2005 PTD (Trib.) 2262; PLD 1969 SC 1; Messrs Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072; Haji Abdullah Khan v. Nisar Muhammad Khan PLD 1965 SC 6900 and 2005 PTD 480 rel.

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

----S.46(4)---Appeal to Appellate Tribunal---Raising of points of facts and law---Principles.?

2005 PTD (Trib.) 2262; PLD 1969 SC 1; Messrs Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072; Haji Abdullah Khan v. Nisar Muhammad Khan PLD 1965 SC 6900 and 2005 PTD 480 ref.

(g) Sales tax---

----S.R.O.---Function of---S.R.O. regulates the different statutory provisions of the statute from time to time.?

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

----S.13(2)(a) & Sixth Sched., Entry No.49---S. R. O.1035(I)/2005, dated 13-10-2005---Exemption---Applicability of S.R.O. 1035(I)/2005, dated 13-10-2005 was restricted only to the local supply of goods from free distribution amongst the earthquake victims.?

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

----S.13 & Sixth Sched., Entry No.49---S.R.O.1035(I)/2005 dated 13-10-2005---C.B.R. Letter C. No.1(24) STT/2005 dated 14-10-2005---Exemption---S.R.O.1035(I)/2005 dated 13-10-2005 was applicable only to the local supplies and the supplies of the registered person were already exempt from payment of sales tax under Entry No.49 to the Sixth Schedule of the Sales Tax Act, 1990---Registered person/refund claimant was not required to file authorization letter for exemption---Contention that Department had granted partial exemption to the registered person and did not allow full exemption of sales tax although the exemption was clearly admissible under, the said S.R.O. was repelled as the registered person had availed exemption on the entire quantity of taxable supplies under the said S.R.O. without any hurdle. ?

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

----S.3(1)(a)---Scope of tax---Components/constituents---Sales tax was to be levied/charged at the rate of 15% (now 16%) of the value of taxable supply by a registered person in the course or furtherance of any taxable activity/business carried on by him.?

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

----S.3---Scope of tax---Plain reading of S.3 of the Sales Tax Act, 1990 revealed that it was a charging section which creates a charge on all taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him and on all goods imported into Pakistan---Scope of tax was only extended to Pakistan to a registered person only and it could not be extended beyond the boundaries of Pakistan by any methodology whatsoever.

?

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

----S.3---Scope of tax---Section 3 of the Sales Tax Act, 1990 is charging section, which creates a charge on all taxable supplies made in Pakistan by a registered person in the course or, furtherance of any taxable activity carried on by him and on all goods imported.?

Messrs Usmani Associates Sub-Proprietary Firm v. Central Board of Revenue and another 2001 PTD , 2982; 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 PTCL 1998 CL 409; Messrs Al-Hilal Motors Stores and others 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 rel.

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

----Preamble---Public Procurement Regulatory Ordinance (XXII of 2002), Preamble---International Tender---Meaning---International Tender had neither been defined in the Sales Tax Act, 1990 nor in the Public Procurement Regulatory Ordinance, 2002.?

(n) Words and phrases---

----International Tender'---Meaning---International tender means that same should be an offer in two or more than two countries for the supply of goods and services.?

International Tender Oxford Advanced Learner Dictionary (2006 Edition) rel.

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

----Preamble---Schedule was regulated by the Federal Government/Federal Board of Revenue through prescribed procedures/ rules or notifications issued from time to time.?

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

----S. 13 & Fifth Sched.---Sales Tax Rules, 2005, Chapter-VIII--Earthquake Rehabilitation Rules, 2006, R. 1(2) & 3---S.R.O.1035(I)/2005, dated 13-10-2005---Exemption---International Committee of the Red Cross---International Tender---Supplies to approved voluntary non?-governmental organizations welfare organizations by registered manufacturers for free distribution among the earthquake victims were exempt supplies---Chapter VIII of the Sales Tax Rules, 2005 were in field and subsequently, the exemption of supplies against international tender for Earthquake Rehabilitation Rules, 2006 were issued---Said rules applied to supplies of taxable goods made by the registered persons against international tender to various international organizations including International Committee of the Red Cross for earthquake rehabilitation---According to R.3 of the said rules, the taxable supplies made by registered person to these organizations including International Committee of the Red Cross against' international tender for earthquake rehabilitation shall be exempted from tax.?

PLD 2008 SC 446 = 2008 PTD 1157; PTCL 1988 CL 257; 1997 PTD 605; PLD 1977 Lah. 1327 and PTCL 1999 CL 533(sic)ref.

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

----Ss. 13, 7 & 10---S.R.O. 1035(I)/2005 dated 13-10-2005---Exemption---Supplies to International Committee of the Red Cross---Adjustment of input tax/claim of refund against exempt supply---Validity---`Taxable supply' means supply of taxable goods other than supply of goods which were exempt under S.13 of the Sales Tax Act, 1990---Supplies to approved voluntary non-governmental organizations or welfare bodies by registered manufacturers for' free distribution among the earthquake victims were exempt supplies---Free distribution of exempt supplies by the claimant on behalf of International Committee of the Red Cross amongst the earthquake victims was exclusively a welfare activity---Claimants were not entitled for refund of sales tax on exempt supplies as well as to claim input tax adjustment on supply of goods which were 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; Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd. 2002 PTD 2457; Messrs Muhammad Shafi Tanneries (Pvt.) Ltd. v. The Collector of Customs (Appeals), Karachi 2002 PTD (Trib.) 111 and Messrs Rainbow Industries v. Collector of Customs and others C. P. No.469 of 2004 rel.

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

----Ss.34(1), 35(5) & 36(1)---Default Surcharge (Additional tax)---Claim of refund on exempt supplies---Rejection of and levy of additional tax and penalty---Validity---Since there was no tax evasion or tax fraud or any sales tax payment involved, no penal action could be taken against the claimant---Adjudicating Authority had seriously erred by attracting the additional tax and imposing penalty on the claimant, whereas it was a case of determination of admissibility or inadmissibility of refund claim against taxable supplies to International Committee of the Red Cross---Corrigendum was, however, issued by the adjudicating authority wherein the penal actions were duly rectified.?

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

----S.13, Fifth Sched., Entry No.3 & Sixth Sched.---Exemption---Principle of approbate and reprobate---Applicability---Claimant of refund first approached the Collectorate for authorization of exemption under S.R.O. 1035(I)/2005 dated 13-10-2005 which was duly granted, although their supplies were exempt from payment of sales tax under the Sixth Schedule to the Sales Tax Act, 1990 and there was no condition for obtaining permission for such exempt supplies---After realizing misconception and apprehension that they will not be able to get their supplies zero-rated in this way, they changed their stance and switched over to the claim of supplies against International Tender, despite the fact that International Committee of the Red--Cross was already covered under Entry No. 3 to the Fifth Schedule of the Sales Tax Act; 1990 and a detailed procedure had been provided in Chapter VIII of the Sales Tax Rules, 2005---Since they did not follow the prescribed procedure ,they remained stick to their stance that their supplies were covered by the International Tender and these were zero-rated; such was a typical position of approbate and reprobate, which was not acceptable before any court of law.?

Law Terms and Phrases by PLD Publishers, Lahore 1996 Edition, P-105 rel.

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

----S.13---Customs Act (IV of 1969), Preamble---S.R.O. 1035(I)/2005 dated 13-10-2005--S.R.O. 1211(I)/2005 dated 9-12-2005---Exemption from payment of sales tax---Repayment of whole of customs duties.

?

(u) Exemption---

----If exemption is granted under one statute, the same cannot be claimed under another statute unless and until clearly provided.?

Messrs New Green Hotel, Peshawar v. Deputy Collector (Adjudication), Customs, Excise and Sales Tax, Peshawar 2003 PTD (Trib.) 1473 and Messrs Pak Cement Industries v. Pakistan F.A.O. No.82/67 Lah. rel.

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

----S.4---Zero-rating---Concept---Zero-rating was an exception to the general scheme of the Sales Tax Act, 1990 that is, it provides for zero-rating of supplies which were otherwise taxable under S.3 of the Sales Tax Act, 1990 and as such, the provision of S.4 read with item 4 of Fifth Schedule to the Sales Tax Act, 1990 fell in the category of exemptions/concessions/benefits conferred upon the registered person--While interpreting such provisions, the same shall be construed strictly and in case of doubt, the same shall be resolved in favour of the revenue and against the taxpayer.?

Messrs Muhammadi Steamship Company Limited v. Commissioner Income Tax, C.A. K-69 1966 PLD 828 rel.

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

----S.10---Excess amount to be refunded---International Tender---Claimant was under obligation to prove/substantiate its claim for refund of sales tax paid on supplies against International Tender, however, in the present case, except for letters from International Committee of the Red Cross, it had no evidence to prove that supplies were made against an International Tender floated by the International Committee of the Red Cross---Refund was declined in circumstances.?

Abdul Razaq, Addl. Collector/D.R. and Muhammad Haroon Khattak, Senior Auditor for Appellants.

Muhammad Sulaiman, Consultant and Irfan Tahir Manager Accounts for Respondents.

Dates of hearing: 14th and 16th April, 2009.

2010 P T D (Trib.) 635

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir and Muhammad Asif Sargana, Judicial Members

S.T.A. No.127/LB of 2009, decided on 15th October, 2009.

(a) Interpretation of Statues---

----Fiscal statute---Type of provisions---Three distinct types of provisions in every fiscal enactment---Charging provisions, which relate to the levy or charge of the tax, usually state that tax was to be levied and on what matter or goods or services and in which manner and to what rate and matters relevant thereto---Assessment provisions, which dealt with the assessment, calculation, or qualification of the tax for the purpose of determining the amount of tax due and payable or which had escaped collection or had been under assessed or assessed at lower rate or on which excessive refund had been allowed---Collection provisions were that which relate to the mode and manner of receipt or collection the tax.

(b) Interpretation of Statutes---

----Fiscal statute---Charging section---Interpretation of---Charging section has to be strictly construed and any benefit found therein has to be given to the taxpayer, whereas the assessment and collection provisions are merely the machinery sections and they can be liberally construed.

(c) Central Excise Act (1 of 1944)---

----S.3(1), third proviso---Sales Tax Act (VII of 1990), Ss.3 & 2(46)((b)---S.R.O. 617(I)/2000, dated 2-9-2000---"Levied and collected"---Connotation---Duties specified in the First Schedule, Central Excise Act, 1944 to be levied---Transformation of central excise duty into sale tax---Payment of duty without deducting discount---Refund of---Validity---Words "levied and collected" has beet used in third proviso to. S.3(1) of the Central Excise Act, 1944 and the same words "levied and collected" were mentioned in S.R.O. 617(I)/2000 dated 2-9-2000---As per third proviso the duty shall be "levied and collected" as if it were a tax payable under S.3 of the Sales Tax Act, 1990 and all the provisions of the Act and the rules, notification, orders and instructions made or issued thereunder shall apply---Similar provision was contained in S.R.O.617(I)/2000 dated 2-9-2000 and clarification sought from Central Board of Revenue, meaning thereby that the tax shall be "levied and collected" in the same manner as the tax "levied and collected" under S.3 of the Sales Tax Act, 1990 and all provisions of that Act including its cl. (b) of subsection (46) of S.2 of the Sales Tax Act, 1990 shall apply, as if it was levy of sales tax---Words collectable clearly shows that the duty shall be paid in the, same manner as the sales tax was collected---Since, the sales tax was collected on discounted price, thus the duty on telephone services shall also be collected in the same manner---Duty paid completely transformed into sales tax and the appellant was entitled for refund of excess amount recovered from him without deducting discount, which was admittedly in conformity with the normal business practices, provided that the incidence thereof had not been passed on to the end consumers---Contention that it was levy of central excise duty under which there was no concept of trade discount was not tenable, because the words "levied and collected", used in third proviso of S.3(1) of the Central Excise Act, 1944 showed that the central excise duty was "levied and collected" as if it were tax "levied and collected" under Sales Tax Act, 1990 would completely transform into sales tax and the calculation and collection shall be made on the discounted price in terms of Cl. (b) of subsection (46) of S.2 of the Sales Tax Act, 1990---Department could not take two different stances on the same issue, because the words "levied and collected" were used which obviously meant complete transformation of central excise duty into sales tax.

Messrs Pakcom Limited v. Collector of Customs (Adjudication), PNCA Building Liaquatabad Road Rawalpindi Appeal No.3136/2001 and Messrs Friends Sons and Partnership Concern v. The Deputy Collector, Central Excise and Sales Tax Lahore and 3 others PLD 1989 Lahore 337 rel.

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

----Ss.2(46)(b) & 66---Central Excise Act (1 of 1944), S.3(1) third proviso---Value of supply---Discounted price---All the provisions including the one relating the value of supply in terms of el. (b) of subsection (46) of S.2 of the Sales Tax Act, 1990 were applicable and the duty was payable on discounted price provided the tax invoice showed the discounted price as well as related tax and the discount allowed was in conformity with the normal business practices---Appellant was entitled to claim excess amount recovered on the gross billed amount under S.66 of the Sales Tax Act, 1990 but only if the incidence had not been passed on to the end consumers.

(e) Interpretation of Statutes---

----Retrospectivity---Scope---Notifications, regulations, executive orders and instructions can be given retrospective effect if it goes to the benefit of the taxpayer---Such instruments, if found detrimental to the assessee would have no retrospective effect.

Messrs Army Welfare Sugar Mills Ltd., and others v. Federation of Pakistan and others 1992 SCMR 1652; Elahi Cotton Mills Ltd., and others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1997 SC 582 and Collector of Customs Lahore v. Messrs A.A. Corporation Lahore 2004 PTD 2738 rel.

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

----S.3-D Refund---Limitation---Once the claim was entertained, processed and sanctioned by the competent authority, the question of limitation became immaterial.

Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others PLD 1998 SC 64 rel.

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

----S.3(1)---Duties specified in the First Schedule to be levied--Claim of refund---Contention of the department that the refund was wrongly claimed as it was Pakistan Telecommunication Authority, which deposited the tax into Government Treasury, was not sustainable, because Pakistan Telecommunication Authority had only acted as collecting agent on behalf of Government, whereas duty was paid by the appellant---Claim of refund of tax, which was not payable or was paid in excess could only be made by the person paying the tax and not the one who had collected the same as the collecting person, he was always acting as an agent---Appellant had rightly claimed refund of excess duty because it was recovered from him.

The Federation of Pakistan v. Metropolitan Steel Corporation 2002 PTD 87 rel.

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

----S.3-D---Refund---Tax fraud---Claim of refund on the basis of clarification issued by the Central Board of Revenue was not a case of tax fraud.

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

----S.33---Central Excise Act (I of 1944)---S.3-D Offences and penalties---Tax fraud---First Appellate Authority found that it was levy of central excise in which the term tax fraud was alien, while on the other hand penalty was imposed under S.33, Sales Tax Act, 1990---Validity---Since, department had failed to prove that there was any intentional, dishonest fraudulent act and without lawful excuse the obtaining of inadmissible refund on the part of appellant---Allegation of tax fraud was not justified---Mere claiming the refund and that too on the basis of clarification issued by the Central Board of Revenue could not be termed as attempt to commit tax fraud---Appellant had adopted lawful course and lodged claim of refund on the basis of clarification, which was still holding the field and the refund was properly processed, examined, scrutinized and sanctioned by the competent authority and such effort of the appellant could not be said to be a tax fraud---Present was not a case where the default surcharge and penalty could be imposed on the allegation of tax fraud, which could not be proved by the department---Orders in appeal as well as order-in-original so far as the same related to default surcharge and penalty were not sustainable under law.

(j) Sales Tax Act (V[I of 1990)---

----S.3B---Central Excise Act (I of 1990), S.3D---Collection of excess tax etc.---Claim of refund---Passing on of the incidence of tax to the end consumers---Admittedly, no audit was conducted by the department in order to ascertain as to whether the incident had been passed on to the end consumers or otherwise appellant had sold the cards even at lesser price than the one fixed by the Pakistan Telecommunication Authority---Only few invoices were placed on record by the department, on the basis of which it could not be ascertained as to whether the incident of duty was passed on to the end consumers--However, price charged by the appellant from end consumers was also included the amount of tax and its such it shall be presumed that the incidence thereof had been passed on to the end consumers---Contention of appellant that even if their audit was now undertaken they would be in a position to establish that the incidence was not passed on to the end consumers was without any substance, because nothing had been placed on record before the Appellate Tribunal in this behalf---Presumption would be that incidence of tax was passed on to the end consumers and the appellant was not entitled to claim refund of any excess amount in such past and closed transactions---Refund was not admissible in. such past and closed transactions and it had rightly been held recoverable from the appellant as the incident of tax was passed on to the end consumers in terms of S.3B of the Sales Tax Act, 1990 read with S.3D of the Central Excise Act, 1944--Appeal so far as it related to imposition of default surcharge and penalty was accepted and the orders in appeal as well as Order-in-Original were set aside to that extent only by the Appellate Tribunal.

Mian Abdul Ghaffar for Appellant.

Sh. Nadeem Anwar for Respondent.

Date of hearing: 13th October 2009.

2010 P T D (Trib.) 779

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial)

S.T.A. No.2395/LB of 2001, decided on 28th March, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 11, 36, 37-C, 40-A & 46---Information regarding evasion of Sales Tax---Raiding of the premises---Appeal to Appellate Tribunal---Appellant had assailed order-in-original , vide which a liability of Sales Tax had been adjudged against the appellant which had already been deposited by the appellant before conclusion of adjudication proceedings---Record had shown that an informer had given information that appellant was evading Sales Tax and that appellant had shifted its products and had not paid the Sales Tax---Assistant Collector conducted raid without obtaining any permission of the Board or the Collector---Validity---Surprise raid could be conducted under S.40-A of the Sales Tax Act, 1990, if Assistant Collector had reasons to believe that any document or thing, in his opinion, could be useful or relevant, had been concealed or there was a danger of its removal---Assistant Collector in the present case, while conducting raid had not recorded such belief---So many infirmities were apparent in the impugned order-in-original---No record had been produced during the surprise raid, inasmuch as the concerned person was not available and could not be contacted---Impugned order revealed that the supplies were "probably" not declared in the Sales Tax record, which had shown that the contravention report and the adjudication proceedings had been conducted in a haphazard manner---Appellant had not been given reasonable opportunity of being heard or to produce the relevant record---Appellant, however had voluntarily deposited disputed amount albeit under tacit protest---Appellant in the interest of justice should have been given a reasonable opportunity to contest his liability---Demand of Sales Tax could not be upheld on the basis of "probability", that the Sales Tax had been evaded or that it was an "interim contravention report" based on "interim scrutiny" and no audit report had been prepared---Impugned order was set aside and ease was remanded to the Adjudicating Authority to afford the appellant a reasonable opportunity to be heard and produce the relevant record and determine the liability, if any, afresh in accordance with law.

Muhammad Akram Nizami for Appellant.

Ashiq Ali for Respondent.

2010 P T D (Trib.) 1075

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial-II

Sales Tax Appeal No. K-270 of 2004, decided on 10th November, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 3-B, 13, 46 & 6th Sched.---Exemption---Collection of excess tax---Appeal to Appellate Tribunal---Exemption of sales tax was claimed by the appellants in terms of entry No.55 of the 6th Schedule of the Sales Tax Act, 1990---Assessment was claimed under heading 2924.1000 covered by serial number 55 of 6th schedule and goods were cleared under said heading without payment of sales tax---Subsequently a dispute as to classification of the product arose---Appellant company paid duty under protest and material was sent to Research Institute of Chemistry which confirmed that imported item carbofuran' was a cyclic amide (cyclic carbamate)---Based on that description, goods were apparently covered by heading 29.24---Department, however took the plea that the goods were classified under heading 29.32---Record showed that a long standing practice of assessingcarbofuran' under heading 29.24 existed before the classification was charged to 29.32---Long standing practice of such charge was deprecated by the higher judicial fora through a number of judgments on record---Clearance of appellant as well as his competitors were under heading 29.24 till the dispute of classification arose---No recoveries were made from their competitors for past clearances made under heading 29.24---Appellant, in circumstances, was at a disadvantage vis-a-vis its competitors---Two similarly placed persons could not be treated differently---Present was a case of discrimination whereby appellant was treated differently than his competitors---Even otherwise an innocent person paying duty on the goods in a bona fide manner to the satisfaction of the rules was protected from being further harassed---Change of Tariff classification could have prospective effect only and could not be applied on past clearances---Tax was recovered from the appellant under duress and under protest, subject to outcome of adjudication proceedings---Tax could not be imposed discriminately and change of classification retrospectively---Government could not retain the money which was not due to it---Impugned order was set aside, in circumstances.

Nazir Ahmad v. Pakistan and others PLD 1970 SC 453; Elahi Cotton Mills Ltd. and other v. Federation of Pakistan 2002 PTD 976 and Messrs Elahi Cotton Mills v. Federation of Pakistan PLD 1997 SC 582 ref.

Akhtar Ali and Maqsood Ahmad Chartered Accountant for Appellants.

Taofeeq Ahmad Sheikh for Respondent.

2010 P T D (Trib.) 1086

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Customs Appeal No.H-185 of 2009, decided on 10th August, 2009.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(1)(8)(89), 157, 171 & 194-A---Import and Export (Control) Act (XXXIX of 1950), S.3(1)---Sales Tax Act (VII of 1990), S.33---Seizure and confiscation of imported goods---Appeal to Appellate Tribunal---Oil Tanker loaded with foreign origin high speed diesel, was seized and confiscated on the allegation that same was brought into the country through un-authorized route and without payment of duty and taxes leviable thereon---Validity---No person should be deprived of his property by way of penalty, unless it was clear that he was in some measure responsible for assisting or furthering the commission of offence committed---Unless material was brought on record by customs staff to show that owner of the oil tanker was criminally linked with smugglers or had definite knowledge that goods to be transported were smuggled; or that either of them was conscious, assisting or furthering commission of offence of smuggling, prima facie presumption could not be to the effect that vehicle for transporting was being wilfully used in transportation of smuggled goods and the same was not liable for confiscation---Appellant who was driver of the oil tanker, had picked the load against normal hire charges---Irrespective of the fact that the owner of the item (diesel) was on board or not on board the oil tanker, appellant was neither the owner of the goods nor had any other material interest therein---No act of connivance or abetment existed in the commission of offence either---Seizure of oil tanker and imposition of fine thereon, in circumstances, was not warranted by law---Not only the consignment was covered by the proper bills, appellants had produced to the Seizing Officer the documents available with him---No reasonable belief as to the status thereof within meaning of S.168(1) of the Customs Act, 1969 existed to warrant seizure of the oil tanker---No act of smuggling within the meaning of S.2(s) of the Customs Act, 1969, was proved to have been committed by the appellant/driver and possession holder of the oil tanker---Impugned orders were modified and appeal was allowed to the extent of releasing the oil tanker to the appellant.

Ansar Ali for Appellant.

Naeem Akhtar, D.C. for Respondent.

2010 P T D (Trib.) 1104

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Hamayun Khan Sikandari, Member (Technical)

Appeal No. Cus.226/PB of 2009, decided on 11th January, 2010.

Customs Rules, 2001---

----R.103(2)---Customs Agent (Licensing) Rule, 1971, Rr.19 & 21--Customs Act (IV of 1969), S.2(s), 156(1)(98)(89) & 178---Control of . Narcotic Substances Act (XXV of 1997), S.6, 7, 8 & 9---Custom Agent Licensing---Action in case of violation---Revocation of license on the ground of inefficiency---Licence of the appellant was suspended on 7-8-1998 by the authority, which had been. appealed against and it was on 9-8-2006, after the period of more than eight (8) years, the case was decided by the Licensing Authority---Department pleaded that there was no time of limitation for adjudication of such cases---Validity---Expeditious disposal of the cases was the requirement of the time, as well as was the mandate of every civilized law, because it determines the rights of the parties and save them from unnecessary inconvenience---Where no limitation for conclusion of any proceedings was fixed, such proceedings must be concluded, within a reasonable time---Where the law required issuance of notice, within the stipulated period, the Licensing Authority was required to complete the proceedings within a reasonable time---Where law required issuance of notice as a necessary corollary it excepted completion of proceedings on such notice, within the relevant time period---Merely, issuing a notice, the Licensing Authority was not absolved of his duty to complete the proceedings, within' a reasonable time period---Issuance of notice did not give an unending period of time to complete the proceedings---Purpose of issuance of notice within certain time frame would be defeated, if the Licensing Authority, after having acted and issued a notice was allowed to sleep over the matter, or drag same along for almost eight years---Order passed after time period of almost eight years, could not be said to be in accordance with law---All the superstructure built subsequently, would suffer from the same infirmity---Such order would be liable to be set at naught on the ground of their having been passed against the express provisions of law---When the High Court exonerated the appellant from the charges levelled against him, the Licensing Authority should have clearly acted in good faith as no charge of misdeclaration/production of false documents, collusion and fraud had been proved against the appellant and revocation of his licence merely; on the grounds of his inefficiency could be a very harsh decision---Order of Licensing Authority was set aside by the Appellate Tribunal and case was remanded to the Licensing Authority for decision afresh by taking into consideration the issues raised by the appellant and then pass a speaking and judicious order by providing an ample opportunity of hearing to the appellant.

Suhail Ahmad and others v. The State Criminal Appeal No.53 of 2001, dated 19-9-2001; Triple-M (Pvt.) Ltd. v. Federation of Pakistan 2002 YLR 2792 and Messrs East End Exports, Karachi v. Chief Controller of Imports and Exports PLD 1965 SC 605 rel.

Isaac Ali Qazi and Danish Ali Qazi for Appellants.

Muhammad Azam, Superintendent for Respondent.

Dates of hearing: 16th September, 6th and 27th October, 2009.

2010 P T D (Trib.) 1112

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member (Judicial)

S.T.A. No.1341/LB of 2003, decided on 30th'May, 2009.

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

----S. 73---Certain transactions not admissible---C. B. R. Order No.17/06, dated 17-4-2006---Sales Tax General Order No.8 of 2008, dated 26-2-2009---Payment through banking channel delayed beyond statutory limit---Validity---Payment had been made through banking channel and the same were delayed beyond statutory limit as provided under S.73 of the Sales Tax Act, 1990---Delay in making payments beyond 120 days and 180 days was not contumacious and on account of certain financial problems which entailed no revenue loss, such procedural omission was condoned by the Appellate Tribunal.

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

----Ss.8, 10, 26, 34 & 36(1)---Tax credit not allowed---Input adjustment and claim of refund against invoices of suspected unit---Registered taxpayer assailed that no liability could be created against any person merely on suspicion and doubt as no specific order for blacklisting of such person or suspension of his registration had been provided by the department and even no action or proceedings had so far been taken against the said supplier despite expiry of years of inclusion of their names in the list of suspected units---Validity---Mere inclusion of a unit in a list of suspicious units or declaring as a suspected unit would not render same fake unless it was declared as a blacklisted unit after due process of law as provided under S.21 of the Sales Tax Act, 1990---Charge of suspected unit against the registered taxpayer was held to be illegal, unlawful and premature and no recovery stood against such registered taxpayer.

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

----Ss.36(1) & 3---Recovery of tax not levied or short-levied or erroneously refunded---Suppression of sales---Recovery of sales tax on the charge of suppression of sales---Production had been estimated on the basis of RPM of machinery installed whereupon it was alleged that the same had been understated by the registered taxpayer---Validity---Calculations made by the department were based on presumptions and assumptions---Working of machines was one of the relevant factors which need to be taken into account for ascertaining the production of a unit---Assessment made solely on the basis of efficiency of machines was not sustainable under the law---Sales entail delivery of goods and receipt of money consideration as price---Neither any clandestine removal of goods nor any concealed receipt of money was established or proved, the observations stood unsubstantiated and remained in the air---Sales tax was charged on supply of taxable goods and not on production or production capacity of a unit---Production formula adopted by audit was subject to number of variables and may be a good tool for assessing production capacity of a weaving unit if all such variable were assigned with some presumptive values---Production and production capacity ascertained on the basis of such formula had no significant value until and unless it was supported by some corroborating evidence regarding any clandestine receipt of raw material or removal of finished goods or receipt of money consideration, without which it remained presumptive and had no force of law---In absence of any material evidence, corroborating the clandestine removal of goods and receipt of money consideration, it was unjustified to hold any recovery on account of suppression of sales against the registered taxpayer---Appeal of the department was dismissed by Appellate Tribunal.

Mohammad Nawaz, S.A. for Appellant.

Falak Sher, Abuzar Hussain and Khubaib Ahmad for Respondent.

Date of hearing: 21st May, 2009.

2010 P T D (Trib.) 1146

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

Appeal No. S.T. 215/PB of 2005, decided on 20th August, 2009.

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

----S.36(3)---Recovery of tax not levied or short levied or erroneously refunded---Limitation---Case was not decided by the Adjudicating Authority within stipulated period of 45 days---Validity---Adjudication proceedings were to be completed within the stipulated time and any order passed beyond the period of limitation, the entire proceedings would be barred by time---Adjudication proceedings were completed much beyond 45 days of limitation provided under the law and admittedly no extension was obtained from the Federal Board of Revenue---Adjudication proceedings therefore, were barred by time on the face of it.

2008 PTD 578 and Super Asia Muhammad Din & Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala and others 2008 PTD 60 rel.

Super Asia Muhammad Din & Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala and others 2008 PTD 60 and Messrs Al-Qasim Textile Mills Ltd.'s case Appeal No. 79/ST/IB 2005 ref.

Messrs Suger Asia Mohammad Din & Sons v. Messrs Hanif Straw Board Factory and others C.P.L. No.25-L, 121-L and 122-L of 2008 and S.T.A. No.16 of 2004 distinguished.

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

----S.2(46)---Central Excise Act (I of 1944), S.4(2)---Value of supply---Determination of---Central excise and sales tax levies provided different regimes for determination of value and assessment of duty and taxes---Law of Sales Tax provided for assessment under S.2(46) of the Sales Tax Act, 1990 whereas the Central Excise Law provided for assessment of duty under S.4(2) of the Central Excise Act, 1944.

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

----S.2(46)---Central Excise Act (I of 1944), S.4(2)---Value of supply---Determination of---Issues to be resolved before giving findings.

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

----S.2(46)(a) & Third Schedule, item 10---Value of supply---Determination of---Retail price regime---Ad valorem regime---Consideration of money---Prior to substitution of Third Schedule to the Sales Tax Act, 1990, the products were liable to sales tax on the retail price vide item 10 of the Third Schedule of the Sales Tax Act, 1990---Products of the registered person were transferred from "retail price regime" to "ad valorem regime" and registered persons were governed by S.2(46) of the Sales Tax Act, 1990 for the purpose of valuation and assessment of sales tax---Registered persons were admittedly calculated and paid sales tax on the "value of supply" as defined in Cl.(a) of Sub-S. (46) of S.2 of the Sales Tax Act, 1990---Value of supply happened to be the "consideration of money" received by the registered persons from their suppliers---Adjudicating authority had not appreciated the fact that department could not prove, through documents or any other evidence on record, that the registered persons received higher consideration of money from suppliers than declared in their sales tax records on which they had been paying sales tax.

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

----S.2(46)(a)---Central Excise Act (I of 1944), S.4(2)---Value of supply---Open market price---Finding by the authorities that appellants had to pay sales tax on open market price was not backed by any legal stipulation or any statutory provisions of Finance Act, 1998---Adjudicating authority had altogether ignored the fundamental and legal stance and based his findings on the highest price prevailing in the open market which was neither rational nor backed by any legislation or law of Sales Tax---Adjudicating authority presumed that "if there were two or more different values of same supplies, then the maximum value of supply would be considered for tax purposes"---Such presumption had no backing in the Central Excise Act, 1944 or the Sales Tax Act, 1990, however, allegations that appellants had been paying sales tax on retail price inclusive of excise duty were correct---Adjudicating authority had erred by misinterpreting the provisions of law and by giving its findings without material evidence on record---Issues raised by the department and accepted by the Adjudicating authority were presumptive in nature, which were neither sustainable nor maintainable in the eyes of law---Order was set aside by the Appellate Tribunal being devoid of material evidence.

Ishtiaq Ahmad for Appellant.

Muhammad Haroon Khattak and Dost Muhammad for Respondents.

2010 P T D (Trib.) 1315

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Custom Appeal No. K-405 of 2009, decided on 16th November, 2009.

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

----S. 79(1)(b)---Pakistan Customs Computerized System, Rules, R.433--Entry for home-consumption or warehousing---Declaration of goods---Declaration of importer for clearance of goods begins with the submission of goods declaration in terns of R.433 of the Pakistan Customs Computerized System Rules read with S.79 of the Customs Act, 1969 which stipulates that goods declaration shall be deemed to have been submitted to customs authorities only when duty and taxes leviable thereon, if any, had been pail in terms of Cl. (b) of subsection (1) of S.79 of the Customs Act, 1969.

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

----Ss. 32,79,80,81 & 83---Pakistan Customs Computerized System, Rules, Rr.433, 435, 437, 438 and 492---Untrue statement, error, etc.---Mis-declaration of goods---Evasion of tax by making misdeclaration of particulars was only possible through submission of incorrect goods declaration as the examination, the assessment, checking of goods declaration and release of goods by the Customs Officers was only possible when a goods declaration under S.79 of the Customs Act, 1969 read with R.433 of the Pakistan Customs Computerized System Rules was submitted by the importer, otherwise, neither declaration of the importer could be checked or viewed nor goods could be assessed, examined and released by the customs authorities after satisfying themselves about the declaration and payment of leviable tax---Before adjudging the bona fide or mala fide intentions of an importer, mechanism devised in the aforesaid sections of law and rules was to be kept in mind as a whole and before invoking provisions of S.32 of the Customs Act, 1969.

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

----S.25---Customs Rules, 2001, R.107 (a)---Customs General Order 12 of 2002 dated 15-6-2002, Chapter XIV, S.No. 78-Valuation of imported or exported goods---Enhancement of value ---Department could not bring on record as evidence, any invoice of contemporaneous physical imports for the same type of goods having a transaction value of US$ 1.90 per kg. during the same period---Highest value at which similar goods had been cleared was US$ 1.17 per kg---For the sake of uniformity in assessment of contemporaneous imports, said value was to be applied in the appellants case as well---Transactional value of goods could only be ascertained by following the procedure prescribed under S.25 of the Customs Act, 1969---For bringing home their allegations, the Customs authorities had to disprove the stance of appellant and disprove and negate the documentary evidence produced with valid and cogent reasoning---On the contrary no invoices had been produced as evidence and no higher unit values so determined had been indicated in the show cause notice ---Where only cumulative alleged short recovery amount had been mentioned, show-cause notice and the order-in-original was deficient in the material ingredients, defective and void ab initio---Value enhanced was without any basis and reason, despite that it was incumbent upon the respective officials to make a contravention report and forward the case to the respective adjudication authority for decision along with evidential invoice of the same period and the country of import.

Collector of Customs Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International, Faisalabad 2007 PTD 2623; Collector of Customs Valuation v. Karachi Bulk Storage and Terminal Ltd. 2004 PTD 2592 and Collector of Customs Valuation and others v. Karachi Bulk Storage and Terminal Ltd. 2007 PTD 1858 rel.

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

----S.32---Untrue statement, error, etc.-P.C.T. Heading ---Mis­declaration---Citation of particular P.C.T. Heading in the Bill of Entry did not amount to misdeclaration---Determination of P.C.T. Heading was the sole function of the Customs Officers-Importer only assists the customs by citing the P.C.T. Heading of the goods---Citation of P.C.T. Heading may be called a claim for assessment of taxes, which means a request which may be accepted or rejected by the competent authority but was not a punishable offence under any of the provisions of Customs Act, 1969 or notification issued thereunder---Citation of particular P.C.T. Heading in the Bill of Entry did not amount to mis­declaration within the meaning of S. 32 of the Customs Act, 1969.

2003 PTD (Trib.) 293 rel.

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

----Ss. 32, 32A, 79 & 80---Untrue statement, error, etc.---Mis­declaration---Incorrect quoting of P.C.T. Heading would not tantamount to misdeclaration within the ambit of mischief of Ss.32(1), 32(2) and 32(A) of the Customs Act, 1969 since a positive assertion of facts was a prerequisite for bringing charges of misdeclaration against the tax payer---If wisdom of Customs Authorities for invoking S.32 of the Customs Act, 1969 in cases of incorrect citing of P.C.T. Heading was acceded to no responsibility obviously devolve upon the hierarchy of Customs Officials to levy and assess the duty according to law and the provisions of Ss. 79 and 80 of the Customs Act, 1969 in such a state of mind would become redundant.

2003 PTD (Trib.) 293; Messrs Falcon Enterprises v. Collector of Customs Appeal No.K-723 of 2007; Customs Appeal Nos.K-432 and State Cement v. Government of Pakistan C.A. No.43 of 1999 rel.

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

----S.32---Untrue statement, error, etc.---Application of the provision of S.32, Customs Act, 1969---Scope---Section 32 of the Customs Act, 1969 would be attracted only when misdeclaration was made to cause loss to the Government Exchequer by evasion of customs duly---In the absence of any revenue loss the charge of misdeclaration under S.32 of the Customs Act, 1969 was not attracted.

Al-Hamd Edible Oil (Pvt.) Ltd. and others v. Collector of Customs 2003 PTD 552 and Kamran Industries v. Collector of Customs Export PLD 1996 Kar. 68 rel.

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

----S.32A---Fiscal fraud---Importer/appellant never filed or submitted concocted, altered, mutilated, false, forged, tampered or counterfeit document to a functionary of Customs, so the case of appellant did not fall within the purview of S.32A of the Customs Act, 1969.

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

----S.32---Misdeclaration---When a charge of mis-declaration was to be alleged, importers' declaration, documentary evidence produced, previous knowledge, intent to defraud and misstatement in material terns were to be proved by the contesting department after a thorough scrutiny and investigation.

(i) Administration of justice---

----Substantive illegalities---Procedural irregularities or technicalities---Violations of mandatory provisions of law are in fact substantive illegalities and not procedural irregularities or technicalities and violations of the same will hit the cases fatally.

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

----Ss.156(1), Cl.14, Cl.14A & 32-A---Punishment for offences---In cases of assessment under First Appraisement System the allegation of misdeclaration withers away, the penalty imposed under Cl.14 of S.156(1) of the Customs Act, 1969 and also stands remitted---When the allegation in terms of S.32A of the Customs Act, 1969 stands scraped, penalty under Cl.14A of S.156(1) of the Customs Act, 1969 also abates.

1985 CLC 2796 rel.

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

----S.25---Customs Rules, 2001, R.107(a)---Valuation of imported and exported goods---Discrimination---Enhancement of value---Show-cause notice indicated that subject goods which were on physical examination found to be "P.E Holographic glittering sheets in rolls classifiable under H.S. Code 3921.9090 were assessable @ US$ 3.5/Kg.---Order-in-­original revealed that goods after chemical laboratory test were found to be classifiable under H. S. Code 3921.9090 assessable @ US$ 1.9/kg--Value incorporated in show-cause notice was US$ 3.5/Kg as against US$ 1.9/Kg determined after conducting of Customs labora­tory test---No haste was shown on the part of Customs Administration to issue the show-cause notice and without waiting for the result of chemical test---Results could be procured from the Laboratory within a period of three to four days---Record produced by the importer showed that consignments imported prior and subsequent to the subject importation of said Sheets were released without sending them to laboratory for chemical test---Such discriminatory treatment on behalf of concerned group was found to be highly objectionable---Customs Authorities had not been able to bring on record any evidence in respect of the value of US$ 3.5/per kg mentioned in the show-cause notice or US$ 1.9/per Kg upon which the subject case was adjudicated--Enhancement of declared price to US$ 1.90/per kg was therefore, uncalled for---Highest price as per price statement of 90 days valuation data in terms of S.25 of the Customs Act, 1969 read with R.107(a) of the Customs Rules 2001, on record was US$ 1.17 per kg which could be taken as yardstick/ criterion for assessing the subject goods for uniformity and meeting out similar treatment to all such like imports---Order was modified by the Appellate Tribunal accordingly.

Rahim Din v. Collector of Customs 1987 SCMR 1840; PTCL 1992 CL 32; PLD 1959 SC 364; PLD 1969 SC 708, PLD 1967 SC I; 1998 PCr.LJ 891; Messrs Abdul Aleem v. The State PLD 1976 Kar. 1154; Messrs Hindustan Electro Graphites Ltd v. Union of India (1990) 50 E.L.T. 259; 2003 PTD 552; 2007 PTD 2623; 2006 PTD 909; 2004 PTD 2592; Appeal Nos.659 of 2007 and 146 of 2008; Messrs Akhtar Hussain v. Collector (Appeals) Karachi 2003 PTD 2090; Messrs Shaheen Enterprises v, Additional Collector 2005 PTD (Trib.) 1321; 2005 PTD (Trib.) 1826; Collector of Customs Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International, Faisalabad 2007 PTD 2623; Collector of Customs Valuation v. Karachi Bulk Storage and Terminal Ltd. 2004 PTD 2592; Collector of Customs Valuation and others v. Karachi Bulk Storage and Terminal Ltd. 2007 PTD 1858; 2003 PTD (Trib.) 293; Messrs Falcon Enterprises v. Collector of Customs Appeal No.K-723 of 2007; Customs Appeal Nos.K-432; State Cement v. Government of Pakistan C.A. No.43 of 1999; Al-Hamd Edible Oil (Pvt.) Ltd. and others v. Collector of Customs 2003 PTD 552; Kamran Industries v. Collector of Customs Export PLD 1996 Kar. 68; 1985 CLC 2796 and Messrs Exide Pakistan Limited Karachi v. Deputy Collector of Customs and others 2004 PTD 1449 rel.

Ch. Muhammad Rafiq Consultant for Appellant.

Ghulam Yasin for Appellant.

2010 P T D (Trib.) 1335

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II) and Javed Kazi, Member (Technical-I)

Custom Appeal No.K-348 of 2009, decided on 20th October, 2009.

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

----First Sched., Chapters 59, 50, 55, 58 & 60---Explanation of the Headings---Harmonized Commodity Description and Coding System of Brussels Nomenclature includes impregnated, coated, covered or laminated textile fabrics; textile article of a kind suitable for industrial use---Heading No.9503 applies to the textile fabrics, impregnated, coated, covered or laminated with plastics, whatever the weight per square meter and whatever the nature of the plastic material (compact or a cellular) other than: fabrics partially coated and partially covered with plastic and which usually pertain to Chapter 50,55,58 or 60---Sub­heading of Harmonized Commodity, Description and Coding System of Explanatory Note 5903 includes textile fabrics impregnated, coated, covered or laminated with plastics other than those of heading 5902---Said heading covers textile fabrics which are impregnated, coated, covered or laminated with plastic e.g. Poly Vinyl Chloride---Such products are classified irrespective weight per square meter and whatever the nature of plastic component (compact or cellular), provided that textile fabric was not completely embedded in, or coated or covered on both sides with plastics.

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

----First Sched: Chapters 59, 52, 55, 58 & 60---PCT Headings No.5903.9000 & 5407.4200---Classification of goods---Fabric plastic coating---Sample of the fabric had plastic coating only on backside which could be seen with naked eye/visible change in colour---Such was the criterion/yardstick which has been made the focal point and the very foundation for assessing the subject goods under PCT Heading No.5903.9000---Since the goods of importer as per laboratory report and as per physical/visual examination by the naked eye showed that they were coated only on one side that would tantamount to a clear and admitted conclusion that the goods were partially coated as opposed to being coated---Partially coating and coating were mutually exclusive of each other---Specific exclusion of the partially coated fabrics from Chapter 59 and more specifically Heading 5903.9000 bracket these partially coated fabrics with fabrics of Chapters 52, 55, 58 and 60---Textile fabric was not completely embedded in, nor coated or covered on both sides with plastic---Proviso No.3 left no room whatsoever for inclusion of subject fabrics under Heading 5903 because they were not completely embedded in, nor coated or covered on both sides with plastic---Subject fabrics were for manufacture of rucksacks and could not be put to any technical use which would classify the said fabrics under Chapter 59---Classification made by the Customs Authorities was based on complete misconception of the relevant provisions of Harmonized Commodity Description and Coding System read with relevant provisions of Pakistan Customs Tariff---Goods were correctly classifiable under PCT heading 5407.4200 of Pakistan Customs Tariff which covered woven fabrics of synthetic filament yarn.

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

----S.25---Customs Rules, 2001, R.107(a)---Value of imported and exported goods---Nylon fabric---Liner fabric---Enhancement of value---Value of subject 100% Nylon Fabric and liner fabric was declared through goods declaration @ US$ 1.150 per meter FOB and US$ 0.880 per meter FOB respectively which were enhanced @ 4.0804 per kg and US$ 5.6028 per kg respectively--- Goods declaration was completed and the same was intercepted by officers of Directorate of Intelligence and Investigation and after issuance of show-cause notice the already enhanced values were further enhanced on the basis of evidential import of trade rivals under which similar goods were imported @ US$ 7.7 per meter; and even declared PCT Heading 5407.4200 attracting customs duty @ 15% ad valorem was changed to Heading 5903.9000 attracting customs duty @ 25% ad valorem---Validity---First enhancement of the declared unit value was done on the basis of evidence which had neither been disclosed either in the show cause notice nor in the order-in-original---Goods were cleared at enhanced price to avoid demurrage charges as well as to honour contractual obligations---Second enhancement after detention of goods was done on the basis of evidential import of trade rivals who had imported a totally different main camouflage fabrics cordura in the year 2007---Evidential import was imported 8 months subsequent to importation of appellant which was not applicable in terms of 90 days valuation data in terms of S.25 of the Customs Act, 1969 read with R.107 (a) of the Customs Rules, 2001---Data of import of other evidential import was 15 months prior to the subject import ---Both the invoices relied upon for first and second enhancement of declared invoice price of the importer were not relevant and admissible in terms of provisions of S.25 of the Customs Act, 1969 read with R.107(a) of the customs Rules, 2001---Enhancement of value made by the Customs Department was unlawful, illegal and without any legal basis.

Messrs Aftab Ahmad v. The Collector 2004 PTD (Trib.) 2898; Messrs Latif Brothers v. Deputy Collector, Customs, Lahore and others 1992 SCMR 1083; Messrs Eastern Rice Syndicate v. Central Board of Revenue and others PLD 1959 SC (Pak) 364; Messrs Muhammad Ateeq Paracha and others v. The State 2005 PTD (Trib.) 135; Messrs S.T. Enterprises v. Federation of Pakistan and others 2009 PTD 467; Messrs Sunny Traders v. Federation of Pakistan and others 2009 PTD 281; 2005 PTD (Trib.) 196; 2005 PTD (Trib.) 135; Assistant Director, Intelligence and Investigation, Karachi v. Messrs B.R. Herman and others PLD 1992 SC 485; 2007 PTD 167; 2004 PTD 369; 2003 PTD 2821; PTCL 1983 (CL) 184; 1998 MLD 650; 2003 PTD 2821; PLD 1968 Kar. 599; 2004 PCr.LJ 1958; 2008 PTD 649; 2006 PTD 909; 2003 PTD (Trib) 2233; PLD 2001 ??? and 2008 PTD 1475 ref.

2002 PTD 2957; 2005 PTD 21; 2004 PTD 2993; 2006 PTD 1876; 2006 PTD 232; 2007 SCMR 1357 = 2007 PTD 1858; 2008 PTD 1250 and 2009 SCMR 438 rel.

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

----S.25---Constitution of Pakistan, 1973, Art. 25---Value of imported and exported goods---Determination---Discrimination ---Invoices relied upon by the Department indicated that the fabrics had been classified under PCT Heading 5407.5200 and 5407.4400 attracting customs duty @ 5% ad valorem as 100% Nylon fabrics as against the classification of similar fabrics of the appellant's under PCT Heading 5903.9000 attracting customs duty @ 25% ad valorem as textile fabrics coated with plastics---Imported fabrics under PCT Heading 5407.4220 attracted customs duty @ 15% ad valorem---Different treatment had been meted out to the appellant by the Department which militates against the principles enshrined in Article 25 of the Constitution---Facility allowed to some one and denied to other was a case of discrimination.

2005 SCMR 492 rel.

(e) Words and phrases---

----Discrimination---Facility allowed to some one and denied to other is the discrimination.

Raza Kazim and Usman Raza Jamil for Appellant.

Fayyaz Rasool, D.C., Fazal Dad, A.C., Rana Gulzar, S.I.O. and Ghulam Yasin, Appraising Officer for Respondent.

2010 P T D (Trib.) 1359

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Ibrahim Khan, Member (Judicial)

Appeals Nos. ST-25/PB to ST-28/PB of 2009, decided on 10th October, 2009.

Sales Tax Rules, 2006---

----Rr. 26(e) & 28---Sales Tax Act (VII of 1991), Ss. 7, 10 & 66---Sales Tax General Order 8 of 2009- S.R.O. No. 978(I)/2004, dated 10-11-2004---Refund claim filed beyond prescribed time---Delay, condonation of---Plea of taxpayer was that concerned person of his office had gone abroad on long leave; and that he received certain documents late---Rejection of refund claim by Adjudication Officer on ground of limitation upheld by Collector in appeal---Validity---Adjudication Officer had based his findings on Rule 28 of Sales Tax Rules, 2006---Scope of further extension of time by 30 days as provided under R. 28(2) of Sales Rules, 2006 had declared R.28 thereof to be regulatory in nature---Rule 26 was mandatory in nature---According to S.66 of Sales Tax Act, 1990 read with S. R.O. No. 1204(I)/2007, dated 11-12-2007, Collector had power to condone time limit prescribed for adjustment and refund of input tax upto one year on fulfilment of conditions given in S.R.O. No. 978(I)/2004, dated 10-11-2004---Such compelling circumstances had rendered taxpayer incapable of filing refund claim within prescribed period---Collector was bound to have condoned such delay despite clear law on the subject and Sales Tax General Order 8 of 2009 issued by Federal Board of Revenue in terms of powers conferred under S.74 of Sales Tax Act, 1990---Tribunal set aside impugned orders and remanded case to Adjudication Officer for its decision afresh in accordance with law.

Messrs Kohinoor Industries' case 1994 CLC 994; Ghulam Abbas v. Member Judicial C.B.R. 1994 CLC 1612; Messrs Pfizer's case PLD 1998 SC 64 and Messrs Cherat Electric's case 2002 PTD (Trib.) 1525 ref.

Isaac Ali Qazi and Danish Ali Qazi for Appellant.

Dost Muhammad, Senior Auditor for Respondents.

Date of hearing: 31st August, 2009.

2010 P T D (Trib.) 1377

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-17)

Sales Tax Appeal No.K-259 of 2007, decided on 5th August, 2009.

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

----S.3---Scope of tax---Charge of sales tax on the value of opening or closing stock---Validity---In the system designed under the Sales Tax Act, 1990, sales tax, in terms of the provisions of S.3 of the Sales Tax Act, 1990, was chargeable on value of supplies made and there was no scope in the sales tax legislation for charging sales tax on the value of opening or closing stock available in the inventory.

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

---Ss.3 & 22---Scope of tax---Levy of tax on the ground that material purchased from local market had not been recorded and goods produced from such material had been supplied in local market---Validity---Statement produced by the taxpayer clearly mentioned that stock of imported as well as locally purchased raw materials, in opening and closing balance, consumption of both the materials, goods produced according to parameters determined in the final certificate issued by Federal Board of Revenue---Authenticity of such record had not been challenged/refuted by the Department---In presence of inventory of material maintained under S.22 of the Sales Tax Act, 1990 containing the entries of locally purchased raw materials, the allegation that appellant did not record the material purchased from local market and goods produced from such material had subsequently been supplied in local market was without any substantial documentary evidence---Charge was baseless and stood unproved.

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

----S.3---S.R.O. 389(I)/2001 dated 18-6-2001---Scope of tax-Levy of tax on the ground that taxpayer procured raw material, that is aluminized steel sheet and pipes against payment of sales tax @ 20% of the value---Scrap received from such raw material and scrap received after its processing was equally chargeable to sales tax @ 23% plus on its supply---Validity---Contention of Department that "wastage and scrap irrespective of its re-meltable or re-rollable was to be sold on payment of 23% sales tax; and by charging the supply of scrap @ 18% sales tax the taxpayer had made short payment and the short paid amount of sales tax recoverable" appeared ill-logical---S.R.O. was very much clear in relation to levy of sales tax at the higher rate i.e. 30% on the goods specified in table of S.R.O.---Charge of sales tax on all iron and steel scrap whether it was re-rollable or not was not tenable---Charge was based upon misconception of facts and stood unproved.

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

----Ss.9 & 73---Debit and Credit Note and Destruction of Goods Rules, 1996, R.2 & 3---Debit and Credit Notes---Department alleged that the taxpayer received back from its buyer, rejected goods but did not enter it in the inventory of the finished goods and the said un-recorded goods had been supplied in the local market without payment of sales tax---Validity---Taxpayer was maintaining debit and credit notes in accordance with the procedure laid down in S.9 of the Sales Tax Act, 1990 and Rr.2 and 3 of the Debit and Credit Note and Destruction of Goods Rules, 1996; and that is why the auditors were able to detect the returns of rejected/defected supplies; but such rejected/defected goods could not be taken into inventory of finished goods being not in saleable condition; and same were recorded as scrap and subsequently sold along with other refuse/scrap against payment of sales tax on the value received---Sale of such scrap had been mentioned in tax return as and when such scrap was sold---Presumption of Department that such rejected sale returns were finished goods, to be taken into the inventory of finished goods and should be sold as such was against the business norms---Department failed to justify the allegation with the help of potential "evidence that such goods had ever been sold as finished goods---In absence of any substantial documentary evidence in support of allegation, charge was unproved.

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

----S.3---Scope of tax---Deposits/credit entries and withdrawals/debit entries in the bank accounts were treated as purchases and sales respectively by the Department---Taxpayer contended that it could be adjudged from the charge, the Department took total of credit and debit entries of all three bank accounts and preserved that deposits/credit entries in the bank accounts and all the withdrawal/debit entries in these accounts related to purchases and sales only, which was not the factual and correct position as a number of deposits and withdrawals into and from the banks related to other non-taxable transactions---Validity`---Department not only presumed without any co-relative evidence, that all the receipt in the bank accounts were on account of supplies and all the withdrawals pertained to purchases---Department, by doing so also tried to shift the burden on the taxpayer to prove it otherwise for each and every transaction in all of their bank accounts--No provision existed in the Sales Tax Act, 1990 purporting to deem the receipt of money in the bank account to be a sale and the withdrawal from the bank account to be a purchase---Assessee could be subjected to tax under a provision of law, which was unambiguous and clear--All the charges mentioned in the show-cause notice were explicitly based on either misconception of facts or misconstruction of law or forced construction of law and stood unsubstantiated---Orders of First Appellate Authority was set aside and the appeal of taxpayer was allowed by the Appellate Tribunal with the direction that the Bank Guarantee furnished by the taxpayer was also to be released and returned to the taxpayer/appellant.

Sales Tax Appeal No.K-241/2002 and 2004 PTD 868 rel.

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

----S.73---Certain transactions not admissible---Department tried to make a case under section 73 of the Sales Tax Act, 1990 while there had been no charge against the registered person in the show cause notice, for violation of the provisions of section 73 of the Sales Tax Act, 1990---Validity---Department was restricted to go beyond the grounds specified and incorporated in the charter of the show cause notice by the Appellate Tribunal in the light of superior court's judgment reported as 1987 SCMR 1840.

1987 SCMR 1840 rel.

Habibuddin Ahmed Farooqi, Consultant for Appellant.

Asadullah and Abdul Shakoor, Auditors for Respondents.

2010 P T D (Trib.) 1418

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Sher Zaheer Ahmad Khan, Pir Akhtar Hussain Bodla, Members (Judicial) and

Sayed Mohsin Asad, Member (Technical)

Appeal No. 357/LB of 1999, decided on 9th December, 2003.

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

----Ss. 194-C(7) & 194-B (2)---Procedure of Appellate Tribunal---Power of Appellant Tribunal---Appellate Tribunal, in the present case, directed the Customs Authorities to take into custody the van' for its re-examination and inspection for settlement of the controversy in the appeal---Validity---Appellate Tribunal was amply vested with the power under S. 194-C(7) of the Customs Act, 1969 to pass the order and especially when the auction purchaser of thevan' stood also added as respondent in the appeal being a necessary party who never turned to present his view point despite notice and the order as well lawfully inured against him---Contention of the Department that goods could only be seized by the Customs Authorities under S.168 of the Customs Act, 1969 or that van' could not be taken into custody by then being no more liable to confiscation or that on that account, the Tribunal's order on the point was not under the law worthy of compliance by the Customs Authorities under S.168 of the Customs Act, 1969 or could only be termed as far-fetched and worth no importance---Customs officers had to take possession ofthe van' under the authority and warrant of the Tribunal for the ends of justice and not at all under their own authority vested in them under S.168 of the Customs Act, 1969---Compliance of order of the Appellate Tribunal could by no means be said to in any way involve or imply the seizure under S.168 of the Customs Act, 1969---Contentions were totally oblivious of the explicit and unambiguous provision of S. 194-C(7) of the Customs Act, 1969---Applications for review were dismissed being not maintainable and being bereft of any substance and merits---Conduct of the Customs Officers, in not complying with the Tribunal's order and its subsequent orders for taking into custody `the van' and then producing it for re-examination, could be said to be highly unjustified.

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

----Ss. 206 & 155-R----Rectification of mistake---Mistake apparent on record---Order passed by the Bench concurrently and after full deliberation keeping in view the facts and circumstances of the case, and then repeated in a number of dates, could not at all be termed as mistake apparent from the record.

PLD 1979 SC 741; PLD 1962 SC 335 and 1983 CLC 370 rel.

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

----Ss. 193-A & 194---Review---Scope---No court much less the Tribunal having the special and limited jurisdiction possesses the inherent power to review its order unless this power is expressly granted by the statute.

PLD 1981 SC 1994; PLD 1970 SC 1 and PLD 1965 SC 55 rel.

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

----S.2(s)---Smuggling---Onus of proof---To prove at least to discharge the initial onus of proof, that the item was smuggled one, was unquestionably the duty of the prosecution.

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

----S.2(s)---Smuggling---Onus of proof---Benefit of doubt---On the basis of the bare and bald allegation that the chassis plate of the van' was tampered with, or even supposing of the worst situation, that chassis plate in any way re-welded, the same in itself will not in the absence of some other solid evidence, suffice to justify on any legal and reasonable hypothesis the positive finding thatthe van' was necessarily smuggled one---No evidence was available on the record showing that `the van' was necessarily smuggled one---Benefit of doubt must always be given as of right to the accused.

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

----S.17----Evidence---Report from the Forensic Science Laboratory, at the back of the importer could not be said to be a valid and legal piece of evidence.

1985 CLC 1781; 1974 SCMR 417 and 1985 PCr.LJ 8 rel.

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

----S.17---Conflicting reports of Forensic Science Laboratory--Evidentiary value---Report of the Forensic Science Laboratory, could not be implicitly relied upon as the sole basis of verdict of the Adjudicating Officers for the reason that it was substantially in conflict with or at least not on all fours and in complete consonance with the basic report obtained by the prosecuting agency itself and forwarded as a piece of evidence with the case to the First Appellate Authority.

(h) Administration of justice---

---Any authority entrusted with the function of adjudication is obliged, while determining a controversy, not to in any way abdicate its authority in favour of any one else much less in favour of any opinion of any agency, and that too when uncorroborated by any other evidence of any and even shorn of substantiation of the supporting testimony of its author or promoter.

PLD 1984 Kar. 302 and KLR 1994 CC 705 rel.

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

----S.2(s)---Smuggling---First Appellate Authority had found that the chassis plate of certain legally imported vehicle was welded on the van', after having cut its original chassis plate---Validity---Such finding must be brushed aside being based on conjectures and surmises and being devoid of any foundation---Logical question before entertaining such allegation would be as to where was the originally legally imported vehicle, the chassis plate whereof was allegedly got for being welded and affixed onthe van'---No clue was available of that vehicle---No effort appeared at all to have been made to trace out that vehicle or to collect any of the record which could be available in number of concerned offices and departments---Failure of the prosecution to do so was suggestive of nothing but the fact that the charge on the point levelled by it and the eventual finding of the First Appellate Authority were totally conjectural, unfounded and frivolous.

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

---S.2(s)---Smuggling---Report of the laboratory---Reliance on---Application for re-examination---First Appellate Authority, while stating the reasons of relying solely on the report of the Forensic Science Laboratory and rejecting the appellant's application for re-examination of the vehicle observed that the Forensic Laboratory was a recognized expert body in this specialized field and the reports of that organization were mostly accepted and so many vehicles had, on its report, been released or confiscated by the Collectorate in the past and its report was accepted---Validity---Reports per se and solely could not universally be the decisive and determinative criteria of the disputes---In any event, if the claim of appellant was really correct then what could be the explanation of his conduct in getting the vehicle re-examined in other cases for reports over and above the reports of the Forensic Science Laboratory---First Appellate Authority had observed that the reports of the Forensic Science Laboratory were mostly accepted, and the term mostly was indicative of the fact that there were as well the cases in which its reports were not accepted --- Reports per se and by themselves could not be the sole criteria of acceptance or rejection thereof.

(k) Lis pendens---

----Principle of---Principle of lis pendens is a universally recognized and accepted rule of justice; it is a principle of law, equity, good conscience and public policy---contention that principle of lis pendens is merely doctrine of common law, does not seen to be wholly correct.

1995 MLD 1554; PLD 1961 Lah. 623, PLD 1975 Lah. 909 and 1987 CLC 459 ref.

(l) Lis pendens---

----Principle of---Object---Basic object underlying the principle is to maintain status quo and preserve the corpus of the lis during the continuance of litigation and till the final decision of the dispute so as to be ultimately made over to the adjudged right-holder irrespective of the fact whether injunctive order was passed by the Court or Tribunal seized with the lis---Principle of lis pendens must take precedence especially where there was colourful, dubious and mala fide exercise of jurisdiction in passing an order by an authority bestowed upon under the law that jurisdiction in blatant disregard of its power under the law and in violation of all the canons of justice and fair play or even of the principles of natural justice.

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

----Ss.2(s), 16, 156(1), (7), (9), (77), (89), (90), 168 & 178---Smuggling---Seizure and sale of vehicle in auction in spite of the Appellate Tribunal's order production of the van' for re-examination--Validity---Vehicle was cryptically got examined from the Forensic Science Laboratory during the pendency of adjudication proceedings at the back of the appellant despite the fact that it was a futile exercise becausethe van' had since long been in exclusive possession and control of the customs staff without an access to it of the appellant and the genuine state and condition could not be legally and justly be vouchsafed---Appellant was blatantly denied the right to cross-examine the author of the Laboratory's report and even his request for re-examination of the van' was turned down notwithstanding the fact that Adjudicating Officer had in a number of identical cases, got the vehicles re-examined even more than once despite the availability therein of reports of the Laboratory, then released the vehicles---Appeal was dismissed by the First Appellate Authority without touching the merits of the case and using his independent mind and just confirmed the order of his subordinate---Customs staff proceeded with the auction ofthe van' as soon as the Additional Collector concluded the adjudication despite the pendency of the appellant's appeal---Appellant's complaint to Collector of Customs and request not to confirm the auction was also turned down---Appellate Tribunal's orders for the production of the van' for re-examination was contumaciously resisted and foiled by the Customs Authorities and the last chance of testing the correctness or otherwise of the charge in the case was once for all set at naught---Vehicle was not at all liable to confiscation, and the entire proceedings, conducted were tainted with bias, mala fides and arbitrariness---Appeal was accepted by the Appellate Tribunal and orders of the authorities were set aside---Appellate Tribunal, in the peculiar circumstances of the case, ordered for the restoration of the vehicle being a violation of principle of lis pendens but for the alternative request of the appellant allowed him the sale proceeds---Appellate Tribunal directed that entire amount of sale proceeds ofthe van' should be made over to the appellant within a period of one month from the date of judgment communicated to Collector of Customs.

PLD 1979 SC 741; PLD 1962 SC 335; 1983 CLC 370; PLD 1981 SC 1994; PLD 1970 SC 1; PLD 1965 SC 55; 1985 CLC 1781; 1974 SCMR 417; 1985 PCr. LJ 8; PLD 1984 Kar. 302; KLR 1994 CC 705; 1995 MLD 1554; PLD 1961 Lah. 623; PLD 1975 Lah. 909 and 1987 CLC 459 ref.

Ch. M. Asghar Saroha for Appellant.

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

Date of hearing: 9th December, 2003.

2010 P T D (Trib.) 1450

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Customs Appeal No.K-482 of 2008, decided on 27th July, 2009.

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

----Ss. 79 (1)(b), 80, 81, 45, 32, 32A, & 179(1)(b)---Pakistan Customs Computerized System Rules, Rr.400, 401, 402, 406, 433, 434, 435, 437, 438 & 442---S.R.O. 704(I)/2007 dated 14-7-2007---Declaration and assessment of goods for home consumption or warehousing---On line amendments in the particulars of consignment---Department contended that the importer actually imported "Wooden strips", and information was received about gross misdeclaration and attempt of evasion of duty and taxes---Consignment was examined, "miscellaneous items" were found instead of "Wooden strips", and the matter was under examination when the initial importer in connivance with shipping agent made online amendments in the name of consignee and particulars of the consignment by using their users IDs; and the Importer in connivance with initial importer and shipping agent attempted to deprive the government of its legitimate revenue and had committed violation of various sections of law---Order in original was very firm and sound while the First Appellate Authority had passed order against the facts and law---Amendments were made in the VIR/carrier's declaration against the spirit of R.406 of Customs Rules, 2001 and S.45 of the Customs Act, 1969---Payment of duty and taxes in terms of Cl. (b) of S. 79(1) of the Customs Act, 1969, under the self-assessment scheme, did not absolve an importer form the charge of an attempt to defraud the government through a foul play---Validity---Shipping agents were allowed to amend authorized data field in Vessel Intimation Report online for all incoming and outgoing vessels--Carrier's agents were also allowed to clear their outstanding dues on the first and fifteenth of each month---Words used in R.401(1) of the Customs Rules, 2001 that "the carrier or his agent shall be entitled to amend authorized data fields in the Vessel Intimation Report by using their IDs online" showed that online amendments made by the carrier or his agent shall be allowed without any prior permission against the prescribed fee---Rule 401 of the Customs Rules, 2001 prescribed that "or by making an amendment electronically "; and disputed amend­ments were tirade online by the carrier's agent on the request of cargo booking agent which were not objected to by the Collectorate at any stage, as a result of which the name of new importer with new description appeared in the Customs data field-Till making such amendments, previous importer had not filed any goods declaration by declaring the description as Wooden Strips---Importer had filed goods declaration after amendments without showing any haste which was accepted by the Collectorate without any objection and Customs Reference Number was also allotted to goods declaration---Declaration made in goods declaration were scrutinized by the Assessing Officer and release message was also communicated electronically---Consignment was put on hold and a show-cause notice was electronically served upon the importer, initial importer and carrier's agent after a period of more than one month of the purported examination and amendments thereby completely ignoring the fact that the importer had filed goods declaration, making true and accurate declaration of particulars of goods without concealing actual goods and nowhere declaring the goods as "Wooden strips"---Case till revolves around the amendment and particulars initially declared by the shipping agent in vessel Intimation Report and carrier's declaration---Department was arbitrarily ignoring his own action, the developments and changes which had precipitated after the arrival of vessel and online amendments made in Vessel Intimation Report/carrier's declaration---Neither the initial nor the respondent importer had declared the goods as "Wooden Strips" before Customs---Goods Declaration was filed after online amendments which was accepted, processed and cleared as well---Respondent importer prior to filing of goods declaration had also paid duties and other allied taxes in terms of S. 79(1)(b) of the Customs Act, 1969---All the requirements envisaged under statutes and rules were duly fulfilled in all respects---Charging the respondent importer for misdeclaration of description on the basis of initial information contained in Vessel Intimation Report or carrier's declaration was neither understandable nor warranted by law---Appeal had basically been crafted on the edifice of Vessel Intimation Report and carrier's declaration which were duly amended as per existing provisions of law--- Goods Declaration was filed/submitted in terms of S. 79(1) of the Customs Act, 1969 read with R.433 of Pakistan Customs Computerized System Rules, declaring therein true particulars of goods without concealing actual goods, not only this, the amount of duty and other taxes were also paid---Order of First Appellate Authority was quite exhaustive having no legal flaw or infirmity---Appeal of the Department was rejected by the Appellate Tribunal having no merits and substance.

Messrs Al-Hamd Edible Oil (Pvt.) Ltd. v. Collector of Customs 2003 PTD 552 rel.

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

----S. 79(1)(b)-Pakistan Customs Computerized System Rules, R.433---Declaration and assessment of goods for home consumption or warehousing---Declaration of an importer, before the customs, for clearance of his goods begins with the submission of goods declaration in terms of R.433 of Pakistan Customs Computerized System Rules, read with S.79 of the Customs Act, 1969, which stipulates that Goods Declaration shall be deemed to have been submitted to Customs only when duty and taxes leviable thereon, if any, had been paid in terms of cl. (b) of subsection (1) of S. 79 of the Customs Act, 1969.

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

----Ss. 79, 80, 81, & 83--- Pakistan Customs Computerized System Rules, Rr.433, 434,435,437, 438 & 492---Declaration and assessment of goods for home consumption or warehousing---Bona fide or mala fide intention---Evasion of taxes by making misdeclaration of particulars was only possible through submission of incorrect goods declaration as the examination, the assessment, checking of goods declaration and release of goods by the Customs officer was only possible when a goods declaration under S.79 of the Customs Act, 1969 read with R.433 of Pakistan Customs Computerized System Rules, was submitted by the importer, otherwise, neither declaration of the importer could be checked or viewed nor goods could be assessed, examined and released by the Customs after satisfying themselves about the declarations and payment of leviable taxes---Before adjudging the bona fide or mala fide intentions of an importer, mechanism devised in the Law and Rules was to be kept in mind as a whole.

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

----Ss.32 & 32A---False statement, error, etc.---Examination of goods without waiting the declaration of importer ---Penal action---Validity---Before invoking provisions of S.32 or S. 32A of the Customs Act, 1969, Adjudicating officer must satisfy himself that the case squarely fell within the ambit of Ss.32 and 32-A of the Customs Act, 1969---Importer should be allowed to follow the provisions of Rules and law before taking any penal action---Department, totally ignoring the whole scheme of Customs Act, 1969 and Customs Rules, 2001 proceeded to examine the goods without first waiting the declaration of the importer in undue haste; particularly when the goods were in their safe custody and there was no danger of their clandestine removal---Provision of S.32A of the Customs Act, 1969 has also been invoked against the importer on the basis of Vessel Intimation Report/carrier's declaration, without meeting condition laid down in the provision of law, which did not exist in the data field of Pakistan Customs Computerized System---On the contrary, the importer's declaration of imported goods as miscellaneous goods in the customs documents viz. Bill of Lading, Commercial Invoice and Goods Declaration had been totally ignored by the Customs which had not resulted into any loss of revenue to invoke the provisions of S.32 of the Customs Act, 1969.

Messrs Al-Hamd Edible Oil (Pvt.) Ltd. v. Collector of Customs 2003 PTD 552 rel.

Ghulam Yasin, Appraising Officer and Shahnawaz, Examining Officer for Appellant.

Rana Zahid Hussain Khan for Respondent.

2010 P T D (Trib.) 1636

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir and Mher Muhammad Arif Sargana, Members (Judicial)

S.T.As. Nos. 94/LB and 105/LB of 2008, decided on 5th September, 2009.

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

----Ss.2(14), 2(37), 7, 8, 8A, 10, 11, 23 & 26---Sales Tax Refund Rules, 2004---Input tax---Rejection of refund---Registered person contended that refund was rejected merely on the objection that supplier had been de-registered, despite the fact that the same was registered at the time while making taxable supplies and refund was claimed against valid sales tax invoices issued by the supplier when he was registered which could not be disallowed on his subsequent de­registration---Validity---Registered person filed refund claim for the period 12/2004 and 02/2005, which was rejected on the basis of Sales Tax Automated Refund Repository (STARR) objection---Sales Tax Automated Refund Repository (STARR) system was introduced in the year 2006 and it could not be implemented retrospectively---Appeals were accepted and the orders-in-appeal as well as orders-in-original were set aside by the Appellate Tribunal.

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

----S.45---Power of adjudication---Pecuniary jurisdiction---Void order--Assistant Collector, could, at the relevant time, only adjudicate upon the cases involving amount of tax or the amount erroneously refunded not exceeding Rupees one million---Amount involved in the cases exceeded Rupees one million--Adjudication officer had transgressed his jurisdiction, which was unlawful and there ran no limitation against a void order---Order passed by the First Appellate Authority on the ground of limitation was not sustainable in circumstances.

Messrs Blue Horizon (Pvt.) Limited, Sialkot v. The Collector (Appeals) Northern Zone and others PTCL 1999 CL 162 ref.

2002 PTD 87 rel.

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

----S.36(3)---Recovery of tax not levied or short levied or erroneously refunded---Limitation---Show cause notices were issued on 9-3-2006 and 13-3-2006 respectively and the orders were passed on 30-12-2006--Limitation period provided in S.36(3) of the Sales Tax Act, 1990 expired on 9-6-2006 and 13-6-2006 respectively, as such, the orders were passed after expiry of limitation period of 90 days---No evidence was available to show that said period was extended by the Collector or the Board and it remained to be answered as to why the Government was revising the limitation period from 45 days to 90 days and then from 90 days to 120 days, if this limitation had no legal consequences---Plea of the registered person that "order in original had been passed after the limitation period of ninety days was liable to be set aside" was upheld by the Appellate Tribunal.

M/s Super Asia Muhammad Din Sons (Pvt.) Limited v. The Collector of Sales Tax, Gujranwala 2008 PTD 60; M/s Hanif Straw Board Factory v. Collector (Adj.) Customs Central Excise and Sales Tax, Gujranwala and 2 others 2008 PTD 578 and M/s Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore 2009 PTD (Trib.) 1263 rel.

Abu Zar Hussain and Khubaib Ahmad for Appellant.

Abdul Nasir, Auditor for Respondent.

Date of hearing: 24th August, 2009.

2010 P T D (Trib.) 1675

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mher Muhammad Arif Sargana and Mian Muhammad Hanif Tahir, Members (Judicial)

S.T.A. No. 1402/LB of 2008, decided on 5th September, 2009.

Sales Tax Act (VII of 1990)---

----Ss.36, 7, 8, 8A, 10, 11, 23, 26, 2(14), 2(37) & 73---Sales Tax Refund Rules, 2006, R.12---Recovery of tax not levied or short levied or erroneously refunded---Post refund audit of refund claims showed that registered person received refund deliberately, knowingly and fraudulently against fake/flying invoices issued by the supplier, which was blacklisted---Registered person was charged with violation of the provisions of Sales Tax Act, 1990 and was called upon to show cause as to why sales tax may not be recovered along with default surcharge and penalty---Registered person/appellant contended that he purchased goods from supplier up to 06/2006 through valid sales tax invoices and the payments were made through banking channel, whereas the supplier was blacklisted on 17-11-2007, meaning thereby that at the time of making business transactions with the supplier, they were having status as "operative" and he had committed no irregularity/fault in making business transactions with the suppliers having "operative" status , and if the supplier was blacklisted later on, it could not have a retrospective effect---Validity---During post refund audit of refund claims for the tax period 11/2005, 02/2006 to 04/2006 and 06/2006, it was observed that the appellant received refund deliberately, knowingly and fraudulently against fake/flying invoices issued by the supplier which was blacklisted on 17-11-2007---At the time of making business transactions with the supplier by the appellant/registered person, the supplier was not blacklisted and had "operative" status---Order through which the suppliers were blacklisted was an executive order and the orders or notifications, which confer rights and were beneficial, would be given retrospective effect and those which adversely affect or invade upon vested rights could not be applied with retrospective effect---Appeal was accepted by the Appellate Tribunal and orders in original as well as order in appeal were set aside.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 rel.

Messrs Al-Hilal Mines Stores and others v. The Collector of Sales Tax and Federal Excise (East) Karachi and others 2004 PTD 868; Messrs Brother Engineering (Pvt.) Limited's case 2004 PTD 2928 and Messrs M.Y. Electronics Industries's case 1998 SCMR 1404 = 1998 PTD 2728 ref.

Abu Zar Hussain and Khubaib Ahmad for the Appellant.

Abdul Nasir Auditor for the Respondent.

Date of hearing: 24th August, 2009.

2010 P T D (Trib.) 1681

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member (Judicial)

Sales Tax Appeal No. 577/LB of 2008, decided on 5th May, 2009.

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

----S.10, 4, 7, 8(1), 11(2), 26 & 2(14)---Sales Tax Refund Rules, 2006--Standing Order No.3/06 dated 2-I1-2006---Excess amount to be refunded---Rejection of appeal on ground of limitation---Registered taxpayer contended that no time limitation ran against a void order as the refund claim was rejected for want of attestation/verification of supportive documents submitted under the Sales Tax Refund Rules, 2005 and all the supportive documents as required under the law were submitted to the adjudicating authority but the same were not considered---Validity---Only on executive instructions, the substantive rights of the citizens should not be crucified---If the refund was admissible and the appellants had submitted all the authentic documents before the concerned authority, then the rejection of refund on ground of limitation was against justice---Order was a void and illegal order and the point of limitation did not arise---Registered person produced Sales Tax Return-cum-payment challans, Sales Tax Invoice, copies of supply register, de-registration of different units, verification of bills of entry, statement ,of purchases and payments proof through banking channel---Order was set aside and the case was remanded to adjudicating authority to reprocess and re-examine the refund claim on the basis of documents and records available with the registered person within a period of one month from the date of receipt of judgment after affording an opportunity of hearing.

M/s. Chenab Fabrics and Processing Mills Ltd. Faisalabad v. Government of Pakistan and five others 2006 PTD 1412 rel.

Messrs All Muhammad and others v. Chief Settlement Commissioner and others 2001 SCMR 1822; 2002 PTD 87; 2007 PTD 1458; PLD 1998 SC 64; 2005 SCMR 492; GST 2003 CL 601 and 2002 PTD 549 ref.

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

----S.10---Constitution of Pakistan, 1973, Art.25---Excess amount to be refunded---Limitation---Discrimination---First Appellate Authority sanctioned the refund on one case on the ground that if the appellants had fulfilled the provisions of Sales Tax Act, 1990 and the relevant Refund Rules, the denial of refund would be a violation of the Constitution while on the other hand on the same point he rejected the refund claim of the registered person which was a discriminatory action of the appellate authority, as all the citizens were equal under the Constitution.

Messrs Abuzar Hussain and Khubaib Ahmad for Appellant.

Messrs Abdul Rashad, S.A. and M. Mushtaq Auditor for Respondent.

Date of hearing: 4th May, 2009.

2010 P T D (Trib.) 1687

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

S.T.As. Nos. 49/LB of 2008 and 50/LB of 2008, decided on 5th October, 2009.

Sales Tax Act (VII of 1990)---

----S.45, 45A (4) & 31---Exercise of adjudication power by Collector---Validity---Collector, on the executive side, in presence of powers under subsection (4) of S.45A of the Sales Tax Act, 1990, could not exercise powers of adjudication under S.45 of the Sales Tax Act 1990---Section 31 and subsection (4) of S.45A of the Sales Tax Act, 1990 were different than each other---Orders passed by the officers, in exercise of powers under S.45 of the Sales Tax Act, 1990, were appealable before the First Appellate Authority, whereas there was no forum mentioned in the Sales Tax Act, 1990 where the order passed by the Collector on the executive side could be assailed, which was against the natural justice---Collector, having laid his hands upon a matter amenable only to adjudication proceedings, clearly violated the provisions of S.45 of the Sales Tax Act, 1990---Said orders were declared to be without jurisdiction---Order in original was set aside and the show-cause notices were vacated by the Appellate Tribunal.

Muhammad Akram Nizami for Appellants.

Nemo for Respondent.

Date of hearing: 30th September, 2009.

2010 P T D (Trib.) 1754

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Riaz Mehmood, Member (Judicial)

C.A. No. 1384/LB of 2008, decided on 26th February, 2009.

Customs Act (V of 1969)---

----Ss.32(1), 2, 156(1)(14)---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)(3)---PCT Heading 9027.800---Income Tax Ordinance (XLIX of 2001), S.148---S.R.O.549(I)/08 dated 11-6-2008---S.R.O.566(I)/08 dated 11-6-2008---Untrue statement, error, etc.---Declaration of goods was filed for clearance of consignment---Admittedly, goods were exempt from customs duty and sales tax and only advance income tax under S.148 of the Income Tax Ordinance, 2001 was payable thereon which was to be collected by the Collector of Customs--Goods were assessed on revised value---Subsequently, an invoice relating to the subject consignment retrieved by MCD section indicated the actual value of the goods and it was alleged that importer, with the active connivance of the Clearing Agent, prepared and presented untrue import documents in order to evade the duty and taxes and committed an offence---Importer was ordered to pay 50% redemption fine and 100% penalty equivalent to the value of goods in addition, a personal penalty of Rs.50, 000 was imposed on the Clearing Agent---First Appellate Authority upheld the order in original by reducing the penalty equivalent to 100% of the value of goods into 100% of the amount of taxes short paid, while maintaining the quantum of redemption fine imposed by the adjudicating authority--Importer/appellant contended that provisions of law were not applicable to the enforcement of income tax where similar provisions of law were available in the Income Tax Ordinance, 2001; and subject goods were life saving equipment and the government had exempted those equipments from the customs duty and sales tax and only advance income tax was payable under S.148 of Income Tax Ordinance, 2001; and department had incorrectly charged advance income tax @ 5% which was payable before 11-6-2008 and the same had been reduced from 5% to 2%, excess amount of income tax charged was liable to be refunded---Validity---Sections 32 and 156 of the Customs Act, 1969 was not at all attracted as such---Under S.148 of the Income Tax Ordinance, 2001, the value would be determined in the light of S.25 of the Customs Act, 1969---Value would be presumed on the basis of invoice retrieved in the MCD section---In view of S.R.O. 566(1)/08 dated 11-6-2008, the advance income tax would be charged @ 2%---Redemption fine and penalty imposed was contrary to law---Orders of First Appellate Authority and the adjudicating authority were set aside, show-cause notice was discharged and it was ordered that importer/ appellant was liable only to pay advance tax on his consignments @ 2% along with any penalty payable under S.138 of the Income Tax Ordinance, 2001---Department may impose any reasonable penalty provided in S.183 of the Income Tax Ordinance, 2001 accordingly. ?

2007 SCMR 1131 = 2007 PTD 1473 rel.

Messrs Pakistan Tobacco Company v. Collector of Sales Tax, Rawalpindi Appeal C. No. 52/ST/IB of 2004 and Messrs SCAN and Systems (Pvt.) Ltd. v. Collector of Customs, Appraisement Karachi PTCL 1999 CL 114 ref.

Hussain Ahmad Sherazi for Appellant.

Rehan, Inspector for Respondent.

Date of hearing: 23rd February, 2009.

2010 P T D (Trib.) 1886

[Customs, Excise and Sales Tax Appellate Tribunal Pakistan]

Before Muhammad Arif Moton, Member Judicial-II

Customs Appeal No. K-738 of 2007, decided on 12th October, 2009.

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

----Ss.32(1) & 156(1)(14)---Constitution of Pakistan, (1973), Art. 12---S. R. O. 425(I)/2007, dated 24-5-2007---S. R. O. 487(I)/2007, dated 9-6-2007---Untrue statement, error, etc.---Export of rice---Mistaken loading---During physical examination, bags of black channa, dall moong and dall channa were also found along with bags of rice---Such items attracted regulatory duty @ 35% at the relevant time---Redemption fine and penalty was imposed on the exporter and a penalty was also imposed on the Clearing Agent---Exporter contended that mixing of pulses and black chana and rice was caused due to faulty loading of goods from warehouse; and packing of each bag of pulses, black channa and rice was 45 kgs as admitted by the Department in show-cause notice as well as in order; and it was clear that packing of different items was similar; and there was an acute and abrupt electricity breakdown in the godown due to a serious fault in main power cable and repair was continued for three days; and due to darkness and climatic suffocation, he stood outside the godown and in the meanwhile the illiterate labour loaded the mixed goods as they could not distinguish sacks of rice and pulses having same weight---Order was modified by the First Appellate Authority to the extent of slashing the redemption fine and penalty on exporter while the penalty on Clearing Agent was quashed---Validity---Mixed loading of different items was caused by the mistake of the labour and it was beyond the preview of S.32(1) of the Customs Act, 1969 and not punishable under CI. (14) of S.156(1) of the Customs Act, 1969---Charges levelled in show-cause notice were not proved and resultantly orders of adjudicating officer and Collector (Appeals) for imposition and modification of redemption fine and penalty against the exporter were set aside by the Appellate Tribunal and appeal was disposed of accordingly.

2001 SCMR 838; 2006 PTD 2209; 2006 PCr.LJ 1427 = 2006 PTD 2190; 2003 PTD (Trib.) 2525; PLD 1959 SC (Pak.) 364; Abdul Aleem v. The State 1988 PCr.LJ 891; PLD 1996 Kar. 68; PLD 1991 SC 963; 2006 PTD (Trib.) 2533; 2004 SCMR 466 = 2004 PTD 1179; 2006 PTD (Trib.) 196; 2006 SCMR 129; 2008 PTD 356; 1995 PTD 91; 1986 CLC 1408; 1980 CLC 541 and 1999 MLD 90 rel.

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

----S.32---Untrue statement, error, etc.---Untrue and false statement attracting the mischief of provisions of S.32 of the Customs Act, 1969 needs to be proved to have been made knowingly' orhaving reason to believe' that such statement is false.

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

---S.32---Untrue statement, error, etc.---False statement---Meaning of--False statement means more than erroneous or untrue statement and entails intention to deceive.

Black's Law Dictionary rel.

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

----S.32---Untrue statement, error, etc.---"Mens rea"---Words "knowledge" and "reasons to believe" in the provisions of S.32 of the Customs Act, 1969 necessarily make "mens rea" or "guilty intention" and integral part of the offence under S.32(1) of the Customs Act, 1969.

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

--- S.32---Untrue statement, error, etc.-Affidavit-Non-filing of counter-affidavit to controvert facts stated in petition, would amount to admission of averments made in such petition.

1986 CLC 1408 rel.

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

----S.32---Untrue statement, error, etc.---Affidavit---Prima facie proof--Conclusive proof---Affidavit was considered sufficient prima facie proof and if not rebutted by cogent evidence, it becomes conclusive proof.

1999 MLD 90 rel.

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

----S.32---Untrue statement, error, etc.---Burden of proof---Onus to prove the allegations of untrue declarations/statements on the basis of collusiveness or inadvertence lay on the department.

2001 SCMR 838 rel.

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

----S.32---Untrue statement, error, etc.---Evidence---Mere assertion of the prosecution is no evidence.

2006 PCr.LJ 1427 = 2006 PTD 2190 rel.

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

----S.32---Untrue statement, error, etc.---Misdeclaration---Statement or declaration made under bona fide belief was not a misdeclaration.

2006 PTD 2209 rel.

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

----S.32---Untrue statement, error, etc.---Benefit of doubt always goes to the appellant/party and not the Government.

2003 PTD (Trib.) 2525 rel.

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

----S.32---Untrue statement, error, etc.---Penal proceedings---Standard of proof required in penal proceedings which are criminal in nature and require a proof beyond all reasonable .doubt---If it is not so the action of the department was held to be completely without jurisdiction, illegal, void ab initio and of no legal effect.

PLD 1996 Kar. 68 rel.

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

----S.32---Untrue statement error etc---Penalty---Imposition of penalty is illegal where the evasion of duty was not wilful.

PLD 1991 SC 963 rel.

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

----S.32---Untrue statement, error, etc---Penalty---Where there was a case of confusion rather than wilful evasion, penalty can be remitted.

2006 PTD (Trib.) 2533 rel.

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

----S.32---Untrue statement, error, etc.---Penalty---No penalty should be imposed in case of absence of mala fides.

2004 SCMR 466 = 2004 PTD 1179 rel.

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

----S.32---Untrue statement, error, etc.---Penalty---No penalty should be imposed where there is no wilful evasion.

2006 PTD (Trib.) 196 rel.

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

----S.32 & 156 (1)(14)---Untrue statement, error etc.---Word "untrue" in S.32 of the Customs Act, 1969 carries the sense of falsity Jo the knowledge of the person concerned, and where the accused is charged under S.156(1)(14) of the Customs Act, 1969, court is compelled to examine whether declarations made by the accused persons and his Agent were not only false but that they knew or had reason to believe that they were false.

PLD 1959 SC (Pak.) 364 and Abdul Aleem v. The State 1988 PCr.LJ 891 rel.

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

----Ss.32(1) & 156(1)(14)---Constitution of Pakistan (1973) Art. 12---S.R.O. 425(I)/2007 dated 24-5-2007---Untrue statement, error, etc.---Application of S.R.O.---S.R.O. 425(I)/2007 dated 24-5-2007 could not be applied retrospectively to the Goods Declaration filed weeks earlier as it violated the provision of Article 12 of the Constitution, which provided that no law shall authorize the punishment of a person for an act or omission that was not punishable by law at the time of the act or omission.

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

--- S.5---Executive orders or notifications which confer right and are beneficial would be given retrospective effect and those which adversely affect or invade upon vested right cannot be applied with retrospective effect.

2005 SCMR 492 rel.

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

----S.5---Notifications---Operation of---Notification, which purports to impair an existing or vested right or imposes a new liability or obligation cannot operate retrospectively.

1992 SCMR 1652 rel.

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

----S.5---Notification or an executive order adversely affecting rights of any person could not operate retrospectively.

2004 PTD 2928 rel.

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

----S.32(1) & 156(1)(14)---S. R. O. 425(I)/2007 dated 24-5-2007---Untrue statement, error, etc.---S.R.O. 425(I)/2007 dated 24-5-2007 was not applicable to the consignment of `black channa' as the Goods Declaration relating thereto was filed 13 days before enforcement of such S.R.O.

2005 SCMR 492; 1992 SCMR 1652 and 2004 PTD 2928 rel.

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

----S.194A---Appeal to the Appellate Tribunal---Appeal by the Deputy Collector Customs (Exports) without specific authorization in writing---Validity---Deputy Collector Customs (Exports) in the absence of specific authorization in writing to file the appeal, was not competent to file appeal under S.194 A of the Customs Act, 1969 and appeal filed by him was not competent.

2006 SCMR 129; 2008 PTD 356 and Appeals Nos. 181/2003, 182/2003, 183/2003, 184/2004, 185/2003 and 127 of 2003 rel.

Ali Bux Appraising Officer for Appellant.

Hussain Ahmed Sherazi Advocate assisted by Aqeel Ahmad for the Exporter.

Shaikh Suleman, Advocate for the Clearing Agent.

2010 PTD (Trib.) 1960

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial

Rectification Application in Customs Appeal No. K-232 of 2008, decided on 19th April, 2010.

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

----Ss.194-B (2), 25, 25A, 32, 32A, 79(1) & 196---Sales Tax Act (VII of 1990), S.33 (11)(c)---Customs Rules, 2001, R.107---S.R.O. No.487(I)/2007---Customs General Order 12/2002 dated 15-6-2002---Orders of Appellate Tribunal---Rectification of mistake---Application by the Additional Collector of Customs for rectification of Appellate Tribunal's order on the ground that goods imported were "Prime" Quality as against "Secondary" and raised questions of facts--Importer contended that since judgment contained no apparent mistake on the face of order, the application for rectification should be dismissed in limini, being filed with ulterior designs and mala fide intention, which was proved from the fact that despite receipt of judgment, the applicant and his subordinate were not complying the directions given therein---Validity---Rectification application was filed so late---If any apparent mistake was floating on the surface of the order, same could have been observed earlier---Application for rectification was nothing except to circumvent the complaint filed by the Importer with the Federal Tax Ombudsman for compliance of judgment of Appellate Tribunal and with the intention to file a reference before High Court against the order in rectification application, despite the fact that under S.196 of the Customs Act, 1969, no reference lay before the High Court---Applicant had not been able to establish the vehemently contested version of "mistake" either in actual, factual or legal sense; rather the attempt ended as a wild goose chase and tantamounted to an exercise in futility---Judgment of the appellate Tribunal called for no rectification as envisaged in 5.194-B(2) of the Customs Act, 1969---Application being devoid of material substance was dismissed by the appellate Tribunal.

Customs Appeal No.535/2003; (K-2 and Customs Appeal No.7/2001); Commissioner of Income Tax Karachi v. Abdul Ghani, 2007 PTD 967; Collector of Customs and Central Excise Peshawar v. Plasto Beg (Pvt.) Ltd. Hattar and others 2009 PTD (Trib.) 2189 Commissioner of Income Tax/Wealth Tax Multan v. Khalid Idrees Bhatti 2009 PTD 2139 and Messrs Pakistan Oil Fields v. Customs Central Excise and Appellate Tribunal 2009 PTD 1664 ref.

Black's Law Dictionary (Sixth Edition at page 1001); Mian Rafiq Sehgul and others v. Bank of Credit and Commercial International (Overseas Limited) and others PLD 1997 SC 865; Spin Bacha and 9 others v. Mst. Neelam and others 2003 YLR 1306; PLD 1981 SC 94; Commissioner of Income Tax Karachi v. Abdul Ghani 2007 PTD 967 and Pakistan Oil Field v. Customs and Central Excise and Appellate Tribunal 2009 PTD 1664 rel.

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

----S.194-B (2)---Order of Appellate Tribunal---Rectification of mistake Held against the theory of continuation for trial or proceedings was not conclusive of the existence of a right to make a previous judgment open for scrutiny whether by a higher Court in the form of appeal or the same court in the form of review and when this legal aspect of the matter is juxtaposed with the judicial pronouncement of the Superior Courts then the very rectification application so filed stood nowhere except with a razor thin marginal scope of review, when there was an "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.

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

----Ss.194-B (2) & 194-A(2)---Orders of appellate Tribunal---Rectification application by the Additional Collector of Customs---Validity---Provisions of subsection (2) of S.194-B of the Customs Act, 1969 in unequivocal, and unambiguous terms clearly state that the mistake needs to be brought to the Appellate Tribunal's notice by Collector of Customs or other party to the appeal---Collector of Customs was the competent authority who could file the rectification application in terms of subsection (2) of S.194-B of the Customs Act, 1969 and was different for appeals filed to the Appellate Tribunal in terms of subsection (2) of S.194-A of the Customs Act, 1969 where the competent officer should not be below the rank of Assistant Collector or Assistant Director so authorized in writing by Board or Collector or Director as the case may be---Rectification application filed by the Additional Collector and not by the Collector, was not maintainable.

Shahid Dasti, A.O. for Applicant.

Nadeem Ahmed Mirza Consultant for Respondent.

2010 P T D (Trib.) 2064

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

Appeal No.S.T. 434/PB of 2008, decided on 9th September, 2009.

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

----S. 25---Companies Ordinance (XLVII of 1984) --- Access to record, documents, etc.---Audit of sales tax and working out sales tax liabilities on the basis of Annual Audited Accounts/Income Tax Returns filed with Income Tax Department---Validity---Under the provisions of S.25(1) and (2) of the Sales Tax Act, 1990 the Sales Tax Officer was empowered to obtain and conduct the audit of the records being maintained under any other law besides the records being maintained under the Sales Tax Act, 1990---Annual audited Accounts were statutory documents being maintained under the Companies Ordinance, 1984 while the Income Tax Return was also a statutory document under the Income Tax Ordinance, 2001; declarations made in such documents were self-declarations by the assessee and the department was legally authorized to conduct audit on the basis of such statutory documents under the provisions of Sales Tax Act, 1990.

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

----S.3---Scope of tax---Issuance of show-cause notice on the ground that assessee had disposed of their stocks/assets without payment of sales tax leviable thereon---Validity---Balance sheet of the assessee as on 30th June, 2006, revealed that the assets which were available on the balance sheet as on 30th June, 2005, but were not reflected in the balance sheet of the subsequent period i.e. 30th June, 2006, meaning thereby that assets were disposed of without payment of sales tax and the proceeds realized from such disposal of stocks/assets were utilized for payment of their outstanding liabilities as there was a corresponding decrease of liabilities in the balance sheet as on 30th June, 2006---Assessee could not explain as to how these assets disappeared from 'their Balance Sheet and how their liabilities decreased enormously when they were not having any alternate source of funding---Assets were always equal to liabilities in the Balance Sheet (Assets-Liabilities) and increase or decrease in assets had always corresponding effect on the liabilities of the balance sheet---Vanishing of such huge value of assets from the Balance Sheet and corresponding decrease in the liabilities of the assessee as on 30th June, 2006 was itself irrefutable evidence against the assessee---Assessee disposed of assets without payment of leviable sales tax and utterly failed to discharge their obligations under the Sales Tax Act, 1990.

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

----S.45-B(3)---Appeals---Further inquiry during the hearing proceedings by the Collector (Appeals)---Validity---Collector (Appeals) had conducted further inquiry under the express provision of S.45-B of the Sales Tax Act, 1990 and all the relevant facts had been incorporated in the Order-in-appeal---No need was left for any further inquiry into the matter by the Appellate Tribunal.

Qazi Waheeduddin and Zulfiqar Hussain, G.M. for Appellants. Abdul Razzaq, DR/Additional Collector, Muhammad Haroon Khattak and Dost Muhammad Sr. Auditors for Respondents.

Date or hearing: 9th September, 2009.

2010 P T D (Trib.) 2086

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Hafiz Ahsaan Ahmed Khokhar, Member (Judicial)

Appeal No.187/CU/IB of 2008, decided on 31st July, 2009.

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

---S.179---Power of adjudication---Assistant Collector or the Additional Collector---Authorities of---Issuance of show-cause notice/corrigendum of show-cause notice or adjudication upon the show-cause notice by the Assistant Collector or Additional Collector---Validity---In view of admitted position of monetary limit the jurisdiction could only be exercised by the Customs Officers according to language of 5.179 of the Customs Act, 1969, and no deviation could be made on one or any other pretext, and if the action had been taken or order had been passed without having the competency given under S.179 of the Customs Act, 1969, the same could be declared illegal, unlawful and without jurisdiction---Scheme of S.179 of the Customs Act, 1969 provided that the power was given to the Deputy Collector in this present case and such power was not vested with the Assistant Collector or the Additional Collector, even the corrigendum power could only be exercised by an officer who was designated with the original jurisdiction under the provision of S.179 of the Customs Act, 1969---Additional Collector therefore wrongly assumed the jurisdiction by issuing the show-cause notice through corrigendum and decision by him was illegal, un-lawful and without jurisdiction---Appeal was allowed and it was declared by the Appellate Tribunal that Additional Collector wrongly assumed the jurisdiction on the show-cause notice and over the corrigendum and the exercise of jurisdiction was not legal, justifiable and also not within the four corners of law---Department's action/procedure to recover the amount of Income Tax front the appellant's, was also illegal, void ab initio, without any legal jurisdiction/authority and the same was also against the mandatory provisions of law---Additional Collector wrongly assumed the jurisdiction, transgressed its authority, acted against the mandatory provision of law---Orders passed by the Additional Collector having been declared as null and void and were set aside, the show-cause notice and the corrigendum issued to the appellant's were vacated by the Appellate Tribunal.

Khalid Saeed v. Shamim Rizwan 2003 SCMR 1505; 2008 PTD 1024; Abida Rasheed v. Secretary PLD 1995 Kar. 587; Rashid Ahmed v. The State PLD 1972 SC 271; Abdul Razzak v. Muhammad Sharif PLD 1997 Lah. 1; 2008 PTD 1024, 515, 1607; 2009 PTD (Trib.) 500; PLD 1992 SC 455; PTCL 2003 CL 599(sic); PLD 1975 Kar. 482; 2005 PTD 23; PLD 1998 SC 64; 1998 SCMR 1404; 1999 SCMR 412 and 2008 PTD 1094 rel.

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

----S.179---Power of adjudication---Power to hear and decide the appeal could not be conferred, even by consent, to any officer other than the one notified by the competent authority i.e. the Central Board of Revenue, which had the statutory powers to appoint the officers through gazette notifications.

Abida Rasheed v. Secretary PLD 1995 Kar. 587 and Rashid Ahmed v. The State PLD 1972 SC 271 rel.

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

----Ss.162, 148---Customs Act (IV of 1969), S. 179---Recovery of tax from the person from whom tax was not collected or deducted---Recovery by the Customs Department in case of default under S.148 of the Income Tax Ordinance, 2001---Validity---Only the Commissioner of Income Tax could exercise powers under S.162 of the Income Tax Ordinance; 2001, on account of default or non-payment of tax or if there was a lapse on the part of collecting officer and it could not be said that the collecting officer could himself automatically presume the jurisdiction of recovery of amount of Income Tax on the basis of assumptions or being the officer of Customs or as a collecting officer under S.148 of the Income Tax Ordinance, 2001, until the specific powers had been given to him under the law --- Collector of Customs did not have the authority to recover the Income Tax later on, but he had the power of collection of tax under S.148 of the Income Tax Ordinance, 2001---Mere collection did not mean that he could go for the recovery at the later stage, if the default was made by the person to whom the amount of Income Tax was due, the best possibility of recovery according to scheme of law as that after realizing the amount of Income Tax in form of audit or investigation, the collecting officer could refer the matter to the Commissioner of Income Tax for taking the action of recovery under S.162 of the Income Tax Ordinance, 2001---One person could not be tried on the same offence by two forums, he could be tried only where the clear cut provisions of law were available---Section 148 of the Income Tax Ordinance, 2001, only gave the power of collection to the Customs Department and the power of recovery in case of default under S.148 of the Income Tax Ordinance, 2001, vested with Income Tax Department and the Commissioner of Income Tax as prescribed could go on for recovery.

Black's Law Dictionary ref.

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

----Ss.148 (5) (6) & 162(1)---Customs Act (IV of 1969), S. 179---Imports---Recovery of tax from the person from whom tax was not collected or deducted---Recovery by Customs Department---Validity---Power to collect the advance Income Tax under S. 148(5) of the Income Tax Ordinance, 2001 could not have the effect of converting Income Tax into Customs Duty---Mere providing the manner of collection of tax as an advance tax under any tax enactment, the nature of the tax could not be changed---Short recovery of tax collectable under S.148(5)(6) of the Income Tax Ordinance, 2001, to a person in form of short collected, short levied, or not so collected, either on account of mis-declaration of the importer, or, on account of error, or inadvertence or under mistake, vested with the Commissioner of Income Tax alone under S.162(1) of the Income Tax Ordinance, 2001--Collector of Customs did not have the authority to go for the recovery, it was only the. Commissioner of Income Tax who could start the proceedings of recovery against the person in case of default on short collected, short levied, or not so collected, either on account of mis­declaration of the importer, or, on account of error, or inadvertence or under mistake---Adjudication by the Custom's Department on the point of recovery of Income Tax against the importer was not legal, justifiable and not tenable in the eye of law and exercise of jurisdiction on this point by the Customs Department and also the adoption of recovery procedure by them were set aside by the Appellate Tribunal.

1994 CLC 1612; 1990 PTD 29; 2005 PTD 23; Collector of Sales Tax and Federal Excise v. Messrs Qasim International Container Terminal, Pakistan Limited 2007 PTD 250 and Xen Shahmir Division v. Collector Sales Tax (Appeals), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad 2008 PTD 1973 rel.

Farhat Nawaz Lodhi for Appellant.

Majeeb-ur-Rehman Warraich aid Faiz Ali, DC/DR for Respondents.

2010 P T D (Trib.) 2188

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Humayun Khan Sikandri, Member (Technical)

S.T. No.167/PB of 2009, decided on 28th October, 2009.

Sales Tax Act (VII of 1990)---

----S. 46---Delay in filing appeal to appellate Tribunal---Condonation of delay---Sufficient case---Principles---Appeal under S.46 of Sales Tax Act, 1990 which was to be filed against order or decision of Collector (Appeals) within 60 days from date of receipt of such order or decision, was filed after 5 years, 9 months and 23 days along with application for condonation of such 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 substantial justice by disposing matters on merits---Nature of the case and consequences of refusing to condone delay, necessarily had to be taken into account---Factors such as the monetary stakes involved and the importance of the issue raised would be relevant for that purpose---Postal delay of unusual type resulting in late filing of appeal, also would constitute sufficient cause for condonation of delay---Where the appeal was time-barred and the appellants had made an application for its condonation, but it was not adverted to by the Bench of the Tribunal and the appeal was admitted to regular hearing, the delay stood automatically condoned---Provisions of S.46(2) of Sales Tax Act, 1990 provided that Appellate Tribunal could admit an appeal filed after the period of limitation, specified in S.46(1) of the Act if Tribunal was satisfied that sufficient cause existed for not presenting same within the specific period---Appeal was filed along with application for condonation of delay, which was admitted by the Tribunal to regular hearing on the ground that the issue of limitation needed further inquiry; and same would be dilated upon while deciding the main appeal in the light of the factual and legal issues involved therein---Since the appellant had raised some crucial, factual and legal issues, which needed to be properly determined, time limitation was condoned so as to arrive at just and fair decision of the case---Case had been decided ex parte in violation of the principle of audi alteram partem, impugned orders passed by the lower fora, were set aside and case was remanded to the original authority for decision afresh by taking into consideration the issues raised by the appellant.

Federation of Pakistan v. Jamaulddin, 1996 SCMR 727; Income Tax Officer v. Sheikh Miraan Bakhsh and 25 others, 1986 SCMR 1255; MEO and another v. Syed Qamoos Shah and 20 others, PLD 2004 Pesh. 40 and 2005 PTD 501 ref.

Isaac Ali Qazi and Danish Ali Qazi for Appellants.

Muhammad Haroon Khattak, Senior Auditor for Respondent.

Dates of hearing: 13th April, 23rd June, 5th August and 28th October, 2009.

2010 P T D (Trib.) 2204

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Zafar Ahmed Khan Sherwani, Member (Judicial-I)

Custom Appeal No. K-333 of 2006, decided on 15th February, 2010.

Customs Act (IV of 1969)---

----Ss. 25, 32-32-A, 81 & 194-A---Determination of customs value of imported goods---Misdeclaration---Direction to pay the short levied amount of duty and taxes, besides the penalty---Respondent/importer imported consignment and filed G.D.----Officials of appellant department being not satisfied with the valuation of the consignment, made provisional assessment under S.81 of Customs Act, 1969, however, final determination was made by the Director of Valuation vide valuation ruling---On the basis of said valuation ruling, the Collector of Customs/appellant served show-cause notice to importer under Ss.32(1)(2), 32-A & 32(5) of the Customs Act, 1969 to pay total sum in terms of duties and other leviable taxes, penalties and Adjudication Officer passed order-in-original in that respect---On filing appeal by the importer, Collector of Customs (Appeals) set aside the said order holding that since the Collectorate failed to meet its obligation under S.81(3) of Customs Act, 1969, its right to issue show-cause notice under S.32(5) of the Act ceased to exist---Show-cause notice was held of no legal effect and said order was set aside---Validity---Show-cause notice was issued by the appellant department with the specific allegation that the valuation of the offending goods declared therein were grossly under-invoiced with mala fide intention to evade colossal amount of government revenue---Said show-cause notice was issued to the importer after expiry of limitation period as provided under S.81 of the Customs Act, 1969---Show-cause notice, in circumstance, was barred by time as provided under S.32(5) of Customs Act, 1969---Neither any allegation with regard to misdeclaration was made in said show-cause notice nor copy of inquiry report was supplied to the importer---No action, in circumstances, could be taken under S.32(1) of the Customs Act, 1969 and no penalty on such charge could be imposed---Impugned order was unexceptionable in circumstances.

Rehan Umer v. Collector of Customs, Karachi and 2 others 2006 PTD 909; Messrs CIBA GEIGY (Pakistan) Limited v. Deputy Controller of Customs Valuation, Karachi and 2 others 2005 PTD 1131; Messrs Hassan Trading Company v. Central Board of Revenue, Islamabad and 2 others 2004 PTD 1979; Messrs Abdul Aziz Ayoob v. Assistant Collector of Customs and 3 others PLD 1990 Kar. 378; Messrs Dawlance (Pvt.) Limited v. Collector of Customs Adjudication, Karachi-I 2002 PTD (Trib.) 3077; Messrs Sohrab Global Marketing v. Deputy Collector of Customs, Lahore and 4 others 2005 PTD 67; Messrs Habib-ur-Rehman and Company v. Collector of Customs (Appraisement) Karachi and 4 others 2005 PTD 69; Messrs Karachi Bulk Storage and Terminal (Pvt.) Limited v. Controller of Customs (Valuation), Karachi and another 2004 PTD 2592; Messrs Haji Sultan Muhammad v. Government of Pakistan and another 2004 PTD 2599; Messrs Punjab Beverage (Pvt.) Limited v. Appellate Tribunal (Customs, Excise and Sales Tax) and 2 others 2002 PTD 2957 and Messrs Collector of Customs (Valuation) .and another v. Karachi Bulk Storage and Terminal Limited 2007 SCMR 1357 ref.

Tariq Aziz, Appraising Officer for Appellant.

Shaukat Hayat for Respondent.

2010 P T D (Trib.) 2432

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Aril Moron, Judicial (Member-II)

Customs Appeals Nos.K-288 to K-292 of 2009, decided on 2nd July, 2010.

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

----Ss. 25, 79, 80 & 194-A---Customs Rules, 2001, Rr.107(a), 109, 433 & 438---Determination of customs value of goods---Reassessment of---Importers, imported a consignment and upon arrival of vessel, importers transmitted bill of entry or goods declaration under S.79(1) of the Customs Act, 1969 and R.433 of Customs Rules, 2001 to the Collectorate and paid upfront duty---Appraiser concerned instead of allowing clearance of the consignments on declared value asked importers to deposit additional amount of duty and taxes while reassessing value of imported goods---Importers challenged reassessment before authorities below but their representations were rejected and Assistant Collector issued impugned assessment order---Appeal filed by the importers had been dismissed by the Collector Customs---Validity---First issue involved in the case was, "whether importers' declared value was transaction value within the meaning of S.25(1) of Customs Act, 1969; and that importers had discharged the burden of proof laid down under R.109 of Customs Rules, 2001 "---When importers in the Column of (Financial information) of CD had transmitted clearly that the import was against confirmed letter of credit, its number and date, importers had discharged burden laid upon them under S.25(1) of the Customs Act, 1969 and under R.109 of Customs Rules, 2001---For disputing the said value, it was mandated upon the authorities to transmit the message under sub-rule (2) of R.109 of Customs Rules, 2001 to the importers for transmitting/ scanning additional documents, but no such exercise was undertaken, either by the Appraiser, Principal Appraiser and Assistant Collector of Customs---Department had failed to discharge the onus of establishing that price declared by the importers was not the transaction value within the meaning of S.25(1) of the Customs Act, 1969---Said issue was answered in affirmative.

Kamran Industry v. Collector of Customs, Exports PLD 1986 Kar. 68; Punjab Beverages (Pvt.) Ltd. v. CEST and 2 others 2002 PTD 2957; Messrs Collector of Customs, Port Muhammad Bin Qasim v, Messrs Zymotic Diagnostic Int'l., Faisalabad 2008 SCMR 438; Innovative Trading Company Ltd. v. Appellate Tribunal 2004 PTD 38; S.T.B. International v. Collector of Customs, Lahore and 5 others 2006 PTD 232, Rehan Umer v. Collector of Customs and 2 others 2006 PTD 909; Najam Impex Lahore v. Assistant Collector of Customs, Karachi and 4 others 2008 PTD 1250; Toyo Int'l Motorcycle v. Federation of Pakistan and 03 others 2008 PTD 1994; Messrs Shafique & Company v. Assistant Collector of Customs and 2 others 2008 PTD 1481; Sun Traders v Deputy Collector of Customs, Faisalabad and 4 others 2008 PTD 1594; Customs Appeal No. K-249/2000/13372; Customs Appeal No: K-35/2002, Customs Appeal No. K-1670/2001; 2005 PTD (Trib) 617; 1668/LB and 1669/LB of 2002, Customs Appeal No. K-1281/05; 1986 MLD 790; PLD 1996 Kar. 68; 2007 SCMR 1357 = 2008 PTD 1858; 2008 SCMR 438; 1992 SCMR 1083; 2008 SCMR 438; Karachi Bulk Storage and Terminal (Pvt.) Ltd. v. Controller of Customs (Valuation) Karachi and others 2004 PTD 2592; Messrs Abdul Wahid and Co. v. Assistant Collector MCC, Karachi; 2009 PTD (Trib.) 1926; Messrs, Zaman Cement Company (Pvt.) (Ltd.) v. C.B.R. 2002 SCMR 312; Pakistan v. Ms. Muhammad Saleem PLD 1995 SC 396; Ms. Gatron Industries Ltd. v. Pakistan 1990 SCMR 1072; Pakistan Messrs Azhar Brothers Ltd. 1990 SCMR 1059; Commissioner v. Makhdoom Syed Hussain Shah 1975 SCMR 352; Collector v. Ms. Novartis Pakistan Ltd., 2002 PTD 976; Ms. M.Y. Electronics' case 1998 SCMR 1404; Messrs Elahi Cotton Mills Ltd. v. Pakistan PLD 1997 SC 582; Messrs Sandalbar Enterprises v. C.B.R. PLD 1997 SC 334; Messrs Flying Craft Paper Ltd. v. C.B.R. 1997 SCMR 1874; Government of Pakistan v. Village Development Organization 2005 SCMR 492; PLD 2003 SC 124 = 2003 CLD 621 and 1992 SCMR 1083 ref.

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

----S. 25---Determination of customs value of imported goods---Issue involved in the case was "whether the customs authority had discharged the burden of proof by following the provisions of S.25(1) of the Customs Act, 1969 while determining the assessable value of the subject goods"-Provisions of Customs Act, 1969 were to be followed in sequential manner barring certain exceptional cases, where massive group under invoicing was rampant; however, resort to subsequent method was not permissible without exhausting the sequence indicated in S.25 of Customs Act, 1969 as it would annihilate and terminate the spirit and essence of the transaction value which in the first instance had to be established as colourable and tainted---Mere insertion of word "may or may not" in place of "are required to" in subsection (15)' of S.25 of the Customs Act, 1969, would not give unbridled and unfettered 'authority to customs administration to play havoc with the provisions of S.25 of the Act, thereby making them ineffective and redundant---Discretion had to be exercised within limits based on reason, rationale and fairplay---Section 25 of the Customs Act, 1969 specially provided that the customs value of the imported goods, subject to the provisions of said section and Rules, would be the transaction value i.e. the price actually paid or payable for the goods when sold for export to Pakistan---Said issue was answered in the affirmative, in circumstances.

Toyo International Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494 ref.

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

---S. 25---Customs Rules, 2001, Rr.107(a) & 110---Determination of customs value of imported goods---Issue involved in the case was "whether the transaction value declared by importers was in conformity with clause (d) of subsection (5) of S.25 of the Customs Act, 1969"---Declared values of the importers were also fair in the light' of transaction value of identical goods expressed in S.25(5) of the Customs Act, 1969---Said clause (d) of S.25(5) of Customs Act, 1969 had stated that if two or more transaction values of the identical goods were available in the data of 90 days as per stipulation of R.107(a) of Customs Rules, 2001, maintained by the Authority in terms of R.110 of said Rules, the lowest value had to be applied for completing the assessment of the identical goods under dispute---Issue was answered in the affirmative, in circumstances.

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

----Ss. 25-A, D, 80 & 193---Determination of customs value of goods---Review of the value determined---Issue involved in the case was "whether a review lies under S.25-D of the Customs Act, 1969 to Directorate-General Customs Valuation against an assessment order passed by the Assistant Collector of Customs under the provisions of S.80 of the Customs Act, 1969---Plea of department was that the importers should approach the Directorate-General (Valuation) for review of assessment value in terms of S.25-D of the Customs Act, 1969 for revision of value, which was neither tenable nor applicable and was irrelevant in the case---Subject assessment of the value was admittedly made by Assistant Collectorate of Customs under the provisions of S.80 of the Customs Act, 1969 against which an appeal lay under S.193 of the Act; however, values fixed through valuation ruling in terms of S.25-A of the Customs Act, 1969 by the Collector of Customs or Director of Customs Valuation were subject to a review under the provision of S.25-D of the Customs Act, 1969---Issue was answered in the negative.

Sun Traders v Deputy Collector of Customs, Faisalabad and 4 others 2008 PTD 1594 ref.

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

----Ss. 25 & 194-A---Determination of customs value of imported goods---Appeal, competency of---Issue in the case was "whether appellants/importers lost their right of appeal after the completion of unilateral assessment against payment of duty and taxes on the said assessed value for obtaining delivery of the consignment---Stance taken by the Collector of Customs that importers could not dispute the assessment complete' by Assistant Collector of Customs at a belated stage, when he paid the duty and taxes on the said assessed value for obtaining the delivery, was misconceived---Importers had right to raise the objection in accordance with their desires and they were free to challenging the vires of assessment before the legal forum provided under Customs Act, 1969---Belief that the amount payable would not preclude importer from asserting such legal right was mistaken---Issue was answered in negative, in the circumstances---Impugned re-assessment order, which was based upon proceedings which were invested with patent illegalities, was null and void---Same as well as impugned order of the Collector (Appeals) based on such proceedings were also ab initio null and void and were set aside.

Messrs Shafique & Company v. Assistant Collector of Customs and 2 others 2008 PTD 1481 ref.

Nadeem Ahmed Mirza, Constultant for Appellant.

Shahid Dasti, Appraising Officer for Respondent.

2010 P T D (Trib.) 2472

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial

Customs Appeal No.K-573 of 2009, decided on 31st August, 2010.

Customs Act (IV of 1969)---

----Ss. 25, 32, 32-A, 79, 80, 156, 181 & 194-A---Customs Rules, 2001, Rr.107, 109 & 110---Misdeclaration of description, classification, quantity and value of imported goods---Confiscation of goods---Appeal---Allegation against importer was that he deliberately misdeclared the description, classification, quantity and value of imported goods and besides importing excess quantity, undeclared banned items, in order to suppress the value, wilfully and with mala fide intention, had attempted to defraud the government from its legitimate revenue amounting to Rs.207,404--Imported goods were confiscated however, option was given to the importer to redeem the offending goods after payment of redemption fine---Validity---If the quantity was. excess as against the declared one, the Examining Officer should have stated in clear terms in examination report that same was found in excess of declared quantity, but that had not been done in the present case and no such allegations were levelled in the show-cause notice---Charges to that extent levelled against the importer stood extinguished---When the Customs Department disputed the value of any goods, it would take upon the responsibility to produce material to substantiate that the value of the goods had been misdeclared, but department had failed to do that, rendering the charge of misdeclaration of value as unsubstantiated and based on presumptive considerations---Goods not mentioned in the charter of show-cause notice, could not be subsequently taken up and adjudicated by the adjudicating authority in the adjudicating order---Impugned order-in-original based on such a deficient show-cause notice which did not mention the goads, was palpably illegal and void---Impugned orders were set aside, in circumstances.

The Collector of Central Excise and Land Customs and others v. Rahm Din 1987 SCMR 1840; Messrs Mughal Tobacco Limited v. Collector of Customs 1986 MLD 190; Messrs Kamran Industries v. The Collector of Customs, Exports and 4 others PLD 1996 Kar. 68; Messrs Punjab Beverages (Pvt.) Ltd. v. Appellate Tribunal Customs and Excise and Sales Tax and 2 others 2002 PTD 2957; Innovative Trading Co. Ltd. v. Appellate Tribunal and 2 others 2004 PTD 38; 2005 PTD (Trib.) 617; Rehan Umer v. Collector of Customs, Karachi and 2 others 2006 PTD 909; Najam Impex Lahore v. Assistant Collector of Customs, Karachi and 4 others 2008 PTD 1250; Collector of Customs Port Muhammad Bin Qasim v. Zymotic Diagnostic International, Faisalabad 2008 SCMR 438; D.G. Khan Cement v. Collector of Customs 2003 PTD 1797; Messrs Atlas Tyres v. Additional Collector 2003 PTD 1593 Zamindara Paper v. Collector 2003 PTD 1257; Assistant Collector v. Khyber Electric Lamps 2001 SCMR 838; Abu Bakar v. Collector of Customs 2004 PTD 2187; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala 2008 PTD 60; Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala 2008 PTD 578; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762; Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others 2009 PTD (Trib.) 1263; Leo Enterprises v. President of Pakistan and others 2009 PTD 1978; 2009 PTD 467; 1986 MLD 190; 2002 PTD 2957; 2004 PTD 1449 and 2009 PTD 1978 ref.

Nadeem Ahmed Mirza, Consultant for Appellant.

Ghulam Yasin, Appraising Officer for Respondent.

2010 P T D (Trib.) 2523

[Customs, Federal Excise-and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial-II

Customs Appeals Nos.K-435 to K-455 of 2008, decided on 21st June, 2010.

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

----Ss. 79, 80, 83, 179, 181, 193, 194-A & 195---Import of banned and non-importable vehicles---Imposition of redemption fine---Importers in "Goods Declaration", declared import of old and used Refrigerated Lorries and got the consignment released in terms of S.79(1) of the Customs Act, 1969---Scrutiny of said Declaration revealed that import of old and used Refrigerated Lorries was not permissible by Import Policy---Assistant Collector decided that redemption fine amounting to 30% of the value of the offending goods be charged against released goods---Collector (Appeals) had upheld decision of Assistant Collector--Contention of importers was that they had imported subject vehicles lawfully as such import was allowed under provisions of Import Policy Order 2006-2007, which order remained valid till issuance of next Import Policy Order---Goods imported by the importers had been assessed by competent officers exercising powers under Ss.79 & 80 of the Customs Act, 1969---Said assessment order became a final order after the lapse of time period for filing an appeal against said order---Even otherwise right of appeal had not been given to Customs Authorities in terms of S.193 of the Customs Act, 1969 in order to reopen a past and closed transaction---Only recourse available for the authorities was to initiate action within the framework of S.195 of the Customs Act, 1969---Authorities, instead of reopening an already finalized case of the importers, initiated adjudication proceedings through issuance of show-cause notice and adjudication of the whole matter afresh, which explicitly was not admissible under the law---If the subject assessment order passed by the Assessing Officer was not legal, it could only be challenged and reopened by revisional authority i.e. Collector of Customs or Federal Board of Revenue in terms of S.195 of the Customs Act, 1969---Such was an assessment order for all legal and practical purposes, where goods had been released after examination and assessment of duties and taxes by the competent officers of the Customs and was a past and closed transaction---General principles in such cases would imply that neither confiscation nor imposition of penalty was a determinative criterion or a condition precedent to stamp an order under law as an order appealable.

Messrs Kamran Industries v. The Collector of Customs PLD 1996 Karachi 68; Messrs Pfizer Laboratories v. Federation and Pakistan and others PLD 1998 SC 358; 2006 PTD 340; PTCL 2005 CL 841; 2006 SCMR 129; PLD 1971 SC 124; 2004 PTD 3032; 2001 SCMR 838; Eduljee v. Federation of Pakistan 1990 PTD 155; 2003 PTD 2090; Messrs Muhammad Razi v. Collector Customs (Appraisement) 2003 PTD 2821; Messrs Shaheen Enterprises v. Additional Collector 2005 PTD (Trib.) 1321; 2005 PTD (Trib.) 1826; 1987 SCMR 1840; Khyber Electric Lamps' case 2001 SCMR 838; Messrs Caltex Oil (Pakistan) Ltd. v. Collector Central Excise and Sales Tax and others 2006 SCMR 1519; Abu Bakar Siddique v. Collector of Customs, Lahore 2004 PTD 2187; PLD 1991 SC 963; 2006 PTD 2237; 2007 SCMR 1880; PLD 1964 SC 536; Noor Muhammad v. Member Judicial, BOR PLD 1986 Lah. 237; Shaikh Muhammad Saeed and Co. v. Deputy Collector PTCL 1997 CL 206; Secretary of State v. Mask and Co. AIR 1940 SC 105 and Ajay Exports v. Collector of Customs 1986 ELT (26) 8731 ref.

(b) Words and phrases---

---"Illegal"-Connotation.

(c) Words and phrases---

----Improper', defined and explained.

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

----S. 195---Revisional powers of Federal Board of Revenue or Collector-Scope-Revision-al powers conferred vide S.195 of Customs Act, 1969 did not authorize an officer to examine issue not falling within the scope of terms legality' andpropriety' which would mean that the powers under S.195 of Customs Act, 1969, were limited as compared to an appeal before a competent Authority.

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

----Ss. 79, -80, 83, 179, 193 & 195---Assessment of duty---Appeal to Collector---Revisional powers of Federal Board of Revenue and Collector of Customs---Under the provisions of Customs Act, 1969, any order passed in terms of S.79, read with Ss.80 and 83 of the Act, was appealable in terms of S.193 of the Act to Collector (Appeals) by aggrieved person, which did not include the Customs Officers---In the present case in the wake of requests made by the importers in terms of S.79(1) of the Customs Act, 1969 for first appraisement, the assessments were finalized by the Customs Officers through assessment orders in terms of Ss.80 & 83 of the Customs Act, 1969---Said orders if issued against the importers, could have been assailed by them in terms of S.193 of the Customs Act, 1969 with the Collector (Appeals)---Since the officers of Customs had no right to assail those orders in terms of S.193 of the Customs Act, 1969, 'a course was defined - by the Legislature in S.195 of the Act for reopening such cases where the legality or propriety of any decision or order passed by subordinate officer was in question---Customs Authorities could not start adjudication of past and closed transactions through issuance of show-cause notices and adjudication orders under S.179 of the Customs Act, 1969 when a lawful course had been prescribed by the Legislature in S.195 of the Act, for reopening of such decision or orders.

East Jamunia Co..(Pvt.) Ltd. Calcutta v. Collector of Customs Calcutta 1978 ECR 790; Council of Civil Service Union v. Minister for the Civil Service (1985) AC 374; Union of India v. Popular Dechem 1987 (ELT 63) Bom. and 1982 ELT 43 (Del) ref.

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

---Ss. 32, 156(14) & 195---Misdeclaration---Orders passed by subordinate officer---Revisional powers---Scope---Order or decision passed or taken by the subordinate officer, could only be corrected in revisional jurisdiction and not under S.32 of the Customs Act, 1969---Where the case had been adjudicated upon by Assistant Collector/ Deputy Collector after the issuance of show-cause notice for misdeclaration under S.32 of Customs Act, 1969, or where the case needed to be reopened either by Federal Board of Revenue or Collector of Customs in terms of S.195 of the Act: the legal consequential position emanating in both the situations was one and the same that redemption fine in both the cases could not have been imposed either by the Assistant Collector or Deputy Collector or even by the Board or Collector of Customs in terms of redemption of subject goods since those were not available for redemption being released earlier by the Customs Authorities---Only course open to Assistant Collector/Deputy Collector or the Board/Collector of Customs, would have been to impose the prescribed pitch of penalty in terms of S.156(14) of the Customs Act, 1969 for securing the element of fine in lieu of confiscation of offending goods, which could not be done in their absence.

2008 PTD 1968; 2009 PTD 467; PLD 1971 SC 197 and Raunaq Ali's case PLD 1973 SC 236 ref.

(g) Maxim---

----"Expressum facit cessare tacitum" (If the doing of a thing was made lawful in particular manner, then doing of that thing in conflict with the manner prescribed, would be unlawful)---Violation of maxim---While considering the impact »f violation or non-observance of the method prescribed by law for doing an act in a particular manner or mode observed that if the law had prescribed' method for doing of a thing in a particular manner, such provision of law was to be followed in letter and sprit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted.

2001 SCMR 838; 2003 SCMR 1505 and Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd, and others 2006 SCMR 129 ref.

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

----S. 181---Option to pay fine in lieu of confiscation of imported goods---Presumptive regime of taxation---In case of imposing fine in lieu of confiscation of goods, the officer, in the first instance had to confiscate the offending goods by passing adjudication order---Option to pay fine in lieu of confiscation of the goods as per discretion of the adjudicating officer, was to be given to the owner of the goods---Federal Board of Revenue had the privilege to specify the goods or class of goods where such option could or could not be given to the owner along with the pitch of fine in lieu of confiscation in respect of those goods for violation of provisions of S.15 or the notification issued under S.16 of the Customs Act, 1969 or any other law for the time being in force---Said conditions had categorically pre-supposed the presence of the goods on which fine in lieu of confiscation was to be imposed for their release---Fine in lieu of confiscation, also termed as "redemption fine", ordained the availability of the goods with the Customs Authorities, which could be released/redeemed after their confiscation by the concerned officer against payment of fine in lieu of their confiscation---Presence/availability of goods, was a condition precedent, a requisite for confiscation of the goods and their release against payment of fine in lieu of confiscation---Presumptive regime of taxation was based on notional concept of income as against real concept of income---Federal Board of Revenue or even Government of Pakistan under no circumstances, was competent to create a legal fiction whereby the goods which were not available for confiscation could be confiscated in the first place and thereafter release after imposing of fine in lieu of confiscation---Determination of income under the presumptive regime through legal fiction on notional, basis, would become possible through reliance on primary, secondary circumstantial and extraneous evidence.

Messrs Elahi Cotton PLD 1997 SC 582 ref.

(i) Interpretation of statutes---

----Statute, if in contradiction with the subordinate legislation, would prevail upon the subordinate legislation.

PLD 1989 SC 222; PLD 1995 SC 423; 1982 SCMR 522; 1985 SCMR 365; 2005 SCMR 186 and 2000 PTD 399 ref.

Shamshad Younus for Appellant.

Sibtain Mahmood, Advocate assisted by Ghulam Yasin A.O. for Respondent.

2010 P T D (Trib.) 2576

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial-II

Customs Appeal No.K-192 of 2006, decided on 29th April, 2010.

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

----S. 193---Constitution of Pakistan (1973), Art. 25---Appeal to Collector (Appeals)---Limitation---Reference to Federal Tax Ombudsman---Rejection of appeal by First Appellate Authority being time-barred---Validity---Ground taken by the appellant in respect of limitations was that the case/complaint was subjudiced with the Federal Tax Ombudsman and the appellant was not sleeping over his right---Such was a sufficient ground to condone the delay in submission of appeal before First Appellate Authority as belated filing of appeal before First Appellate Authority was also not contumacious and there was no latent or patent benefit accruing to the appellant through late filing of appeal---First Appellate Authority should not have treated the appeal as time-barred in view of explanation tendered by the appellant---First Appellate Authority indulged into an act of discrimination to detriment of appellant, when in another appeal barred by time by 341 days was impliedly condoned by it without deciding the question of pre-admission on limitation---Differential treatment given to appellant was also in violation of Article 25 of the Constitution---Ordinance accordingly.

Messrs K.K. Enterprises v. Collector of Customs, Sales Tax and Federal Excise (Appeals) Customs Appeal No.K-112 of 2006; 2002 SCMR 312; PLD 1995 SC 396; 1990 SCMR P. 1072; 1990 SCMR 1059; 1975 SCMR 352; 2002 PTD 976; 1998 SCMR 1404; PLD 1997 SC 582; PLD 1997 SC 334; 1997 SCMR 1874 and 2005 SCMR 492 rel.

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

----S. 25(5)(d)---Value of imported and exported goods---Enhancement of value---Enhance price of US$ 1.10/kg of the identical or similar items was not based on physical contemporaneous imports---Declared data transaction values of similar imported goods were in the range of US$0.70/kg to US$ 1.00/kg which had been enhanced to US$ 1.10/kg to US$ 1.20/kg without producing evidence of physical imports of 90 days valuation data---Since there could be more than one transaction value for identical/similar goods it is not necessary to enhance the declared transaction value to the level of the highest of such value of identical/similar goods on record in terms of Cl. (d) of Sub-S. (5) of S.25 of the Customs Act, 1969---Department had not been able to bring on record any cogent evidence or documents which could prove the declared transaction value of the subject goods tainted or colourable--Lower transaction value for the subject goods in absence of such evidence did not necessitate the enhancement of the value to the level of the highest of transaction value for similar/identical goods on record.

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

----S.32 (1)---Customs General Order No.12/2002 dated 15-6-2002, Para 101(B)(ii)---Untrue statement, error, etc.---Description of goods---Specification/quality of goods---Charged of misdeclaration---When description of goods remains the same and difference of opinion arises regarding the specification/quality of goods, charge of misdeclaration under S.32(1) of the Customs Act, 1969 could not be invoked by virtue of fact that no false declaration was submitted---Both specifications/ qualities i.e. "Un-worked or worked" fell under the same HS Code attracting the notified duties and taxes under the said head---Difference in specification/ quality of the goods did not alter its composition except in the appearance, fineness and viability---Description of the contentious goods remain the same.

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

----S. 32---Untrue statement, error, etc. ---Incorrect citation of P.C.T. Heading---Charge of misdeclaration--Validity--Determination of P.C.T. Heading was the sole function of the Customs Officers---Importer only assists the customs by citing the P.C.T. Heading of the goods----Citation of P.C.T. Heading may at best be called a claim for assessment of taxes, which means a request, may be accepted or rejected by the competent authority but was not a punishable offence under any of the provisions of the Customs Act, 1969---Citation of a particular P.C.T Heading in the Bill of Entry did not amount to mis­declaration within the meaning of S.32 of the Customs Act, 1969---Allegation under S.32 of the Customs Act, 1969 were thus unwarranted---Correct goods declaration' was filed by the Appellant with correct description of goods which was undisputed; there was no false statement or any collusion with the Officer of the customs---Present was a case of classification of goods and no case could be made out under the provision of S.32 of the Customs Act, 1969---Allegations of mis-declaration of value and description of the subject goods were misconceived and the orders were set aside by the Appellate Tribunal.

2004 PTD 100; Messrs Mughal Tobacco Company Ltd. v. Collector Customs 1986 MLD 790; Kamran Industries v. The Collector of Customs, Exports PLD 1996 Kar. 68; Latif Brothers v. Deputy Collector of Customs, Lahore 1992 SCMR 1083; Eastern Rice Syndicate v. C.B.R.; PLD 1959 SC (Pak.) 364; The Collector, Central Excise and Land Customs, Chittagong v. Imdad Ali. 1969 SCMR 708; Karachi Bulk Storage and Terminal (Pvt.) Ltd., v. Controller of Customs (Valuation) Karachi and others 2004 PTD 2592; Messrs Zeb Traders v. Federation of Pakistan and others 2004 PTD 369; AIR 1936 Pat 282 = 162 and Cas 550; 2002 MLD 296; Messrs Hashwani Hotels Ltd. v. Federation of Pakistan 2004 PTD 90; Messrs Mehran Associates Ltd. v. The Commissioner of Income Tax Karachi 1993 SCMR 274; Messrs 3N Traders v. Collector (Appeals) Central Zone, Lahore 2003 PTD (Trib.) 220; Land Acquisition Collector, Nowshera and others v. Sarfaraz Khan and others PLD 2001 SC 514; Customs Appeal No. K-249/2000/13372 Messrs National Radio Products, Karachi v. The Collector, Customs, Sales Tax and Central Excise, Karachi; Customs Appeal No. K-35/2002 Messrs Iqbal Brothers, Lahore, Karachi v. The Additional Collector, Customs (Adjudication-1), Karachi, Customs Appeal No. K-1670/2001, Messrs Tauheed Glass House, Lahore v. The Collector of Customs, (Appraisement), Karachi; 2005 PTD (Trib.) 617 in Customs Appeal Nos.1668/LB and 1669/LB of 2002; Customs Appeal No.K-1281/2005 Messrs Muhammad Farooq and Sons v. The Collector of Customs, Sales Tax and Central Excise (Appeals), Karachi; 2006 PTD 909; Rehan Umar v. Collector of Customs, Karachi 2002 PTD 2957 Messrs Punjab Baverages (Pvt.) Ltd., v. Appellate Tribunal(Customs Excise and Sales Tax) and 2 others 2007 SCMR 1357 = 2007 PTD 1858; Collector of Customs, (Valuation) and another v. Karachi Bulk Storage and Terminal Ltd., 2008 SCMR 438; Collector of Customs, Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostics

International, Faisalabd ref.

Monnoo Industries Ltd. v. Government of Pakistan 1984 PTD 199; State Cement Corporation v. Govt. of Pakistan C.A. No.43 of 1999; 2003 PTD (Trib) 293; Messrs Falcon Enterprises v. Collector of Customs Vide Appeal No. K-723 of 2007 and Customs Appeal No.K-432 rel.

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

----Ss. 32, 79 & 80---Untrue statement, error, etc.---Incorrect quoting of P.C.T. Heading would not tantamount to misdeclaration within the ambit of mischief of Ss.32(1), 32(2) & 32(A) of the Customs Act, 1969 since a positive assertion of facts was a prerequisite for bringing charges of misdeclaration against the taxpayer---If the wisdom of Customs Authorities for invoking S.32 of the Customs Act, 1969 in cases of incorrect citing of P.C.T. Heading was acceded to, no responsibility devolve upon the hierarchy of the Customs Officials to levy and assess the duty according to law---Provisions of Ss.79 and 80 of the Customs Act, 1969 in such a state of mind would become redundant.

C.A. No. 43 of 1999; Al Hamd Edible Oil (Pvt.) Ltd. and others v. Collector of Customs 2003 PTD 552 and Kamran Industries v. Collector of Customs Export PLD 1996 Karachi 68 rel.

Nadeem Ahmed Mirza, Consultant for Appellant.

Najamlul Hassan Jamali, Appraising Officer for Respondent.

2010 P T D 21

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs AMIN AND SONS TAILOR, MIANWALI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 241-L of 2009, decided on 29th September, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.114(6), 115(4), 122, 153(1)(b) & 170(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10 & 11---Constitution of Pakistan (1973), Art. 24(I)---Non-payment of income tax refund for the years 2003 to 2006---Refund was claimed on account of tax withholdings under Ss.153 & 235 of the Income Tax Ordinance, 2001---Since the taxpayer had paid tax through deduction and also filed statements under S.115(4) of Income Tax Ordinance, 2001, he had to be paid the excess amount of deducted tax---Denial of refund would be violation of Art.24(1) of the Constitution which had laid down that "no person would be deprived of his property save, in accordance with law "---Belated claim of refund was not barred by time since time limit for issuance of refund was directory and not mandatory---Ombudsman recommended that (i) Secretary, Revenue Division to ensure the issuance of refund to the complainant in accordance with the provisions of law; (ii) officer concerned to pass speaking order under S. 170(4) of Income Tax Ordinance, 2001 that the return filed by the complainant for tax year 2003 was hit by limitation of statutory provisions, so that he could avail the opportunity of the appellate forum; and (iii) compliance be reported within 30 days.

2008 PTD 1897; 2008 PTD (Trib.) 370 and 1999 PTD 2012 ref.

Raashid Umar for Complainant.

Umar Farooq, ACIT Enforcement 14 RTO, Faisalabad for the Respondent (DR).

Muhammad Daud Khan, Advisor (Dealing Officer).

2010 P T D 53

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs J.M. ENTERPRISES through Messrs Tax & Management Consultant, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-364-K of 2009, decided on 12th October, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8 & 10---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9, 10 & 11---Sale Tax input adjust­ment---Complainant had pleaded that audit observation of the Directorate, Revenue Receipt Audit, in the matter of Sales Tax input adjustment based on photocopies of 5 bills of entry, were not well ­founded---No satisfactory reply was given by the Departmental Representative---Representative of the complainant had stated that he approached the Assistant Collector concerned and produced before him original bills of entry, whereupon the Assistant Collector assured that he would satisfy Directorate Revenue Receipt Audit or their office so that matter could be settled---Departmental Representative verified that Payment of Sales Tax was made at the proper stage on the relevant dates and the disallowance of input tax claim and creation of demand was not correctly made---In the process, the complainant has suffered since 2006 on account of wrong notices, ex parte order-in-original and Payment of a part demanded due to coercive measures---Department did not realize that if the bills of entry were produced, the tax must have been deducted and it only needed verification which was initiated after 3 years and that too after the matter was taken up before the Federal Tax Ombudsman and after causing undue inconvenience and difficulties to the taxpayer---Departmental officers should have thought as to how to proceed to determine whether any loss of revenue had been caused---Officers adopted easy course of creating the demand by disallowing input claim and that also by making ex parte decision---Even coercive measures for recovery were adopted by placing embargo---Delay had caused a lot of inconvenience to the taxpayer and created an embarrassing situation for them---Such was a case of mal­administration---Recommendations were made to the effect; that Revenue Decision to direct the Collector to cancel the order-in-original passed by his subordinate and to undertake fresh proceedings; that FBR could write to the complainant regretting the inconvenience caused; that FBR to initiate inquiry against the officer responsible for order-in-original and for imposing embargo; that issue appropriate guidelines for the Sales Tax Officers in the matter of handling Directorate Revenue Receipt Audit, related observations; and that compliance of recommendations be reported up to specified date.

Mumtaz Ahmad, Advisor/Dealing Officer, FTO's Regional Office, Karachi.

Khushnood A. Khan, Authorized Representative.

Masood Sabir, Deputy Collector Sales Tax/Departmental Representative.

2010 P T D 124

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs T.F. PIPES LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 16 of 2009, decided on 30th September, 2009.

Customs Act (IV of 1969)---

----S.25---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Enhancement of assessable value of imported goods---Demand of short levied amount of customs duties and taxes---Complaint against---Complainant had filed complaint against customs for arbitrary enhancement of assessable value of its imports of goods without supplying evidence of higher assessable value---On continued failure of customs to produce proper proof of higher value, complainant filed a refund claim of the amount of customs duties and taxes which had been forcibly recovered from the complainant---Settlement of said refund having excessively been delayed by the customs authorities, complaint was filed---Customs authorities forced the demand of short levied amount of customs duties and taxes on the complainant company by threatening closure of their bonded warehouses operations and in circumstances had forcibly recovered the additional amount---Besides the customs authorities failed to protect their live file containing the documents of the case from loss and misplacement---As protection of live file containing the documents of the case against loss or misplacement was a top res­ponsibility of every Government Department, its loss or misplacement aggravated the extent and seriousness of maladministration involved in the case---Customs Officers dealing' with pre-audit of refund claims objected to refunding the amount on the basis of which the Audit Para had been settled and thus the decision to grant unlawful and unjustified refund was timely aborted---In view of said findings recommendations had been made that disciplinary action be taken under the Removal from Service (Special Powers) Ordinance, 2000 against: Customs Officers/officials who initially assessed the goods on lower value without obtaining the relevant valuable advice in terms of relevant Import Trade Price, Customs Officers/officials who failed to obtain the requisite evidence from Directorate of Revenue Receipt Audit of higher Import Trade Price after detection of short levy and Customs Officers/officials who sanctioned refund claim after the Audit Para was settled---Complaint could be included as a case study in the training module for customs officers in order to forestall chances of recurrence of such practice, FBR to put in place a foolproof and sustainable system to protect their live files against loss or misplacement; FBR to identify all excessively delayed funding cases for deciding them in the next three months and compliance be reported within 100 days.

G.A. Naqvi, G.M. Finance Authorized Representative.

Masood Ahmad, D.C. Customs, Islamabad Departmental Representative.

Yasin Tahir, Advisor, F.T.O. Secretariat Islamabad, Dealing Officer.

FACTS AND FINDINGS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---Messrs TF Pipes Ltd., Islamabad, a subsidiary of Telecom Foundation, filed Complaint No.16 of 2009 dated 5-1-2009 against Islamabad Customs for arbitrary enhancement of assessable value of their imports of Suspension grade PVC Resin imported in the year, 1994 without supplying evidence of higher assessable value.

1. Brief facts of the case are that the complainant Company Imported 165 M. ton of suspension grade PVC Resin under heading 3904.1000 of Pakistan Customs Tariff (PCT) in 1994 and filed into bond bill of Entry No.271 dated 25-9-1994 for temporary warehousing of the same in their Bonded Warehouse in Islamabad duly licensed by the Customs Department. They subsequently cleared the raw material under reference on the basis of declared value for assessment of customs duties and taxes as indicated against each ex-bond bill of entry as follows:--

| | | | | --- | --- | --- | | i. | 2947 dated 1-10-1994 | Assessed @ US$ 825/M Ton | | ii. | 3134 dated 5-10-1994 | Assessed @ US$ 910/M Ton | | iii. | 3942 dated 23-10-1994 | Assessed @ US$ 910/M Ton | | iv. | 4318 dated 3-11-1994 | Assessed @ US$ 910/M Ton | | v. | Nil dated 5-11-1994 | Assessed @ US$ 910/M Ton |

1. During post clearance audit in 1995, the Directorate of Revenue Receipt Audit (DRRA) pointed out that the customs authorities had wrongly assessed the goods at the declared values of US$ 825 PMT and US$ 910 PMT because the Import Trade Price (i.e. assessable value) of the goods under reference had been revised by the Competent Authorities in Customs House Karachi during the relevant periods as US$ 920 PMT vide C.No.Si/Miscellaneous./636/94-IV dated 4-10-1994 and US$ 980 PMT vide C.No. Si/Miscellaneous./636/94-III dated 22-10-1994 which were applicable to the whole of Pakistan. Thus DRRA pointed out a short levy of customs duties and taxes to the tune of Rs.316,549. The demand of short levied amount was accordingly raised against the importing Company, and the recovery was made good by Islamabad Customs by threatening closure of operations of their Bonded Warehouse. The Audit Para-on the subject was accordingly settled on the basis of recovery of the short levied amount.

2. The importing Company kept on demanding copies of the evidence of the revised assessable values in terms of the Import Trade Price (ITP) fixed as per the aforesaid documents of Custom House, Karachi. The customs authorities in Islamabad however, could not obtain this evidence either from the DRRA who had pointed out the short levy, or from Custom House, Karachi to prove the fact of revision of assessable values for suspension grade PVC Resin under reference. On continued failure of Islamabad Customs to produce proper proof of higher value, Messrs TF Pipes Ltd., filed a refund claim of the amount of customs duties and taxes which had been, forcibly recovered from them. Settlement of this refund claim was also excessively delayed by the customs authorities. The importing company there-fore, filed the Complaint under reference in the FTO Secretariat, Islamabad.

3. The parties were heard in the FTO Secretariat on 25-8-2009 and 14-9-2009. During hearing, the Departmental Representative (DR) informed that Islamabad Customs tried to obtain the relevant evidence of higher ITP value from Custom House, Karachi. Despite reminders, Karachi Customs did not supply the requisite evidence. He showed a couple of letters written by Islamabad Customs to Custom House, Karachi which were statedly not responded to. The DR however, admitted that it was not clear whether copies of evidence were demanded from DRRA as the relevant file on the subject was missing from customs record due to shifting of offices from one hired building to another during the intervening period. Therefore, .it was not possible at this belated stage to supply the requisite evidences of higher assessable values. That is also why it was not known whether the revised values which were meant for implementation on all Pakistan basis and which were regularly circulated by Custom House, Karachi to all customs stations of the country, reached Islamabad Customs and if these reached why these were not applied in the first instance. Under the circumstances, the DR was advised to make another attempt to procure evidence of assessment of suspension grade PVC Resin from Custom House, Karachi in the relevant period of 1994 from the computerized database managed by Pakistan Revenue Automation Ltd. (PRAL).

4. The DR made a renewed and earnest effort and obtained computer printout from Custom House, Karachi showing values on which these goods were being assessed during the relevant periods in 1994. This data clearly showed that suspension grade PVC Resin had been- assessed on revised ITP of US$ 920 PMT in the earlier part of October and at US$ 980 PMT during the later part of October and early November, 1994 as already pointed out by DRRA. This evidence was presented to the Authorised Representatives (ARs). They accepted this evidence and agreed to treat the valuation issue as settled. They, however, felt extremely bitter about 15 long years since, 1994 during which period they had been made to suffer extreme hassle, anguish and difficulties involved in dealing with customs authorities to get the matter settled on the basis of revised Import Trade Price (ITP). They stated that had Islamabad Customs taken the same course which they have now taken on the direction of FTO Secretariat, they would have obtained the same information far more easily in 1995 when the short recovery was pointed out by DRRA and thus the 15 years of hassle to the complainant and sheer wastage of management time by Islamabad Customs in handling this case would have been spared both to the complainant company and the customs department.

5. It is regretfully observed from the facts of the case, that this matter has been unnecessarily mishandled both by DRRA and Islamabad Customs for the last 15 years when the goods were cleared from the Customs Licensed Bonded Warehouse. As a matter of fact, the DRRA should have attached with their audit observation the relevant evidence of higher ITP on the basis of which they had pointed out the short recovery. Had DRRA backed up their audit observation with appropriate documentary evidences, the maladministration involved in this case and sheer wastage of time and energy by the customs department as well as the complainant Company could have been avoided. Secondly, Islamabad Customs failed to obtain the requisite evidence of higher assessable values either from DRRA or from Custom House Karachi for want of effective correspondence and efficient follow up. Their major mistakes were firstly to issue demand on the basis of DRRA objection without obtaining. the evidence of higher value on the basis of which audit objection had been made. Secondly, they addressed the letter asking for the requisite evidence to Assistant Collector Customs in Karachi rather than Collector Customs Incharge of the Appraisement Collectorate in Custom House, Karachi. The established norm of correspondence between Customs Collectorates is at the level of Collectors and not subordinate officers. In any case, the letter should have been effectively followed up by written reminders as well as telephonic reminders, which was not done in this case. Thirdly, instead of obtaining the requisite evidence either from DRRA or from Custom House, Karachi, Islamabad Customs forced the demand of short levied amount of customs duties and taxes on the complainant Company by threatening closure of their bonded warehouse operation and thus forcibly recovered the additional amount of Rs.316,549. Besides, Islamabad Customs failed to protect their live files containing the documents of this case from loss and misplacement. As protection of live files against loss or misplacement is a top responsibility of every Government Department let alone the Customs Department whose operations are better structured and highly documented, therefore, its loss or misplacement aggravates the extent and seriousness of maladministration involved in this case.

6. It is also regrettable to note that after settlement of the Audit Para, the customs authorities took a u-turn and sanctioned refund of Rs.117,497 and indicated adjustment of an amount of Rs.66,159 from the Company's future Income Tax and sales tax liabilities but an amount of Rs.132,893 was again decided to be non-refundable. However, the customs officers dealing with pre-audit of refund claims objected to refunding this amount on the basis of which the Audit Para had been settled and thus the decision to grant unlawful and unjustified refund was timely aborted.

Recommendations:

1. In view of the above findings, the following recommendations are made:

(i) Disciplinary action be taken under the Removal from Service (Special Powers) Ordinance, 2000 against:

(a) the customs officers/officials who initially assessed the goods on lower values without obtaining the relevant valuation advice in terms of relevant Import Trade Price of PVT from Custom House, Karachi.

(b) the customs officers/officials who failed to obtain the requisite evidence from DRRA of higher ITP after detection of short levy by them; and

(c) the customs officers/officials who sanctioned the refund claim after the Audit Para was settled.

(ii) This complaint may be included as a case study in the training module for Customs Officers, in order to forestall chances of recurrence of such practices;

2010 P T D 132

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD ARSHAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.70 and Complaint No. 204-K of 2008 decided on 11th September, 2009.

Customs Act (IV of 1969)---

----Ss.161, 187, 201 & 215---Customs Rules, 2001, R.71---Establish­ment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9, 10, 11, 14(8) & 22---Review of decision of Federal Tax Ombudsman---Application for---Applicant had sought review of an earlier decision of Federal Tax Ombudsman on his complaint wherein Federal Tax Ombudsman had decided not to intervene in the matter as the question whether diesel oil in question was smuggled or not was sub judice before the Customs Appellate Tribunal at that time---Despite clear, and solid documentary evidence received by the customs department that diesel oil under reference was not smuggled at all, the anti-smuggling staff of customs department issued a show-cause notice for confiscation of the goods rather than bringing the investigation to its logical conclusion by withdrawing the case---Customs department while handling the case had grossly violated the prescribed customs law and procedure by selling the diesel oil without fulfilling mandatory requirement of serving due notice to the owner or his agent under S.201(1) of Customs Act, 1969 and non releasing of the driver under S.161(10) of the Customs Act, 1969 after receiving conclusive evidence that diesel oil in question belonged to Pakistan Sate Oil---Case, in circumstances turned out to be a painful example of misuse of powers by the customs functionaries---Applicant/complainant had prayed that earlier judgment of Federal Tax Ombudsman could be reviewed to the effect, that (i) department could be directed to pay the full cost of diesel oil, plus repair charges of the oil tanker; (ii) S.H.O. concerned along with other personnel of the raiding party could be recommended for disciplinary action for violating the mandatory provisions of law; (iii) that any other compensation could be allowed under S.22 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Customs department having miserably failed to discharge their obligations under the law for which the applicant/complainant suffered hugely and inexcusably, recommendations were made to the effect; that (i) that sale proceed on account of sale of diesel oil be paid to the applicant within specified period; (ii) Officers responsible for extreme maladministration in the case be directed to show-cause notice accordingly---S. H.O. concerned was being separately referred to Provincial Police Officer for taking appropriate disciplinary action.

Asad Arif, Advisor, F.T.O's, Regional Office Karachi (Dealing Officer).

Muhammad Iqbal Riaz Authorized Representative.

Imdad Ali Jokhio, Assistant Collector, Customs Departmental Representative.

2010 P T D 783

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs MAJEED & SONS STEELS (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, GOVERNMENT OF PAKISTAN, ISLAMABAD

Complaint No.C-493-K of 2009, decided on 4th December, 2009.

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

----S.25-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.22--Action where declared value is less than the value determined---Delay in determination of value---Release of goods was not allowed on the ground that the goods were of secondary quality---Department made reference to the Pakistan Steel Mills for verification and consignment was held up till the receipt of report---Complainant approached the Department with the request that verification from Pakistan Steel Mills was not required under the law as the parameters of prime and secondary quality were given in Public Notice, wherein it was laid down that if the goods were in mill packing and were accompanied by a mill test certificate the goods would be treated as prime quality---Goods were incurred huge demurrage and container rent---Complainant claimed compensation against demurrage and container rent---Validity---Principal Appraiser proposed a contravention report directly without affording the complainant an opportunity to explain and without referring the case for second opinion, which was done later after seven days---Assessment of goods on higher value than declared one, despite the fact that the goods were held to be of prime quality and value indicated that the same were of prime quality, consumed three days that could have been saved had the contravention report contrary to established practice not been made and spoke of neglect add inattention on the part of senior hierarchy, as also inaptitude on the part of the person calling for documents---Delay of at least 10 days occurred due to available maladministration---Farther, complainant also did not clearly mention in the Goods Declaration that the goods were of prime quality---All the delay could not be attributed to the Customs Authorities---Delay of 10 days was clearly attributable to maladministration---Demurrage, container storage and yard payment were already paid to the respective authorities and Customs Authorities will not be able to get the same refunded neither there was any provision in the Customs Act, 1969 under which the customs may be made to pay the same to the importer---Case was fit for grant of compensation to the complainant under S.22 of the Establishment of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommenced that Federal Board of Revenue to ask Collector of Customs, MCC PACCS, to show cause within 30 days as to why compensation equal to 50% of the demurrage, container rent and container yard payment and additional compensation equal to 5% of the declared value of goods for loss caused to the importer/complainant may not be awarded under S.22 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 on account of undue delay/ maladministration; Collector of Customs may also be asked to state whether he would like to be heard in person; that Federal Board of Revenue to direct the Collector of Customs, MCC, PACCs, to put in place a system to alert the senior Customs Officers if a Goods Declaration was not cleared within a week, as also to solve the problem at Assistant/Deputy Collector/Additional Collector level before proposing of Contravention Report; that Federal Board of Revenue to move a Summary to Economic Coordination of Committee of the Cabinet suggesting inclusion of a provision in the relevant Rules/ procedures of KPT and Terminal Authorities to waive off the demurrage, container rent and container yard payments in case where the delay occurs due to Customs procedure and a Delay and Detention Certificate is duly issued by the Customs Authorities.

?

1996 SCMR 727; Complainant No. 1350-K/2002 and M. Yousaf v. The Collector of Customs Kar. PLD 1969 SC 153 ref.

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

----S. 217---Protection of action taken under the Customs Act, 1969---No suit, prosecution or other proceedings could lie against the Customs Officers dealing with cases---In order to avail such exception the presence of good faith was a necessary condition.?

Syed Barkat Ali Bukhari, Consultant, FTO Secretariat, Karachi (Dealing Officer).

Afzal Awan, Imran Iqbal and Akhtar Saeed (Complainant) for the Complainant.

Daud Prizada, Deputy Collector (Customs), Departmental Representative.

FACTS AND FINDINGS

DR. MUHAMMAD SHOAIB SUDDLE, (FEDERAL TAX OMBUDSMAN).---This complaint has been filed by Messrs Majeed Sons (Pvt.) Ltd. against the misadministration of Collector of Customs, MCC. PaCCS, custom House, Karachi on account of non-acceptance of claim of Rs.5,558,216 as detail reproduced below:

| | | | | --- | --- | --- | | 1. | Port Demurrages | Rs.,889,200 | | 2. | Container Rent | Rs. 722,000 | | 3. | Yard Payment | Rs.317,720 | | 4. | R and D Charges | Rs.106,000 | | 5. | Market Loss | Rs.3,523,296 | | 6. | Total Claim | Rs.5,558,216 |

1. The first four heads of claim of the complainant are based on the accrual payments made to various relevant companies/departments/ agencies, while the fifth one is based on difference between market price of the goods on the day of import and the day of delivery of the same from the port.

2. Brief facts of the case are that the complaints imported a consignment of 479.360 metric tons of prime hot rolled wire rods from U.S.A and filed Goods Declaration vide CRN No.HC-999180 dated 9-5-2009. The release of goods was not allowed by Customs on the purported ground that the goods were of secondary quality. The respondents also made a reference to the Pakistan Steel Mills for verification and the consignment was held up till the receipt of report thereof. The complainant approached the respondents on 3-6-2009 with the request that verification from Pakistan Steel was not required under the law as the parameters of prime and secondary quality were given in Public Notice No.2 dated 9-1-2002, wherein it was laid down A that if the goods were in mill packing and were accompanied by a mill test certificate the goods would be treated as prime quality. It was further claimed by, the complainant that the goods were incurring huge demurrage and until then an amount of Rs.12,75,000 of demurrage and Rs.7,60,000 of container rent had accumulated (demurrage and container rent being approximately Rs.55,000 and Rs.61,000 per day respectively). The Collector was requested to intervene and rescue the importers from further loss, financial cost, and mental agony with a further prayer to compensate the demurrage and container rent of Rs.20,35,000 incurred until then.

3. The report from Messes Pakistan Steel was issued vide QCD/ Customs/2009 dated 4-6-2009 wherein was confirmed that the imported goods were found to be of prime quality. The importer/ complainant again approached the Department vide their letter dated 5-6-2009, written to Collector of Customs that the verification from Pakistan Steel was not legally required and was unprecedented and that the reference had cost them about five million rupees as losses on account of container rent, port demurrage and financial loss. The Collector was requested to intervene and allow release of goods on that day, issue Delay and Detention certificate and compensate for the container rent. The goods were finally released by Customs on 10-6-2009 after lapse of 31 days from the date of filing of Goods Declaration. Delay and Detention Certificate was also issued but the Assistant Collector of Customs confirming the delay caused in the customs process. Consequent upon the delayed release, the complainant wrote letters dated 15-6-2009, 22-6-2009 and 29-6-2009 for acceptance of their claim as in para. 1 above but no response was given form the respondents. Notice dated 2-7-2009 served upon the respondents to file a complaint before the F'TO also went unheeded, hence this complaint.

4. Reliance by the complainant is made on 1996 SCMR 727 and findings/recommendations in Complaint No.1350-K/2002.

5. In reply, the Department has maintained that:-

(i) The checking of Goods Declaration (G.D) is duty of an officer in terms of Section 80 read with Section 16 of the Customs Act 1969, which cannot be termed as maladministration;

(ii) The contents of complaint tantamount to a "damages suit" and in the absence of Shy mala fides, the same should be dismissed in limine in terms of section 217 of the Customs Act, 1969;

(iii) The subject complaint pertain to refund of port/demurrage charges, which under section 200 of the Customs Act, 1969 are the responsibility of the importer complainant. As held by the Hon'ble Supreme Court of Pakistan in the case of M. Yousuf v. Collector of Customs Karachi PLD 1969 Supreme Court 153, The High Court in writ jurisdiction under Article 98 of the Constitution of Pakistan (1962) could give only those directions for which provision existed in law;

(iv) The applications dated 15-6-2009, 22-6-2009, 29-6-2009 and notice dated 2-7-2009 were not communicated to the PaCCS in terms of section 155F and 155Q of the Customs Act, 1969, nor was the subject refund application covered under any provision of the customs Act, 1969; therefore, the same were not entertained;

(v) The complainant's declaration was neither showing any specification, i.e. prime or secondary, nor the standard AISI number was declared in the relevant column of `specification/ grade' of the Goods Declaration filed terms of section 79(1) of the Customs Act, 1969.

(vi) The goods imported by the complainant were checked/examined in terms of section 80 of the Act and during examination it was found that the wire rods were rusty, in un-even packing, which due to their appearance were considered not in line with the acceptable standard of prime;

(vii) The sub-standard/stock lot quality being "not importable" under Sr. No.10 of Appendix-C of the Import Police Order, 2008-9, and as per practice in vogue, the matter was referred for examination of goods by the Pakistan Steel Mills, prior to taking decision about contravention case for confiscation of goods or release of the same. As the complainant's consignment was a big one consisting of 19 containers (479.360 Kgs), the experts took some time for examination and submission of their report;

(viii) The Public Notice of 2002 referred by the complainant is for "sheets" and not for "rods"; that is why it cannot be applied, mutatis mutandis on the complainant's consignment; secondly, as per the electronically recorded assessment notes in terms of sections 155E and 155Q of the Customs Act 1969, the said Public Notice was nerve provided to the Assessing Officer and. thirdly, even the Public Notice confirms the actions of he department;

(ix) According to electronically recorded assessment history, the GD was completed on 6-6-2009, immediately after receipt of Steel Mills report, however, instead of clearing the goods the complainant availed review and then 2nd review options in terms of Customs Rules 2001. The 2nd review request was decided, after giving opportunity of hearing, on 9-6-2009 and thereafter the complainant accepted the assessment and cleared their consignment on 10-6-2009;

(x) Considering the normal procedure of processing of G.D in such type of disputed cases and also taking into account the Public Notice 16/89 dated 2-7-89, there is no question of any mala fides on the part of the Collectorate;

(xi) Considering the provisions of sections 217 and 33 of Customs Act, 1969, and Hon'ble Supreme Court's judgment PLD 1969 SC 153, there is no question to entertain the claim of the complainant;

(xii) The facts of the reported case-law 1996 SCMR 727 are not identical to the circumstances of the case;

(xiii) The allegations of maladministrations are not well-founded and hot provable in terms of section 2(2) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000, therefore, no compensation is admissible to the petitioner under section 22 ibid. The complaint is even not maintainable in the light of preliminary objections; hence it may kindly be rejected.

1. Hearing in the case was fixed on 7-9-2009-when the Departmental Representative was present but the complainant or his counsel did not appear. Next date was fixed on 29-9-2009 when the case was heard in detail as discussed in the ensuing paragraphs. The Departmental Representative sought one day's time to bring day to day history of the case. The information was brought on 3-10-2009 when the complainant sought time to bring satisfactory proof that the documents were duly scanned in the system. The final hearing was conducted on 6-10-2009.

2. During the hearing it was contended by the learned counsel for the complainant that the Goods Declaration in this case was filed on 9-5-2009 and the goods were released on 10-6-2009. The delay was due to negligence, inattention and mala fides which tantamount to misadministration. Damages of Rs.5558216 occurred to the importer due to this delay. It was further contended that reference was made to Pakistan Steel on 27-5-2009. The complainant came to know of the objection on 6-5-2009 whereupon a letter dated 28-5-2009 was written to Collector of Customs, MCC, PaCCS which was marked by the Collector to Addl. Collector MCC III. It was told by the complainant that a similar consignment KAPR-HC-69433 dated 14-4-2009 was cleared from Collectorate of Customs Appraisement wherein also reference was made to Pakistan Steel but the opinion was obtained promptly. He further stated that the Collector MCC, PaCCS firstly refused to see but agreed to see the complainant on intervention from the Association. According to complainant, he also apprised the Chief Collector, after clearance of the situation, on whose intervention the delay and detention certificate was issued.

3. The Departmental Representative frankly admitted that delay occurred but according to him it was not due to any mala fide. It was averred that on examination goods were found rusty with uneven packing. Under the Import Policy, substandard goods are not importable; therefore care was required to be taken. He further submitted that documents were called twice on 15-5-2009 and 18-9-2009 but the complainant did not respond. He reiterated the arguments gives in the written reply. Regarding letter dated 28-5-2009, the DR submitted that he could not comment except that by that time samples had been drawn and sent to Pakistan Steel and no action could be taken without receipt of report from that company.

4. In rebuttal, the learned counsel for the complainant argued that the department had admitted the delay which was also clear from the computer print out supplied by the Department. According to him, the delay occurred in there segments: first segment 9-5-2009 to 15-5-2009; second segment 15-5-2009 to 27-5-2009 and third segment 4-6-2009 to 10-6-2009. In reply to Department's argument that there was no provision in the Customs Act 1969 regarding payment of losses/damage, it was argued that the complaint was of maladiministration under the Establishment of FTO Ordinance. The loss occurred due to negligence and maladministration and it is settled law that nobody should suffer loss due to negligence of public functionaries. It was stated by the complainant that the documents were provided twice. First time the same were handed over to the clearing agent and 2nd time to the Additional Collector concerned on 26-5-09. He further argued that goods were referred to Pakistan Steel despite the declared value being that of prime quality. (According to him the value of prime quality ranged from $450 PMT upwards and that of secondary quality from $280 to $300.) He also argued that the coils bore tags affixed by the Mills and that the rust appearing on the same was due to atmospheric effect. The learned counsel for the complainant argued that the judgment referred to by the Department in the case of M. Yousuf vs. The Collector of Customs Karachi PLD 1969 SC 153 was not relevant.

5. During the hearing on 1-10-2009 the Department Representative brought the computer printouts which showed that the examination was first time held on 29-5-2009 and there appeared no action to have been taken prior to that. When the learned counsel for the complainant pointed it out, Departmental Representative sought time to re-verify. Time was granted till 2-10-2009 when he Departmental Representative telephonically sought extension for one more day. Hearing was accordingly fixed on 3-10-2009 when the DR brought 4 pages of computer printout showing that the GD was filed on 9-5-2009 and was selected by the system for examination. First examination was conducted on 10-5-2009; second on 13-5-2009 and the third on 26-5-2009 in collaboration with Pakistan Steel. The complainant expressed reservation saying that the communications did not appear in the inbox of the. importer upon which the Department Representative clarified that the examination orders/reports were not communicated to the imports. The Departmental Representative further clarified that in the present case a contravention report was proposed because the goods were held to be of secondary quality. The complainant while agreeing to the proposition that the system could not be manipulated averred that in the presence of the Public Notice 2/2002, the reference to Pakistan Steel was not necessary. He sought time to confirm in writing that the documents were duly scanned by the importer/clearing agent. Next hearing was fixed on 6-10-2009 when both the Complainant as well as the Departmental Representative confirmed that the documents were scanned into the system by the importer on 17-5-2009 and 20-5-2009 in reply to requests dated 15-5-2009 and 18-5-2009 respectively.

6. After going through various printouts filed by the Departmental Representative, the picture of activities on the Goods Declaration emerges as follows:

| | | | | --- | --- | --- | | Activity | Date | Remarks | | G.D. filed | 9-5-2009 | Selected for examination by the system | | Activity | Date Remarks | | | First Examination | 10-5-2009 | Goods reported rusty in uneven packing | | 2nd examination | 13-5-2009 | | | Opened by Assessor | 15-5-2009 | | | Call for documents | 15-5-2009 | Assessor to Principal Appraiser 16-5-2009 | | Documents scanned by the importer | 17-5-2009 | | | Call documents by P.A | 18-5-2009 | | | Documents scanned | 20-5-2009 | | | D.G remained with P.A | 20-5-2009 | ADC Law performed | | | To | activity on 5-6-2009 and | | | 5-6-2009 | 6-6-2009 | | ADC Law ordered examination jointly with Pakistan Steel Examination conducted | 27-5-2009 | | | Report fed into the system | 4-6-2009 | | | Contravention report deleted | 6-6-2009 | |

1. From the above table it is clear that the Principal Appraiser in this case proposed a contravention report, which was deleted on the order of the Additional Collector Law, on the basis of report from Pakistan Steel to the effect that the goods were of prime quality. After that the Customs officer making the assessment, did not accept the declared value as transaction value due to which the importer had to go through the process of review and second review, delaying the release of goods for further three four days.

2. It is significant to note that the reference to Pakistan Steel was made after the importer personally met the Additional Collector and handed over to him a set of documents already scanned in the system. No use of the documents appears to have been made by the Principal Appraiser who initially created the messages for calling the same. No evidence has been produced before this office to show on what basis the contravention report was proposed by the Principal Appraiser. It was argued by the DR that the checking of correctness of import, including declaration was duty of Customs Officer under section 80 of the Customs Act, 1969, but that does not mean holding of Goods Declaration for two weeks without any action on it. Had the importer/complainant not raised hue and cry, further delay in clearance of goods could no be ruled out.

3. The Departmental Representative relied on section 217 of the Customs Act, 1969 under which no suit, prosecution or other proceedings could lie against the Customs Officer dealing with cases, but he was reminded that in order to avail that exception the presence of good faith was a necessary condition.

4. The learned counsel for the Complainant rebutted DR's contention by saying that his claim was under section 22 of the Establishment of Officers of Federal Tax Ombudsman Ordinance and not under any provision of Customs Act 1969.

5. The DR also referred to Hon'ble President of Pakistan decision dated 20-5-2009 in Complaint No.534-K/08 (FBR v. Messrs Umm-e-Kulsoom Trading Company) in which case the Hon'ble President had held that Custom could not implement the recommendations of the FTO 'to release the goods after settling the storage, container and other charges with the KICT and the Shipping Agency???'. However, he was confronted with the fact that the Customs Authorities in the present case had issued Delay and Detention Certificate for KPT as well as for Pakistan International Container Terminal.

6. The learned counsel for the Complainant also referred to FTO Recommendation in Compliant No.1350-K/02 wherein reference to Ministry of Food and Agriculture after clear report from HEJ Laboratory was held to be unwarranted and argued that the referral by Customs Authorities to Pakistan Steel was not required in view of the provisions of the Public Notice 02/2002 and other documents. However, there is no denying the fact that a dispute had arisen between Customs official and the importer regarding quality of goods, which, according to Para 2 of the same Public Notice, could be referred to independent source for verification/confirmation of documents. Therefore while reference to Pakistan Steel cannot be held to be without jurisdiction, the timing of referral was of crucial importance in this case. The appropriate time to send the reference to Pakistan Steel was immediately after the Principal Appraiser called the document and concluded that somehow he was not able to release the goods as prime. Before that the calling of documents to ascertain the quality was well within the scope of section 80 of the Customs Act, 1969, as the importer had not clearly mentioned in the Goods Declaration whether the goods were of prime quality or otherwise. Once the documents had been called to confirm the quality, especially the mill test certificate, and the importer had scanned them in the system, the burden of proof shifted to customs to prove that the goods were not of prime quality. There should have been a system in place to have a second opinion in case the Customs Officer checking the documents did not agree with the veracity of the same. In this case, and similar other cases, there does not appear to be a system in place to provide for that second check it the matter before making out a contravention case. The Principal Appraiser in this case proposed a contravention report directly without affording the importer an opportunity to explain and without referring the case for second opinion, which was done later in the case after seven days. Then, again, the assessment of goods on higher value than declared one, despite the fact that the goods were held to be of prime quality and the value indicated that the same were of prime quality, consumed three days that could have been saved had the contravention report contrary to established practice not been made and speaks of neglect and inattention on the part of senior hierarchy, as also ineptitude on the part of the person calling for documents. Thus, it is obvious that delay of at least 10 days occurred due to avoidable maladministration in this case.

7. Coming to the claim of the complainant, it is worth noting that initially the importer did not clearly mention in the Goods Declaration that the goods were of prime quality; therefore all the delay cannot be attributed to the Customs Authorities. However, as held in para.18 above, a delay of 10 days is clearly attributable to maladiministration. The demurrage, container storage and yard payment is already paid to the respective authorities and Customs Authorities will not be able to get the same refunded neither there is any provision in the Customs Act 1969 under which the Customs may be made to pay the same to the importer. However, this seems to be a fit case for grant of compensation to the complainant under section 22 of the FTO Ordinance.

?

1. On the basis of above findings it is recommended that:-

(i) FBR to ask Collector of Customs, MCC, PaCCS, to show cause within 30 days as to why compensation equal to 50% of the demurrage, container rent and container yard payment and additional compensation equal to 05% of the declared value of goods of loss caused to the Importer/complainant may not be awarded under section 22 of FTO Ordinance, 2000 on account of undue delay/maladministration. The Collector Customs may also be asked to state whether he should like to be heard in person.

(ii) FBR to direct the Collector of Customs, MCC, PaCCS, to put in place a system to alert the senior Customs Officers if a Goods Declaration is not cleared within a week, as also to solve the problem at Assistant/Deputy Collector/Additional Collector level before proposing of a Contravention Report.

2010 P T D 862

[Federal Tax Ombudsman]

Before, Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ZAMAN TEXTILE MILLS LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. C-555-K, C-554-K and C-556-K of 2009, decided on 3rd December, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.162, 205, 148 & First Sched., Part-IV, cl. (56) [as substituted by Finance Act, 2008]---S.R.O. 567(I)/2008 dated 11-6-2008---Recovery of tax from the person from whom tax was not collected or deducted---Additional tax---Import of cotton---Demand of tax due at the import stage along with additional tax on the ground that S.R.O. 567(I)/2008 dated 11-6-2008 allowing exemption had become redundant on substitution of provision of cl. (56) Part (iv) of First Schedule to the Income Tax Ordinance, 2001 by the Finance Act, 2008, from 1-7-2008---Assesee contended that while substitution of cl. (56) was said to have taken effect from 1-7-2008, the Commissioner of Income Tax on 12-7-2008 clarified to the Chief Collector of Customs that the said S.R.O. was in field and exemption was available---However, returns of income were due by December, 2009, where purchase of raw materials including import of cotton would be reflected in audited accounts/statements---Tax collectable at import stage was not final discharge of tax liability---If tax was not collected at import stage, it could be discharged at the time of filing return---Validity---There appeared lack of coordination, inaction and mistaken interpretation on the part of Federal Board of Revenue officials---Confusion, delay, inaction, unjust and unreasonable treatment meted out to the complainant constituted maladministration--Ingredients of mal-administration, additionally Federal Board of Revenue clarified the position with regard to the said S.R.O. and cl. (56) by Circular letter dated 8-6-2009, but by that time imports had taken place---On 26-9-2009, after complainant's representation, the Federal Board of Revenue directed field offices that recovery of demand in such-like cases be kept "on hold" and the amount be recovered in six equal instalments starting July, 2009 onwards but the recovery was being enforced, and on "default" additional tax was being charged---From the facts and documents maladministration was there due to delay, negligence, incompetence, and lack of coordination and being unjust and unreasonable in the treatment to resolve the issue---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct Commissioner of Income Tax to cancel the order under S.162 read with 205 of the Income Tax Ordinance, 2001 and decide the issue in accordance with law after providing opportunity of hearing to the "Complainant"; that to fix responsibility for non-withdrawal of SRO from website on the date of promulgation of Finance Act, 2008, for incorrect clarification on 12 July, 2008; and also for restricted circulation of clarification issued on 31 January, 2009, and proceed against those responsible under the Removal from Service (Special Powers) Ordinance, 2000; that to adopt measures to avoid such ugly situations, in future; that to consider request of complainants on merit for payment of tax due on instalment basis; and to collect details in respect of total imports of similar nature and tax amount involved, and share the data with the office of Federal Tax Ombudsman.?

Mumtaz Ahmad, Advisor (Dealing Officer).

Imran Javed Iqbal, A.R. and Syed Tasneem Ahmed, Manager for the Complainant.

Aslam, Additional Commissioner of Income Tax/D.R. and Fayaz Rasool, Deputy Collector of Customs/D. R. Departmental Representative.

2010 P T D 913

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ZIA INDUSTRY, GUJRANWALA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 503-L of 2009, decided on 3rd December, 2009.

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

----Ss.102, 59A, 62, 63/132, 103, 156---Income Tax Ordinance (XLIX of 2001), S.122A---Additional payment for delayed refund---Assessments made under S.62 of the Income Tax Ordinance, 1979 were set aside by the First Appellate Authority---Said assessments were re-assessed ex parte under Ss.63/132 of the Income Tax Ordinance, 1979 reinstating the income tax demand determined earlier for the years, neutralizing the refund determined---After five and a half years, the complainant had finally been paid the refund due to him---Complainant claimed that the additional payment for the delayed disbursement of refund should also be made "in accordance with law"---Validity---Manner in which assessments were made for assessment years 1999-2000 and 2000-2001 after assessments for assessment years 2001-2002 and 2002-2003 created a strong presumption that this was done deliberately in order to thwart issuance of refund created in assessment years 2001-2002 and 2002-2003-Ambient circumstances were indeed compelling, because the subsequent years of assessments and re-assessments made for such two assessment years became the vehicle for obstructing issuance of refunds---Inescapable conclusion was that such was a case of gross maladministration---Departmental functionaries involved had not acted in the manner the law required them to do, they obstructed `due process', flouted directions given by the First Appellate Authority and had also violated instructions issued by the Federal Board of Revenue--Refundable amount due to the complainant had been disbursed after five and a half years---Case having gone in appeal the reckoning for the additional payment due to the complainant as per law was required to be made on the basis of order of the Appellate Tribunal, which annulled order for assessment years 1999-2000 and 2001---Claim of complainant for compensation on delayed payment in accordance with the provisions of Income Tax Ordinance, 1979 was justified---Federal Tax Ombudsman recommended that short payment in the additional payment for delayed issuance of refund, as per rate of compensation under the provisions of Income Tax Ordinance, 1979 be made good and amount due under the law paid to the complainant within 30 days and that Officers dealing with the complainant's case be asked to explain their conduct, and appropriate departmental action taken within 60 days under intimation to Federal Tax Ombudsman Office.?

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

----Ss. 62 & 59A---Assessment on production of accounts, evidence etc.---Amendment of assessment on the basis of gross profit rate---Legality---Illegality was attempt to "amend" the assessment made under S.59A of the Income Tax Ordinance, 1979 on the ground that the gross profit rate was inadequately disclosed and the nature of business was not properly. stated---Departmental Officers should have known that there was nothing sacrosanct about the "Gross Profit Rate" and there was no fixed "Gross Profit Rate" for any business, there were "industry norms" and a business was expected to conform to industry norms and the "Gross Profit Rate" was part of such norms and the same type of business were expected to have more or less similar results as regards profitability wastage etc.---Wide variations could be there depending upon the facts and circumstances peculiar to each such business---One business may be showing a "loss" when others were showing "profit"---Although business norms were a useful reference point when evaluating the results shown by a business enterprise, they could by no means be used to "amend" the disclosed results---No such thing as a "fixed Gross Profit Rate" for a business existed which had got to be disclosed under all circumstances---Plenty of "case-law" on the subject was on record and this was also "common knowledge" in the Department---Officer charged with "assessment" work would have to be an ignoramus not to be aware of this.?

(c) Income Tax---

----Turnover---Estimation of---Principles---No doubt the Assessing Officer is empowered to "estimate" turnover where the declared version is not properly substantiated, but he certainly has no licence to make the estimate whimsically as he chooses---Officer has to specify proper objective basis for discarding the declared turnover and substituting it by higher level of turnover.?

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

----S.171---Additional payment for delayed refunds---Rate of additional payment---As per amendment made in S.171 of the Income Tax Ordinance, 2001 through Finance Act, 2004 the compensation rate was reduced from 15% to 6%---Said change was affected only on those refunds that were to be created after 1st July, 2004---Refund created on 28-6-2003 was not affected by such change in law---Statutory enactments were always prospective in their application and could be made applicable retrospectively only when the enactment itself said so.

Muhammad Munir Qureshi, Advisor (Dealing Officer).

Yawar Mehdi Naqvi for Authorized Representative.

Dr. Muhammad Idress, Addl. C.I.T. for Departmental Representative.

2010 P T D 954

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Major (Retd.).JAVED ZAMIR AHMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 337-L of 2009, decided on 26th November, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S. 111---Unexplained income or assets---Gain on sale of property---Addition of---Complainant contended that additions were unjustifiably made without giving statutory notice and providing reasonable opportunity of hearing---Validity---Matter decided arbitrarily without issuing a show cause notice to assessee was tantamount to maladministration in terms of sub-S.(3)(i)(a) and (d) and sub-S.(3)(ii) of S.2 of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that the Secretary, Revenue Division, may seek explanation of the Taxation Officer in writing as to why proceedings under section 22 of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000 may not be initiated against him for maladministration committed by him and he be asked as to whether he wishes to be heard in person.

2007 PTD (Trib.) 2319 and Writ Petition No. 4630 of 2009, dated 24-4-2009 rel.

Haji Ahmad, Advisor (Dealing Officer).

S.A. Khan for the Complainant.

Ms. Saima Ejaz, Deputy Commissioner of Income Tax and Khuram Ali Qadir, Taxation Officer for Respondent.

2010 P T D 1001

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

BILAL HUSSAIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.266 of 2009, decided on 1st December, 2009.

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

----S.156---Punishment for offences---C.B.R. Policy No.(1) AS-04 dated 24-3-2006---Complaint to get the bid of tampered vehicle cancelled and the bid amount refunded---Validity---Record showed that the problems relating to the vehicle initially created by the failure of Customs Authorities to comply with the Central Board of Revenue's instructions to sell tampered confiscated vehicles only to government/semi government institutions, were compounded due to glaring irregularities on the part of the complainant---Both the parties shared the responsibility of creating, aggravating and complicating the problems involved in the case---Desirable course would be that the tampered/confiscated vehicle was taken back by the customs authorities for its disposal only to a government /semi government departments/institutions etc. in accordance with the guidelines provided by the Central Board of Revenue---Precedent available in Federal Tax Ombudsman's decision and invoked by the complainant in support of his request for return of the vehicle was applicable after adding the amount of repairs statedly incurred by the complainant was finally worked out by customs authorities after verification of receipts as also the depreciation for intervening period---Depreciation could be worked out on account of its retention and use by the complainant in accordance with the rules of second hand vehicles being imported and assessed to import duties and taxes---Federal Tax Ombudsman recommended that the confiscated/tampered vehicle under reference be taken back by the Customs department; that the sale value and the repair and renovation charges be paid to the complainant after verification of the receipts of repair and renovation; and depreciating the value as per rules; that the time limit for registration of vehicles purchased in customs auction be standardized by FBR at a uniform level of sixty days on all Pakistan basis; that the responsibility of non-compliance of Central Board of Revenue's policy instructions about disposal of confiscated tampered vehicles be fixed; that the responsibility for the acts of maladministration involved in the case be fixed and those responsible be proceeded against under the Removal From Service (Special Powers) Ordinance 2000.

Complaint No.504 of 2009 ref.

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

----S.156---Auction---Doubtful nature of chassis number of confiscated vehicle---Recommendation of customs authorities in the sale certification that the vehicle be registered on the visible chassis number was quite revealing of the customs knowledge of the doubtful nature of the chassis number, otherwise there was no need to incorporate such a recommendation in the sale certificate.

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

----S.156---Auction of confiscated vehicle---Locus standi of complainant---Customs authorities had established such locus standi by issuing the sale certificate in the name of complainant, attorney of the bidder, instead of the actual bidder in auction and who deposited the bid amount in the government treasury---Raising objection on locus standi of the complainant was not only invalid but also irrational and self-contradictory---Complainant also held the power of attorney given by the actual bidder.

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

---S.156---Auction of confiscated vehicle---Incomplete address on application---Not a valid excuse for the customs authorities for failing to respond to the application that the address on the application was incomplete, as complete address was already available in customs file in which sale certificate had been issued in his name with full address---Legal notice addressed by the representative of the complainant also contained complete address of both the representative and the complainant---Despite this, customs authorities did not respond---Not even an interim reply was given---Such was a lame excuse to say that customs authorities could not make a reply because of incomplete address on the complaint.

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

----S.180---Show-cause notice---Procedure---Complainant were rather summoned for joining the investigation through a call letter---If they failed to comply only then a show-cause notice could be justified and that too after giving sufficient reminders.

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

----S.156---Public auction of confiscated vehicle---Procedure---Chemical test of chassis number, engine number---Customs authorities were under obligation to put the vehicle to chemical test for verification of the genuineness or otherwise of the chassis number, engine number, etc, before putting same to public auction.

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

----S.156---Confiscation of tampered vehicles---Auction of---Policy---C.B.R. letters No. 10(1) AS/2004 dated 24-3-2006 and dated 18-10-2006---Confiscated vehicles with tampered chassis numbers would not be put to public auction---Tampered/confiscated vehicles could only be sold to government and semi government institutions.

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

---Ss.156 & 181---S.R.O. 179(I)/2006 dated 30-2-2006---Option to pay fine in lieu of confiscated goods---Failure of the customs authorities to put the vehicle to forensic test/chemical test to verify the genuineness or otherwise of the chassis number also misled the Appellate Tribunal to assume that no question of tampering was involved in respect of the vehicle and they allowed its redemption of payment of fine and leviable duties and taxes.

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

----S.156---Auction of confiscated vehicle---Issuance of sale certificate in the name of other person than the successful bidder--Validity---Nothing existed in the Auction Rules to suggest that the sale certificate could be lawfully issued to anybody other than the successful bidder---Act of customs authorities to issue sale certificate to a third party was obviously unlawful, being in violation of the Auction Rules---Sale certificate issued by customs authorities to a third party could lead to another mischief which the customs authorities should have comprehended at the time of dealing with the bidder's written request for issue of sale certificate to a third person---When the sale certificate was issued in the name of bidder, it involved an obligation on his part to declare purchase of an asset in his income tax return for the year--Act of issuance of sale certificate by customs authorities in the name of a third party may have resulted in evasion of income tax which clearly constituted maladministration on the part of customs officials.

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

----S.156---Auction of confiscated vehicle---Bidder---Third person in whose name sale certificate had been issued could not be considered to be the bidder because he was purchaser of the vehicle under reference and not the bidder.

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

----S.156---Auction of confiscated vehicle---Failure to register vehicle within time---In spite of an express conditionality in sale certificate that the registration of the vehicle was required to be done within 15 days of the issuance of sale certificate, complainant failed to apply for registration of the vehicle even within 16 months---Such failure not only created a procedural violation of the customs sale certificate but also of the law of motor registration authorities.

Nijat Khan and Bilal Khurshid Anwar for the Complainant.

Muhammad Jamil, Law Officer Customs, Departmental Representative.

Yasin Tahir, Senior Advisor, FTO, Secretariat, Islamabad (Dealing Officer).

2010 P T D (Trib.) 9

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Saeed, Accountant Member

I.T.As. Nos. 337/KB, 338/KB and 339/KB of 2008, decided on 14th September, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.39(f)(i), 40, 122(5-A) & 131---Amendment of assessment order---Making addition by disallowing expenditure---Deletion of addition---Appeal to Appellate Tribunal---Additional Commissioner finalized the order under S.122(5-A) of Income Tax Ordinance, 2001 whereby assessment order was amended---Additional Commissioner had also made addition by disallowing expenditure---Assessee/respondent being aggrieved with order of the Additional Commissioner filed appeal before Commissioner Income Tax (Appeals), who vide impugned order deleted orders passed by the Additional Commissioner for the reason that impugned orders were passed without notice to respondent/ assessee---Appellant-Department dissatisfied with judgment of the Commissioner Income Tax (Appeals) had filed appeal before Appellate Tribunal---Order passed by the Additional Commissioner of Income Tax was on the basis of ex parte as none attended on behalf of assessee/taxpayer---Order passed by the Commissioner Income Tax (Appeals) was vacated and the matter was remanded to the same' quarters with the direction that as the issue involved in the appeals having not been decided on merits, finding should be given on the agitated issue on merits and passed the order after confronting with the parties.

Afaque A. Qureshi, D.R. for Appellant.

Abdul Tahir Ansari for Respondent.

2010 P T D (Trib.) 12

[Income-tax Appellate Tribunal Pakistan]

Before Abdul Rauf, Accountant Member and Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 868/LB, 869/LB and 870/LB of 2008, decided on 30th September, 2009.

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

----Ss.131 & 221---Rectification of mistake---Appeal to Appellate Tribunal---Taxation Officer 'noticed some mistakes in the calculation of tax charged and also in calculation of tax liability on income assessed, issued notice under S.221 of Income Tax Ordinance, 2001 confronting the taxpayer/respondent with the mistakes apparent on record---Taxation Officer after considering the reply of the taxpayer as unsatisfactory, proceeded to rectify the assessment under S.221 of Income Tax Ordinance, 2001---Assessee filed appeals before the Commissioner Income Tax (Appeals) who vide her order cancelled order passed under S.221 of Income Tax Ordinance, 2001---Validity ---Inadvertent mistakes of omission and commission in the orders/judgments of the Authorities entrusted with the administrative responsibilities and dispensation of justice was a common phenomenon and rectification thereof was an essential requirement of the principle of natural justice---Commissioner Income Tax (Appeals) had disposed of the appeals of the company only on the technical ground and had not touched the merits of the case as contained in other grounds--Order of Commissioner Income Tax (Appeals), was not sustainable---Order of First Appellate Authority was vacated and case was remanded with the direction to pass speaking order on the other grounds of appeal after taking into consideration the arguments of representative of the company.

2009 PTD 712 and 2009 PTD 1557 ref.

(b) Interpretation of statutes---

----No provision of law could be presumed to be redundant and superfluous---Principle of harmonious construction required that the provision of law should be construed and interpreted in such a way that the different provisions of law dovetail into each other in such a way that the entire statute remained a well-knit, integrated and workable piece of legislation.

Muhammad Asif, D.R. for Appellant.

Muhammad Iqbal Khawaja for Respondent.

2010 P T D (Trib.) 17

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

I.T.A. No., 2423/LB of 2004, decided on 25th September, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.120, 122 & 131---Setting aside of assessment---Appeal before Appellate Tribunal---Appellant/assessee, which was non-resident company filed appeal against order of Commissioner Income Tax (Appeals) whereby the assessment finalized by the Assistant Commissioner of Income Tax was set aside---Contention of appellant was that instead of setting aside the assessment, the Commissioner Income Tax (Appeals) should have adjudicated the matter by passing a speaking order on the pertinent aspects of the case---Assessing Officer, in the present case was not satisfied with the disclosure in the declaration of undisclosed income, should have first rejected the declaration of undisclosed income filed by the appellant-Company; and then proceeded to assess the income of the appellant Company, but that had not been done---Besides, there was no discussion in the assessment order to establish that the undisclosed income shown for the relevant year in the declaration of undisclosed income, did not cover the income assessed---Accepting appeal, assessment finalized, was cancelled by the Appellate Tribunal.

Shahbaz Butt for Appellant.

Nemo for Respondent.

2010 P T D (Trib.) 25

[Income-tax Appellate Tribunal Pakistan]

Before Mrs. Zareen Saleem Ansari, Accountant Member and Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 167/KB of 2006, decided on 15th September, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.67 & 122(5-A)(9)---Income Tax Rules, 2002, Rr.13, 231(1)(6) & 131---Apportionment of deductions---Amendment of assessment---Appeal to Appellate Tribunal---Expenditure had to be apportioned on a reasonable basis after taking into consideration and account the relative nature and the size of the activities to which the amount related---Taxation Officer, in the present case had failed to point out a single expense which related to either dividend income or the exempt capital gain declared by the assessee---Taxation Officer had apportioned the expenditure only on the premise and the assumption that "had the taxpayer not invested in the shares, then the fund so available would have been invested in business", which had shown that the Taxation Officer could not bring on record any evidence to justify his said action--Alleged apportionment was found to have been made on imagination only---Taxation Officer had failed to prove "relative nature" and size of the activities to which the amount related which was an essential requirement as per the provisions of S.67 of Income Tax Ordinance, 2001---Said apportionment made by the Taxation Officer, had rightly been deleted by Commissioner Income Tax (Appeals)---No interference in that regard was required---Taxation Officer had misinterpreted R.231(1)(b) of Income Tax Rules, 2002 by bringing export rebate within the ambit of total profit which was contrary to the provisions of S.154(4) of Income Tax Ordinance, 2001--Appeal filed by the department against decision of Commissioner Income Tax (Appeals) on issue of apportionment, was dismissed and order passed by Commissioner Income Tax (Appeals) was confirmed.

Rehmatullah Khan Wazir and Farrukh Ansari, DRs. for Appellant.

Irfan Saadat Khan for Respondent.

2010 P T D (Trib.) 30

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 567/LB of 2009, decided on 20th August, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.121, 120(1) & 177---Best judgment assessment---Issuance of notice under S.121, of the Income Tax Ordinance, 2001 suggesting certain alterations/amendments---Assessee did not attend the audit proceedings---Taxation Officer passed ex parte order under S.121 of the Income Tax Ordinance, 2001 and had assessed the income---Assessee contended that Taxation Officer could not make an assessment when there was already an assessment order in the field in the shape of deemed assessment order or in any other shape---Under Sub. S(6) of S.177 of the Income Tax Ordinance, 2001 it had been specifically provided that after completion of audit under Sub. S(5) or Sub. S. (8) the Commissioner may if consider necessary after obtaining taxpayer's explanation on all the issues raised in the audit, amend the assessment under Sub. S(1) or Sub. S(4) of S.121 of the Income Tax Ordinance, 2001, as the case may be---Once there was an assessment order in the field without cancelling that order a new order could not be passed---Order may be amended, rectified or reviewed if provided under the law but in the presence of one order same authority could not pass the assessment order under S.121 of the Income Tax Ordinance, 2001---Validity---Contention of the department that "once the matter was selected for total audit and it was established that the case of the taxpayer was not in accordance with the criteria selected for the acceptance of the return, the Taxation Officer was fully authorized to pass the new order and already passed order will automatically become invalid was repelled---Until and unless the order in the field was not cancelled in accordance with law that will not become invalid---Assessment already passed that may be deemed or otherwise may be amended or rectified under the specific provision of law---Regarding the cases selected for audit it had specifically been mentioned in Sub. S(6) of S.177 of the Income Tax Ordinance, 2001 that after obtaining taxpayer's explanation on all the issues raised in audit, the assessment will be amended under Sub. S(1) of Sub. S(4) of 5.122 of the Income Tax Ordinance, 2001 as the case may be---Cancellation of order by the First Appellate Authority was upheld by the Appellate Tribunal and departmental appeal was dismissed.

(1968) 18 Tax 111; 1973 PTD 446; (1947) 15 ITR 61 and 2006 PTD 734 ref.

2006 PTD 734 rel.

M. Tariq, D.R. for Appellant.

Kh. Riaz Hussain for Respondent.

2010 PTD (Trib.) 33

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

W.T.As. Nos. 57/LB to 58/LB of 2009, 1/LB to 2/LB of 2009, decided on 7th May, 2009.

Wealth Tax Act (XV of 1963)---

----S.23---Appeal to Appellate Additional Commissioner from orders of Deputy Commissioner---Annulment of assessment---First Appellate Authority annulled the assessments for the reason that assessments were made by the Taxation Officer who was not a prescribed authority under the Wealth Tax Act, 1963 and assessments made were illegal, void ab initio---Department did not challenge the findings given by the First Appellate Authority before the Appellate Tribunal---Since annulled assessments were not hit by limitation, after issuing statutory notices, fresh assessments were framed by the competent/proper authority having the designation of Deputy Commissioner of Income Tax/Wealth Tax---Assessee contended that assessment framed by the Taxation Officer was got annulled by the First Appellate Authority being without jurisdiction, a vested right was created in favour of the assessee and to provide an opportunity to frame fresh assessment tantamount to snatching away that right---Very fact of making fresh assessment would show that the original assessment framed by the Taxation Officer did not have the legal backing and hence no legs to stand on---Validity---Admittedly, the department did not challenge the findings recorded by the First Appellate Authority in the first round of litigation and it attained finality---It was not the issue that whether original re-assessment order was made by the competent authorities but the moot point was that whatever the findings given by the First Appellate Authority, those findings remained uncontested---By not challenging the order passed by the First Appellate Authority, vested right had accrued in favour of the assessee---Order passed by the First Appellate Authority was vacated and assessment framed by the Assessing Officer were cancelled by the Appellate Tribunal.

2002 PTD 2379 rel.

2008, PTD 823 distinguished.

Shahid Pervaiz Jami for Appellant.

S.A. Masood Raza Qazilbash, D.R. and Ghulam Nabi Tahir, D.C.I.T. for Respondent.

2010 P T D (Trib) 37

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.As. Nos. 620/KB and 640/KB of 2008, decided on 2nd May, 2009.

(a) Income Tax---

----Disallowance out of "other expenses"---Assessee contended that complete details along with particulars had been filed and Bill and Vouchers were also examined---In PNR and other notices, the Taxation Officer had not pointed out any specific unverifiable claim or any defect except for estimated figure on assumed working---Validity---Contention of the assessee was correct as the Taxation Officer was not justified to disallow the expenditure based on stock phrases which was obvious from the order passed by the Taxation Officer---No disallowance could be based upon stock phrases like partial unverifiability and alleged presence of element of personal use---If Taxation Officer had failed to take into consideration that the assessee being a juristic or legal person its personal use of facilities like telephone, vehicle etc. need all the more strict test to bring home that any employee/director of company had in fact used or availed same which had not directly or indirectly connected with business of company, the disallowance could not be made---Disallowance out of other expenses were deleted by the Appellate Tribunal.

2002 PTD 1496 rel.

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

----S.21---Disallowance out of "advertisement expenses"---Taxation Officer had only disallowed the claim regarding which no evidence had been furnished by the assessee---Taxation Officer was fully justified in disallowing the claim which was accordingly maintained by the Appellate Tribunal.

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

----S.21---Disallowance out of "travelling expenses"---Taxation Officer had admitted that complete details of travelling expenses were filed---Claim was disallowed without pointing out any specific instances and by using stock phrases---Manner of disallowance was not sustainable as the law required that the specific unverifiable claim should be pointed out---Disallowance made in that respect was deleted by the Appellate Tribunal.

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

----Ss.21(c) & 233--.-Deductions not allowed---Disallowance out of "collection charges "---Advice of the Bank showed that they had charged discount on the credit facilities provided against payments made on' account of credit cards---All the scheduled banks enjoy exemption from the provisions of withholding of taxes on their receipts and tax was not deductible from them---Even otherwise, the banks had declared their entire receipts as taxable and had offered the same for taxation---Provision of S.21(c) of the Income Tax Ordinance, 2001 had not been violated---Disallowance made by the Taxation Officer was deleted by the Appellate Tribunal.

1996 PTD (Trib.) 411 rel.

(e) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S. 3---Income Tax Ordinance (XLIX of 2001), Preamble---Tax Year 2004---Levy of workers' welfare fund---Assessee contended that in the tax year, 2004 workers' welfare funds could not be levied as in S.3, Workers' Welfare Fund Ordinance, 1971 there was no reference to such levy under the Income Tax Ordinance, 2001---Validity---Levy of workers' welfare fund was charged under the Workers' Welfare Funds Ordinance, 1971 wherein the levy was restricted to charge under the Income Tax Ordinance, 1979 and not under the Income Tax Ordinance, 2001---In the year under review the amendment in the relevant law was not made and Taxation Officer could not charge workers' welfare fund---Levy of workers' welfare fund was deleted by the Appellate Tribunal.

2002 PTD 14 and 2007 PTD (Trib.) 1860 rel.

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

----Ss.21, 149 & 165---Deductions not allowed---Disallowance of salaries paid to contractor---First Appellate Authority deleted the same for the reason that income tax on payments made to contractor against labour provided by him had been deducted which was duly disclosed in the statement under S.165 of the Income Tax Ordinance, 2001 and did not relate to deduction of tax disclosed in the statement under S.149 of the Income Tax Ordinance, 2001---Contract labourers were not the employees of the assessee-company---Tax deducted on payments made to contractor was correctly disclosed in the statement filed under S.165 of the Income Tax Ordinance, 2001---Directions of the First Appellate Authority were confirmed by the Appellate Tribunal and appeal filed by the Department on the issue was dismissed.

I.T.A. No.662/KB of 2004 rel.

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

----S. 21---Deductions not allowed---Disallowance of "financial charges" on the ground that claim was in excess of fixed mark-up rate of 10%---Validity---Financial charges had been paid directly to the bank at different rates---Admittedly, assessee had filed breakup of financial charges with rate of interest and was supported by bank statement which was neither appreciated nor properly examined by the Taxation Officer---First Appellate Authority after examining the record, had rightly disagreed with the Taxation Officer with a specific finding that neither the claim was unverifiable nor there was finding that the loan obtained was used for non-business purpose---Loan had increased during the period---First Appellate Authority had given a clear finding that the claim of financial charges was supported by bank statement and was fully vouched and verifiable---First Appellate Authority had correctly deleted the disallowance of financial charges and his order was confirmed by the Appellate Tribunal and appeal filed by the department was dismissed.

Iqbal Salman Pasha and Nadeem Ahmed Dawoodi for Appellant (in I.T.A. No.620/KB of 2008).

Rehmatullah Khan Wazir for Respondent (in I.T.A. No.620/KB of 2008).

Rehmatullah Khan Wazir for Appellant (in I.T.A. No.640/KB of 2008).

Iqbal Salman Pasha and Nadeem Ahmed Dawoodi for Respondent (in I.T.A. No.640/KB of 2008).

2010 P T D (Trib.) 48

[Income Tax Tribunal Pakistan]

Before Abdul Rauf, Accountant Member and Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 1175/LB of 2008 and 867/LB of 2008, decided on 1st October, 2009.

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

----Ss. 205, 221 & 131---Liability to pay additional income tax---Rectification of mistake---Appeal to Appellate Tribunal---Appellant/ taxpayer vide its letter had intimated the Taxation Officer that at the time of filing of return for the tax year 2000-01 appellant-company had available refunds of Rs.18,08,012 for the charge years 1990-91 to 1999-2000 out of which amount of Rs.338,841 be adjusted against his tax liability for the year under consideration---Taxation Officer, however found that refund of Rs.4,28,875 became due to appellant/ taxpayer for the assessment year 1999-2000 as a consequence of order passed under S.62 of the Ordinance, 1979 and that no further refund was due to the appellant---Issuance of refund of Rs.10,47,120 to the appellant-company on 30-6-2000 had proved beyond any shadow of doubt that substantial refund was due to the appellant---Taxation Officer's observation that no amount other than the refund of Rs.428,875, was due to appellant, in circumstances was factually incorrect---Record of the appellant was not carefully examined by the Taxation Officer at the time of charging additional tax under S.205 of Income Tax Ordinance, 2001---Order of the Taxation Officer was set aside and case was remanded to the Taxation Officer with the direction to examine the record of appellant carefully and if sufficient amount of refund to cover the tax liability of the appellant was found to be due to it, additional tax under S.205 of Income Tax Ordinance, 2001 should not be charged.

2002 PTD (Trib.) 166 and 2002 PTD (Trib.) 1666 ref.

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

----Ss.221 & 131---Rectification of assessment---Appeal to Appellate Tribunal---Appellant/department had assailed the order of Commissioner Income Tax (Appeals) whereby she had cancelled the order of the Taxation .Officer passed under S.221 of Income Tax Ordinance, 2001, holding that assessment finalized under the repealed Ordinance, 1979 could not be rectified under the provisions of Income Tax Ordinance, 2001---Original assessment in the case of appellant was finalized under. S.62 of said Ordinance, 1979 on 12-3-2003 and period of limitation of four years as laid down under S.156 of late Ordinance, 1979 for the purpose of rectification of mistake was to expire on 11-3-2007---By 30-6-2003 the period of rectification of four years had not expired and on 1-7-2003 the provisions of S.221-(A) of Income Tax Ordinance, 2001 came into force by way of insertion through the Finance Act, 2001---Provisions of S.221 of the Income Tax Ordinance, 2001, were squarely applicable to the case of appellant because assessment for the assessment year 2002-03 had not become a past and closed transaction by 30-6-2003 so far as applicability of S.156 of the late Ordinance, 1979 was concerned---Order of the Commissioner Income Tax (Appeals) was vacated and that of Taxation Officer was restored.

Asif Hashmi for Appellant in I.T.A. No.1175/LB of 2008.

Muhammad Asif, D.R. for Respondent in I.T.A. No.1175 of 2008.

Muhammad Asif, D.R. for Appellant in I.T.A. No.867/LB of 2008.

Asif Hashmi for Respondent in I.T.A. No 867 of 2008.

2010 P T D (Trib.) 58

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.A. No. 1630/KB of 2005, decided on 24th June, 2009.

(a) Income Tax ---

----Past history---Rejection of trading results---Assessee contended that Taxation Officer had rejected the books version on the basis of previous history which had already been modified by the High Court, the same treatment should be made for the year---Validity---Taxation Officer rejected declared trading results on the basis of history---First Appellate Authority had already mentioned the history of the case---Position of maintaining the amount and other relevant fact remained the same---Appellate Tribunal directed that trading version declared by the assessee be accepted as there was no justification for rejection of the same.

ITRA No. 580 of 2006 rel.

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

----S.62---Assessment on production of accounts, evidence etc.---Non-confrontation on the issue---Addition on account of payment received from parent company---Assessee contended that he was not confronted on the issue and referred assessment order as well as notice sent by the Taxation Officer under S.62 of the Income Tax Ordinance, 1979 in that regard---Validity---Neither in the assessment order it had been mentioned that the assessee had been confronted in that regard nor in the notice under S.62 of the Income Tax Ordinance, 1979 the query had been made by the Taxation Officer from the assessee---Addition was deleted by the Appellate Tribunal in circumstances.

(c) Income Tax ---

----Addition---Other income---Assessee contended that similar addition made in the previous years had been deleted by the Appellate Tribunal--In view of settled position the addition on account of other income was deleted by the Appellate Tribunal.

(d) Income Tax---

----Disallowance out of repair and maintenance expenses---Following the decision of Appellate Tribunal and history of the case Appellate Tribunal directed that such expenses be restricted to 25% of the claim as in similar circumstances disallowance was reduced in the previous assessment year by the Appellate Tribunal---Disallowance out of other expenses was also set aside for fresh consideration as the similar disallowance made in the previous year was set aside---Taxation Officer was directed to pass fresh order in respect of other expenses in accordance with law affording reasonable opportunity of hearing to the assessee.

Irfan Saddat for Appellant.

Dr. Abdus Sattar Abbasi, D.R. for Respondent.

2010 P T D (Trib.) 68

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member, Khalid Waheed Ahmed, Chairman and Khalid Siddiqui, Accountant Member

I.T.As. Nos. 1609/KB, 1610/KB, 1611/KB and. 1612/KB of 2005, decided on 20th August, 2009.

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

----Ss.80-D & 80-DD---Minimum tax on income of certain persons---Calculation of tax liability---Where assessee was taxed under Presumptive Tax Regime under S.80D or S.80DD of the Income Tax Ordinance, 1979 his final tax liability was first calculated under normal tax regime on the basis of total income as the return in that regard was filed by the assessee in accordance with law.

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

----Ss.80-D, 80-DD & 50(5)---Minimum tax on income of certain persons---Levy of surcharge---Validity---Provisions of S.80-D or S.80DD, Income Tax Ordinance, 1979 were applicable only when the liability under the normal law regime were 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 is against the very scheme of the Income Tax Ordinance, 1979 to levy surcharge from an assessee who had already paid tax at an amount higher than the tax calculated under normal law regime as the tax paid under S.80D/80DD were the final tax liability including income tax and surcharge---Assessee would be subjected to an additional charge in the shape of surcharge only when it was more than the income tax and super tax, if any, payable for that year under the normal tax regime.

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

----Ss. 9, 10 & First Sched.---Charge of income tax---Surcharge---Where income tax was not levied under S.9 of the Income Tax. Ordinance, 1979 no surcharge could be levied under S.10 of the Income Tax Ordinance, 1979 as both the sections were read in conjunction---Section 10 of the Income Tax Ordinance, 1979 provide that an additional duty in the form of surcharge will be levied on the income tax payable under S.9 of the Income Tax Ordinance, 1979 at the rate as given in the First Schedule of the Income Tax Ordinance, 1979.

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

----First Sched., Ss.9 & 10---Rate of tax---Inducing provisions---Nexus of Schedule with sections---Schedule of Income Tax Ordinance, 1979 had direct 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 were Ss.9 & 10 of the Income Tax Ordinance, 1979.

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

----Ss.10, 80D & 80DD---Charge of super tax and surcharge---Under S.10 of the Income Tax Ordinance, 1979 surcharge was to be levied on the basis of assessed total income---Where tax was not levied on the basis of assessed total income, no surcharge could be levied.

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

----First Sched., Part-III, Para-C---Certain sections of Presumptive Tax Regime had been mentioned in Para-C of Part-III of the First Schedule of the Income Tax Ordinance, 1979 only to clarify that 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 late will be excluded.

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

----Ss.80-D, 80DD & First Sched., Part-III, Para-C---Minimum tax on income of certain persons---Levy of surcharge---Validity--Sections 80-D and 80DD 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---Provision of Part-III of the First Schedule of the Income Tax Ordinance, 1979 regarding rates of surcharge were not relevant to S.80D and S.80DD of the Income Tax Ordinance, 1979.

2006 PTD (Trib.) 1189 approved.

I.T.A. Nos. 1238 to 1240/KB of 2003 overruled.

2005 PTD (Trib.) 1882; 2000 PTD 2173; 2002 MLD 209; Oxford Encyclopedic English Dictionary; 2004 PTD (Trib.) 204; I.T.As. Nos. 820, 821, 1175 and 6859/LB/2004 ref.

Aminuddin Ansari for Appellant.

Rehmatullah Khan Wazir, D.R. and Farrukh Ansari, D.R. for Respondent.

2010 P T D (Trib.) 89

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

I.T.As. Nos.552/LB and 553/LB of 2007, decided on 3rd October, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.38, 131 & 221---Income Tax Ordinance (XXXXI of 1979), S.80-D---Rectification of mistake---Appeal to Appellate Tribunal---Appellant/department through two appeals had impugned the consolidated order of Commissioner Income Tax (Appeals)---Commissioner Income Tax (Appeals), had deleted additions under S.80-D of (repealed) Income Tax Ordinance, 1979 on the gain on sale of land and it had been observed that S.80-D of (repealed) Income Tax Ordinance, 1979, had clearly stated that where no tax was payable by the company, then minimum tax payable would be 5% of the turnover of assessee--Since the tax payable by the assessee under S.80-CC of (repealed) Income Tax Ordinance, 1979 was lower than the tax worked out at 5% of the turnover of the assessee, tax under S.80-D of (repealed) Income Tax Ordinance, 1979 was charged in the original assessment under S.62 of (repealed) Income Tax Ordinance, 1979, but the Taxation Officer without any justification had rectified the order under S.221 of Income Tax Ordinance, 2001, despite the fact that for the assessment year 2002-2003 the assessee's contention in that regard had already been accepted by the Taxation Officer---Commissioner, Income Tax (Appeals), in circumstances had rightly held that tax under S.80-D of (repealed) Income Tax Ordinance, 1979 would be chargeable as had been charged in the original assessment under S.62 of said Ordinance---Appellate Tribunal had already held that the gain on the disposal of land was a capital gain not chargeable to tax---Tax under S.80-D of (repealed) Income Tax Ordinance, 1979 was chargeable on the turnover of the assessee and not on capital gains as it did not form a part of turnover---Commissioner Income Tax (Appeals) in circumstances had rightly deleted the tax, under S.80-D imposed on gain of sale of land.

Sabiha Mujahid, D.R. for Appellant.

Yousaf Saeed, F.C.A.' for Respondent.

2010 P T D (Trib.) 91

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

M.As. (A.G.) Nos. 18/LB of 2008 to 22/LB of 2008, 451/LB of 2008 to 455/LB of 2008, I.T.As. Nos. 7029/1B of 2005 to 7030/LB of 2005, 5156/LB of 2003, 1031/LB of 2004 and 5072/LB of 2005, decided on 11th April, 2009.

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

----S.156-Rectification of mistake---Un-adjudicated ground of appeal--Mistake apparent on the face of record---Since the grounds taken up by the assessee on the issue of gross profit rate remained unadjudicated, the Appellate Tribunal committed a mistake which could be treated as `mistake apparent on the face of record'---Miscellaneous application of the assessee was accepted and earlier order on the issue of gross profit rate was recalled by the Appellate Tribunal.

(b) Income-tax---

----Gross profit rate---Rejection of accounts---Parallel cases---While rejecting declared version no plausible reasons were given by the Assessing Officer---Citations of parallel cases was not in accordance with law for the reason that in parallel cases cited by the assessee in the same locality were not taken into account at all and Assessing Authority proceeded to rely upon the cases of units located at other cities, which were not parallel in stricto sensu---Rejection of declared version and the resultant application of gross profit rate was not in consonance with law---Order of First Appellate Authority was vacated by the Appellate Tribunal and Assessing Officer was directed to accept the declared gross profit rate.

1998 PTD (Trib.) 2106; 2002 PTD 407; 1985 PTD 516; 1984 PTD 150; 2009 PTD (Trib.) 838; 1994 PTD 123; 2003 PTD (Trib.) 1972 and, 2001 PTD (Trib.) 1972 ref.

Sajid Ijaz Hotiana for Appellant (in M.As. Nos. 18/LB/2009, 19/LB/2008, 20/LB/2008, 21/LB/2008, 22/LB/2008, M.As. Nos.451/LB/2008, 452/LB/2008, 453/LB/2008, 454/LB/2008, 455/LB/ 2008, I.T.As. Nos.7029/LB/2005, 7030/LB/2005, 5156/LB/2003, 1031/LB/2004, 5072/LB/2005.

S.A. Masood Raza Qazilbash, D.R. for Respondent in M.As. (A.G.) Nos. 18/LB/2009, 19/LB/2008, 20/LB/2008, 21/LB/2008, 22/LB/2008, M.As. Nos. 451/LB/2008, 452/L13/2008, 453/LB/2008, 454/LB/2008, 455/LB/2003, I. T. As. Nos.7029/LB/2005, 7030/LB/2005, 5156/LB/2003, 1031/LB/2004, 5072/LB/2005.

S.A. Masood Raza Qazilbash, D.R. for Appellant (in I.T.As. Nos. 5462/LB of 2003 and 1039/LB of 2004).

Sajid Ijaz Hotiana for Respondent (in I.T.As. Nos. 5462/LB of 2003 and 1039/LB of 2004),

2010 P T D (Trib.) 96

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.A. No. 186/KB of 2009, decided on 25th July, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 21(1) & 231-A---Deductions not allowed---Cash withdrawal from Bank---Withholding tax by the Bank under S.231-A of the Income Tax Ordinance, 2001---Addition was made by the Taxation Officer on the ground that cash withdrawn from the Bank attracted the provisions of S.21(1) of the Income Tax Ordinance, 2001 despite the fact that assessee explained that Bank had deducted the tax after excluding withdrawal below Rs.25,000 in each withdrawal and out of total withdrawals the assessee had utilized certain amounts in payment of salaries etc., of various employees and the balance amount was re-deposited in the Bank on various dates---Validity---Assessee had not only produced books of accounts but also the Bank statements, deposit slips and date-wise statements of deposits in the bank accounts---Assessee had never tried to take shelter of second proviso to S.21(1) of the Income Tax Ordinance, 2001 as they had never made a claim under the said provision---Since the assessee had produced all the evidence before the Taxation Officer, it was the duty of the Taxation Officer to prove that the statement made by the assessee was not correct but he had failed to point out any defects or discrepancies in the details filed by the assessee and had made the addition on the basis of presumptions and surmises---After examining the books of accounts and Bank statements the Taxation Officer was not justified to make addition on the basis of assumption regarding the factual position specifically when he had failed to detect any expenditure to the extent it was incurred in cash---Taxation Officer had totally misdirected himself on incorrect assumptions and the First Appellate Authority had upheld the treatment meted out by the Taxation Officer without any justification---Order of the First Appellate Authority was vacated by the Appellate Tribunal and addition made under S.21(1) of the Income Tax Ordinance, 2001 was deleted.

(1970) 21 Tax (S.C. Pak) rel.

1998 PTD 2969 ref.

Sulman Pasha, along with Nadeem Ahmed Daudi for Appellants.

Rehmatullah Wazir, D.R. for Respondent.

2010 PTD 111

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zareen Saleem Ansari, Accountant Member

I.T.As. Nos. 448/KB and 420/KB of 2008, decided on 23rd June, 2009.

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

----S.122(5A)---Amendment of assessment---Fishing enquiries--Issuance of three repeated notices---Validity---Taxation Officer through second notice had claimed to have elaborately highlighted errors that caused prejudice to the Revenue---Second notice was an admission on the part of Taxation Officer that he could not point out any error in his first notice under S.122(9) to invoke S.122(5A) of the Income Tax Ordinance, 2001 and it had also not been mentioned as to under what legal provision the second notice was issued---Third notice under S.122(9) of the Income Tax Ordinance, 2001 was again sent to the taxpayer which showed that first two notices were deficient on legal grounds---Taxation Officer had repeatedly issued notices on the same issues which showed that he was not sure on the issues which were confronted to the assessee through first notice---Such type of fishy inquiries could not be approved to make basis for invocation of S.122(5A) of the Income Tax Ordinance, 2001 as such an approach, if allowed, would result in gross misuse of provision of law---Mere suspicion could not be allowed to be a basis to invoke S.122(5A) of the Income Tax Ordinance, 2001.

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

----S.21(f) & (e)---Deduction not allowed---Payment of gratuity---Ascertained liability---Disallowance of deduction on the ground that expense was to be allowed when it was incurred and not when paid---Validity---Taxpayer had actually paid the gratuity during the year and had deducted tax thereon fulfilling the condition of S.21(f) of the Income Tax Ordinance, 2001---Claim of expense on account of gratuity paid was an admissible expense being a lawful business expense---Argument of the Department that being an ascertained liability the gratuity expense was to. be allowed when it was incurred and not when Paid was repelled as the provision of gratuity was admissible expenditure for the reason that it pertained to ascertained liability---Department could not be allowed to use a double-edged sword against the taxpayer first by not allowing the expenses in previous years being a provision and again by not allowing the same in the year of payment on the basis of accrual basis---No legal or moral justification existed to deviate from the treatment meted out to the actual payment and provision of gratuity in the immediately preceding year without actual payment on account of gratuity was allowed as a genuine and lawful business expenditure by the Department and provision thereon was allowed and rightly so being inadmissible under S.21(e) of the Income Tax Ordinance, 2001---Under the law of consistency, the identical treatment this year could meet the ends of justice---Taxpayer had also not claimed the entire expense of gratuity paid against non-PTR income, the same had been included in the total expenses that had been apportioned between PTR and non-PTR income.

1999 PTD 3899; 1992 SCMR 763, 1981 PTD (Trib.) 168; 2006 PTD 460 and 1985 PTD 413 ref.

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

----Ss. 40 & 67---Income Tax Rules, 2002, R.13---C.B.R. Circular No.5 of 2002, dated 6-3-2000---Deduction in computing income chargeable under the head "income from other sources "---Apportionment of deduction---Inclusion of other income for apportionment---Disallowance of expenses---Validity---Income from other sources could not be earned without incurring certain expenses including administrative expenses---Expenses disallowed as a result of direct addition of "other income" to provide attributable to local sales constituted 0.822% of the expenses claimed---Taxpayer could not be said to have not incurred expenditure to the tune of 0.822% in earning income of over Rs.7.6(m) particularly when provisions of law in the shape of Ss.40 and 67 of the Income Tax Ordinance, 2001 read with R.13, Income Tax Rules, 2002, were there to cater to the allowance allocation of admissible deductions.

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

----S.122(5A)---Amendment of assessment---Non-confrontation of issues---Issuance of notice which merely pointed out certain deficiencies in the return while seeking information, explanations and evidence raising apprehensions---Validity---Order was passed on the issues which were not confronted through notice and order passed also did not fulfil the twin prerequisites of being erroneous and prejudicial which were. essential conditions to invoke the provisions under S.122(5A) of the Income Tax Ordinance, 2001---Notice, on the basis whereof the action under S.122(5A) of the Income Tax Ordinance, 2001 had been upheld by the First Appellate Authority, merely pointed out certain deficiencies in the return while seeking information, explanation and evidence raising apprehensions---Initial notice being void, all subsequent proceedings/orders or the superstructures built thereon had become void and order passed by the Taxation Officer was not sustainable in the eyes of law---Order of First Appellate Authority was vacated and the order passed by the Taxation Officer under S.122(5A) was annulled and the deemed amended assessment under S.122(3) of the Income Tax Ordinance, 2001 was restored by the Appellate Tribunal.

1999 PTD 3899; 2004 PTD 244; 2004 PTD 422; 2008 PTD 1491 and (1995) 72 Tax 233 ref.

S. Riazuddin for the Appellant (in I.T.A. No.448/KB of 2008).

Farooq Ansari, DR and Rehmatullah Khan Wazir DR for Respondents (in I.T.A. No.448/KB of 2008).

Farooq Ansari, DR and Rehmatullah Khan Wazir DR for Appellants (in I.T.A. No.420/KB of 2008).

S. Riazuddin for Respondent (in I.T.A. No.420/KB of 2008).

2010 P T D (Trib.) 129

[Income-tax Appellate Tribunal Pakistan]

Before Javed Masood Tahir Bhatti, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.A. No. 1134/KB of 2007, decided on 31st August, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.131 & 221---Assessment---Rectification of order---Appeal to Appellate Tribunal---Appellant/taxpayer was a private limited company and the assessment for the subject year was completed in year 2002 under provisions of S.62 of repealed Income Tax Ordinance, 1979---Taxpayer had declared total income of Rs. 1,787,824 and export proceeds were declared at Rs. 4,807,040---Taxation Officer after a show-cause notice to the taxpayer rectified the order under S.221 of Income Tax Ordinance, 2001 on the ground that while prorating the expenses between normal sales and exports sales, export freight expenses by mistake were not excluded from the expenses related to normal sales---Taxpayer agitated said order passed under S.221 of Income Tax Ordinance, 2001 before the Commissioner Income Tax (Appeals) who vide impugned order rejected the appeal of the taxpayer and maintained the action of Taxation Officer---Contention of taxpayer was that the assessment for the subject year was completed on 16-3-2002 under S.62 of repealed Income Tax Ordinance, 1979, issuance of show-cause notice under the provisions of S.221 of Income Tax Ordinance, 2001, was change of opinion of the Taxation Officer insofar as the rectification in orders passed. by him under repealed Ordinance was concerned---Assessee contended that while finalizing the case, Taxation Officer having applied his mind, any change in the order requiring interpretation of statute or enhancing tax liability or any action detrimental to the interest of taxpayer was the `change of opinion' by the same authority, which was not permissible under the law---Validity---Action taken by Taxation Officer under provisions of S.221 of Income Tax Ordinance, 2001 and upheld by Commissioner Income Tax (Appeals) vide his impugned order was without any legal basis and lawful authority-Orders of two officers below were annulled, in circumstances---Taxation Officer was directed to examine issues involved in the case and take action as per law after affording an opportunity of being heard to the taxpayer.

2008 PTD 253 ref.

Muhammad Mehtab Khan for Appellant.

Gohar Ali, D.R. for Respondent.

2010 P T D (Trib.) 142

[Income-tax Appellate Tribunal Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 199/LB to 202/LB of 2008, decided on 31st August, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 131, 143-B & 221---Assessment order---Cancellation of assessment order---Appeal to Appellate Tribunal---Assessee, private limited company, filed statements under S.143-B of Income Tax Ordinance, 2001 which were deemed to be accepted as such---Assessment Officer had observed that assessee-company had received interest from the Banks and deducted tax thereon 10%, and by so doing assessee-company had failed to deduct tax by applying normal rate applicable to private limited company on interest which was 43% for assessment of first two years and 45% for next two years---Assessee, being aggrieved with the treatment meted out by the Assessing Officer filed appeal before Appellate Authority, who cancelled the order passed by the Assessing Officer under S.221 of Income Tax Ordinance, 2001 treating same to be ab initio null and void---Revenue had come up in appeal before Appellate Tribunal---Action taken by Appellate Authority/ Commissioner Income Tax (Appeals) in cancelling the assessment order for the first three years (1999-2000, 2000-01 & 2001-02) was perfectly justified because said assessments could not be rectified under S.221 of Income Tax Ordinance, 2001 after lapse of five years from passing of assessment order---Order of Commissioner Income Tax (Appeals) to the extent of said assessment of first three years, was maintained and appeal to that extent was dismissed being devoid of merits---Regarding assessment of year 2002-03, assessee/respondent had filed statement under S.143-B of Income Tax Ordinance, 2001 and tax deducted was final discharge of liability---Commissioner Income Tax (Appeals) had wrongly cancelled the order regarding assessment year 2002-03 on the grounds; that firstly, assessment completed for the assessment years 1999-2000, 2000-01, 2001-02 and 2002-03 would be deemed to have been accepted under S.59-A of repealed Income Tax Ordinance 1979 and could not be rectified under S.221(1-A) of Income Tax Ordinance, 2001; secondly order passed under repealed Income Tax Ordinance, 1979 and could not be rectified after expiry of 4 years by invoking provisions of S.221 of Income Tax Ordinance, 2001---Appeal filed in respect of fourth assessment by Revenue was accepted and case for assessment year 2002-03 was remanded to the Commissioner Income Tax Ordinance (Appeals), for passing an appropriate order after providing a reasonable opportunity of hearing to the parties on all available grounds.

2005 PTD 1316, 2006 PTD 734 and 2005 PTD 14 ref.

Khalid Latif, D.R. for Appellant.

Yousaf Ali Ch. I.T.P. for Respondent.

2010 P T D (Trib.) 150

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.339/IB of 2007, decided on 28th February, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161, 205 & 221---Failure to pay tax collected or deducted---Additional tax---Action under Ss.161/205, Income Tax Ordinance 2001 was taken for recovery of principal amount of default and additional tax in addition to action already taken under Ss.161/205 of the Income Tax Ordinance, 2001 as the amount of default under S.161 of the Income Tax Ordinance, 2001 was not fully charged---Assessee contended that Assessing Officer had already issued an order under Ss.161/205 of the Income Tax Ordinance, 2001---If there was any mistake/deficiency or error in calculation of tax, it could/should have been rectified under S.221 of the Income Tax Ordinance, 2001---Fresh order under Ss.161/205 of the Income Tax Ordinance, 2001 could not be passed as the same was legally void---Validity---If there was any mistake in the first order, the Assessing Officer could/should have rectified it under S.221 of the Income Tax Ordinance, 2001---Passing of fresh order under Ss.161/205 in respect of omitted amount of default was tantamount to fresh independent order---When an assessment was made in respect of income of a taxpayer, any error or omission appearing therein could be rectified under S.221 of the Income Tax Ordinance, 2001---Fresh assessment could not be made in respect thereof because it would be a case of double assessment which was not permissible under the law---Rectification could/should have been made 'under S. 221 of the Income Tax Ordinance, 2001---Order passed by the Assessing Officer under Ss.161/205 of the Income Tax Ordinance, 2001 was illegal which was cancelled by the appellate Tribunal.

Tariq Jamil, F.C.A. and Farrukh Jamil, A.C.A. for Applicant.

Muhammad Asif, D.R. for Respondent.

2010 P T D (Trib.) 153

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos.635/LB to 640/LB of 2008 and M.A. No.91/LB to M.A. No.96/LB of 2008, decided on 7th March, 2009.

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

----Ss.2(65), 161, 182 & 205---Taxation Officer---Assessment years 2003 to 2007---Assessment by Deputy Commissioner of Income Tax---Validity---Designation of Deputy Commissioner was included in the definition provided under S. 2 of the Income Tax Ordinance, 2001 for the reason that many assessments which were being framed by such official pertained to the assessment year which were to be governed by the Income Tax Ordinance, 1979---Tax years 2003 to 2007 were covered by Income Tax Ordinance, 2001---Assessments which were to be framed under Income Tax Ordinance, 2001 ought to have been framed by an official carrying the designation of Taxation Officer---Since assessments framed were made by an official having ,the designation of "Deputy Commissioner" and not by "Taxation Officer" as mandated under the law, the assessment so framed had been made without jurisdiction and lawful authority---Assessments were coram non judiee and nullity in the eye of law.

2006 PTD (Trib.) 995 and I.T.A. No.6935/LB of 2005 rel.

I.T.A. No.6935/LB of 2005 and 2002 PTD 87 ref.

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

----Ss. 2(65), 161, 182 & 205---Taxation officer---Assessment years 2003 to 2007---Designation "Deputy Commissioner of Income Tax"---Purpose and jurisdiction---Law makers clearly had in their minds that during the transitory period when the system was being shifted from the Income Tax Ordinance, 1979 to the newly promulgated Income Tax Ordinance, 2001, there would be confusion with regard to the designated officers/ officials, who would be having power to exercise jurisdiction to frame assessments---After promulgation of Income Tax Ordinance, 2001, the jurisdiction with regard to completion of assessment proceedings would be vested with the "Taxation Officer"---By an amendment brought through Finance Act, 2002, the definition of "Taxation Officer" given in S.2(65) of the Income Tax Ordinance, 2001 was extended to include "Deputy Commissioner of Income Tax"--It was done to cater the cases which pertained to the assessment years which fell within the domain of the Income Tax Ordinance, 1979---Phrase "Taxation Officer" means "Deputy Commissioner of Income Tax" signifies that if an assessment relating to an assessment year governed by the Income Tax Ordinance, 1979 was completed by "Taxation Officer", it would be treated as having been made by "Deputy Commissioner of Income Tax" since the official who was authorized So make assessment under the Income Tax Ordinance, 1979 was "Deputy Commissioner of Income Tax"---One could not reconcile with the situation where an assessment was made by an officer by the nomenclature of "Deputy Commissioner," which fell within the purview of Income Tax Ordinance, 2001.

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

----Ss.239(2) & 2(65)---Income Tax Ordinance (XXXI of 1979), Ss.59A, 61, 62 & 63---Savings---Taxation Officer---After 1-7-2002, assessment in respect of any income year ending on or before the 30th June, 2002 shall be made by an income tax authority which was competent to make an assessment in respect of a tax year ending on any date after 30-6-2002, let alone tax years falling under the Income Tax Ordinance, 2001---Only exception which was shown by S.239(2) of the Income Tax Ordinance, 2001, was that in order to make such assessment, the procedure specified in S.59 or 59A or 61 or 62 or 63, would be followed because as per S.2(65) of the Income Tax Ordinance, 2001 for the assessments pertaining to Income Tax Ordinance, 2001, the relevant authority, who had been authorized to complete assessment was "Taxation Officer".

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

----Ss.2 (65), 161, 182 & 205---Taxation Officer---Assessments made by an official who did not figure in the hierarchy of the persons who were authorized to frame assessment under the law, such assessments could not be considered to be having been made in consonance with the law.

2006 PTD (Trib.) 995 and I.T.A. No.6935/LB of 2005 rel.

(e) Income Tax---

---Void order---Limitation---Time did not run against the void order---Order passed by the First Appellate Authority being a void order, assessment was cancelled and the assessments framed by the Assessing Officer were vacated by the Appellate Tribunal.

2002 PTD 87; Rehmat Bibi and others v. Punna Khan and others 1986 SCMR 962' and Syed Haji Abdul Wahid and others v. Syed Sirajuddin 1998 SCMR 2296 rel.

Shoaib Ahmed Sheikh for Appellant.

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

2010 P T D (Trib.) 355

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairman, Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member

I.T.As. Nos.537/IB to541/IB of 2008, decided on 31st March, 2009.

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

----S. 122(5A)---Amendment of assessment---Tax year, 2003---Provisions of S.122(5) of the Income Tax Ordinance, 2001 did not apply to tax year, 2003---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 for tax year, 2003 was illegal and a nullity which was annulled by the Appellate Tribunal.

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

----S.11 & 39---Heads of income---Income from other sources-Income of Oil and Gas Regulatory Authority---Section 11 of the Income Tax Ordinance, 2001 included salaries, rent of property, business, capital gains and income from other sources---Any income which did not fall in the definition of any of such specific heads was taxable as "income from other sources "---Certain specific sources of income had been specifically classified as "other sources" of income under S.39 of the Income Tax Ordinance, 1979---Income of Oil and Gas Regulatory Authority did not fall in any category of income classified as other sources under S.39 of the Income Tax Ordinance, 2001---Such was apt income from business and trade---Oil and Gas Regulatory Authority was in receipt of consultancy charges and fees from business of regulatory activities of oil and gas sector---Taxpayer was clearly engaged in a regular business/trade and it's income would not fall in any of the categories mentioned in section 39 of the Income Tax Ordinance, 2001.

(c) Income Tax Ordinance (XLIX of 2U01)---

----Ss. 18 & 40---Income from business---Deductions in computing income chargeable under the head "income from other sources"---Income of Oil and Gas Regulatory Authority was income from business and not income from other sources---Said Authority was entitled to claim all deductions admissible against income front business---Nature of such income was similar to the income of consultancy companies and professional consultants---If their income was assessed as business income, income of Oil and Gas Regulatory Authority was also assessable as income from business---Oil and Gas Regulatory Authority's income was assessable as "business income" in the light of provisions of section 18 of the Income Tax Ordinance, 2001 and said authority was entitled to claim all expenses/deductions admissible under the law against income from business.

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

----S.3(28)---Local authority---Characteristic of "Local Authority"---Under S.3(28) of the General Clauses Act, 1897 a local authority' means a Municipal Committee, District Board, Body of Port Commissioners or other authority legally entitled to, or entrusted by the Government with, control or management of a municipal or "local fund"---Entity can be considered as alocal authority' if it: (i) has its own juristic personality distinct from its members (ii) within its own local self-Government (iii) chalks out its schemes for the development of a local area under its control and provide civic amenities for the inhabitants of that very area; (iv) prepares areas with 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.

(e) Income-tax---

----Local authority---Status of Oil and Gas Regulatory Authority with reference to "local authority".

(f) Oil and Gas Regulatory Authority Ordinance (XVII of 2002)---

----S. 18---Local fund---National fund---Provisions of S.18 of the Oil and Gas Regulatory Authority Ordinance, 2002 did not lead to that the Oil and Gas Regulatory Authority fund was "local fund"---Local fund means the fund vested in any authority which had its operations restricted to "local area", whereas Oil and Gas Regulatory Authority's operations were spread all over the country and its funds could not be treated as a "local fund"-Oil and Gas Regulatory Authority's fund was a "national fund".

(g) Income-tax---

----Local authority---Regulatory authority---Status of Oil and Gas Regulatory Authority---Local authority, in addition to other features, has 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 shortfall of finances, if any, was met out of the grants from the Provincial Government---Characteristic of Oil and Gas Regulatory Authority's operations were in no way similar 'to those of a local authority---Oil and Gas Regulatory Authority was not a local authority, it was rather a regulatory authority which was specifically established to regulate the ' functions' of oil and gas sector in the country.

PLD 1976 Lah. 258 and 1981 PTD 66 rel.

AIR 1962 SC 1753; Black's Law Dictionary: Adnan Afzal v. Sher Afzal PLD 1969 SC 187; CIT v. Eastern Federal Union Insurance Company PLD 1982 SC 247; Pakistan v. Messrs Hashwani Hotel Ltd. PLD 1990 SC 68; Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise and Land Customs PLD 1988 SC 370; Abdul Rahim v. United Bank Ltd. PLD 1997 Karachi 62; C.I.T. v. Nazir Ahmad and Sons (Pvt.) Ltd. 2004 PTD 921; Heritage Illustrated Dictionary of English Language; Messrs Commissioner of Income Tax v. Idrees Cloth House 2008 PTD 1420; Messrs Innovative Trading Company Limited v. Appellate Tribunal and 2 others 2004 PTD 38; Messrs Calibrative Heavy Industries (Pvt.) Limited v. CIT/WT Coys. Zone-II, Lahore 2005 PTD 2525; Federation of Pakistan v. Haji Muhammad Sadiq and others 2007 CLD 1 = 2007 PTD 67; 1996 PTD 489; Collector Sahiwal v. S.M. Akhtar 1971 SCMR 681 (SC Pak); Chief Secretary Government of Punjab v. Commissioner of Income Tax PLD 1976 Lah. 258; Chief Secretary, Government of Punjab v. Commissioner of Income Tax PLD 1965 SC 201; CIT v. Lyallpur Cold Storage 58 Tax 1 (SC Pak.); Khalid Qureshi and 5 others v. United Bank Limited I.I. Chundrigar Road, Karachi 2001 SCMR 103; Al-Habib Flour Mills v. CIT, Rawalpindi 2008 PTD 1715; CIT v. Haji Maula Bakhsh PLD 199 SC 990 = 1990 PTD 821; CIT Bengal v. Shaw Wallace and Company AIR 1932 PC 138; Mrs. Samina Shaukat Ayub Khan v. CIT, Rawalpindi PLD 1981 SC 85; CIT v. Smith Kline and French of Pakistan Ltd. and 2 others 1991 PTD 999 = 1991 SCMR 2374; I.T.A. No. 207 etc./IB/08, dated 20-11-2008; S.A. Builders Ltd. v. CIT (Appeals) (2009) 99 Tax 9 (SC India); CIT v. Dalmia Cement (B) Ltd. and (200)(sic) ITR 377 (Delhi HC); 2007 PTD (Trib.) 345; 2000 PTD 2407; PLD 1975 SC 506 (Page 554); 1981 PTD 66; Sallahuddin and 2 others v. Frontier Sugar Mills and Distillery Ltd. PLD 1975 SC 77; CIT Muzaffarabad v. Altaf Ahmed Mir AVP, NBP, RHG 2001 PTD 1538; 2001 PTD (Trib.) 865; 2000 PTD (Trib.) 2853; 2000 PTD SC 892; 1987 PTD 73.9; Hasbury's Laws of England and PLD 1977 Lah. 292 ref.

(h) Interpretation of statutes---

----Retrospective or prospective effect---Unless the statute itself so provides, the provision creating a charge or otherwise dealing with substantive right cannot be made retrospective---In the absence of clear intention of the legislature a provision of statute cannot apply retrospectively and has always prospective application.

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

----S.49(4)---Constitution of Pakistan, 1973, Art. 165A---Federal Government, Provincial Government, and Local Government income---Amendment made under S.49(4) of the Income Tax Ordinance, 2001---Nature of---Prospective effect---Amendment made under S.49(4) of the Income Tax Ordinance, 2001 was not clarificatory in nature but was of substantive character because it creates a tax burden against certain , entities which did not figure anywhere in. the taxable regime---Provision of law inserted without stating effective date of operation, takes effect prospectively and not retrospectively---Very fact that provision had been added would mean that same would come into force from the date of incorporation in law---If the law makers intended to make it effective from the past, the amendment would/could/should have been made by way of "explanation "---Legislature had been empowered through Art.165A of the Constitution, to give retrospective effect to any piece of legislation, if so intended---In case of amendment under S.49(4) of the Income Tax Ordinance, 2001 inserted through Finance Act, 2007 no such intention was expressed by the legislature which meant that the said amendment had to take prospective effect from 1-7-2007---Substantive/new enactment had been made through subsection. (4) of S.49 of the Income Tax Ordinance, 2001---Charging provisions of substantive nature had been enlarged through said amendment and exemption from tax had been denied to certain entities---It had not been specifically provided in such amending provisions of law that same will have retrospective effect---Such amendment was not been specifically provided in such amending provisions of law that same will have retrospective effect---Such amendment was not explanatory, declaratory or clarificatory in nature but had the effect of enlarging and extending the substantive provisions of law creating new liabilities in respect of certain entitles and it was not clearly provided in the amendment that same will-apply retrospectively---In the absence of any such clear provision same would prospectively apply from the date of its insertion in law.

Al Habib Flour Mills v. CIT Rawalpindi 2008 PTD 1715 rel.

(j) Interpretation of statutes---

----Retrospective effect of provisions---Principles---Where Legislature had intended to give retrospective effect to any provision of law it had specifically stated so---Scope of legal provisions could not be stretched in any manner which was not clearly intended---Whenever a new or substantive law was made, the legislature had to clearly specify that it will apply retrospectively, if so intended---If no such intention was early shown, it will automatically mean that such law will have prospective effect---Fate of past transactions will remain sealed in such circumstances and no tax authority had the powers to open or reopen such closed transactions---Role, intent and purpose of a provision had to be inferred in accordance with letter of law and no guess work had any role to play.

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

----S.49(4)---Constitution of Pakistan (1973), Art. 165A---Income of Federal Government, Provincial Government, and Local Government--Amendment made in S.49(4) of the Income Tax Ordinance, 2001---Whether explanatory or charging---Subsection (4) of S.49 of the Income Tax Ordinance, 2001 did not explain the meaning of any existing provision of law but it created a new provision through which exemption from tax had been withdrawn from certain entities who were previously provided with such exemption---Whenever there was any ambiguity or vagueness in the main enactment, it was, always clarified through an "explanation" and clear intention of law was conveyed to the stakeholders---Section 49 of the Income Tax Ordinance, 2001 was amended by Finance Act, 2007 and subsection (4) was added creating a charge of tax against certain entities---If such charge was intended retrospectively, a clear intention should have been reflected in the enactment itself---In absence of any such clarification it could not be presumed that it was of explanatory character and had retrospective application.

(l) Interpretation of statutes---

----Substantive provision of law is only applied prospectively---Unless the statutes itself so provides, the substantive pr1visions of law should not have any retrospective application---Every statute by general rule, is deemed to prospective unless by express provisions or necessary implication it is given retrospective effect---Acid test for ascertaining whether the statute or an amendment operates prospectively or retrospectively is the legislative intent.

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

----S.49(4)---Income of Federal Government, Provincial Government, and Local Government---Provision of subsection (4) of S.49 of the Income Tax Ordinance, 2001 was substantive in nature and did not have any retrospective application.

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

----S.49(4)---Income of Federal Government, Provincial Government, and Local Government---Prospective in effect and not retrospective--Where two interpretations of law are possible, one favourable to the taxpayer should be adopted--Provisions of law relating to exemptions should not be interpreted liberally---Such rule of interpretation did not come into play when the law itself was very clear and candid and there was no doubt or ambiguity in it---Section 49 of the Income Tax Ordinance, 2001 did not specifically provide that the amendment in question shall have retrospective application---In absence of any clear provision, it could not be deemed that it was retrospective in nature.

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

----S.49(2)---Income of Federal Government, Provincial Government, and Local Government---Exemption---Oil and Gas Regulatory Authority being not a "local authority", it was not covered under S.49(2) of the Income Tax Ordinance, 2001 for the purpose of exemption from tax.

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

----S.80(2)(b)---Oil and Gas Regulatory Authority Ordinance, (XVII of 2002), S.3(2)---Person---Company---Status of Oil and Gas Regulatory Authority---Claim of exemption from tax---Validity---Under the provisions of S.3(2) of Oil and Gas Regulatory Authority Ordinance, 2002, the Oil and Gas Regulatory Authority was a "body corporate"---Said Authority had rightly been treated as a "public company" for the purposes of taxation in the light of provisions contained in section 80(2)(b) of the Income Tax Ordinance, 2001---Oil and Gas Regulatory Authority was not registered under the Companies Ordinance, 1984 yet it fell within the definition of a "company" as contained in section 80 of the Income Tax Ordinance, 2001---Oil and Gas Regulatory Authority was a body corporate having the status of "public company", its claim of exemption from tax was not maintained by the Appellate Tribunal.

Sh. Mohammad Ilyas, F.C.A. and Imran Ilyas, F.C.A. for Appellants.

Mohammad Asif, DR and Mohammad Sajid, Taxation Officer, for Respondent.

2010 P T D (Trib.) 401

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.As. Nos.607/KB to 609/KB of 2008, decided on 1st September, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5-A) & 131---Amendment of assessment---Appeal to Appellate Tribunal---Returns filed by the appellant/taxpayer for the years under review were amended by the Taxation Officer, for the reason that same were erroneous and prejudicial to the interests of Revenue; as the subsidy received from the Federal Government had not been offered for tax, which, according to the Taxation Officer, was an income and liable to tax---Appeal filed by the taxpayer before Commissioner Income Tax (Appeals), having been dismissed, appellant/taxpayer had filed second appeal before the Appellate Tribunal---Amount received by the appellant/taxpayer was price differential of cost and sale price of transaction, executed for and on behalf of the Federal Government, which could not be treated as subsidy---Matter of price differential arising from executing transactions at the prices instructed by the Federal Government, was quite similar to the fact of the oil distribution companies' cases of which had been referred by the counsel for the appellant in his arguments---Appellant/taxpayer as well as oil distribution companies, both dispose of goods at price lower than the cost at the instruction of the Federal Government---When the department had accepted and not taxed that price differential in the case of the oil distribution companies, it should also be accepted in the case of appellant/taxpayer having similar facts---Amount under consideration was not subsidy to the appellant-Corporation as it was the loss of the government which had to be considered as borne out by the government being a principal, in other words, it could be said that it was a subsidy to general public by the Federal Government and not to the appellant-Corporation---Consolidated order of the Commissioner Income Tax (Appeals) was vacated and the orders passed by the Taxation Officer under S.122(5-A) of the Income Tax Ordinance, 2001, for all the three years under review were cancelled.

PLD 1975 Kar. 924; Messrs Bolan Beverages (Pvt.) Ltd. v. PEPSICO PLD 2004 SC 86; 1987 PTD 289 and 2002 PTD (Trib.) 2539 ref.

Ehsan Laliwala, A.C.M.A. and Khaliqur Rehman, F.C.A. for Appellant.

Dr. Imtiaz Ahmed, D.R. for Respondent.

2010 P T D (Trib.) 415

[Income-tax Appellate Tribunal Pakistan]

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

M.A (R) No.69/IB of 2008, decided on 12th august, 2008.

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

----S. 156---Rectification of mistake---Miscellaneous application for recall of order---Opportunity of being heard---Order was recalled by the Appellant Tribunal on the ground that Department be heard on merit and be not penalized due to single default of the Departmental Representative.

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

----S.156---Rectification of mistake---Error in pleadings---Appeal was dismissed by the Appellate Tribunal being hit by limitation---Application for recall of order on the ground that Appellant Tribunal had passed correct order by taking the date of communication as 3-3-2007 which was inadvertently typed as 3-3-2007 instead of 9-3-2007 which was the date of receipt of order passed by the First Appellate Authority---Validity---Error, even not considered as an afterthought, lies in the pleading adopted by the Department---Rectification was to be made in the Appellate Tribunal's order and it could not be made in the pleading of the revenue---Pleadings could have been amended before passing of Appellate Tribunal's order and not after that---No error in the Appellate Tribunal's order having been found, request made by the Revenue was declined.

Faisal Mushtaq, DCIT/DR and Mazhar Hussain Raja, I.O. for Applicant.

Mushtaq Ahmed Vohra, F.C.A. for Respondent.

2010 P T D (Trib.) 428

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.A. No.728/KB of 2008 decided on 1st September, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.159, 107, 221 & 131---Issuance of exemption certificate---Application for---Appeal to Income Tax Tribunal---Respondent-Corporation applied to the Commissioner Income Tax for issuance of exemption certificate under S.159(1) of Income Tax Ordinance, 2001, however after lapse of around 15 months, a letter was issued from the Commissioner Income Tax, Enforcement and Collection Division, regretting issuance of said exemption certificate---Regret letter to the respondent-Corporation refusing exemption certificate, was issued without properly adjudicating on the point raised in the application; including the provisions of Ss.159(1)(a) & 107 of Income Tax Ordinance, 2001 read with relevant Article of the Avoidance of Double Taxation Treaty between UAE and Pakistan and decision of the Tribunal in Income Tax Appeal (dated 8-7-2006) in their proper perspective-;-Regret. letter against application under S.159 of Income Tax Ordinance, 2001 had constituted an order for the purpose of S.221 of Income Tax Ordinance, 2001 as law did not prescribe a specific format for the order under S.159 of the Ordinance---Such was a particular case of lethargy and inefficiency on the part of the departmental officers---Federal Board of Revenue had issued standing instructions to the field formations to dispose of applications for exemption certificates expeditiously; in fact in order to allow relief in suitable cases, F.B.R. empowered itself under S.159(3) of Income Tax Ordinance, 2001 to exempt persons, classes of persons, goods, classes of goods or payments etc. from application of any provisions of the Ordinance relating to withholding taxes---On receipt of application under S.159 of Income Tax Ordinance, 2001, primary responsibility of Commissioner was either to issue exemption certificate or to regret the same by establishing that the income of the non-resident company was chargeable to tax in Pakistan, but that had not been done---Held, business profits of the non-resident company were not chargeable to tax in Pakistan and the company was entitled for issuance of exemption certificate in the light of the provisions of S.159(1)(a) of the Income Tax Ordinance, 2001---Order of Commissioner Income Tax (Appeals) directing to issue exemption certificate to the respondent/non-resident company, did not call for any interference which, was maintained.

2007 PTD 1687 ref.

Dr. Abdul Sattar Abbasi, D.R. for Appellant.

Syed Riazuddin along with Syed Munir-uz-Zaman for Respondent.

2010 P T D (Trib.) 494

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.26/IB and 27/IB of 2008, decided on 19th February, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.131, 138 & 210---Assessment of income tax---Making additions on account of unexplained cash---Setting aside of order of making additions---Delegation of powers---Appeal to Appellate Tribunal---Original assessment framed by making additions under Ss.13 (1)(d) & 13(1)(aa) of (repealed) Income Tax Ordinance, 1979, were contested by the assessee in appeal and Commissioner Income Tax (Appeals) having set aside said additions, department had filed appeal against order of Commissioner Income Tax (Appeals)---Tribunal in its earlier decisions had decided that under the provisions of (repealed) Income Tax Ordinance, 1979, the powers of assessment and powers of approval were vested in two different authorities i.e. Deputy Commissioner of Income Tax and Inspecting Additional Commissioner of Income Tax respectively---In-built mechanism of approval being available under repealed Ordinance, approval of addition granted by the Inspecting' Additional Commissioner was according to the said mechanism---Under Income Tax Ordinance, 2001 a complete switch over had been made about the mechanism of assessment---Under said new law there was no concept of approval by any higher authority---Commissioner himself was the authority who could delegate his power for exercise of his functions by the subordinate officer---Under the new Ordinance, 2001 it was the Commissioner who could make assessment; he could not at the same time be an authority for assessment and also for approval---Under subsections (1) & (2) of S.239 of Income Tax Ordinance, 2001 it was provided that in case of assessment in respect of any income year ending on or before 30-6-2002 the provisions of repealed Ordinance, 1979 would apply for the purpose of computation of income and tax payable thereon, however, such assessments would be made by the Income Tax Authority who was competent to make assessment under new Income Tax Ordinance, 2001---Since there was no concept of granting any kind of approval in the new law, no authority appointed under said new Ordinance had any such powers of making approval---Approval from IAC for the assessment under appeal was not according to the provisions of law---Keeping in view all the facts and circumstances of the case and the ratio already settled by the Tribunal, orders passed by the Commissioner Income Tax were upheld and appeals of the department were rejected for being without any merit.

(1985) Tax 521; 2004 PTD 1173; 2005 PTD (Trib.) 720 and 1993 PTD (Trib.) 1172 ref.

Muhammad Asif, D.R. for Appellant.

Ch. Naeem-ul-Haq for Respondent.

2010 P T D (Trib.) 504

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti Judicial Member and Zareen Saleem Ansari, Accountant Member

I.T.As. Nos. 235/KB to 237/KB of 2009, decided on 17th June, 2009.

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

----Ss.161,205(2), 152(2) & 107---Income Tax Ordinance (XXXI of 1979), Ss.52/86---Agreement for the Avoidance of Double Taxation between Pakistan and Belarus---Wet Lease Agreement between the parties---Failure to pay tax collected or. deducted---Payment to non­residents---Assessee was treated as "assessee in default" for not withholding tax on allowances paid in Pakistan to employees of foreign Airline---Assessee contended that payment of monthly allowance was not paid to the crew members but it was paid to the Airline for onward disbursement to their crew members as salaries; since, monthly allowance was part of salaries of non-resident crew members, income tax on salary and allowance of such employees of the Airline shall be paid by such employees or personnel in their home country and income tax was neither deductible nor payable in Pakistan---Validity---Relevant-clause of the Wet Lease Agreement showed that the assessee was not required to deduct income tax on payment of compensation and as the income tax had actually been paid by these employees, the tax authorities had neither disputed the payment of income tax nor had raised any such queries---Taxation Officer had misdirected himself and the orders passed under Ss.161/205 of the Income Tax Ordinance, 2001 were not maintainable and the First Appellate Authority upheld the treatment meted out by the Taxation Officer without any justification.

1999 PTD 3357 and 2003 PTD 1571 ref.

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

----Ss. 161 & 205---Failure to pay tax collected or deducted---Assessment year 2002-2003 and tax years 2003 to 2005---Agreement for the Avoidance of Double Taxation between Pakistan and Belarus--Retrospective effect---Agreement for Avoidance of Double Taxation between Pakistan and Belarus was executed. on 23-7-2004 and was notified in the official Gazette on 30th August, 2006---Proceedings under Ss.161/205 of the Income Tax Ordinance, 2001 for three years had been initiated after August, 2008 and the orders in this respect had been passed on 31-10-2008---Prior to the .said dates, the Treaty for Avoidance of Double Taxation had already come into existence and had acquired the force and status of law under S.107 of the Income Tax Ordinance, 2001-Being beneficial law, it was applicable retrospectively for the reason that the proceedings had commenced at much later date.

1993 SCMR 73 rel.

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

----Ss. 107, 161 & 205---Assessment year 2002-2003 and tax years 2003 to 2005---Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion, Art. 15---Retrospective effect of beneficial provision---Provisions of treaty for the avoidance of double taxation were applicable to the facts of the case for the reason that both the countries had executed a Convention for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to taxes and income on 23rd of July, 2004 and according to S.107 of the Income Tax Ordinance, 2001, it had acquired the status and force of law---Since the proceedings under S.161/205 of the Income Tax Ordinance, 2001 were initiated in the year 2008, the benefit of that treaty was available to the assessee---In view of the specific terms agreed by both the parties, as per Cl. 8.1. (v) of Wet Lease Agreement, the assessee had not committed any default by not deducting tax on payment of compensation to the non-resident personnel of the foreign Airline (Belarus) during their service period in Pakistan which was much less than 183 days and did not come under the ambit of Para 2(a) of Article 15 of the Agreement---Provisions of Ss.161/205 of the Income Tax Ordinance, 2001 had wrongly been invoked as there was no violation of law---Treatment meted out by the Taxation Officer was upheld by the First Appellate Authority without any justification---Order of First Appellate Authority for all the three years was vacated and three orders passed by the Taxation Officer were cancelled by the Appellate Tribunal.

1991 PTD 488 SC Pak. ref. 1993 SCMR 73 rel.

Salman Pasha and Nadeem Dawoodi for Appellant.

Rehmatullah Wazir, D.R. and Dr. Farrukh Ansari, D.R. for Respondent.

2010 P T D (Trib.) 519

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Sherazi, Accountant Member

I.T.A. No.91/LB of 2008, decided on 5th March, 2009.

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

----S. 171(2)(c)-Additional payment for delayed refund---Sec­tion 171(2)(c) of the Income Tax Ordinance, 2001 had to be read in conjunction with other provisions relating to determination of refund and its issuance.

BILZ (Pvt.) Ltd. v. D.C.I.T., Multan 2002 PTD 1 and Messrs Indus Basin Co. v. C.I.T. 2002 PTD 2169 rel.

(b) Interpretation of statutes---

----First and foremost duty of a Court is to ensure harmonious construction, yet if a conflict is found out amongst different sections of an enactment, it is then to normally resolve in favour of the subject of the State.

2000 PTD 1958 H.C. Lah. rel.

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

----S.171---Additional payment of delayed refund---Features of S.171 of the Income Tax Ordinance, 2001 highlighted by Appellate Tribunal.

(d) Interpretation of statutes---

----Legal fiction---Provisions creating legal fiction have to be construed strictly and for the purpose for which they have been enacted.

Elahi Cotton Mills Ltd. and others v. Federation of Pakistan, 1997 PTD 1555; C.I.T./WT Companies Zone, Faisalabad v. K.A. Enterprises (Pvt.) Limited, 2005 PTD 849 and Latif Ghee Industries (Pvt.) Ltd. v. C.I.T. Companies Zone, Karachi 2006 PTD 2368 rel.

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

----S.171(2)---Additional payment for delayed refund---Subsection (2) of S.171 of the Income Tax Ordinance, 2001 in totality reflects legal fiction in favour of taxpayers and to provide a check on tax authorities not to employ any negative means to avoid payment of compensation.

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

----S.170(3)---Refund---Refund application---Subsection (3) of S.170 of the Income Tax Ordinance, 2001 makes it the sole responsibility of Commissioner to apply excess tax paid in reduction of any other tax due from the taxpayer and refund the remainder, if any---In such situation there was neither any need for filing of refund application nor to wait for 45 days for passing of refund order by Commissioner.

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

----S.170(4)-Refund---Application for refund-Suo motu action---Provisions of S.170 (4) of the Income Tax Ordinance, 2001, apply where taxpayer files an application for refund e.g. in cases of a commercial importer where statement under S.115 (4) was filed and there were deductions made under S.148 of the Income Tax Ordinance, 2001---Taxpayer will have to file a refund application because there was nothing on record to make it obligatory for the Commissioner to take suo motu action under S.170(3) of the Income Tax Ordinance, 2001---When an application is filed in such a case, Commissioner was bound to pass an order within 45 days and if he fails to do so, an aggrieved person could file an appeal as provided in S.170(5)(b) of the Income Tax Ordinance, 2001.

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

----Ss.170(3), 171, 120 & 147(10)---Refund---Where refund is created by Commissioner himself as a result of an order under S.120 of the Income Tax Ordinance, 2001 or where it was due in terms of S.147(10) of the Income Tax Ordinance, 2001 then in terms of S.170(3) of the Income Tax Ordinance, 2001 it was the legal obligation of Commissioner to issue refund suo motu---If the Commissioner failed to do so within 90 days of refund becoming due then S.171 of the Income Tax Ordinance, 2001 will come into play.

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

----Ss.171(1) 120 & 170(3)---Additional payment for delayed refund---Refund was due on finalization of proceedings under S.120 of the Income Tax Ordinance, 2001--Commissioner was bound to pay the same under S.170(3) of the Income Tax Ordinance, 2001 and there was no need of filing an application to the Commissioner---Commissioner having failed to pay refund, even after filing of application, compensation was payable as envisaged in S.171(1) of the Income Tax Ordinance, 2001.

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

----S.171---Additional payment for delayed refund---Refund was due the moment return was filed under S.120 of the Income Tax Ordinance, 2001---Department acknowledged such fact as no adverse order was passed against such claim-Department by ultimately making an order of refund just confirmed what was due at the time of declared version---Commissioner being satisfied about excess payment, his obligation under S.170(3) of the Income Tax Ordinance, 2001 was well defined-Non-payment of excess tax paid within 90 days was a clear violation attracting S. 171 of the Income Tax Ordinance, 2001.

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

----S.171---Additional payment for delayed refund --In each and every case the Department did not enjoy 45 days plus 90 days cushion in every case to avoid compensation under S.171 of the Income Tax Ordinance, 2001.

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

----S.171---Additional payment for delayed refund---Suo motu adjustment of tax liability---Held, it will be self-contradictory on the one hand when it is claimed that unless -refund was made, date for working compensation under section 171, Income Tax Ordinance, 2001 did not come into existence and on the other hand refunds due were suo motu adjusted against any tax liability and it was a mere lame excuse to deny a person his lawful right of full compensation under S.171 from the date of original order when refund was undisputedly due.

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

----Ss.171(2)(c) & 170(3)---Additional payment for delayed refund---Refund due---Order for refund---Words "in any other case, on the date the refund order is made" in S.171 (2), Income Tax Ordinance, 2001 applied where there was legal requirement for making a refund order--In terms of section 170(3) of the Income Tax Ordinance, 2001 read with section 120(1) of the Income Tax Ordinance, 2001 there was no need for making a refund order and S.171(2)(c) shall not apply---Words "for the purpose of this section, a refund shall be treated as having become due" used in Sub-S.2 of S.171 of the Income Tax Ordinance, 2001 did not limit the expression "refund due" as used in Sub-section (1) of S.171 of the Income Tax Ordinance, 2001 but only provided certain situations where, by legal fiction in respect of time, the date for "refund due" had been determined different from the actual one.

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

----S. 171(2)(c) --Additional payment for delayed refund---Section 171(2)(c) of the Income Tax Ordinance, 2001 provided a legal fiction and did not override the term "when it becomes due" in S.171(1) of the Income Tax Ordinance, 2001.

(o) Interpretation of statutes---

----Deeming provision---Interpretation of---Principles---Deeming provision had to be strictly construed for the purpose it was enacted---Such provision required strict interpretation and could not be spilled over to other provisions in the statute and had to be interpreted strictly within the four corners of its object for which it was enacted.

2002 PTD 2112 H.C. Lah. rel.

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

----Ss.171(2)(c) & 120---Additional payment for delayed refund---Due date for payment of additional tax---Law as stands with regard to framing of assessment is that the assessment is deemed to have been made, if complete return of income was filed---In such-like situation, S.171 of the Income Tax Ordinance, 2001 is to be read in the light of S.120 of the Income Tax Ordinance, 2001 as refund became due the moment an assessment order creating the said refund came into existence---All the proceedings conducted in pursuance of completion of assessment should be considered to have been made along with the actual assessment, which stands completed on the day complete return is filed---In case of a taxpayer who had filed incomplete return, the assessment would not be considered to have been made and any resultant proceedings cannot be initiated--Additional payment for delayed refund as provided under section 171 of the Income Tax Ordinance, 2001 was not immediately payable unless 90 day's limitation expires---Legislature has given sufficient time. i.e. 90 days to avoid compensation for a determined refund---In the Income Tax Ordinance, 1979 it was also made incumbent upon the assessing officer to calculate refund, if any, along with the calculation of tax and mention the same on the IT-30 as well as on the demand notice along with assessment order which was to be sent to the assessee---Stance of the Revenue that the refund should be treated as having become due on the date the refund order was made in terms of section 171(2)(c) of the Income Tax Ordinance, 2001 which is deeming provision enacted to treat in same circumstances the artificial "due" in contradistinction to actual due under S.171(1)(c) of the Income Tax Ordinance, 2001 was not approved.

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

----Ss.170(4), 170(3)(c), 171(1), (2) & 120---Refund---Limitation for issuance of refund---In terms of S.170(4) of the Income Tax Ordinance, 2001, Commissioner was duty bound to issue refund within 45 days of receipt of application, but under S.170(3)(c) of the Income Tax Ordinance, 2001 even no refund application was required to refund any amount overpaid after adjustment, if any---Refund in the present case was "due" for the purpose of S.171(1) of the Income Tax Ordinance, 2001 on the date of order treated to have been made and after lapse of three months from the said date, the compensation was due---Section 171(2) of the Income Tax Ordinance, 2001 did not vitiate the right of compensation---Section 171(2) of the Income Tax Ordinance, 2001 created a legal fiction for certain specific "refund due" in section 171(1) of the Income Tax Ordinance, 2001 and a refund shall be treated as having become due.

Complaint No.1096-L of 2005, ref.

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

S. Atif Hussain for Respondent.

Date of hearing: 5th March, 2009.

2010 P T D (Trib.) 541

[Income-tax Appellate Tribunal Pakistan]

Before Jawed Masood Tahir Bhatti, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.As. Nos. 93/KB, 94/KB of 2004 and 1332/KB of 2005, decided on 19th October, 2009.

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

----Ss.62 & 50---Assessment on production of accounts, evidence etc.---Disallowance---Commission---Trade discount---Amount paid to, distributor was disallowed by treating the same as commission liable to deduction of tax under S.50 of the Income Tax Ordinance, 1979---First Appellate Authority deleted such addition by treating such commission amount paid by the assessee as trade discount---Department contended that assessee had entered into "Distributorship Agreements" with various concerns across the country and the dealers conduct their business under the logo identifiable with assessee---Word dealer' signifies that the "dealer" was not a buyer in the ordinary sense of word but that he was the person who sold the assessee's products to the real buyer---Dealer represented the assessee and this arrangement was a test for agent principal relationship within the meaning of Contract Act, 1872---Even if, it was trade discount, then it should reflect in the invoices/ledgers---Assessee itself described the transaction as "commission" in the agreement---Validity---Assessee failed to substantiate his claim with documentary evidence i.e. sale invoices and ledger account in which the discount amount had been reflected---If it was a trade discount then it should be reflected in the separate Ledger Account---Ledger Account did not reflect the trade discount, the claim of the assessee could not be accepted---No separate account was being maintained by the assessee and the substantial amounts of commission were paid in lump-sum---Assessee had indulged in transactions within the meaning of "commission" and failed to deduct tax under S.50 of the Income Tax Ordinance, 1979---Assessee with collusion of distributor had devised to evade tax, which could not be approved---Such tax evasion mechanism i.e. branding the transaction as trade discount could not be approved---Court was bound to implement the law in letter and sprit---Amount paid was commission---First Appellate 'Authority was not justified in treating the same astrade discount' and its order was not sustainable in the eyes of law---Order of First Appellate Authority was ,vacated and orders of the Taxation Officer were restored on this ground.

1994 PTD (Trib.) 1278 not relevant.

(b) Words and Phrases---

----Commission'---Word "commission" generally signifies disbursement of an amount relatable to the amount involved in the transaction--Most significant character ofcommission' is its receipt or lump sum payment in cash or in any other form to be categorized as "commission".

(c) Income Tax---

----Res judicata principle of---Applicability---Scope---Past history---Contention that in the preceding as well as in the subsequent years no such treatment was accorded could not be accepted as principle of res judicata would not apply in income tax proceeding as every assessment year was an independent proceeding and was decided on its own merit.

1965 PTD 283; 1992 PTD 523 and 2001 PTD 3090(b) rel.

(1966) 14 Tax 161 and 2002 PTD (Trib.) 769 not relevant.

(d) Income Tax---

---Profit and loss expenses---Element of personal and non-business expenses---Add backs---Deletion of---Validity---Deletion of add backs out of sundry and miscellaneous and printing and stationery was not justified as element of personal and non-business nature could not be ruled out---Keeping in view the nature and volume of business the add backs under such heads seemed be justified and the order of First Appellate Authority on this ground was vacated and the order of Taxation Officer was maintained by the Appellate Tribunal.

(e) Income Tax---

----Bad debts---Deletion of disallowance---Validity---First Appellate Authority was not justified in .deleting such disallowance as no legal efforts had been made by the assessee to recover the amount so that the debts could not be held to be bad and irrecoverable---In absence of proper efforts to recover the same the disallowance made by the Taxation Officer was restored and the order of First Appellate Authority was vacated by the Appellate Tribunal.

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

---Ss. 62 & 2(24)---Income---Connotation---Assessment on production of accounts, evidence etc.---Voluntary contribution from associated foreign concern---Taxation of---Assessee contended that voluntary contribution was not received under any statute or contractual obligation; that payment was benevolent and constituted a gesture of goodwill on the part of foreign company to help assessee to improve its financial position and receipt was in the nature of a mere windfall; that it could not be said that voluntary contribution had a character of a revenue receipt; that Taxation Officer was not justified in treating the voluntarily contribution as income and that all receipts could not be income for the purposes of income tax statutes---Validity---Word "income" was not exhaustive but was merely inclusive having wide significance---Any sum which may be deemed to be income or income accruing or arising or received in Pakistan may be construed as income-- Term "income" could not be construed in a narrow and pedantic sense---Voluntarily contribution from associated undertaking was declared as income in the audited accounts whereas it was excluded by the assessee from the income in the computation of income---Such conduct of assessee could not be approved----Assesee could not take hot and cold in same breath---Further, such voluntary contribution was only supported by a photo copy of credit advice of bank and it was not supported by audited statement of accounts of foreign donor---There was a nexus between the receipt and the trading of foreign donor, as such "contribution" was liable to tax under the Income Tax Ordinance, 1979---Order of the First Appellate Authority was vacated and that of Taxation Officer was restored by the Appellate Tribunal.

Mrs. Samina Ayub Khan v. C.I.T., Rawalpindi PLD 1981 SC 85 rel.

1991 SMR 2374 = 1991 PTD 999; 1962 46 ITR 144; 1970 75 ITR 191; 1959 35 ITR 339; I.T.A. No.1973/KB of 1993-94 and 46 ITR 590 rel.

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

----S.2(24)---Income---Term "income" which had been defined in S.2(24) of the Income Tax Ordinance, 1979 is inclusive definition---Term income not only includes those things which are included in S.2(24) of the Income Tax Ordinance, 1979, but also covers all such things which the term signifies according to its general and natural meaning.

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

----S.2(24)---Income---Explanation of----Income need not necessarily but the recurrent return from -a definite course, though it is generally of that character; it may consist of a series of separate receipts as for instance happens in the case of professional earnings---Question whether a particular kind of receipt is income or not would depend for its answer on the peculiar facts and circumstances of the case.

(i) Interpretation of statues---

----Construction of law---Principles---Court must make every effort not to declare as redundant any part of statute and must, if necessary, stretch language so as to give the same meaning to justify its context and object---Law should be construed in accordance with intention expressed in the law.

(j) Income Tax---

----Addition-Profit & Loss account--.Travelling and conveyance expenses---Claim of expenses on the basis of cash vouchers which were not open to verification---Certain expenses could not be termed as expenses---First Appellate Authority was not justified in deleting such add-back made out of travelling and conveyance expenses.

Farrukh Ansari and Rehmatullah Wazir, D.Rs. for Appellant.

Muhammad Naseem for Respondent.

2010 P T D (Trib.) 557

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Amjad Ikram Ali, Accountant Member

I.T.As. 1058/LB to 1063/LB of 2008, decided on 23rd October, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.221 & 131---Rectification of mistake---Application for---Appeal to Appellate Tribunal---Assessee/respondent filed applications requesting for rectification in the original assessment order on the ground that income or loss had not been determined while passing orders under S.62 of late Income Tax Ordinance, 1979---Said applications were rejected by the Assessing Officer against which the assessee filed appeal before Commissioner Income Tax (Appeals) who set aside the assessment for all the years under review---Appellant Department did not file any second appeal against said order of Commissioner Income Tax (Appeals), but the Assessing Officer while complying with order of the Commissioner Income Tax (Appeals), had again rejected the rectification applications of the assessee for the reason that said applications were barred by time---Assessing Officer while finalizing the reassessment should have to restrict himself to the directions made by Commissioner Income Tax (Appeals), while setting aside the order---Department by not filing second appeal against order of Commissioner Income Tax (Appeals), was bound to accept the direction made in the order---Assessing Officer in the present case had fallen in. error which had always been viewed very seriously and could entail into an appropriate action---Assessing Officer while rejecting the applications of the assessee, did not consider the fact that Commissioner Income Tax (Appeals), in his order had specifically stated that the orders passed by the Assessing Officer was violative of the Ordinance and could be rectified as the original assessment order was passed hastily in, a summary manner without going into the merits of the case---Commissioner Income Tax (Appeals) in the second round of appeal had rightly found that orders passed under review suffered from the mistakes which were apparently floating on the face of the order; and no basis had been given by the Assessing Officer for assessing the income of the assessee---Appellate Tribunal upheld the view of the Commissioner of Income Tax (Appeals) that the original orders under review should be rectified under S.221 of Income Tax Ordinance, 2001 and directed that the rectification applications of the assessee be accepted and the income of the assessee be computed accordingly.

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

Muhammad Iqbal Hashmi for Respondent.

2010 P T D (Trib.) 561

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Iqbal, Judicial Member and M. Liaqat Ali Khan, Accountant Member

M.A. No.68/PB of 2003, decided on 28th March, 2007.

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

----Ss.83 (3) & 156---Income from revocable transfer of assets, etc.---Oral gift---Possession of property---Assessee contended that since son of the assessee had been declaring the rental income from the property by filing of income tax return the same could be equated to possession of immovable property by the donee---Validity---Law contained in S.83(4) of the Income Tax Ordinance, 1979 was unambiguous and stipulated that in case of gift of immovable property, it must be registered---Claim of gift of immovable property without registration of same with the revenue authority was unfounded and there was no mistake in the order---Miscellaneous application on behalf of assessee being devoid of merit, was rejected by the Appellate Tribunal.

1987 SCMR 1907 and 1987 SCMR 1403 rel.

(b) Income Tax---

----Evasion of tax---Person was allowed to arrange his affairs in any manner to minimize the tax burden, however, such an intention and the manner to achieve the goal must not amount to design to evade tax.

(c) Income Tax---

----Oral gift---In case of gift of immovable property, its registration was mandatory otherwise the gift was not valid for the purpose of taxation under the Income Tax Law.

94 Tax 145 rel.

Abdul Rauf Rohaila for Applicant.

Yousaf Ghaffar, D.R. for Respondent.

2010 P T D (Trib.) 567

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Liaquat Ali Chaudhry, Accountant Member

I.T.As. Nos. 799/LB to 803/LB of 2006, decided on 15th March, 2007.

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

----S. 13(1)(a)---Addition---No account case---Tax authorities were not justified to make and confirm additions under S.13(1)(a) of the Income Tax Ordinance, 1979 as the assessee's case was no-account case where additions under S.13(1)(a) of the Income Tax Ordinance, 1979 were not attracted under law.

2002 PTD (Trib.) 3142 rel.

(b1) Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(c)---Addition---Non-disclosure of bank account---Effect---When a bank account was not disclosed, the most logical way to treat it was to take the peak deposit appearing in that account in the relevant accounting period as the amount unexplained---Such treatment would mean that an addition under S.13(1)(c) of the Income Tax Ordinance, 1979 would have to make which was non-existent---In case of addition of peak balances, S.13(1)(c), Income Tax Ordinance, 1979 was to be applied and if difference of pending and closing amount was added, S.13(i)(aa) of the Income Tax Ordinance, 1979 was to be applied--Necessary approval was also absent on the record---Addition was deleted by the Appellate Tribunal being unlawful.

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

----S.13(1)(d)---Addition without approval---Addition made under S.13(1)(d) of the Income Tax Ordinance, 1979 was deleted by the Appellate Tribunal being the same without approval.

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

----S.121---Best judgment assessment---Assessment was framed ex parte by the Assessing Officer condemning the assessee unheard by not providing opportunity to defend---Case was remanded to the Assessing Officer for de novo proceedings after affording the assessee opportunity of being heard.

Hafiz M. Idrees for Appellant.

Muhammad Tahir Khan, D.R. for Respondent.

2010 P T D (Trib.) 582

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.79/PB of 2008, decided on 21st May, 2009.

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

----Ss.170(2)(c) & 120(1)(b)---Refund---Limitation---Application for refund of excess amount tax deducted was filed which fact had been denied by the department, while assessee once again appealed for issuance pf refund---Taxation Officer rejected application being barred by limitation---Validity---Refund had been refused being barred by limitation i.e. after the prescribed period of two years---Assessee contended that not only the application was filed within time but genuine refund could not be refused otherwise---Assessee produced the acknowledgment receipt of application submitted before the Taxation Officer and signed by the official of department---Such application bore the seal and stamp of the department and also initial of income tax official---Order treated as passed under S.120(1)(b) of the Income Tax Ordinance, 2001 was still intact and had not been amended under the provision of S.122 of the Income Tax Ordinance, 2001---Appellate Tribunal held that refund claimed and created under the deemed assessment order should be issued accordingly.

Pfizer Laboratories (Pvt.) Ltd.'s case PLD 1998 SC 64 and 2008 PTD (Trib.) 320 rel.

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

----S.170(4)---Refund---Failure to pass order within the prescribed period---Effect and procedure thereafter---Section 170(4) of the Income Tax Ordinance, 2001 prescribed the period of 45 days (now 90 days) within which the matter of fund should be decided by Taxation Officer---In case of failure of Taxation Officer to pass any order within the prescribed period as per government policy for early issuance of refund to assessee, right of appeal under S.170(5) of the-Income Tax Ordinance, 2001 had been provided to assessee, where appeal was filed the power of Taxation Officer shifted to First Appellate Authority and he after satisfaction of required conditions and evidence could pass any order about the refund---If the assessee did not file any appeal after 45 days and matter still remained pending before the Taxation Officer, the law did not place any bar on Taxation Officer to give any "decision or to pass any order---If the order was passed against the assessee, he could file appeal as provided in the Income Tax Ordinance, 2001, while during pendency of appeal Taxation Officer ceased to pass any order on the issue of refund.

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

----Ss.120 & 170---Assessment---Refund---Return filed by the assessee had to be treated as deemed assessment order and through such deemed assessment order refund claimed also be treated as created.

Muqarrab Khan, D.R. for Appellant.

Mushtaq Akbar, C.A. for Respondent.

2010 P T D (Trib.) 587

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

I.T.As. Nos. 381/LB to 383/LB of 2006, decided on 6th October, 2009.

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

---Ss. 61 & 62---Notice for calling. for of documents---Notice for production of books of accounts, etc.---Nature of notices---Although notice had been titled as notice under S.62 of the Income Tax Ordinance, 1979, in essence it was a notice under S.61 of the Income Tax Ordinance, 1979 because it was under this section (61) that books of accounts record and documentary evidence etc. were called for.

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

---S.62---Assessment on production of accounts, evidence etc.---Issuance of notice before examination of books of accounts---Notice was issued before the examination of accounts and record whereas proviso to S.62(1) of the Income Tax Ordinance, 1979 made it obligatory for Taxation Officer to issue the said notice after examination of the books of accounts---Department could not rebut the observation of First Appellate Authority 'regarding fatal legal flaw in the assessment proceedings because of which First Appellate Authority did not approve of the treatment accorded by the Assessing Officer---Direction of First Appellate Authority regarding acceptance of declared version was well based and unexceptionable and was upheld by the Appellate Tribunal.

(c) Income Tax---

----Gross profit rate---Acceptance of Gross Profit rate as reasonable by the assessing officer amounts to implied acceptance of all the expenses claimed under the head (cost of sale) appears to be the logical and inevitable inference which was upheld by the Appellate Tribunal.

(d) Income Tax---

----Sugar Mill---Purchase rate---Reliance of parallel cases---Validity---Reliance on the declared purchase rate of other Sugar Mills for the purpose curtailing, the purchase rate of assessee-Company was not sustainable firstly because the Assessing Officer could not find any fault with the record of the company to justify the curtailment in purchase rate and secondly because the circumstances under which the alleged parallel companies operated their factories were not similar because of the factor of location.

(e) Income Tax---

----Depreciation allowance---Addition of---First Appellate Authority deleted the addition made out of depreciation allowance with the observation that the same had been made on flimsy and conjectural basis without pointing out any defect in the books of account or establishing that plant and machinery installed by the assessee-Company had not been used by it during the income year---Such type of addition made with general and casual remarks were neither sustainable nor approved---Deletion of addition was upheld by the Appellate Tribunal in circumstances.

Sajjad Haider Rizvi, L.A. and Muhammad Asif, D.R. L.T.U. for Appellant.

Shahid Pervaiz Jami for Respondent.

2010 P T D (Trib.) 660

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairman, Muhammad Jahandar, Judicial Member and Istataat Ali, Accountant Member

LT.As. Nos.1850/IB of 2005 and 96/IB, 97/IB of 2006, decided on 25th April, 2009.

(a) Interpretation of Statutes---

----When a law is altered, the existing, rights and liabilities are decided according to the law that existed before alteration unless the new statute shows a clear intention to vary such rights---As far as, the procedural matters relating to mode of trial, manner of taking evidence and forums for entertaining action are concerned, the pending matters-are to be processed in accordance with the new statute.

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

----Ss. 239 & 210---Savings---Delegation---Assessments pending in respect of any income year ending on or before 30th day of June, 2002 on the commencement of Income Tax Ordinance, 2001 shall have to be dealt with in accordance with Income Tax Ordinance, 1979---As to procedural matters, there seems a departure as to the forums of processing of those pending assessments and the jurisdiction had been conferred on an income tax authority, made competent under the Income Tax Ordinance, 2001, which shall act in accordance with the procedure specified in the Income Tax Ordinance, 1979---In the scheme of Income Tax Ordinance, 2001, the tax authority was the Commissioner to whom all the powers of processing the cases for assessment were vested but there were also provisions of delegation of powers and function by the Commissioner to the Taxation Officer.

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

----S.210---Delegation---Commissioner in his discretion may delegate all or any of his powers or functions. to Taxation Officer which did not seem open to any question and any functions/powers so delegated, when performed, shall be deemed to have been performed by the Commissioner---Delegation of powers to the Taxation Officer was perceptibly a dynamic step which enabled the Commissioner in letting disposal of cases by the Taxation Officer also that might rise on high side in future---Taxation Officer assists the Commissioner by remaining under his direct control and supervision.

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

----S.211---Power or function exercised---Non-specification of any particular power in the delegation order---Frame of assessment---Legality of---Taxation officer in exercise of powers/functions delegated to him framed the assessments which shall as per S.211 of the Income Tax Ordinance, 2001 be deemed to have been made by the Commissioner---Such exercise of powers surely related to matters/ assessment which could be dealt with only under the Income Tax Ordinance, 1979---As to the distinction, in relation to any act in terms of framing of assessment which was either deemed to have been performed by fiction of law or actually done or performed by the Commissioner, such a distinction was conceived of only by S.120 of the Income Tax Ordinance, 2001 and surely would not apply to matters pending under the Income Tax Ordinance, 1979---Very act of framing of assessments by the Taxation Officer after being vested with such powers by the Commissioner seems unexceptionable---Contention of the assessee as to the incompetence of the Taxation Officer to frame assessment under the Income Tax Ordinance, 1979 did not carry any weight.

1993 SCMR 1503 distinguished.

Allied Motors v. C.I.T. 2004 PTD 1173 rel.

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

----S.211---Power or function exercised---Signing of delegation order---Commissioner being competent authority delegated his powers/ functions to the Taxation Officers, by signing every page---Decision/ order communicated by the Staff Officer of the Commissioner was as good order as could have been signed by the Commissioner himself---For all and sundry, such official communication carried presumption of truth.

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

----Ss. 64(3) & 56-Limitation of assessment---Return filed by the assessee displayed the address of the company---Notice under S.56 of the Income Tax Ordinance, 1979 was issued on the last known address--Inference would be that the Taxation Officer had the address of the assessee company for issuance of a notice and contention of the assessee that this notice could not be issued did not carry weight---Assessment framed was within two years as per S.64(3) of the Income Tax Ordinance, 1979 from the end of financial year in which notice under S.56 was issued.

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

----S.64---Limitation for assessment---Completion of assessment---Communication of order---Bare ,reading of S.64 of the Income Tax Ordinance, 1979 showed that process of assessment stands completed on the framing of assessment---Term `assessed" could not be equated with the "communication "---Assessment order passed within the prescribed limitation under S. 64 of the Income Tax Ordinance, 1979 was a valid one which may be communicated to the assessee later on---Contention that assessments were time-barred was not sustainable.

I.T.A. No.3934/LB of 2002 and 2007 PTD (Trib.) 803 rel.

(h) Income Tax---

----Combined order---Assessee contended that a combined order for the two years could not be passed and such order was nullity in the eyes of law---Validity---Contention of the assessee was not correct for the reasons that at present the practice being in vogue was that in respect of one assessee, assessments of different years were framed by one order--Assessments of two years by ode order was that of one assessee.

1996 PTD 482 distinguished.

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

----S. 63---Best judgment assessment---Estimation of receipts---Principles---Receipts were to be estimated for the purposes of which some meaningful basis had to be evolved---Best judgment was not a punishment which was meted out to the assessee but it was a fair and proper estimate after taking into consideration the condition of the market, assessee's circumstances, knowledge of the history of the assessee and other parallel cases---Taxation Officer had not adverted and indulged into such an analysis which smacked of his inept exercise of powers---Estimation of receipts and that of the expenses for all years could not be upheld---To the extent of estimation of receipts including expenses the assessment orders for the years under consideration along with order passed by the First Appellate Authority was set aside by the Appellate Tribunal and the cases were remanded to the Taxation Officer for estimation of receipts and expenses afresh after affording an opportunity to the assessee of being heard.

Waseem Ahmed Siddiqui FCA for Appellant.

Mrs. Shahina Akbar, Legal Advisor (LA) and Ch. Qasim, Taxation Officer for Respondent.

2010 P T D (Trib.) 679

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairman, Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqi Accountant Member

I.T.As. Nos.218/KB, 1278/KB and 1279/KB of 2006 decided on 3rd August, 2009.

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

----Fourth Sched., R.5(b)---Rules for computation of the profits and gains of insurance business---General Insurance---Disallowance of provision for diminution/depreciation in value of investment ignoring the fact that the claim was an admissible deduction---Validity---Claim of depreciation/diminution/provision in the value of investment was allowable in terms of R.5(b) of the Fourth Schedule to the Income Tax Ordinance, 1979 being a specific provision if the same was accounted for in the accounts and R.5(a) of the Fourth Schedule could not be invoked to disallow the claim.

C.I.T. Central, Karachi v. Alpha Insurance Company Limited and Home Insurance Company Limited PLD 1981 SC 293; E.F.U. General Insurance Co. Ltd. v. Federation of Pakistan 1997 SCC 1174 = 1997 PTD 1693; 1988 PTD (Trib.) 140; Habib Insurance Co. Ltd. v. C.I.T. PLD 1985 .SC 109; 1999 PTD 4138 and 1992 PTD 736 rel.

1989 PTD (Trib.) 192; I.T.As. Nos.2150 and 2151 KB of 2001; I.T.A. No.1105 and 1106/KB of 2005; I.T.A. No. 1756/KB/2003; 2004 PTD 1602; 1989 PTD (Trib.) 1263; 2006 PTD 356; Grindlays Bank PLC v. ACIT and Chairman Panel Companies I.T.A. No.565 of 2000 and 1992 PTD 1177 ref.

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

----Fourth Sched., Rr.5(a) & 5(b)---General Insurance---Scope of provisions of R.5(a)(b) of Fourth Schedule, Income Tax Ordinance, 1979---Rule 5 (a) caters to expenditure or allowance or any reserve or provision for any expenditure which was not deductible against income under the head "income from business" and was specific for the amounts both notional or actual either written off or taken to reserve, or taken credit for in the accounts in relation to depreciation or loss, or appreciation or gain on securities---When the legislature had provided a specific provision for dealing with a particular situation, the general provisions could not be invoked for the particular situation---Rule 5(b) was specific in nature dealing with two types of situations; it caters to depreciation or loss on the realization of investments and appreciation or gains on the realization of investments.

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

----Fourth Sched., R.5(b)---General Insurance---Purpose of enacting Rule 5(b) of the Fourth Schedule of the Income Tax Ordinance, 1979 was negated if it was accepted that R.5(b) of the Fourth Schedule of the Income Tax Ordinance, 1979 was only applicable in cases where the amounts were realized (on actual basis) and the legislature had deliberately not used the word "provision ".

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

----Fourth Sched., R.5(a) & (b)---General Insurance---Nature of provision of R.5(a)(b), Fourth Schedule of Income Tax Ordinance, 1979---Provisions of R.5(a) and (b) of the Fourth Schedule of the Income Tax Ordinance, 1979 were specific and distinct in nature and were to be invoked in specific situations.

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

----Fourth Sched., Rr.5(a) & 5(b)---Overriding effect---General provisions of R.5(a) of the Fourth Schedule of the Income Tax Ordinance, 1979 could not override the specific provisions of R.5(b) of the Fourth Schedule of the Income Tax Ordinance, 1979.

1999 PTD 4138 and 1992 PTD 736 rel.

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

----Fourth Sched., R.5(b)---General Insurance---Notional loss or diminution/depreciation in the value of investment which had been treated as provision for diminution by the department was duly allowable in terms of R.5(b) of the Fourth Schedule of the Income Tax Ordinance, 1979 if the same either written off or taken to reserve---Notional appreciation in the value of investment was taxable if the same was taken credit for in the accounts.

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

----Fourth Sched., R.5(b)---General Insurance---Word "provisions"---Use of word `provision' did not change the nature of the claim since a provision was also charged to accounts.

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

----Fourth Sched., R.5(b)---General Insurance---Nature of the claim and not the form was to be seen to find out whether the same was taxable or otherwise.

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

----Fourth Sched., R.5(b)---Income Tax Act (XI of 1922) Preamble---General Insurance---Provision for diminution---Allowability---Notional appreciation in the value of investment taken credit for in accounts was taxable under the relevant provisions of the First Schedule to the Income Tax Act, 1922---Notional loss or depreciation/ diminution in the value of investments termed as provisions for diminution was also allowable deduction.

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

---Fourth Sched., R.5(b)---General' Insurance---Accounts---Sanctity of--Sanctity has to be granted to accounts prepared under the provisions of insurance law and an Assessing Officer did not have authority to upset the integrity of such accounts.

C.I.T. Central, Karachi v. Alpha Insurance Company Limited and Home Insurance Company Limited PLD 1981 SC 293; E.F.U. General Insurance Co. Ltd. v. Federation of Pakistan 1997 SCC 1997 SCC 1174 = 1997 PTD 1693 and Habib Insurance Co. Ltd. v. C.I.T. PLD 1985 SC 109 rel.

(k) Income Tax Ordinance (XXXI of 1179)---

----Fourth Sched., R.5 (b)---General Insurance---Nature of provision of R.5(b), Fourth Sched., Income Tax Ordinance, 1979---Provisions of R.5(b) of the Fourth Schedule to the Income Tax Ordinance, 1979 were non obstante in nature which overrides the other provisions.

Hassaan Naeem and Faisal Ahad for Appellant.

Riazuddin, Legal Advisor, Farrukh Ansari, D.R. and Rahmat Ullah Khan Wazir, D.R. for Respondent.

2010 P T D (Trib.) 708

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

I.T.As. Nos. 881/LB and 882/LB of 2008, decided on 14th October, 2009.

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

----Ss.156, 135(4), 62, 80C & 80CC---Income Tax Ordinance (XLIX of 2001), Preamble---Rectification of mistake---Scope---Remand proceedings---Scope of rectification---Determination of---Rejection of rectification application---Assessee contended that it was patently illegal that the Taxation Officer, in the remand proceedings had entered into a debate :.:ether the matter fell within the purview of rectification or not; that scope of rectification proceedings had been clearly explained by the First Appellate Authority, which had attained finality once the departmental appeal threreagainst had been rejected by the Appellate Tribunal; that Taxation Officer was duty bound to proceed strictly in line with and within the parameters laid down by the First Appellate Authority; that Taxation Officer transgressed his mandate when he entered into discussion to determine the scope of rectification from the scratch which was not permissible because both the assessee and the department had accepted the order of Appellate Tribunal recorded in the first round of litigation and that Taxation Officer in remand proceedings, was duty bound to proceed only and only within the framework laid down by the appellate authorities---Validity---Taxation Officer grossly erred in re-determination of the scope of rectification once the framework of the re-assessment proceedings had been clearly and specifically restricted and determined by the First Appellate Authority in the first round of litigation, which was also endorsed by the Appellate Tribunal---In the re-assessment proceedings the Taxation Officer had no mandate to disregard the instructions of the appellate authorities, which had remanded the case to him with specific observations and directions---Upholding of reassessment orders by the First Appellate Authority was not in consonance with law---Orders of both the authorities below were vacated by the Appellate Tribunal and it was directed that the Taxation Officer should carry out the rectification strictly adhering to observations of the First Appellate Authority contained in his order in the first round of litigation.

I.T.A; No.452/LB of 2005 rel.

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

----S.156---Rectification of mistake---Scope of "remand proceedings".

I.T.A. No. 452/LB of 2005 rel.

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

----S.156---Rectification of mistake---Loss on account of provision of technical services---Action of not determining the loss on account of provision of technical services was a glaring mistake apparent from the audited accounts especially when the department itself, in the subsequent years, had been consistently according the same treatment to such receipts and expenses as requested by the appellant.

(d) Income Tax---

----Administration of justice---When something is due to a taxpayer under the law, it has to be granted, regardless of the fact whether it has been claimed or not by the taxpayer, because even if a taxpayer has, either due to ignorance of law or otherwise failed to claim a relief which is lawfully due to him, it is the duty of the person entrusted with the administration of law, to apply law in a correct manner so that a taxpayer is not burdened with the tax which is not lawfully due.

(e) Income Tax---

----Administration of justice---Technical subtleties could not be allowed to strangulate justice.

(f) Income Tax---

----Prayer of appeal/grounds of appeal---It hardly matters whether a prayer had been distinctly mentioned in the memo. of appeal or not when the grounds of appeal categorically challenge an order on specific grounds which were fully suggestive of the relief sought by the appellant.

Asim Zulfiqar, F.C.A. for Appellant.

Muhammad Asif, D.R. for Respondent.

2010 P T D (Trib.) 725

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Khalid Siddiqui, Accountant Member

I. T A. No.375/KB of 2009, decided on 1st September, 2009.

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

----Ss.69, 34(2) & 122(1)(5)---Receipt of Income---Advances from members of Exchange against allotment of office space---Taxation of---Assessee contended that such type of advance was not taxable as the same was a liability; till such time and said amount was paid back to member; that such advances were to be adjusted as consideration for allotting offices to the members; that Assessing Officer had erroneously treated such advances to be non-refundable; that such amounts were nothing but liabilities till such time the offices were allotted to the respective members; and that amounts received were mere receipts and not income of the assessee as the basic characters of an income were lacking---Validity---Assessee had admittedly acquired the place for subsequent transfer to its members subject to payment of the stipulated amounts---Though the assessee had termed the amounts to be advances but the fact remained that these amounts were nothing but the consideration received for allotment of space---Said advances were only refundable in exceptional circumstances if the allotment of the premises was cancelled---Such transaction appeared to be a transaction of sale---As the amounts had been received the year under consideration and as the assessee maintained the accounts on accrual basis these amounts had accrued to the Exchange the year under consideration and the same were liable to be taxed in the year under consideration---For all practical purposes the amounts received had vested with the assessee and the assessee alone was its own to utilize it in the manner and mode it deemed fit and proper---In case the amounts were refunded to the members the assessee will be at liberty to claim the amount paid to be its business expenditure---Present case appeared to be a case of offer and acceptance---Offer was made to the members and they were not legally obliged to give their reply in an affirmative to the offer but once they had accepted the offer to purchase the required space the amount given by them to the assessee would be an amount paid for consideration of the required space---Appeal was dismissed by the Appellate tribunal in limine.

(2008) 98 Tax 262 ref.

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

----S.69--Receipt of income---Advances from members of Exchange against allotment of office space---Non-deduction of cost of acquisition of building from the advances treated as consideration for sale of office space---Assessee contended that when Taxation Officer on one hand had considered the arrangement to be sale of property then the corresponding cost should be deducted from such consideration to compute the net gain---Validity---Amount invested could not be deducted from the amounts received from the members due to the fact that the amount invested was a capital investment made by the assessee whereas the amount received from the members were nothing but the business income of the assessee---Amount could not be deducted as claimed by the assessee---Appeal was dismissed on the issue as well.

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

----S.69---Receipt of income---Gain on sale of fixed assets---Taxation of without allowing depreciation on such fixed assets---Validity---Matter was remanded back by the Tribunal with the instructions to examine the issue afresh and if it was found that no depreciation had been allowed to the assessee on the assets sold out by them, then the gain on sale of fixed assets should not be taxed.

Salahuddin Ahmed and Amin Malik, F.C.A. for Appellant.

Rajabuddin, D.R. for Respondent.

2010 P T D (Trib.) 734

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member

I.T.As. Nos.70/IB to 74/IB and 148/IB to 152/IB of 2009, decided on 29th May, 2009.

Income Tax Ordinance (XXXI of 1979)---

----S.62---Assessment on production of accounts, evidence etc.--Transport business---Receipt from Pakistan and Northern Areas---Proportion of---Re-assessments were finalized by adopting 50% receipts from Pakistan and 50% from Northern Areas---First Appellate Authority directed to adopt receipts equal to 35% on account of transport activities etc,. carried on by the taxpayer in Pakistan and the same ratio should also be adopted for allowing expenses, making add backs etc.---Validity---Exact formula of assessment was calculation on the basis of distance, because receipts were proportionate to distance---Receipts from distance covered in Pakistan were taxable and in the same proportion expenses were to be allowed also---If a vehicle departs from a city/point A and its ultimate destination was point B situated in Northern Areas, the receipts of distance covered in Pakistan were to be computed---Similarly vice versa, if a vehicle starts its journey from Northern Areas and goes to any destination in Pakistan, same formula of receipt from respective distance was to be applied-Orders of both the authorities below were vacated and sent the case back to Assessing Officer for fresh adjudication.

Zahid Hussain, A.C.M.A. for Appellant (in I.T.As. Nos.70/IB to 74/IB of 2009).

Tariq Iqbal, D.R. for Respondent (in I.T.As. Nos.70/IB to 74/IB of 2009).

Tariq Iqbal, D.R. for Appellant (in I.T.As. Nos.148/IB to 152/IB of 2009).

Zahid Hussain, A.C.M.A. for Respondent (in I.T.As. Nos.148/IB to 152/IB of 2009).

2010 P T D (Trib.) 747

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zareen Saleem Ansari, Accountant Member

I.T.As. Nos.951/KB and 1151/KB of 2005, decided on 16th June, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.184, 205 & 131---Making additions on account of unexplained business capital gain---Imposition of penalty---Appeal to Appellate Tribunal---Appellant/assessee filed returns showing income of Rs.108,000, which were assessed by the Taxation Officer at Rs.3,288,100 by making addition on account of unexplained business capital gain on sale of shop---Taxation Officer also made additions on account of construction on plot and on account of deemed rental income---On filing appeal by the assessee, Commissioner Income Tax (Appeal) set aside assessment made by the Taxation Officer, with specific direction to the Taxation Officer to verify from the purchaser of shop---Re-assessment was framed after original order being set aside without following instructions given by the First Appellate Authority while setting aside the assessment regarding purchase of shop---Taxation Officer had neither exhausted the means to verify the actual amount of sale nor the date of transaction---Transaction of the property had taken place in financial year 1999-2000, capital gain of which was shown in wealth reconciliation statement in the year 2000-2001, but the Taxation Officer had added gain in the assessment year 2001-2002---Main activity of the assessee was of selling cloth and he was not involved in trading activity of selling and purchasing of shop or property---Commissioner Income Tax (Appeals), had upheld the treatment meted out by the Taxation Officer without any reason---No justification existed for making the addition, holding that the solitary transaction was adventure in the nature of trade---Addition Made in that respect, was deleted, in circumstances---Regarding the addition on account of construction on plot, Taxation Officer had made addition without any basis, as the plot was acquired in 1996 by the assessee and to protect the same from encroachment and the non-utilization fee, boundary wall and temporary room was built in the year 1997; but the Taxation Officer had assumed the construction on said plot in the year 2000; and without any basis had estimated the cost of construction at Rs.400,000, without bringing any material evidence to substantiate the addition in totality---Commissioner Income Tax (Appeals) had also upheld said addition without giving any reason---Addition made in that respect was also deleted---With regard to concealment of income by the assessee, Taxation Officer on the one hand had treated the income of the assessee as business income in the nature of trade and on the other hand he had treated that income as concealed income---Department must be in possession of such evidence as would convince a reasonable-minded person that assessee had concealed his income by consciously misstating the facts---Mere difference of opinion between the Income Tax Officer and the assessee, were not sufficient evidence for levy the penalty---Penalty having been levied by the Taxation Officer without any basis, was deleted.?

Salman Pasha and Nadeem Dawoodi for Appellant.

Nazeer ahmed Soomro, D.R. for Respondent.

2010 P T D (Trib.) 753

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member

M.A. (Stay) No.60/IB of 2009, decided on 18th August, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.183 & 190---Penalty for non-payment of tax---Appeal before Appellate Tribunal---Stay granted against recovery---Show-cause notice for imposition of penalty for non-payment of tax---Validity---Taxation Officer had power to impose penalty in those cases in which the default in making payment of any tax was deliberate or otherwise on the part of an assessee but not because of a stay order granted by a competent authority, as such default was caused by operation of law which was protected under the principle that such passing of the stay order was material for suspending the demand and even its date of communication did not make it effective from that date---Person in whose favour stay order operates could not be held to have failed to make payment and demand would not become final when matter was sub judice before Court which had stated its recovery and that even the demand of department to levy or pay additional tax during the period in which stay was in operation was without lawful authority and of no legal effect---Stay order in effect provisionally suspends or makes demand non existent---Further, stay was granted against the recovery of tax demand---Propriety demands that department should not opt for coercive measures till the decision of appeal---Appellate Tribunal directed that not only the cocercive measures for recovery of tax demands but also the proceedings like imposing penalty be also not initiated against the assessee till the time when stay order holds the field---Stay petition was granted for another 60 days or till the decision of main appeal whichever was earlier---Miscellaneous application was accepted by the Appellate Tribunal.

Atif Waheed for Applicant.

M. Aamir Ilyas, D.R. for Respondent.

2010 P T D (Trib.) 768

[Income-tax Appellate Tribunal Pakistan]

Before Ch. Munir Sadiq, Judicial Member

I.T.A. No.696/LB of 2009, decided on 16th December, 2009.

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

----S.170(4)---Refund---Non passing of an order within the prescribed time---Effect---Law assumes non passing of an order under S.170(4) of the Income Tax Ordinance, 2001 as an order against the taxpayer rather than in his favour.

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

----S.170(4)---Refund---Passing of an order after limitation---Jurisdiction---When the Commissioner fails to pass an order within 45 days of the receipt of a refund application under S.170(1) of the Income Tax Ordinance, 2001, the person aggrieved by the failure of the Commissioner to pass an order under subsection (4) of S.170 of the Income Tax Ordinance, 2001 was entitled to prefer an appeal under Part-III of Chapter X of the Income Tax Ordinance, 2001---By no stretch of imagination it could be assumed that the Assessing Officer had no jurisdiction to pass an order under S.170(4) of the Income Tax Ordinance, 2001 after the specified period of 45 days unless an appeal had been preferred by the aggrieved person, for the failure of the Commissioner to pass an order under subsection (4) of S.170 of the Income Tax Ordinance, 2001, within the time specified in said subsection, before passing of such order after 45 days.

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

----S.170(5)---Refund---Passing of an order after prescribed limitation--Validity---Section 170(5) of the Income Tax Ordinance, 2001 provides a taxpayer an opportunity to get early refund without unnecessary delay by filing an appeal before the First Appellate Authority against the failure of the Commissioner/Taxation Officer to pass an order under S.170(4) within the stipulated period---Where an appeal is filed against such failure of the Commissioner/Taxation Officer, the power of the Commissioner/Taxation Officer shifts to the Appellate Authority and the Commissioner/Taxation Officer could not pass an order on refund application---If a taxpayer did not file any appeal after 45 days and the refund application remains pending before the Commissioner/Taxation Officer the law does not prohibit the Commissioner/Taxation Officer to pass an appropriate order on the same---Admittedly, appellant, in the present case, had not filed any appeal before First Appellate Authority against the failure of the Commissioner before the passing of order under S.170(4) of the Income Tax Ordinance, 2001 and the refund application remained pending before the Commissioner/Taxation Officer, Commissioner, in circumstances had jurisdiction to pass an order under S.170(4) of the Income Tax Ordinance, 2001 even after the expiry of 45 days---Failure to pass an order within prescribed period of 45 days (now 60 days) reflected a lack of interest and inefficiency of the Commissioner/Taxation Officer.

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

----S.170(2)(c)---Refund---Provisions of S.170(2)(c), Income Tax Ordinance, 2001 are directory and not mandatory---Assessing Officer instead of verifying the claim of taxpayer for refund rejected the same on the ground that refund application filed after lapse of statutory limit provided in section 170(2)(c) of the Income Tax Ordinance, 2001 could not be entertained after the prescribed period of two years---Provisions of S.170(2) of the Income Tax Ordinance, 2001 were directory and not mandatory---Word "shall" though has been used in subsection (2) of S.170 of the Income Tax Ordinance, 2001 yet it was not couched in negative language.

(e) Administration of justice---

----Technicalities---Right of people---Government functionaries, especially in an Islamic or a democratic society governed by rule of law, are supposed to do justice and not to deprive the people of their rights on ground of technicalities.

(f) Constitution of Pakistan, 1973---

----Art. 2A---Objectives Resolution reflects the will of the people of Pakistan to establish an Order wherein the principles of social justice as enunciated by Islam .shall also be fully observed---Objectives Resolution admits that sovereignty, over the entire Universe belongs to Allah Almighty alone and the authority which he has delegated to the State of Pakistan, through its people for being exercised within the limits prescribed by Him, is a sacred trust.

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

----S.170---Refund---Refund is a "Amanah "---Public servants hold such amount as an "Amanah" and are supposed to refund/return same to the person entitled to it.

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

----S.170---Refund---Limitation---Purpose---Claim regarding over-payment of tax was to be verified from record and if the record was not available, due to lapse of a long period and claim could not be verified and refund is allowed without verification from original record, same may lead to bogus refunds and corrupt practices---Legislature had set a time limit of two years in order to avoid inconvenience and bogus refund, besides discouraging the delayed application/claims which could not be verified---If over-payment of tax was easily verifiable, there was no bar to adjust or refund the same even if an application was made after the period of two years---Provision did not mean that a taxpayer was free to claim the refund of an overpaid tax at his sweet will at any time even after the expiry of many years as the laches may defeat the claim.

Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 rel.

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

----S.170---Refund---Limitation---Genuine refund claim could not be refused on the ground that application was not filed within prescribed time---When a refund claim was verifiable and genuineness, of over-payment of tax established after verification, but it was refused mere on technicalities it was unfair.

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

----S.170---Refund---Constitution of Pakistan (1973), Art. 2A, 3, 4(2)(a), 24, 25, 29, 31 & 37---Application of refund-Non-filing of---Effect---Forms for "Return of total income ""statement of final taxation" for tax year, 2007 onwards, contained a specific column about tax refundable and most of them also contain a column for request that net tax refundable may be credited to the bank account of the tax payer as mentioned in the column---Income Tax Authority processing the "Return of Total Income/Statement of Final Taxation" was bound to proceed in accordance with law---When, on verification, it was established that taxpayer had over paid the tax, Income Tax authorities were bound to refund the same even without any separate application for refund from the taxpayer and refusal to refund the same was violation of Articles 2A, 3 4(2)(a), 9, 24, 25, 29, 31, and 37 of the Constitution.

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

----S.170--Refund---Limitation---Jurisdiction---First Appellate Authority directed to issue refund on the ground that the Taxation Officer had acted beyond his jurisdiction by passing order on refund application after lapse of about one year and nine months as S.170(4) of the Income Tax Ordinance, 2001 did not allow him to pass an order after the lapse of 45 days---.Validity---Finding of First Appellate Authority was not legally tenable---If the view of the First Appellate Authority was accepted as correct same would render all orders passed under S.170(4) of the Income Tax Ordinance, 2001 after the stipulated period of 45 days (now 60 days) liable to be annulled even in cases where refund had been allowed---Such was against the spirit and intention of law---Authorities acting under an enactment were bound to see and interpret the law as a whole and not to examine any provision in isolation---First Appellate Authority had examined the case in light of subsection (4) of S.170 of Income Tax Ordinance, 2001 and had failed to realize the impact of subsection (5) of S.170 of the Income Tax Ordinance, 2001---First Appellate Authority had also ignored that S.170(3) of the Income Tax Ordinance, 2001 provided that before passing any order of refund it was the duty of the Commissioner/ Taxation Officer to satisfy himself that the tax had been over paid by the taxpayer---No such finding was available on the record---First Appellate Authority ought to have remanded the case to the Taxation Officer for verification of the claim of the taxpayer and issuance of the refund if the tax had been over paid strictly in accordance with law but the First Appellate Authority had straightaway directed the Taxation Officer to issue refund---Orders passed by First Appellate Authority and the Taxation Officer were vacated by the Appellate Tribunal and the' case was remanded to the Taxation Officer/Commissioner with directions to obtain and verify the proof of tax paid; to determine the tax overpaid by the taxpayer and to refund the same as per law, but within a period of 30 days from the receipt of the order.

Khalid Latif, D.R. for Appellant.

Qadeer Ahmad, ITP for Respondent.

Date of hearing: 16th December, 2009.

2010 P T D (Trib.) 819

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No.452/IB of 2009, decided on 10th October, 2009.

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

----Ss.122 & 121---Amendment of assessment---Section 122 and S.121 of the Income Tax Ordinance, 2001 were separate and independent; both the sections were to be applied in two different situations and could not be simultaneously applied---Section 121(1) of the Income Tax Ordinance, 2001 dealt with best judgment assessment while S.122 could be applied for reopening the assessment only where a definite information was available or the order was erroneous and prejudicial to the interest of the Revenue---Parameters of both the sections were entirely separate.

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

---Ss.122 & 121---Amendment of assessment---Simultaneous issuance of notice under Ss. 177 and 122 or 121(1)(d) of the Income Tax Ordinance, 2001---Effect.

Following questions were framed for the purpose of disposal of the matter of simultaneous issuance of notice under sections 177, 122 or 121 of the Income Tax Ordinance 2001:---

(i) Whether any order under clause (d) of subsection (1) of section 12 of the Ordinance could be passed in presence of an order already deemed to have been made by the Commissioner under the provisions of subsection (1) of section 120 of the Ordinance?

(ii) Whether the provisions of sections 122(1)(5) and 121(1)(d) of

the Ordinance could be invoked and applied simultaneously?

The conclusion drawn was as follows:

(i) The initiation of assessment proceedings through simultaneous issuance of notice under sections 177 and 122 or 121(1)(d) is legally not justified and order is passed in consequence thereof being unlawful were not sustainable and ab initio void. Unless any definite information came in the hands of the assessing officer as a result of Audit carried out by him no proceedings for amendment of order under section 122 could be initiated. Similarly until the taxpayer had committed default in producing the accounts, record and other documents etc. required by the assessing officer for the purpose of assessment the provisions of clause (d) of subsection (1) of section 121 were not attracted.

(ii) The provisions of section 121(1)(d) and those subsections (1) and (5) of section 122 were different in nature dealing with entirely different situations therefore could neither be simultaneously applied while passing an order in the case of taxpayer nor the application of one could be replaced by the other.

(iii) Provisions of clause (d) of subsection (1) of section 121 of the Ordinance were attracted only in the case of absence of a valid return i.e. either the return furnished by the taxpayer had been declared invalid under the provisions of subsection (4) read with subsections (3) and (6) of section 120 of the Ordinance or no return was, filed in compliance of notice issue under sub-section (3) or (4) of section 114 of the Ordinance.

(iv) An order amendment under section 122 of the Ordinance could be passed by the assessing officer even if no compliance of all or any statutory notices issued under section 177 or 122(9) was made by the taxpayer and/or no accounts record or evidence etc. required by the assessing officer was produced by him.

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

----Ss.122 & 121---Amendment of assessment---Initiation of simultaneous proceedings under Ss.122 and 121 of the Income Tax Ordinance, 2001---Validity---Proceedings simultaneously conducted were unlawful---Issue of simultaneous notice and assessment to the application of S.121(1) as well as 5.122(5) of the Income Tax Ordinance, 2001 was legally not sustainable---Such assessment was annulled by the Appellate Tribunal as the proceedings conducted were legally defective and the same were untenable in the eyes of law---First Appellate Authority was not justified to confirm illegal action of the Taxation Officers---Assessment order was cancelled by the Appellate Tribunal.

Mohsin Raza v. Chairman, F.B.R. 2009 PTD 1507 and I.T.A. No.30/IB of 2009 rel.

2008 PTD 1440 and 2008 PTD 1517 ref.

Hafiz Muhammad Idris for Appellant.

Ziaullah Khan, D.R. for Respondent.

2010 P T D (Trib.) 878

[Inoue-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.A. No.232/KB of 2009, decided on 30th September, 2009.

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

----S. 177---Audit---Selection of case for total audit---Non-issuance of pre-show cause notice---Effect---Non-Issuance of pre-show-cause notice will make the selection of audit as illegal.

Writ Petition No.4630 of 2009 rel.

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

----S.177---Audit---Notice before selection of case for audit---Inspite of absence of requirement of specific provision of notice in the law, before proceeding with the audit of an assessee, a prior notice was an essential requirement, as the audit of person's income tax affairs resulted in prejudice being caused to the tax payer who was subjected to scrutiny.

2005 PTD 152 rel.

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

----S.177---Audit---Prior notice for selection of cases for audit was of immense significance and absence thereof in the cases render the letters to be devoid of any legal justification.

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

----S. 122(5A)---Amendment of assessment---Estimation of sales---Case of the assessee had been reopened under 5.122 (5A) of the Income Tax Ordinance, 2001 despite the fact that sales of the taxpayer were under the strict control of Central Excise/Sales Tax Department and no discrepancy had been pointed out by the Department as well as by the Central Excise/Sales Tax Department---Estimation of Sales was not legally justified.

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

----S.39(3)---Income from other sources---Payment to third party by the sister concern of the assessee---Addition of---Validity---Additions under S.39(3) of the Income Tax Ordinance, 2001 could not be made to the Payments to the third party by the sister concern.

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

----S.122(5A)---Amendment of assessment---Audit report---Initiation of Proceedings under S.122(5A) of the Income Tax Ordinance, 2001---Validity---Proceedings under S.122(5A) of the Income Tax Ordinance, 2001 had been based on audit report made by the Deputy Commissioner of Income Tax/Taxation Officer---Such proceedings were not permissible under the law and order made by the Taxation Officer/Additional Commissioner was illegal---Proceedings under S.122(5A) of the Income Tax Ordinance, 2001 having been based on fresh evidence placing reliance on the audit report was not maintainable under the law as the proceedings in this respect had not been initiated with independent mind.

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

----Ss. 122(5A) & 177---Amendment of assessment---Audit---Amendment of assessment by the Additional Commissioner of Income Tax while the audit proceedings were pending before Deputy Commissioner of Income Tax/Taxation Officer---After selection of case for total audit by the Commissioner, the matter was assigned to Deputy Commissioner of Income Tax/Taxation Officer, and proceedings were pending before him but the Additional Commissioner/Taxation Officer .without considering such fact had amended the assessment, without considering the explanations given by the assessee---No justification was available in amending deemed assessment by the Additional Commissioner/Taxation Officer under S.122(2A) of the Income Tax Ordinance, 2001 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.122(5A) of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal in circumstances.

2008 PTD 14191; Writ Petition No.5583 of 2009; Messrs Fauji Oil Terminal and Distribution Company Ltd. v. Additional Commissioner 2006 PTD 734 and C.A. No.778 and 2002 PTD 441 ref.

Munim Sultan for Appellant.

Syed Maroof Gallani, D.R. for Respondent.

2010 P T D (Trib.) 927

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.A No.434/Kb of 2009, decided on 20th November, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 221, 170(4), 115(4) & 153(1)(b)---Rectification of mistake---Services rendered---Assessee filed statement under S.115(4) of the Income Tax Ordinance, 2001 under the presumption that tar deducted on account of services rendered was final--Later on, assessee filed revised statement and normal return and claimed tax deducted under S.153(1)(b) of the Income Tax Ordinance, 2001 as adjustable---Claim was accepted and an order under S.170(4) of the Income Tax Ordinance, 2001 was passed to issue refund claimed---Subsequently, order was rectified under S.221 of the Income Tax Ordinance, 2001 and claim of the taxpayer that he was a service provider was refused and taxpayer was treated as "contractor"---Validity---First Appellate Authority observed that "since the power to amend an assessment order lies under S.122 of the Income Tax Ordinance, 2001, no amendment of income and tax liability of a taxpayer could be made under S.170(4) of the Income Tax Ordinance, 2001; order passed under S.170(4) of the Income Tax Ordinance, 2001 amending assessee's income and treating the tax deducted under S.153(1) of the Income Tax Ordinance, 2001 as final discharge of appellant's tax liability was ab initio illegal, and such treatment could not be allowed to sustain as per existing provision of law"---Held, that First Appellate Authority had rightly annulled the order passed under S.221 of the Income Tax Ordinance, 2001 as no exception could be taken from the order of First Appellate Authority---Order of First Appellate Authority was maintained by the Appellate Tribunal.

Basharat Ahmed Qureshi D.R. for Appellant.

Abdul Tahir, ITP for Respondent.

2010 P T D (Trib.) 930

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

I.T.As. Nos.871/LB to 874/LB of 2008, decided on 16th October, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 21(c), 153, 162, 156, 233(2) & 122(5A)---Income Tax Ordinance (XXXI of 1979), Ss. 23 & 50(4)---Deductions not allowed---Amendment of assessment---Customers of the assessee, Gas supply company, discharge their monthly liability for gas supplied by depositing amounts with collecting banks/financial institutions designated by the assessee---Bank/financial institutions after, deducting their charges, known as collection charges' remit such amounts to the assessee---Such charges were recorded in the financial statements asgas bill collection charges'---Assessment was amended on the ground that assessee failed to deduct withholding tax under S.153 of the Income Tax Ordinance, 2001 in respect of `gas bill collecting charges' incurred in connection with services rendered by various institutions/banks in collecting the gas bills and such charges did not qualify to be allowable deductions under S.21(c) of the Income Tax Ordinance, 2001---Assessee contended that no tax was deductible on the amount as the assessee company itself did not pay any amount to the banks rather being collecting agents, the banks were remitting the net amounts to the assessee company and the provisions of S.153 of the Income Tax Ordinance, 2001 were not attracted---Validity---No provision in S.153 of the Income Tax Ordinance, 2001 existed which was parallel to S.233(2) of the Income Tax Ordinance, 2001 and no withholding was required under law---Provisions of 5.162(2) of the Income Tax Ordinance, 2001 could not be invoked to lend credence to departmental action invoking S.21(c) of the Income Tax Ordinance, 2001 in the admitted circumstances that department did not invoke provisions of S.162(1) of the Income Tax Ordinance, 2001 on banks/financial institutions and that these institutions had already discharged their tax liability---Assessee Company was legally correct in not withholding the tax as alleged by the department---Order of First Appellate Authority was upheld by the Appellate Tribunal and departmental appeals were dismissed.

1955 SCC 1; 1990 PTD 248; 1998 PTD 291 and 2000 PTD 1328 distinguished.

Reference Applications Nos.690 to 692/LB of 2003 ref.

M. Asif, D.R. for Appellant.

Asim Zulifqar Ali FCA for Respondent.

2010 P T D (Trib.) 1038

[Income-tax Appellate Tribunal Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.A. No. 6020/LB of 2004, decided on 3rd September, 2009.

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

----Third Sched., R.5A--- C.B.R. Circular No. 22 of 1957, dated 2-10-1957---Depreciation allowance---Addition of machinery---First year allowance---Disallowance of first year allowance was upheld by the first Appellate Authority on the ground that the same was only admissible on the installation of machinery on the basis of setup of industrial undertaking on a specified date and not on the addition of machinery---Assessee contended that spinning units were involved in conversion of cotton to yarn which was a value added process, and it was an addition in value of cotton and part of overall value addition process from cotton to weaving and from fabric to manufacturing of garments---Machinery installed in spinning unit was entitled for first year allowance---Validity---First Appellate Authority had not discussed the issue of value addition and merely rejected the first year allowance on the ground that the same was allowable only to the industrial undertaking setup on or after date specified i.e. 1st day of November, 1997 and not on the addition or renewal of machinery--Unit was involved in process of value addition---Value added is generally the sum of all wages, interest, rent and profit---Since word `value added' had not been defined in the Income Tax Ordinance, 1979, the Appellate Tribunal adopted the ordinary dictionary meaning and observed that claim of first allowance on both the counts was admissible which was directed to be allowed accordingly.

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

----S.62(1)---Assessment on production of accounts; evidence etc.---Addition out of profit and loss account---Assessee being an unlisted public limited company was maintaining proper accounts and had produced for scrutiny to the Assessing Officer---Assessing Officer, in circumstances, was obliged to thoroughly examine the same and confront the assessee with defects noted by him by way of issuance of notice under S.62(1) of the Income Tax Ordinance, 1979 which was a mandatory requirement of law---Assessing Officer failed to do so---Add backs made in profit and loss account was deleted by the Appellate Tribunal.

2003 PTD 2668; 2007 PTD (Trib.) 155; 2005 PTD (Trib.) 1437; 1999 PTD (Trib.) 3892 and I.T.A. No.4406/LB of 2001 rel.

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

----First Sched: Part-III & S. 80DD---C.B.R. Circular. No.5 of 2001 dated 4-7-2001---Rate of surcharge---Minimum tax on income of certain persons---Levy of surcharge @ 5% on minimum tax liability---Validity---Provisions of Part-II of First Schedule of Income Tax Ordinance, 1979 regarding rates of surcharge were not applicable/leviable to Ss.80-D & 80D/80DD of the Income Tax Ordinance, 1979---Order passed by both the authorities below were vacated by the Appellate Tribunal.

2002 PTD 2662 overruled.

ITAT cited as 99 Tax 212 rel.

Aqeel Ahmad for Appellant.

Sajjad Rizvi, L.A. for Respondent.

2010 P T D (Trib.) 1046

[Income-tax Appellate Tribunal Pakistan]

Before Malik Abdul Samad, Accountant Member

I.T.A. No.65/KB of 2009, decided on 8th November, 2009.

Finance Act (V of 1989)---

----Ss. 7(7) & 7(CA)(A)(ii) & 8(1)---Levy of tax on capital value of certain assets---Assessee acquired right (to use for more than twenty years) in the leasehold plot acquired by the original lessee for the term of 99 years---Value of property was not recorded on original deed of assignment--While executing lease assignment in favour of assessee, value was recorded on sub-lease deed and Capital Value Tax @ 2% was paid---Assessing Officer charged Capital Value Tax @ Rs.50 per sq. yd. on the ground that value of immovable property was not recorded---First Appellate Authority annulled the order with the observation that since value of plot had duly been recorded as per Conveyance Deed on which CVT was charged 2% of the recorded value, action of Taxation Officer to charge CVT @ 50 per Sq.yd. was contrary to express provisions of law---Validity---Property had duly been registered with Registrar Office and the value has also been recorded therein---Capital Value Tax had rightly been charged @ 2% on the recorded value of the property---Order of First Appellate Authority was upheld by the Appellate Tribunal and department appeal was dismissed by the Appellate Tribunal.

Dr. Abdul Sattar Abbasi, D.R. for Appellant.

AS. Jaffri for Respondent.

2010 P T D (Trib.) 1056

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.A. No.34/IB of 2009, decided on 13th November, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5) & 40---Amendment of assessments---Deductions in computing income chargeable under the head "Income from other sources"---Definite information---Ground rent---Claim of expenses---Assessee failed to furnish reply and assessment was amended---Assessee contended that nothing was concealed and expenses claimed against ground rent' were admissible under S.40 of the Income Tax Ordinance, 2001---Assessment was annulled by the First Appellate Authority---Department contended that First Appellate Authority was not justified to accept the documentary evidence produced before him in the light of S.122(5) of the Income Tax Ordinance, 2001 as the same were neither produced before Taxation Officer, nor taxpayer was prevented by sufficient cause from producing such material before the Assessing Officer---Validity---Assessment should only be amended on the basis ofdefinite information' acquired by the audit or otherwise--Information had neither come from audit nor it had been received from any other corner---In the absence of `definite information' and that too of concealment, order was to be passed under S.122(5A) of the Ordinance, if it was considered to be erroneous and prejudicial to the interest of revenue---Order passed by the First Appellate Authority was considered to be the correct one---Right course of action, if any, was to resort to the provision of S.122(5) of the Income Tax Ordinance, 2001 which had wrongly been invoked---Order passed by the First Appellate Authority was upheld by the Appellate Tribunal and the departmental appeal was dismissed being without merit.

Ziaullah Khan, D.R. for Appellant.

Hafiz Muhammad Idris for Respondent.

2010 P T D (Trib.) 1067

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 406/IB to 408/IB of 2008, decided on 3rd April, 2009.

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

----Ss. 121, 122, 114, 116 & 174---Best judgment assessment---Scope and application of Ss.121, 122, 114 & 176 Income Tax Ordinance, 2001---Issuance of notices under multiple provisions of law---Assessee contended that simultaneous application of independent provisions of Best Judgment Assessment under 5.121 read with section 122 of the Income Tax Ordinance, 2001 was not justified, illegal and void ab initio and that combined notices issued under S.121 and S.122 of the Income Tax Ordinance 2001 be declared illegal and void---Validity---Stance of the department was that assessment should not be annulled by not mentioning subsection of S.122 of the Income Tax Ordinance, 2001, but the case was quite different---Present case was not the one of non-mentioning subsection but two different sections had been quoted without mentioning their subsection---Assessee was being confronted by issuing a combined notice under S.121 and S.122 of the Income Tax Ordinance, 2001 that too without confronting of the relevant subsection---Present was not the case where only mother provision had been mentioned without mentioning subsection but it was a case where the combined notices of two different independent sections i.e. Ss.121 and 122 of the Income Tax Ordinance, 2001 had been issued which was fatal because it was the jurisdictional defect--Jurisdiction was only required by the Taxation Officer after receiving of an information from the Audit department by issuing a notice under S.122(5) of the Income Tax Ordinance, 2001--Without completion of pre-requisite of show cause notice and supply of the grounds/reasons was in clear words to ascertain as to under which section the case would fall, the demand of the authorities had no legal consequence---Such failure of the authorities issuing show cause notice to disclose the grounds and reasons rendered the notice invalid---Section 121(1) of the Income Tax Ordinance, 2001 would not apply because the return had been filed under S.114 of the Income Tax Ordinance, 2001---Clause(c) of S.121(1) of the Income Tax Ordinance, 2001 would not apply as it was not the case of non-filing the wealth statement---Section 121(1) of the Income Tax Ordinance, 2001 would only apply where person fail to furnish return of income under sub-Ss. (3) and (4) of S.114 or statement under S.116 of the Income Tax Ordinance, 2001 had not been filed or on the subsequent stage if the assessee failed to produce accounts and documents to be maintained under S.174 of the Income Tax Ordinance, 2001 required for the purposes for making of assessment of Income---Section 121(1) of the Income Tax Ordinance, 2001 had no applicability in the present case for it was the case where notice under S.122(9) of the Income Tax Ordinance, 2001 for amendment of assessment was to be issued---Very basis for acquiring the jurisdiction by issuing a combined notice under two different sections thus was fatal---Order of First Appellate Authority was upheld by the Appellate Tribunal.

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

----S.121---Best judgment assessment---Concept ---Application of---Concept of `best judgment assessment' shall apply only where the person had failed to file his return and in Commissioner's opinion, he was required to file his return of income having assessable income---Commissioner may ask to file the return for a period of less than 12 months---Where the return had not been filed due to the death of assessee, his legal heirs or representatives could be asked to file the return or a person had become bankrupt or gone into liquidation or in Commissioner's view a person was due to leave Pakistan permanently.

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

----Ss.121(1) & 114---Best judgment assessment---Scope---Section 121(1) of the Income Tax Ordinance, 2001 would apply if the return had not been filed under S.114 of the Income Tax Ordinance, 2001---Such was the case of non-filing of return by non-residential-ship owner, air craft owner; charter---Subsections (c) and (d) of S.121 of the Income Tax Ordinance, 2001 were confronted with the situation where the return had been filed but the wealth statement had not been filed or if the record required to be maintained under S.174 of the Income Tax Ordinance, 2001 was not produced after selection of the case for audit under sub-S. (2) or (4) of S.177 of the Income Tax Ordinance, 2001.

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

----Ss-1 21(1), 122 & 177--Best judgment assessment---Application and scope---Return filed was a deemed assessment order which could only be amended under section 122 of the Income Tax Ordinance, 2001---Section 121 of the Income Tax Ordinance, 2001 caters for quite different situation embodied in the section from its clauses (a) to (d)---Section 121 of the Income Tax Ordinance, 2001 applies where a return has not been filed or a return is invalid return reasons may be for non-filing of wealth statement or the case was selected for audit under S.177 of the Income Tax Ordinance, 2001.

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

----Ss.120, 122(5), 122(5A) & 177---Assessment---Deemed assessment--Despite the fact that case was selected for audit under S.177 of the Income Tax Ordinance, 2001, the deemed assessment shall remain in the field until it was amended under section 122(5) or (5A) of the Income Tax Ordinance, 2001.

Shakeel Ahmed Shakeel, D.R. for Appellant.

Atif Waheed for Respondent.

2010 P T D (Trib.) 1081

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No.474/lB of 2008, decided on 2nd September, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S.205---Additional tax---Penalty and additional tax---Distinction----Last deposit of tax deducted/collected---Levy of additional tax rejecting the stance of the company that delay was due to internal controls and administrative procedures---Assessee contended that there was no mala fide intention on the part of the company causing delay in deposit in government treasury of tax deducted, as the company voluntarily deposited the tax so deducted, with the government exchequer soon after completion of administrative procedures---Validity---Additional tax could not be equated with penalty---Penalty and additional tax are distinct ones---Penalty was meant to penalize the assessee for not doing an act within stipulated timeframe while additional tax was levied because assessee used the government money and took its benefit or the government was deprived of its utility/profits---Tax was admittedly due and not paid on due date, it amounted to utilization of public exchequer and compulsion of payment of additional tax was quite in accordance with equity and principles of natural justice---Assessee could not be absolved from payment of additional tax qua late payment of admitted liability of tax on the plea of not being wilful---Appeal was dismissed by Appellate Tribunal.

Taimur Shah v. CIT (1976) 34 Tax 151 (H.C. Kar.) = PLD 1976 Kar. 1030 Irrelevant.

Ghulam Muhammad Lundkor v. Safdar Ali PLD 1967 SC 530 ref.

Faisal M. Banday, FCA for Applicant.

M. Asif, D.R. and M. Zaheer Qureshi, D.R. for Respondent.

2010 P T D (Trib.) 1099

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Liaquat Ali Chaudhry, Accountant Member

I.T.As. Nos.11/IB to 16/IB and 529/IB of 2006, decided on 23rd December, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S.52-Notification No. NA-9(7)80, dated 3-4-1999---Letter No. NA-9 (7)/80 dated 3-3-1981---Assessee in default---Returns were filed by showing losses from operation in the areas other than Northern Areas and did not disclose receipts earned from Northern Areas---Statutory notices were issued---Accounts were submitted by the assessee whereby receipts from Northern Areas were disclosed by stating that since the territories of Northern Areas were not part of Pakistan, the same were kept undisclosed---Assessing officer taxed whole income of the assessee accruing/arising from Northern Areas as well as territories of Pakistan by concluding that territories of Northern Areas were part of Pakistan--Action of Assessing Officer was confirmed by the First Appellate Authority---Assessee contended that people of territory of Northern Areas were liable to pay taxes and other levies, which were competently imposed and not liable to pay any tax or levy, which were not competently imposed, since the Income Tax Ordinance, 1979 was not applicable to the people of Northern Areas, even so far after it's withdrawal, the income earned from the territory of Northern Areas was not taxable but same had been determined by the tax authorities illegally and unjustifiably---Validity---People of Northern Areas had been made liable to pay only those taxes or other levies which were competently imposed'---Wordscompetently imposed' connoted that only those taxes or levies would be payable by the people of Northern Areas which were imposed by express notification and legislation measures---Such aspects were regulated by the Ministry of Kashmir Affairs and Northern Areas whereby the applicability of Income Tax Ordinance, 1979 had been withdrawn---Orders of both the authorities below were set aside by the Appellate Tribunal whereby income accrued from the Northern Areas was made taxable illegally and unjustifiably---Case was remanded with the direction to finalize the assessments for all the years under appeal afresh after issuing the statutory notices to the assessee to assess the income earned only from areas other than the territories of Northern Areas---However, in the declared version of the assessee, income on the part of Northern Areas had been shown, whereas losses, with regard to other part of the country, had been shown which seemed to be illogical---Assessing officer was further directed to examine the accounts and other relevant documents, carefully to ascertain as to whether the causes of losses were genuine and were proved with solid documentary evidences and proceed strictly in accordance with law keeping in view the ground realities.

1999 SCMR 1379 ref.

Zahid Hussain, ACMA for Appellant.

Muhammad Tahir Khan, D.R. for Respondent.

2010 P T D (Trib.) 1121

[Income-tax Appellate Tribunal Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf, Accountant Member

I.T.As. Nos. 861/LB and 862/LB of 2008, decided on 8th March, 2010.

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

----Ss. 221, 122 & 39---Second Sched., Part-I, Cl. 132---Rectification of mistake---Assessee, a power generation project---Income from other sources---Exemption---Power generation project---Interest income---Taxation Officer found that income assessable under S.39 of the Income Tax Ordinance, 2001 could not be considered as attributable to the running of the project---Tax was charged on the aggregate income confronted through notice under S.221 of the Income Tax Ordinance, 2001---First Appellate Authority concluded that the matter being controversial and debatable did not fall within the scope of rectification provisions and should have been tackled by recourse to the provisions of S.122 of the Income Tax Ordinance, 2001---Order of the Taxation Officer was vacated by First Appellate Authority by holding that there was no mistake apparent on the face of record which could be rectified under S.221 of the Income Tax Ordinance, 2001---Validity---Interest income of a power generation project had been adjudicated by the hierarchy of the courts up to the level of Supreme Court of Pakistan---Ruling of apex court which held the field laid down the import of law vis-a-vis the taxability or otherwise of such income and if the disclosure made by the assessee in its returns of income or the treatment meted out by the Taxation Officer was in conflict with the ruling of the Supreme Court of Pakistan, the disclosure made by the assessee or the treatment accorded by the Taxation Officer would be considered to be mistake apparent on the record to the extent of repugnancy, which could be rectified under S.221 of the Income Tax Ordinance, 2001---Order of First Appellate Authority, transpired that she had not dilated upon the contentious issues in the light of ratio of judgments of competent courts---Order of the First Appellate Authority was vacated by the Appellate Tribunal and case was remanded for adjudication on contentious issues in the light of available judgments.

CIT v. National Food Laboratories 1992 SCMR 687 = 1992 PTD 570; 2004 PTD (Trib.) 452; 1998 SCMR 908; 1999 PTD 2899; CIT v. Shadman Mills Ltd. 2008 SCMR 204 = 2008 PTD 253; Generation Pakistan Ltd. and others v. Income Tax Appellate Tribunal of Pakistan and others 2004 SCMR 1319 and A.E.S. Pak., Gen. (Pvt.) Ltd. v. Commissioner Income Tax C.Ps. No.2211 and 2212-1/2005 and Civil Petition No.654, 746 and 747-L/2006, dated 13-12-2006 ref.

1998 PTD 3058 rel.

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

----Ss.221 & 122---Rectification of mistake---Controversy which hinges upon a process of arguments and counter-arguments for its resolution fall outside the scope of rectification action---For resolution of such debatable issues appropriate section was S.122 of the Income Tax Ordinance, 2001.

(c) Interpretation of Statutes---

----Real meaning of a provision of law---Court, through the process of interpretation crystalize the real meaning of provision of law which was to be followed by the administrative and also lower judicial fora.

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

----S.221---Rectification of mistake---Assessment---Assessments in past and closed transactions had been found to have been made in a manner contrary to the interpretation of the superior Court---Such assessments would be rectifiable under the relevant provisions of the statute so as to bring them in harmony with the interpretation of the superior court.

Sajjad Tasleem Azam, D.R. for Appellant.

Dr. Ikram ul Haq and Mansoor Baig for Respondent.

2010 P T D (Trib.) 1127

[Income-tax Appellate Tribunal Pakistan]

Before Raja Lehrasab Khan, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.A. No. 281/LB of 2008, decided on 30th October, 2009.

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

----S. 132(2A)---Disposal of appeals by Appellate Tribunal-Limitation--Non-passing of order within six months---Effect---Legislature had not prescribed limitation period for the decision of Appellate Tribunal and it could not be said that provisions of S.132(2A) of the Income Tax Ordinance, 2001 contained express limitation period for decision of Appellate Tribunal---Had it been the intention of legislature to prescribe limitation period for decision of Appellate Tribunal, it would have done so by the express provision---Legislature had not prescribed any consequence if the order is not passed by the Appellate Tribunal within six months of the filing of appeal.

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

----S.221(1) & (3)---Rectification of mistake---Limitation---Law had made it binding on the First Appellate Authority to pass an order an a rectification application filed under the provision of S.221 of the Income Tax Ordinance, 2001 before the expiration of the financial year next following the date on which the mistake was brought to their notice failing which the mistake shall be treated as rectified---While the Appellate Tribunal was authorized to rectify its order is subsection (1) of S.221 of the Income Tax Ordinance, 2001, it was specifically excluded from operation of limitation period prescribed in sub-section (3) of S.221 of the Income Tax Ordinance, 2001.

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

----Ss. 132(2A) & 221(3)---Disposal of appeal by Appellate Tribunal---Rectification of mistake---Comparison of the provisions of S.132(2A) of the Income Tax Ordinance, 2001 with the provisions of S.221(3) of the said Ordinance, revealed that there was no such express provision in S.132(2A) of the Income Tax Ordinance, 2001 for deeming order or relief to be allowed to the taxpayer---Said provision squarely enunciate the intention of the legislature that through provisions of S.132(2A) of the Income Tax Ordinance, 2001 no such relief was intended to be given to the taxpayer.

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

----S. 132(2A)---Disposal of appeal by Appellate Tribunal---Nature of the relevant provisions whether mandatory or directory---Legislature had not set forth any consequences of failure to comply with provision of S.132(2A) of the Income Tax Ordinance, 2001, therefore, the provision of S.132 (2A) were not mandatory but directory in nature.

2008 PTD 60 and 2000 PTD 2872 rel.

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

----S. 132(2A)---Disposal of appeal by Appellate Tribunal---Provisions of S.132(2A) of the Income Tax Ordinance, 2001 squarely fell within definition of `directory provision'.

2008 PTD 60 and 2000 PTD 2872 rel.

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

----S. 132(2A)---Disposal of appeal by Appellate Tribunal---Limitation---Deeming relief---Contention of the taxpayer regarding deeming relief to taxpayer in failure of Appellate Tribunal to pass order within six months of the filing of appeal was illogical and unpractical on the ground that (for arguments sake) if the appellant before the Appellate Tribunal was the department and the Appellate Tribunal fails to pass order within six months of the filing of appeal by the department then appeal of the department will be deemed to have been allowed confirming tax demand created by the department which will neither be a legal nor acceptable situation for the taxpayer.

(g) Income-tax---

----Limitation---There was no time limitation for illegal order.

Pakistan Electric Fitting Manufacturing Company Ltd. through Directors v. C.I.T. and others 2000 PTD 2407 rel.

(h) Interpretation of Statutes---

----Fiscal statute---Principle of strict construction of fiscal statute is applicable to charging provisions and does not apply to machinery provisions.

2002 PTD 441 rel.

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

----S. 132(2A)---Disposal of appeals by Appellate Tribunal---Provisions of S.132(2A) of the Income Tax Ordinance, 2001 are machinery provision and to say that order not passed by the Appellate Tribunal within six months of filing of appeal would become time-barred, would be against the principles of interpretation of statute.

Pakistan Electric Fittings Manufacturing Company Ltd. through Directors v. CIT and others 2000 PTD 2407 and 2002 PTD 441 rel.

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

----Preamble---Deeming provisions---Scope---Deeming provisions in the Income Tax Ordinance, 2001 are meant for specific purposes and they are specifically mentioned in various provisions of the Ordinance---Where there is no deeming provision anything cannot be construed as deemed to be done, as by doing so, one will go beyond the scope of the provisions of law.

PLD 1970 SC 29 rel.

(k) Interpretation of Statutes--

----Deeming provision---Construction of---While interpreting a deeming clause in a statute the court is bound to ascertain for what purpose and object the provision had been enacted.

PLD 1970 SC 29 rel.

(l) Interpretation of Statutes---

----Deeming provision---Effect---Effect of deeming provision is restricted to the section to which it is attached---Deeming provision cannot be interpreted or enlarged to other provisions of the statute.

2002 PTD 2112 rel.

(m) Interpretation of statutes---

----Deeming provision---Deeming provision in a statute cannot spill over to other provisions in a statute and is to be construed strictly within the four corners of its objects.

2002 PTD 2112 rel.

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

----S. 132(2A)---Disposal of appeals by appellate Tribunal---Limitation--Deeming provision---Since there was no deeming provisions in S.132(2A) of the Income Tax Ordinance, 2001 for deeming relief in case of failure of Appellate Tribunal not to pass orders within six months of filing of appeal the contention of taxpayer for deeming relief was not sustainable in law---Deeming relief and limitation period in case of failure of the Appellate Tribunal to pass order within six months of filing of appeal was misdirected and not sustainable in law and was rejected by the appellate Tribunal.

PLD 1970 SC 29 and 2002 PTD 2112 rel.

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

----Second Sched., Part-IV, Cl.3A---Exemption and tax concession---Tax year, 2004---Income on account of waiver of mark up---Taxation of---Taxpayer contended that benefit of Cl.3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 should be allowed with retrospective effect for charge year, 2004---Department contended that unless specifically provided in law, the provisions of enactment could not be applied with retrospective effect specifically when the enactment relates to charging provision of law---Enactment was in the nature of charging provision it could not be applied retrospectively---Validity---Clause 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 was enacted vide Finance Act, 2004 which exempted income derived on account of waiver of profit on debt or the debt itself---No retrospective effect was given by the legislature to the said clause, exemption as such was applicable me. f. 1-7-2004 from tax year, 2005---Provisions of law granting exemption were to be strictly followed and to give retrospective effect to the same would be against the law---Assessing Authority had rightly taxed the income on account of waiver of mark-up in the case of taxpayer and the First Appellate Authority had also rightly upheld the order of Assessing Authority---Appellate Tribunal declined to interfere in the order of First Appellate Authority on the issue---Appeal of the taxpayer was dismissed by the Appellate Tribunal being not maintainable in law.

48 STC 466 (SC) and 1992 PTD 1681 ref.

48 STC 466; 1971 PTD 200; 1970 PTD 127; (1959) I-Tax (111-207) (SC Pak); Abdul Rehman v. Federation of Pakistan 2002 PTD 804 (H.C. Kar.); 2003 PTD 589; 2006 SCMR 1577 = 2006 PTD 2331 and 2005 PTD 830 rel.

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

----Second Sched., Part-IV Cl.3A---Exemption and tax concessions---Clause 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 was enacted through Finance Act, 2004 and it was effective from 1-7-2004 and benefit could not be given retrospectively---Since the Cl.3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 was effective from 1-7-2004 the scope of remedial provisions incorporated could not be enlarged to cover periods not expressly falling under the exemption ambit.

48 STC 466 rel.

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

----Second Sched., Part-IV, Cl. 3A---Exemption and tax concessions---Retrospective effect---Fiscal statute should be construed strictly and the effect of Cl. 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 enacted through Finance Act, 2004, could not be given retrospectively.

(r) Interpretation of Statutes---

----Where the language of any statute or legal document is clear, the same has to be acted upon accordingly.

Abdul Rehman v. Federation of Pakistan 2002 PTD 804 rel.

(s) Interpretation of Statutes---

----While interpreting a fiscal statute there is no room for any intendment, interference or presumption.

2003 PTD 589 rel.

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

----Second Sched., Part-IV, Cl.3A---Exemption and tax concessions---Retrospective effect---Construction of provisions relating to exemption and tax concessions---Scope---Provisions of Cl. (3A) of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 could not be construed or interpreted in a manner to give them retrospective effect.

(u) Interpretation of Statutes---

----Fiscal statute---Exemption provisions---Interpretation of---In case of exemption, law had to be interpreted strictly and not liberally in favour of assessee---Exemption was not to be extended to assessee unless specifically so provided in law.

2006 SCMR 1577 = 2006 PTD 2331 rel.

Ameenudin Ansari for Appellant.

Tariq Mustafa D.R. for Respondent.

2010 P T D (Trib.) 1174

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 1302/LB of 2009, decided on 15th January, 2010.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 121, 114(4), 111(1)(6) & 239(1)---Best judgment assessment---Limitation---Assessment year 2002-2003---Assessee contended that assessment for the assessment year 2002-2003 should be made under Income Tax Ordinance, 1979 as had been provided in saving clause under S.239(1) of the Income Tax Ordinance, 2001 but order had been made under S.121 of the Income Tax Ordinance, 2001 after issuing notices under Ss.114(4) and 111(1)(b) of the Income Tax Ordinance, 2001 which was nullity in the eyes of law---Appeal was rejected by the First Appellate Authority being barred by limitation---Validity---Limitation to file appeal against the order which had been passed without lawful jurisdiction would cease to run----Appeal against such order could be instituted at any time---Taxation Officer had passed an order under S.121 of the Income Tax Ordinance, 2001 without having jurisdiction and against the clear provision of law---First Appellate Authority had dismissed the appeal filed by the assessee without any justification---Order of First Appellate Authority was vacated and the order passed by the Taxation Officer under S.121 of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal.

2009 PTD 1392; 2000 PTD 2407; 2002 PTD 506; (2002) 85 Tax 98 (Lah.); 2002 PTD 1035; PLD 1969 Lah. 1039; PLD 1970 Lah. 6 and 2004 PTD (Trib.) 838 rel.

Rana Munir Hussain for Appellant.

Mrs. Sabiha Mujahid, D.R. for the Respondent.

2010 P T D (Trib.) 1181

[Income-tax Appellate Tribunal Pakistan]

Before Munir Sadiq, Judicial Member and Mazhar Farooq Shirazi Accountant Member

I.T.A. No. 1324/LB of 2007, decided on 22nd August, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S.122, Second Sched., Part IV, Cl. (46-A)---Income Tax Ordinance (XXXI of 1979), Ss.59A & 62---Amendment of assessment---Assessment year 2000-2001---Assessment was finalized under S.62 of the Income Tax Ordinance, 1979---Inspection note was received by the Assessing Officer that consumption of Sui gas was a major raw material energy source which reflected the volume of business---Assessment was amended under S.122 of the Income Tax Ordinance, 2001 which was annulled by the First Appellate Authority---Department contended that First Appellate Authority was not justified to annul assessment order on legal grounds in view of Explanation given in Finance Ordinance, 2002---Validity---Action taken by the First Appellate Authority in cancelling the assessment order for the assessment year 2001-02 was perfectly justified as the assessment was deemed to be accepted under S.59A of the Income Tax Ordinance, 1979 before 30-6-2002---Section 122 of the Income Tax Ordinance, 2001 could not be applied to the assessment completed under Income Tax Ordinance, 1979 prior to 1-7-2003---Appeal filed by the department was dismissed by the Appellate Tribunal being devoid of any merit.

2006 SCMR 109 rel.

Khalid Latif, D.R. for Appellant.

Shoaib Ahmad Sheikh for Respondent.

2010 P T D (Trib.) 1191

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Shahnaz Rafique, Accountant Member

I.T.As. Nos. 5011/LB to 5015/LB, 5847/LB to 5851/LB of 2005, decided on 22nd October, 2009.

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

----Ss.156 & 65---Rectification of mistake---Application for rectification was moved on the ground that not only the proceedings under S.65 of the Income Tax Ordinance, 1979 were illegally initiated but the notice under said section had also been issued in absence of any lawful authority; such plea going to the root of the assessment order, same should have been decided by the First Appellate Authority at the first place---Validity---Such legal controversy needed to be thrashed out at the first appellate stage because it was the preliminary and primary contention of the assessee that the proceedings initiated under S.65 of the Income Tax Ordinance, 2001 were ab initio void and illegal---First Appellate Authority having not passed a speaking order, the case was sent back by the Appellate Tribunal to First Appellate Authority to look into the assessee's contentions in depth and pass a comprehensive judgment on the legal issues raised before him.

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

----Ss.116 & 111---Imposition of penalty after notice of hearing, etc.---Assessee contended that reasons advanced for imposition of penalty were the same as were noted by the Assessing Officer at the time of formulating additional assessment under S.65 of the Income Tax Ordinance, 1979, whereas the penalty proceedings were independent in its character and were not based on the reasons recorded in the assessment order and that penalty proceedings were criminal in nature and onus to prove guilt on the part of assessee squarely lay on the Department---Validity---Penalty proceedings were criminal in nature---Guilt was to be established independently on the basis of cogent evidence as was required in the criminal proceedings---Assessing officer was supposed to establish mens rea in such cases which was a sine qua non---First Appellate Authority dismissed the appeal in a summary manner without adhering to the judicial pronouncements---First set of appeals having been set aside, penalty appeals were also remanded back by the Appellate Tribunal to the First Appellate Authority for fresh adjudication with the directions that First Appellate Authority shall dispose of the penalty appeals after considering the facts of the case in its totality as well as ratio and principle decided in the case law.

(1992) 65 Tax 2005 (L.H.C.) (sic); 1989 PTD 521; 2001 PTD 1348; 2003 PTD (Trib.) 1068; 2003 PTD (Trib.) 1076; 1994 PTD (Trib.) 688; 2003 PTD (Trib.) 1121; 2004 PTD (Trib.) 1225 and 1994 PTD 675 rel.

Shoaib Ahmad Sheikh for Appellant.

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

2010 P T D (Trib.) 1196

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 626/LB and 627/LB of 2009, decided on 13th January, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111(1)(b) & 184---Unexplained income or assets---Addition---First Appellate Authority deleted the additions made by the Taxation Officer under S.111(1)(b) of the Income Tax Ordinance, 2001, as documentary evidence was furnished showing that the taxpayer had the source of investment---Penalty made under S.184 of the Income Tax Ordinance, 2001 being consequential to such addition had also been annulled---Iqrar nama deed of agreement and other documents had been furnished---Appellate Tribunal held that First Appellate Authority had rightly deleted the addition and annulled the consequent penalty mad by the Taxation Officer---No interference was warranted in the order of First Appellate Authority and appeals filed by the Department were dismissed.

Sabiha Mujahid, D.R. for the Appellant.

Shoaib A. Sh. for Respondent.

2010 P T D (Trib.) 1197

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.A. No.741/KB of 2009, decided on 20th November, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.153 (6B), 153(6A) & Second Sched., Part-IV, Cl.46A---Payment for goods and services---Federal Board of Revenue had explained the provision of subsection (6B) of S.153 of the Income Tax Ordinance, 2001 through Cl. (46-A) of Part-IV of Second Schedule to the Income Tax Ordinance, 2001---Department applying the same considered the assessee to be covered within the Final Tax Regime being a manufacturer---Assessee had contended that the High Court had held the said explanation of FBR to be ultra wires to the powers of Federal Board of Revenue and application of provision of S.153(4)(6A) of the Income Tax Ordinance, 2001 was independent and was to be read and applied ignoring Cl. (46-A) of Part-IV of Second Schedule to the Income Tax Ordinance, 2001---Validity---Keeping in view the principle, "when the law required a thing to be done in a particular manner it would be legal and valid only if it was done in that manner and not otherwise", it was held that the case was not covered by Final Tax Regime---Appeal filed by the taxpayer was allowed and the action of the officers below was held to be unlawful---Assessee, in circumstances, was not covered by Final Tax Regime---Deemed assessment was restored and the orders of the officers below were cancelled by the Appellate Tribunal.

2009 PTD 809 distinguished.

2008 PTD 1563 and 2005 MLD 1239 rel.

Muhammad Mehtab Khan for Appellant.

Basharat Ahmed Qureshi, D.R. for Respondent.

2010 P T D (Trib.) 1199

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 1546/LB of 2009, decided on 1st February, 2010.

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

----Ss. 182(1) & 114---Penalty for failure to furnish a return or statement---Notice dated 2-3-2009 under S.114(4) of the Income Tax Ordinance, 2001 was received by the assessee on 6-4-2009 and admittedly assessee had filed return on 9-4-2009---Penalty was imposed for failure to furnish return---Validity---Time was extended on request of assessee for filing the return---Taxation Officer in the notice under S.114(4) of the Income Tax Ordinance, 2001 had allowed 30 days time after the receipt of that notice and in failure to comply with that notice the ex parte assessment/penalty/prosecution etc. were to be initiated---Returns admittedly had been filed on 9-4-2009 in response to the notice---If the penalty order was to be made same could be made only for not more than 7 days but the Taxation Officer had calculated the defaulted days as 53---Advance tax paid by the assessee was more than the tax liability for the year under review and the assessee had to receive back the refund---Under S.182 of the Income Tax Ordinance, 2001 the penalty for failure to furnish a return or statement could be made when the default was without reasonable excuse---Reasonable cause for not filing the return had been established which was due to `the record of the case' being before the auditors, and the Taxation Officer himself had allowed the time on such ground---No justification existed for the penalty which was upheld by the First Appellate Authority without any basis---Order of First Appellate Authority was vacated and the order made by the Taxation Officer under S.182(I)/114 of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal.

Messrs Asim Textile Mills Ltd. I.T.As. Nos. 276 to 278 and 569/LB of 2006; I.T.As. Nos.166 to 169/LB of 2006 and 2004 PTD 1179 rel.

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

----S. 182(1)---Penalty for failure to furnish a return or statement---Purpose of penalty---Purpose of levying penalty is to deter the assessee from repeating the default in future and it cannot be made as resource mobilization/revenue generation measure.

Muhammad Iqbal Hashmi for Appellant.

Imran Raza Kazmi, D.R. for Respondent.

2010 P T D (Trib.) 1209

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

I.T.As. Nos.6713/LB and 6714/LB of 2005, decided on 13th October, 2009.

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

----Ss.80-C, 59 & 61---Constitution of Pakistan (1973), Art.23, 4 & 8--C.B.R. Circular No.15 of 1980, dated 26-6-1980---C.B.R. Circular No.26 of 1980 dated 12-10-1980--Tax on income of certain contractors and importers---Self-assessment----Commission agent---Franchisee---Assessing Officer OUSTED the case from Self-Assessment Scheme due to reason that the notices claiming for short documents had not been complied with within the prescribed time limit and commission receipts fell under the ambit of S.80-C of the Income Tax Ordinance, 1979 as provided under subsection (2)(a)(ia) of the Self-Assessment Scheme---Assessments were finalized under S.62 of the Income Tax Ordinance, 1979---Assessee contended that nature of business had not been properly appreciated as the assessee was not a commission agent but as a Franchisee rendering services to his company as was running a Franchise to solicit customers for company's customers subject to the terms and conditions set out in the agreement and was merely a franchisee not an agent of the company and as such his relationship with the company was not that of a commission agent---Validity---Assessee placed on record a copy of invoices raised to company to support his contention that the nature of receipts were services rather than commission, which revealed that assessee was generating revenue line rent, retention, upgradation, international roaming etc., and all such transactions were out of purview of definition of commission' as revenue in this regard had not been generated from the sale of goods but by providing services---Transactions of the assessee fell out of the definition ofcommission'---Order of First Appellate Authority was vacated and assessments were set aside with the directions for fresh consideration.

2008 PTD 1751 rel.

(b) Words and phrases---

----Franchised dealer---Agent---Distinction---Franchised dealer was defined as "a retailer who sells the product or service of a manufacturer of supplier under a franchise agreement which generally protects the territory for the retailer and provides advertising and promotion support to him "---Such definition showed that a franchisee had a similar role as that of an agent in its wider perspective.

Black's Law Dictionary (Eighth Edition) and 2008 PTD 1751 ref.

Sohail Mutee Babri, I.T.P. for Appellant.

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

2010 P T D (Trib.) 1221

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 1363/LB of 2009, decided on 1st February, 2010.

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

----Ss.122(5) & 122(1)---Amendment of assessment---Definite information--Taxation Officer without confronting the assessee had made addition assuming the jurisdiction under S.122(5) of the Income Tax Ordinance, 2001 despite the fact that no notice had ever been issued under S.122(5) of the Income Tax Ordinance, 2001---Validity---Taxation Officer assumed jurisdiction without issuing proper notice under S.122(5) of the Income Tax Ordinance, 2001 having no definite information and had amended the assessment without giving any basis which had been upheld by the First Appellate Authority without considering the facts as well---Order of First Appellate Authority was vacated and order passed by the Taxation Officer under S.122(1) of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal.

2007 PTD (Trib.) 2601; 1993 SCMR 1108 = 1993 PTD 1108 and 2002 PTD 102 rel.

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

----S.122(5)---Amendment of assessment---Definite information---Reason to believe---Scope---Tangible information and such proof that led to the reason to believe' could only be considered as adefinite information'---Any estimate, gossip, personal whims or surmises could not be termed as the definite information'---Prefix of definite with suffix of information had made the term more strong---Any information which created doubts or provided reason to suspect that the income had been concealed did not ,form a part of the termdefinite information'.

Mirza Anwar Baig for Appellant.

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

2010 P T D (Trib.) 1231

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 1537/LB to 1539/LB of 2009, decided on 1st February, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 183, 182 & 190---S.R.O. No. 708(I) of 2007 dated 14-7-2007---Penalty for non-payment of tax-Non-payment of tax for tax year 2003 as the determined refund was already with the department and the taxpayer had requested the department to adjust the tax liability from that determined refund---Return for tax year 2007 was filed in Regional Tax Office as the Federal Board of Revenue e -portal was not functioning---Levy of penalty---Cancellation of such penalties by the First Appellate Authority--Validity---Determined refund was admittedly available with the department and the taxpayer had already requested the department to adjust the tax liability from that determined refund---Likewise, Taxation Officer instead of verification to establish genuineness of submissions of return from service counter of Regional Tax Offices had imposed the penalty despite the fact that e-Portal of Central Board of Revenue was not functioning properly as was admitted by the Central Board of Revenue in the newspapers of that period:--Taxpayer had already fulfilled his obligations of filing the return on the counter of Central Board of Revenue---As the returns were filed before the Tax Facilitation Centre by the taxpayer it was established that the taxpayer had discharged his liability honestly and legally by filing his returns--Appeals filed by the Department having no merits, were dismissed by the Appellate Tribunal.

Imran Raza Kazmi, D.R. for Appellant.

Tauseef Alam Siddiqui, I.T.P. for Respondent.

2010 P T D (Trib.) 1255

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 1386/LB and 1387/LB of 2009, decided on 1st February, 2010.

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

----Ss.122(5A), 39 & Second Sched., Part-I, Cl. 132---Amendment of assessment---Income from other sources---Sale of sludge and scrap sale---Re-opening of case under S.122(5A) of the Income Tax Ordinance, 2001 for the reason that the assessment was erroneous being prejudicial to the interest of revenue as the taxpayer had not offered other income for tax in the return and the tax thereon had not been paid thereon as per law---Assessee contended that scrap sales and sludge sales were not actually the income of taxpayer but was a reduction in cost of input and such an activity directly related to the use of plant for power generation income which was exempt and as such other income consisting of sale of scrap and sludge was also exempt---Validity---Profit derived by the assessee from sale of "sludge" (which according to assessee was waste) was outside the main business activities and squarely fell in the ambit of "income from other sources" chargeable to tax under S.39 of the Income Tax Ordinance, 2001---Orders of the officers below were upheld by the Appellate Tribunal and appeals filed by the taxpayer were dismissed.

2001 SCMR 1376 = 2001 PTD 2097 rel.

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

----S.2(29)---'Income'---Definition---Nature---Definition in sub-S. (29) of S.2 of the Income Tax Ordinance, 2001 was inclusive and not exhaustive wherein it includes all kinds of profits and gains or receipt that were chargeable to tax under the Income Tax Ordinance, 2001.

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

Mansoor Awan, L.A. for Respondent.

2010 P T D (Trib.) 1271

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 1129/LB to. 1132/LB of 2008, decided on 20th May, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.218(2), 114(4) & 121---Service of notices and other documents--Issuance of notices through courier--Notices under S.114(4) of the Income Tax Ordinance, 2001 were issued through courier service which remained uncomplied with--Further notices were issued through the same courier service, which were also not responded to---Assessments were framed under 5.121 of the Income Tax Ordinance, 2001---Assessee contended that no proper service of notices was made upon the taxpayer; that assessee was a leading club of the city and mode of service of notice by using courier service could not be considered as proper services; that law provided that service of notice shall be treated as properly, served on the person, if personally served on the representative of person; that no such effort was made by the Department which opted for the mode of courier service instead of registered post and that assessments framed in the absence of taxpayer could not be given legal credence---Validity---Section 218 of the Income Tax Ordinance, 2001 clearly showed that service through courier service had been provided under the law but this could not be read in isolation---One could not overlook mode provided under S.218(2)(a) of the Income Tax Ordinance, 2001, which provided that notice personally served upon the representative of a person shall be treated as proper service---In case, the taxpayer did not appear before the tax authorities in response to the modes of service provided in S.218(a)(b) of the Income Tax Ordinance, 2001, the Department ought to have adopted mode of service provided in S.218(2)(c) of the Income Tax Ordinance, 2001, where procedure for service of notice as provided under Civil Procedure Code, 1908, had been laid down that in case of failure to serve the notices in the prescribed manner, service of notice could be made through affixture---Admittedly, it was not difficult at all to serve the notice on the taxpayer or its authorized representative---No serious effort was made by the Department to approach the taxpayer in order to frame the assessments---Tribunal observed that Department will have to bring stark changes in its mindset and shed lethargic attitude in conducting tax proceedings, especially, in the light of prevalent tax culture in the country, where a taxpayer always feel pride in not paying the tax---Order of First Appellate Authority was vacated, case was set aside and remanded to the Taxation Officer for de novo assessment.

Shoaib Ahmed Sheikh for Appellant.

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

2010 P T D (Trib.) 1289

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Shahnaz Rafique, Accountant Member

I.T.A. No. 1025/LB of 2009, decided on 1st October, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S.177(4)(d)---Audit---Selection of case by the Commissioner of Income Tax under S.177(4)(d) of the Income Tax Ordinance, 2001 in the absence of criteria laid down by the Central Board of Revenue 'for selection of any person's income tax affairs for audit'---Validity---Order amended by the Taxation Officer for the tax year, 2007, under S.122(1)(5) of the Income Tax Ordinance, 2001 was without any lawful authority which was quashed as well as annulled by the Appellate Tribunal and order passed by the First Appellate Authority was vacated.

1992 PTD 1; 2000 PTD 2407 (Kar. H.C); 2004 PTD 330; 2006 PTD 2691; 1989 PTD 460; 1991 PTD (Trib.) 786; 1994 PTD (Trib.) 1034; 1997 PTD (Trib.) 73 and 2003 ITA No. 189/LB of 2007 ref.

2009 PTD 1507 rel.

Shoaib Ahmed Sheikh for Appellant.

Ashraf Ahmad Ali, D.R. for Respondent.

2010 P T D (Trib.) 1373

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.A. No.234/IB of 2010, decided on 30th March, 2010.

Income Tax Ordinance (XLIX of 2001)---

----S.182---Penalty for failure to furnish a return or statement---Filing of return manually within time---Late filing of return electronically---Assessee filed its return electronically which was late by 29 days---Since return was late, Taxation Officer issuing show-cause notice imposed a penalty under 5.182 of the Income Tax Ordinance, 2001---Validity---Held, was no wilful default on the part of assessee as the taxpayer had also produced the copy of return manually filed within due dates---Assessing Officer failed to take into account such fact judiciously---No default on the part of assessee had been established against the assesseee---Imposition of penalties was legally not justified---Such piece of legislation was totally against the concept of facilitation rather it was compulsion---Taxpayer had to earn money to pay to government as tax---Tax officials were bound to complete their data and it was not for the assessee that he should complete the data entry of Federal Board of Revenue---Such legislation may be useful in the most developed countries where literacy rate was high that people feel easy to push button of computer instead of using the pen but circumstances of Pakistan at this stage warrant that choice be given to the taxpayer as to how he felt convenient to do the thing---No tax was payable from the assessee as the department had not levied any additional tax and the penalty could not be imposed---Order of First Appellate Authority was upheld by the Appellate Tribunal and the departmental appeal was dismissed as being without merits.

Ayesha Khalid for Appellant.

Nasir Absar for Respondent.

2010 P T D (Trib.) 1394(2)

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No.327/IB of 2010, decided on 16th April, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 182(1), 114, 115(4) & 153---Penalty for failure to furnish a return or statement---Late filing of return---Penalty was imposed by working formula which lay down at one-tenth of one per cent of the tax payable for the late payment of tax on the plea that return was filed late by 16 days---Assessee contended that he had filed statement under S.115 (4) of the Income Tax Ordinance, 2001 and the tax payable had already been deducted/collected at source under S.153 of the Income Tax Ordinance, 2001; and when no tax was due, there was no question of imposition of penalty---Validity---Levy of penalty was contingent to tax payable---No tax was payable with the return there was no question of levying penalty because it was not provided in the law, which was a lacuna in law---Legislature was urged to examine the necessity of enacting an express provisions for the purpose---No error or infirmity having been found in order passed by the First Appellate Authority as no tax was payable, order passed by the First Appellate Authority was upheld and maintained by the Appellate Tribunal and departmental appeal being devoid of any merit was dismissed.

1971 SCMR 128 rel.

Sardar Ali Khawaja, D.R. for Appellant.

Asad Azam, FCA for Respondent.

2010 P T D (Trib.) 1404

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahnaz Rafique, Accountant Member

S.T.A. No.655/LB of 2009, decided on 13th April, 2010.

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

----Ss. 2(47), 3, 25 & 38---C.B.R. Letter No. F5(1)-TR.1/96 dated 21-5-2008---C.B.R. Letter C. No.4 (47)STB/98-Vol.1 dated 27-1-2001--Retail price---Scope of tax---Enrolment as turnover taxpayer---Registered person---Assessee got enrolment certificate as turnover tax­payer---Assessee had not made any supplies as retailer instead their principal business activities were as wholesaler as they had supplied taxable goods and deposited 2% turnover tax; whereas under S.2(47) and 3 of the Sales Tax Act, 1990, the supplier of taxable goods to government/semi government departments, was a wholesaler and the supplies by wholesalers were chargeable to sales tax @ 15% instead of 2%---Assessee contended that he was enrolled as turnover/enrolled taxpayer and charged 2% turnover tax---Department was demanding to deposit 15% sales tax on supply while the assessee was not a registered person---Validity---Assessee charged 2% turnover tax and the same was deposited in government treasury in accordance with law---Assessee was a unregistered person and charged turnover tax @ 2% and 15% turnover was only for the persons who were registered under S.2(47) and 3 of the Sales Tax Act, 1990---Whenever all the documentary evidence was available before the Department and the Department was aware about the facts that the assessee had charged 2% turnover tax under the contract, it was beyond understanding why the Department was pressurizing the assessee to deposit 15% turnover tax---If there was any discrepancy or default to that extent, it had to be created against the purchaser who purchased the goods from a unregistered person to save 13% turnover sales tax and assessee being a unregistered person charged 2% turnover tax instead of 15% turnover tax---Assessee performed his business responsibilities according to his enrolment i.e. unregistered person and charged 2% turnover tax---Assessee's appeal was accepted by the Appellate Tribunal and the department was directed to charge only 2% turnover tax.

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

----S. 38---Authorized officer to have access to premises, stocks, accounts and record---Issuance of notice without approval of Central Board of Revenue---Validity---Notices were issued without prior approval of Central Board of Revenue or Collector and the proceedings initiated against the assessee were useless and did not have any consequences in the eye of law---If the notices were void ab initio and illegal then the show cause notice issued by the Deputy Collector without any date on the basis of such notices were no more the same was also not sustainable in the eye of law.

2001 SCMR 838 ref.

2004 PTD 2952 rel.

Sajid Ijaz Hotiana for Appellant.

Muhammad Nadeem Arif, D.R. for Respondent.

2010 P T D (Trib.) 1440

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No.982/IB of 2009, decided on 17th March, 2010.

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

----Ss. 221 & 120---Rectification of mistake---Rectification of deemed assessment order---Scope---Assessee contended that deemed order passed by the authority could not be rectified---Validity---Wording embodied in S.120(1)(a) of the Income Tax Ordinance, 2001 specifically showed that order passed by Commissioner shall be taken to be deemed assessment---Subsection (b) of S.120 of the Income Tax Ordinance, 2001 also embody the same wording that the "return shall be taken, for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the: return was furnished"---Version of the assessee was devoid of any force because even the deemed assessment order shall be taken to have been made by the Commissioner---Even the deemed assessment order shall' amount to have been made by the Commissioner and the taxpayer could not be given any benefit on such interpretation which was not based upon solid reasoning---Court shall not interpret the law in such a manner to defeat the ends of justice.

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

----Ss. 162 & 161---Recovery of tax from the person from whom tax was not collected or deducted---Failure to deduct tax---Additional tax---Recovery of---Authority could recover additional tax only from the person who failed to deduct' tax at source and not from the assessee/ appellant original amount of tax if not deducted or short deducted could be recovered from taxpayer from whom the tax should have been collected---Withholding agent was bound to pay the additional tax on the difference of the rate 6% and 5% under the law and not the taxpayer---Withholding agent was liable and demand of additional tax if due, could be raised against him and not against the taxpayer--Order passed by both the authorities below were vacated by the Appellate Tribunal up to the extent of levy of additional tax because principal amount, due to difference of rate of tax, had already been paid and additional tax could not be levied against the taxpayer, if it was levied, it could be only against the withholding agent.

Waseem Ahmed Siddiqui, F.C.A. for Appellant.

Ayesha Khalid D.R. for Respondent.

2010 P T D (Trib.) 1445

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahnaz Rafique, Accountant Member

I.T.As. Nos.750/LB and 1276/LB of 2008 and I.T.A. No. 51/LB of 2009, decided on 6th April, 2010.

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

----S.122---Amendment of assessment---Assessment year 2002-2003---Assessment order was passed on or before 30-6-2003---Amendment---Annulment of such amended assessment by the First Appellate Authority---Department contended that First Appellate Authority was not justified to annul the amended assessment on the ground that S.122 of the Income Tax Ordinance, 2001 was not applicable if the original assessment order for assessment years 2002-2003 was passed on or before 30-6-2003; and also not justified to hold that order was legally inform and defective as show cause notice was issued indicating only S.122 of the Income Tax Ordinance 2001, without referring the specific provision of S.122(5)/122(5A) of the Income Tax Ordinance, 2001---Validity---Matter had been rightly decided by the First Appellate Authority after taking into consideration the facts as well as settled law---Appellate Tribunal dismissed the appeal of the department on the issue.

2005 PTD 1316 rel.

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

----S.23(vi)(a)---Deductions---Addition was deleted by the First Appellate Authority on the ground that same was an invalid addition and was in violation of spirit of S.23 (vi)(a) of the Income Tax Ordinance, 1979---No interference was warranted by the Appellate Tribunal in the order of First Appellate Authority, being that of a higher authority, naturally deserved more credence---Departmental appeal was dismissed on the issue.

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

----S.24(c)---Deductions not admissible---Addition made under S.24(c) of the Income Tax Ordinance, 1979 had already been deleted by the Appellate Tribunal after scrutinizing the record that the name, address and the amount matched and the same was not to be disallowed twice---Addition made by the authorities did not sustain in the eye of law and merits deletion.

2005 PTD 1102 ref.

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

----Ss.8000, 80D, & 24 (c)---Tax on income of certain exporters--Assessment year 2001-2002---Section 80D of the Income Tax Ordinance, 1979 could not be applied on each and every source of income of a taxpayer separately and it had to be on the aggregate of the turnover of the taxpayer from all sources---Addition made under S.24(c) of the Income Tax Ordinance, 1979 having already been deleted, addition made under Ss.8000 and 80D of the Income Tax Ordinance, 1979 had no legs to stand---Addition was deleted by the Appellate Tribunal.

2009 PTD 1707 rel.

Muhammad Nadeem, Arif, D.R. for Appellant (in I.T.As. Nos.750/LB and 1276/LB of 2008).

Asad Feroze, ACA fox. Respondent (in I.T.As. Nos.750/LB and 1276/LB of 2008).

Asad Feroze, ACA for Appellant (in I.T.A. No.51/LB of 2009).

Muhammad Nadeem, Arif, D.R. for Respondent (in I.T.A. No.51/LB of 2009).

2010 P T D (Trib.) 1469

[Income-tax Appellate Tribunal Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf, Accountant Member

S.T.A. No.1375/LB of 2009, decided on 16th April, 2010.

Sales Tax Act (VII of 1990)---

----Ss.36---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Order-in-original was passed beyond the period as prescribed under proviso to subsection (3) of S.36 of the Sales Tax Act, 1990 as the show-cause notice was issued on 11-6-2002 and order-­in-original was passed on 9-10-2002 which was beyond the period of 45 days and the period of 45 days was extendable by 90 days but no extension was sought-Department could not indicate that any such extension was sought and was unable to controvert the legal as well as factual position---Appeal of the registered person was accepted by Appellate Tribunal and order-in-original was held to be barred by time and nullity in the eye of law.

2009 PTD 1978 rel.

Khubaib Ahmad for Appellant.

Manzoor Hussain Shad, D.R. for Respondent.

2010 P T D (Trib.) 1470

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas; Judicial Member

I.T.A. No.567/IB of 2010, decided on 1st June, 2010.

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

----Ss.182(1) & 114---Penalty for failure to furnish a return or statement---Tax payable---Imposition of penalty for late filing of annual income tax return---Validity---Provisions of S.182(1) of the Income Tax Ordinance, 2001 clearly established the imposition of penalty linked with the tax payable---Absence of tax payable was fatal for imposition of penalty---Penalty for default of S.114 of the Income Tax Ordinance, 2001 would only become leviable when there was a "tax payable" but when there was no tax payable by the taxpayer, levy of penalty was not justified---No error or infirmity in the order of First Appellate Authority was found which was upheld and maintained by the Appellate Tribunal ---Appeal of the department was dismissed being devoid of any merit.

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

----Ss.182 (1) & 144---Penalty for failure to furnish a return or statement---Tax payable ---Penalty had been prescribed in Sub-Cl. (i) of S.182 of the Income Tax Ordinance, 2001---Said clause had specified that penalty should be imposed on the basis of tax payable, whereas in the present case, no tax had become payable even on assessment--Restriction imposed on calculation of penalty was one tenth of one per cent of tax payable and maximum limit was 25% of the tax payable---Base point was the tax payable, resultantly second part of clause (i) came into operation only when initial calculation of penalty had been made on the basis of tax payable---For imposing penalty for default under S.114 of the Income Tax Ordinance, 2001, the pre-requisite was the tax payable by such assessee---Fulfilment of basic ingredient of "tax payable" thus was a condition precedent for levying the penalty.

(c) Interpretation of statutes---

----Tax statute is to be interpreted strictly and to be followed as per its language without stretching the meanings of the same.

(d) Interpretation of statutes---

----In the matter of taxation, literal approach had to be followed provided it did not lead to manifest absurdity.

Sardar Zafar Mehmood, D.R. for Appellant.

Zahid Hussain, A.C.M.A. for Respondent.

2010 P T D (Trib.) 1473

[Income-tax Appellate Tribunal Pakistan]

Before Ch. Muhammad Ishaq, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.A. No.697/LB of 2010, decided on 5th May, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.121, 114, 115, 120, 122(5) & 177---Best judgment assessment---Assessee contended that provisions of S.121 of the Income Tax Ordinance, 2001 were not warranted for the reason that best judgment assessment could only be made where any taxpayer failed to file return or statement under S.114 or S.115 of the Income Tax Ordinance, 2001, while in the present case the return was duly filed and as such provisions of S.121 of the Income Tax Ordinance, 2001 could not be invoked---Validity---Held, there was no other provision in law which permitted the Assessing Officer to modify or re-assess the already assessed return of income before justifiably establishing that income was either under-assessed or assessed at too low a rate as provided under S.122(5) of the Income Tax Ordinance, 2001---Assessing Officer should not have directly proceeded under S.121 of the Income Tax Ordinance, 2001 before crossing the barrier and fulfilling the requirements for cancelling the deemed assessment under S.120 of the Income Tax Ordinance, 2001 in terms of S.122 of the Income Tax Ordinance, 2001---Assessing Officer instead of resorting to S.121 of the Income Tax Ordinance, 2001 was required to first determine through audit that the deemed assessment was under-assessed or otherwise erroneous and prejudicial to the interest of Revenue as provided under S.122(5A) of the Income Tax Ordinance, 2001---No other method was available to modify or reassess a deemed assessment under the provisions of S.122 of the Income Tax Ordinance, 1979 before exercising jurisdiction provided under S.122(5) of the Income Tax Ordinance, 2001---Such legal flaw in the finalization of assessment was in addition to the findings in the order of First Appellate Authority Taxation Officer's action being not in strict compliance of the provisions and the procedure provided in law, was not endorsed by the Appellate Tribunal---Appeal of the department being without any merit was dismissed.

2006 PTD 734 rel.

2003 PTD (Trib.) 260; 2006 PTD (Trib.) 386; (1983) 48 Tax 56; 1985 SCMR 786, 1968 PTD 573, 1975 PTD 88 and 1976 PTD 347 ref.

Ghulam Murtaza and Muhammad Ajmal Khan for Appellants.

Muhammad Jamil Bhatti, D.R. for Respondent.

2010 P T D (Trib.) 1477

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahnaz Rafique, Accountant Member

I.T.A. No.772/LB of 2010, decided on 10th April, 2010.

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

----Ss.177, 122(1) & 122(5)-C. B.R. Circular C.No.1(1) S. (ITAS)/2004 dated 11-6-2004---C.B.R. Circular C.No.1 (1) S. (ITAS)/2004 dated 28-7-2004---Audit---Department contended that assessee was not justified to challenge the selection of the case because said issue did not arise out of order of First Appellate Authority---Validity---Ground of appeal before First Appellate Authority was "that the order under Ss.122(1) & 122(5) of the Income Ordinance, 2001 was bad in law and against the facts of the case" which covered the illegality of the order---Even otherwise, any legal objection that went to root of the case could be raised at any stage---Issue regarding selection of the case for audit went to the very root of the case, the assessee could not be debarred from raising such issue as the same had arisen out of the order---Said specific issue was challenged before the First Appellate Authority who had dealt with the matter while deciding the additional ground filed by the assessee---Objection raised by the Department was over-ruled by the Appellate Tribunal for the reason that the same was a legal issue and could be raised at any stage of the proceedings and had clearly arisen out of the order of First Appellate Authority.

1967 PTD 339; PLD 1976 Lah. 547; 2000 PTD 359; 2006 PTD (Trib.) 1778; 2008 PTD (Trib.) 397 and 2009 PTD (Trib.) 1136 rel.

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

----Ss. 177 & 122(5)---Audit---Action under S. 177 of the Income Tax Ordinance, 2001 whether appealable---Objection raised by the Department about non-appealability of action under S.177 of the Ordinance was unfounded and misconceived---Assessee had challenged the amendment order made under S.122(5) of the Income Tax Ordinance, 2001 which had been passed in pursuance of selection of case for audit---Amendment order issued under S.122(5) of the Income Tax Ordnance, 2001 stood on an illegal foundation and the same was liable to be annulled for order which was built on an illegal foundation was equally illegal and unsustainable in the eyes of law---Any superstructure raised on an illegal foundation would crumble and be set at naught and will be equally illegal as very foundation was not in accordance with law---Once it was established that selection for audit was contrary to the mandate available to the Commissioner, such principle shall be fully applicable---One can challenge in appeal any amended order on the grounds that the initial selection for audit was illegal and if the said selection was found to be illegal then the consequential amendment order would have the same fate.

1993 PTD 85; 1990 PTD 389; 2006 PTD 276; 2004 PTD (Trib.) 2691 and 2002 PTD (Trib.) 2512 rel.

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

---Ss.177 & 122(1)/122(5)---C. B. R. Circular C. No.1 (1) S. (ITAS)/2004 dated 11-6-2004---C.B.R. Circular C.No.1(1)S.(ITAS)/2004 dated 28-7-2004---Audit ---Department contended that circulars issued by the Central Board of Revenue were internal correspondence and were not open to public---Validity---Such circulars/letters had been throughout referred to before High Court as well as before Supreme Court of Pakistan and had been discussed---Text of the circulars/letters was itself very clear in the judgments that the field formation had been advised to contact taxpayers to avail the incentives---Circulars, in circumstances, could not be said to be internal correspondence and had rightly been referred by the appellant in his support.

1993 PTD 85; 1990 PTD 389; 2006 PTD 276; 2004 PTD (Trib.) 2691 and 2002 PTD (Trib.) 2512 ref.

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

----Ss.177 & 122---Audit---Amendment of assessment---Amendment order would remain intact even if the selection of case for audit was held to be illegal---Validity---Provisions of law permit the Taxation Officer to amend the assessment once "definite information" was acquired either as a result of audit or otherwise but in the present case, the record clearly showed that action taken by the Taxation Officer was on the basis of "definite information" that was acquired through audit---In the body of amendment order, the Taxation Officer had clearly stated the source for acquisition of the said "definite information "---Taxation Officer had admitted that the details filed during the audit proceedings constituted the basis of issuance of notice under S.122(9) of the Income Tax Ordinance, 2001---Arguments/ objections raised by the Department were, not relevant---Since the source of "definite information" remained the audit, the audit being illegal, maintainability of the order will have to be determined as to whether or not the Commissioner was legally empowered to select the case.

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

----Ss.177, 122(1) & 122 (5)---C.B.R. Circular C. No.1(1)S. (ITAS)/2004 dated 11-6-2004---C.B.R. Circular C. No.1(1)S. (ITAS)/2004, dated 28-7-2004---Audit ---Tax year, 2003---Selection of case for audit in spite of the fact that the taxpayer had revised the return in terms of circular/letter of the Central Board of Revenue---Assessee contended that Commissioner was not competent to select the case as provided in the circular/letter dated 11-6-2004---Department contended that the incentive was available to non-corporate taxpayer as no such concession was available to corporate taxpayers---Validity---Federal Board of Revenue had issued two circulars/letters under same reference number both related to deletion of cases from list of cases selected for audit for tax year, 2003, later circular/letter did not override the earlier circular---Rational conclusion should be that, the cases covered by either of the circular/letter would have to be dealt with accordingly---Corporate taxpayers who had revised the return could not be reselected for audit---Commissioner did not have any mandate to select the case once the taxpayer had admittedly revised the return in accordance with the letters issued by the Federal Board of Revenue and subsequent proceedings/orders were held to be a nullity in the eyes of law--Amended order under Ss.122(1)/122(5) of the Income Tax Ordinance, 2001 and orders of First Appellate Authority were vacated as the assumption of jurisdiction to undertake the audit and framing of amended order were all illegal---Revised returns filed by the taxpayer shall be taken to be the valid assessment order.

Pakistan in C.I.T. v. Fatima Sharif Textile, Kasur 2009 PTD 37 and Bisma Textile Mills Limited v. Federation of Pakistan 2009 PTD 41 rel.

Asim Zulifqar Ali, F.C.A. for Appellant.

Muhammad Asif, D.R. and Ch. Tahseen Muzaffar, DCIT for Respondent.

2010 P T D (Trib.) 1489

[Income-tax Appellate Tribunal Pakistan]

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

S.T.A. No.73/LB of 2009, decided on 16th March, 2010.

Sales Tax Act (VII of 1990)---

----S.10---Refund of input tax---Inordinate delay of almost five months in passing order---Taxpayer contended that refund against invoices duly incorporated in supplier's sales register and monthly Sales Tax Returns and its rejection was not only against the provisions of section 10 of the Sales Tax Act, 1990 but also without any lawful authority---Appeal was heard on 2-4-2008 but the order was passed after inordinate delay of almost five months, thus order was not a valid judgment in the eyes of law---Validity---Order delivered after five months of hearing was tantamount to delivering judgment without hearing the parties and a judgment delivered after four and half months after hearing the parties was not legally delivered---Contention of the taxpayer that order had been passed after five months of the hearing of arguments was substantiated from the date of its dispatch---Order, in circumstances, was vacated by the Appellate Tribunal and remanded the case back for fresh judgment after hearing the parties.

PLD 1952 Baghdad-ul-Jadid 38 and PLD 1960 Azad J&K 11 rel.

Khubaib Ahmad for Appellant.

Mian Khadim Hussain, D.R. for Respondent.

2010 P T D (Trib.) 1491

[Income-tax Appellate Tribunal Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf, Accountant Member

S.T.A. No.171/LB of 2009, decided on 16th April, 2010.

Sales Tax Act (VII of 1990)---

----Ss.45B & 10---Appeal---Limitation---Refund of input tax---Appeal was dismissed as barred by 27 days limitation being 30 days as provided under S.45B of the Sales Tax Act, 1990---Taxpayer was prevented to substantiate its claim of refund and was condemned unheard---First Appellate Authority should have examined the reasons of delay sympathetically when admittedly the registered person was proceeded ex parte during adjudication proceedings---Even otherwise the refund, if finally determined, is the money of the registered person, which should not be denied to him on technicalities---Keeping in view the supporting documents produced before the Appellate Tribunal, it would be just and appropriate to provide the registered person a chance to prove the claim of refund---Both the orders by the authorities below were vacated and the case was remanded back with the directions to provide an ample opportunity of being heard and pass a fresh and speaking order after examining supporting documents to be produced by the registered person.

Khubaib Ahmad for Appellant.

Manzoor Hussain Shah, D.R. for Respondent.

2010 P T D (Trib.) 1493

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed and Khawaja Farooq Saeed, Judicial Members Amjad Ali Ranjha, Accountant Member

W.T.As. Nos. 692/LB and 693/LB of 2001, decided on 27th July, 2002.

Per Amjad Ranjha, Accountant Members [Minority view]

Wealth Tax Act (XV of 1963)---

----Ss.17-B & 16(3)---Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order---Additional Commissioner--Inspecting Assistant Commissioner---Cancellation of assessment by the Inspecting Assistant Commissioner when the original order had been passed by another Inspecting Assistant Commissioner---Assessee contended that order passed under S.17-B of the Wealth Tax Act, 1963 was not maintainable as the original proceedings under S.16(3) of the Wealth Tax Act, 1963 were concluded by the Additional Commissioner and the order passed was without jurisdiction and not enforceable against the assessee---Validity---Provisions of S.17-B of the Wealth Tax Act, 1963 had rightly been invoked by the Inspecting Assistant Commissioner---Appeal on the issue was rejected.

Sandal Engineering (Pvt.) Ltd. v. IAC of Income/Wealth Tax 2001 PTD 1467 ref.

Wealth Tax Act (XV of 1963)---

----Second Sched., Part-1, Cl. (8A)---Exemption--Foreign remittances--Assessee contended that by induction of foreign remittance, he became lawful owner of assets equal to the amount of foreign remittance, which was previously covered by loan---Validity---Since share had already been purchased, though on loan, decrease in liability through repayment of loan could not be by any stretch of imagination considered creation of assets---Assets were created when the shares were purchased and any subsequent repayment of loan either through encashment of Foreign Currency could not be treated that assets were created as a result of encashment of Foreign Currency---Order passed by the Inspecting Assistant Commissioner disallowing the exemption claim, d on receipt of money in the shape of foreign currency was upheld by the Appellate Tribunal, rejecting assessee's appeal in toto.

Black's Law Dictionary, Sixth Edn. ref.

W.T.As. Nos. 1372 and 1373/LB of 2000 rel.

Words and phrases---

--increase'-'Creation'-Distinction-Increase in something was distinguishable from creation because word increase ostensibly implied the existence of something, while creation of a thing denoted bringing something into existence.

Black's Law Dictionary, Sixth Edn. rel.

Per Khalid Waheed Ahmed, Judicial Member

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

----Ss. 10(1)(c) & 17-B---Jurisdiction of Wealth-tax Authorities---Where the functions of Deputy Commissioner and Inspecting Assistant Commissioner were exercised by the Inspecting Assistant Commissioner and Commissioner respectively for the purpose of proceedings in respect of cases, the reference to Deputy Commissioner and Inspecting Assistant Commissioner was deemed to be reference to Additional Commissioner and Commissioner respectively---When assessment was framed by the Inspecting Assistant Commissioner, the reference by an Inspecting Assistant Commissioner in such case shall be a Commissioner as was explicit from the provisions of S.10(1)(c) of the Wealth Tax Act, 1963---Special Officer while framing the assessment was considered to be a Deputy Commissioner of Income Tax as per definition of Deputy Commissioner of Income Tax given in S.2(1)(10) of the Wealth Tax Act, 1963---Where such Special Officer was an Inspecting Assistant Commissioner, the jurisdiction of an Inspecting Assistant Commissioner in such case shall be exercised by Commissioner---Proceedings under S.17-B of the Wealth Tax Act, 1963 initiated by the Inspecting Assistant Commissioner whereby the assessment was also framed by the Inspecting Assistant Commissioner, were not maintainable.

Sandal Engineering (Pvt.) Ltd. v. IAC of Income/Wealth Tax 2001 PTD 1467 rel.

Per Khawaja Farooq Saeed Judicial Member---[Agreeing with]

Khalid Waheed Ahmad Judicial Member---[Majority view]

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

----Ss.17-B & 16(3)---Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order---Cancellation of assessment by the Inspecting Assistant Commissioner when the original order had been passed by another Inspecting Assistant Commissioner---Validity---Inspecting Assistant Commissioner when appointed as Special Officer remained an Inspecting Assistant Commissioner in addition to his special assignment as Special Officer of Income Tax; his status in office hierarchy remained that of a senior officer called as an Inspecting Assistant Commissioner---Assignment of Special Officer was not in derogation to his status and was an additional duty---When Commissioner stepped into the shoes of an Inspecting Assistant Commissioner for the purpose of a particular assignment he did not lose his status as a Commissioner, he remained entitled to all powers and jurisdiction assigned to him otherwise while his assignment to act as an Inspecting Assistant Commissioner in special circumstances was over and above his regular charge---Inspecting Assistant Commissioner cannot cancel the order of another Inspecting Assistant Commissioner even if the same had been finalized under special jurisdiction assigned to him as Special Officer---By stepping into the shoes of Assessing Officer in the designation of a Special Officer an Inspecting Assistant Commissioner was not deprived of his legal status in regular administrative hierarchy in any manner---Cancellation of assessment was highly unjustified which could not be upheld---Order passed under S.17-B of the Wealth Tax Act, 1963 being illegal was cancelled by the Appellate Tribunal.

Sandal Engineering (Pvt.) Ltd. v. IAC of Income/Wealth Tax 2001 PTD 1467 rel.

Muhammad Asif, D.R. for Appellant.

M. Iqbal for Respondent.

2010 P T D (Trib.) 1503

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.1496/LB of 2009, decided on 31st March, 2010.

Income Tax Ordinance (XLIX of 2001)---

----S. 205(1B)---Additional tax---Time period for calculating additional tax---Reduction of additional tax---Short payment of advance tax was admitted---Advance tax was chargeable from 1-4-2007---Date of assessment i.e. 30-9-2008 was also undisputed---Only contentious issue was the closing date for calculation of additional tax liability---Taxpayer's assertion was that the "30th day of June of the financial year next following" was 30-6-2007 whereas the department contended that it was 30-6-2008---Additional tax was leviable from 1st April to the date of assessment of relevant tax year or the 30th June of the financial year next following---Financial year of the taxpayer company started from 1-10-2006 to 30-9-2007 and the assessment of the said year was to be made on 30-9-2008 on which the return had to be filed---Taxation Officer was legally correct in calculating the period of default from 1-4-2007 to 30-6-2008 and to levy the additional tax---First Appellate Authority had wrongly reduced the period of default from 1-4-2007 to 30-6-2007 and its order was not sustainable in the eyes of law---Order of First Appellate Authority was vacated and that of the Taxation Officer was restored by the Appellate Tribunal.

Dr. Ishtiaq Ahmad D.R. for Appellant.

Naeem Akhtar Sheikh FCA for Respondent.

2010 P T D (Trib.) 1515

[Income-tax Appellate Tribunal Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member and Khalid Siddiqui, Accountant Member

Sales Tax Appeal No. K-193 of 2006, decided on 20th April, 2010.

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

----Ss.73, 7, 8, 33, 34 & 36(1)---Certain transaction not admissible---Procedural lapse condonable---Disallowance of input tax alleging that the taxpayer violated S.73 of the Sales Tax Act, 1990 as such was subject to penal action under S.33, with additional tax/default surcharge under S.34 and recovery of tax under S.36 of the Sales Tax Act, 1990---Validity---No loss to the national exchequer had been complained for and the allegation was that of procedural lapse which was condonable---No mens rea was alleged or warranted and apparently no tax evasion on the part of taxpayer was found particularly when he had deposited the tax in the national exchequer and no evidence was available on record that mode of collection of tax by the taxpayer was not in line with law---Double taxation was not authorized under the law---Sections 33(2)(cc) and 36(1) of the Sales Tax Act, 1990 dealt with the payment but did not cater the mode of collection of tax---No allegation on the part of taxpayer for violation of S.7 or S.8 of the Sales Tax Act, 1990 or incorrect input tax adjust­ment---Finding on facts and law made by the First Appellate Authority were correct and there was no reason to interfere into the same---Order of First Appellate Authority was confirmed by the Appellate Tribunal in the circumstances.

2002 PTD (Trib.) 1455 rel.

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

----S. 33(2)(cc)---Offences and penalties---Procedural lapse, if any, was not culpable under S.33(2)(cc) of the Sales Tax Act, 1990.

Farasat Rizvi, Senior Auditor for Appellant.

Muhammad Afzal Awan for Respondent.

2010 P T D (Trib.) 1520

[Income-tax Appellate Tribunal Pakistan]

Before Ch. Muhammad Ishaq, Member (Judicial) and Mazhar Farooq Shirazi, Member (Accountant)

I.T.A. No.983/LB of 2009, decided on 19th January, 2010.

Income Tax Ordinance (XLIX of 2001)---

----S.131---Appeal to Appellate Tribunal---Company--Amalgamation--Filing of appeal by incompetent person---Department contended that appeal was required to be filed by new entity on behalf of amalgamated company; that appeal was incompetent just like that a dead person could not file an appeal; that a defunct company could neither sue nor be sued; and that documentation regarding amalgamation was required to be filed along with appeal papers and failure to do so was fatal to the proceedings---Validity---Appeal filed before the Appellate Tribunal was not maintainable being filed by an `incompetent person' which merited dismissal.

PLD 2009 Kar. 169 = 2009 PTD 193 rel.

Maqsood Ahmad for Appellant.

Zulqarnain Tirmizi, D.R. for Respondent.

2010 P T D (Trib.) 1522

[Income-tax Appellate Tribunal Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf, Accountant Member

S.T.A. No.184/LB of 2009, decided on 3rd May, 2010.

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

----Ss.7 & 10---Determination of tax liability---Sales tax demand was raised being inadmissible input tax---Evidence produced by the taxpayer in support of its claim of credit of input tax was accepted by the First Appellate Authority---Department contended that Assistant Collector had recorded valid reasons for disallowing the credit of input tax as he was not in a position to allow the credit of input tax which was not cleared by Sales Tax Automated Repository Revenue (STARR)---Validity---First Appellate Authority was justified to accept appeal of the registered person because the technical objections raised by the Sales Tax Automated Repository Revenue (STARR) for disallowing the credit of input tax had been met through irrefutable evidence.

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

----S.11(4)---Assessment of tax---Limitation---Order-in-original, having been passed by the Assistant Collector in violation of the limitation laid down in S.11(4) of the Sales Tax Act, 1990 was a nullity in the eyes of law.

2008 PTD 578 and 2009 PTD 1978 ref.

Messrs Super Asia Muhammad Din and Sons (Pvt.) Limited v. Collector of Sales Tax, Gujranwala 2008 PTD 60 rel.

Ghulam Mujtaba Bhatti, D.R. for Appellant.

Khubaib Ahmad for Respondent.

2010 P T D (Trib.) 1525

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.A. No.412/IB of 2010, decided on 3rd April, 2010.

Income Tax Ordinance (XLIX of 2001)---

----S.177(4)---Audit---Tax year 2004 --- Selection of the case for audit for tax year 2004 was not sustainable on the ground that Sub-S.(4) of S.177 of the Income Tax Ordinance, 2001 was inserted in Income Tax Ordinance, 2001 through Finance Act, 2004 relevant to tax year 2005 onward and not applicable to tax year 2004---Taxpayer was to be dealt with in a tax year as per law enforceable for that tax year---Law could not be applied retrospectively ---Selection of case for tax year 2004 was nullity in the eyes of law---Departmental appeal was dismissed.

Ziaullah Khan, D.I. for Appellant.

Hafiz M. Idrees for Respondent.

2010 P T D (Trib.) 1537

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Istataat Ali, Accountant Member

I.T.A. No940/IB of 2009, decided on 15th April, 2010.

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

----S.177 (4)---Audit---Selection of case for audit---Commissioner can also select cases for audit' irrespective of issuance of audit selection criteria by Federal Board of Revenue and mentioning of specific clause of S.177(4) of the Income Tax Ordinance, 2001 was not necessarily required.

W.P. No.11166 of 2009 rel.

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

----S. 177(4)---Audit---Pre-selection show-cause notice---Department need not issue a pre-selection show-cause notice---Commissioner was competent to select cases for audit and mentioning of specific clause of S.177(4) of the Income Tax Ordinance, 2001 was not essentially required.

Writ Petitions Nos. 960 of 2008 and W.P. No.11166 of 2009 rel.

2007 PTD 239; 2009 PTD 20; 2009 PTD 284; 2007 PTD 2188; 2008 PTD 1440; PLD 1963 Kar. 182; 2000 SCMR 1017; I.C.A. No.125 of 2007; Writ Petition No.7146 .of 2008 and Writ Petition No. 2928 of 2008 ref.

2010 PTD 395 and Mohsin Raza v. Chairman, F.B.R. and others 2009 PTD 1507 not in field.

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

----S.177(4)---Audit---While selecting a case for audit, the Department should intimate the taxpayer about the same and criteria/reasons of selection of the case for audit, should also be disclosed.

2005 PTD 152 and Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others 2009 SCMR 344 = 2009 PTD 37 rel.

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

----S.177 (4)---Audit---Selection of case for audit---While selecting a taxpayer's case for audit, the Department. should intimate him about the same and also disclosed the criteria/reasons of selection of the case for audit---Such condition is obligatory in nature and it was incumbent upon the Department that if the case of any taxpayer was selected for audit, an intimation should be given about such selection to the taxpayer and criteria/reasons of such selection should also be communicated---In the present case, Department, while intimating the taxpayer about selection of his case for audit, also disclosed the criteria/reasons of selection---Intimation letter was duly issued through which the taxpayer was informed that his case was selected for audit, because claim of exemption from tax had to be examined---Legal requirements for selection of the case for audit were duly fulfilled by the Department---Case was rightly selected for audit and objections raised from the taxpayer's side about selection of his case for audit were not maintained by the Appellate Tribunal---Appeal of the taxpayer against selection of case for audit, being devoid of any merit, was rejected.

2009 PTD 284 rel.

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

----Ss.54, proviso, 170, 177, 120(1) 122 (1) & Second Sched., Part-1--Income Tax Ordinance (XXXI of 1979), Fifth Sched., Part-1---Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act (XXIV of 1948), S.38, Paragraphs (9) to (13)---Petroleum Concession Agreements---Exemption and tax provisions in other laws---Salary income of expatriate---Exemption of---Assessee contended that salary income earned by the expatriate was exempt from tax for a period of three (years) from the date of arrival in Pakistan---Department pleaded that income of the taxpayer was not exempt from tax under any of the provisions of Second Schedule to the Income Tax Ordinance, 2001; and in the light of provisions contained in S.54 of the Income Tax Ordinance, 2001; and in the absence of any specific exception in the Second Schedule, income of the taxpayer was not exempt from tax---Assessee pointed out that there was a proviso which was part of S.54 of the Income Tax Ordinance, 2001, which envisaged that any exemption from income tax or a reduction in the rate of tax or a rate of tax liability' of any person or any exemption from operation of any provision of the Income Tax Ordinance, 2001 provided in any other law. in force on the commencement of the Income Tax Ordinance, 2001 shall continue to be available unless withdrawn; and said proviso was omitted by Finance Act, 2008; and in this manner, exemption. provided under laws/regulations relating to petroleum/mines shall continue to be operative till tax year, 2008, because the proviso was omitted/deleted through Finance Act, 2008---Income of the taxpayer was exempt in terms of proviso to S.54 of the Income Tax Ordinance, 2001, because specific exemption from tax was granted through sovereign agreement by Government of Pakistan and the Regulation of Mines & Oil Fields and Mineral Development (Government Control) Act, 1948---Validity--- Exemption from tax was provided through sovereign agreement between the stakeholders--Exemption was also available as contained in the provisions of Regulation of Mines & Oil Fields and Mineral Development (Government Control) Act, 1948---Proviso to S.54 of the Income Tax Ordinance, 2001 further supported the contention of the taxpayer, because protection was provided through the proviso to the exemptions granted by the Federal Government through statutes---It was only in 2008 that a decision was made by the Government that exemption from tax shall only be available through Income Tax Ordinance, 2001 and no other statute granting exemption from tax shall have any legal effect---Income of the taxpayer was exempt from tax and Taxation Officer was not justified to reject taxpayer's claim of exemption---Action of both the authorities below on said point was vacated and taxpayer's appeal on the point of exemption from tax was accepted by Appellate Tribunal.

Flopetrol International S.A, Islamabad' and others v. Central Board of Revenue, Islamabad and others 1994 CLC 1721 = 1994 PTD 1370 and 2003 PTD 463 ref.

Rashid Ibrahim, F.C.A., Jehanzeb Amin, A.C.A. and Hafiz M. Idrees for Appellants.

Mrs. Aisha Khalid, D.R. for Respondent.

2010 P T D (Trib.) 1552

[Income-tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.As. Nos.408/IB to 410/IB of 2010, decided on 3rd April, 2010.

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

----S.177---Audit---Words "in addition to" and "also"-Interpretation---of literal construction was that an interpretation which renders any part of provision as surplusage was not correct---Construction which could leave without effect any part of the language of a statute will normally be rejected---Provision of subsections (2) and (4) of S.177 of the Income Tax Ordinance, 2001 are disjunctive and not conjunc­tive---Subsection (4) of S.177 of the Income Tax Ordinance, 2001 clearly empowers the Commissioner Income Tax to issue notice on the basis of criteria spelt out in sub-clauses (a), (b), (c) and (d) of subsection (4) of S.177 of the Income Tax Ordinance, 2001---Question whether a notice was necessarily required to be issued before selecting a case for audit under S.177(4) of the Income Tax Ordinance, 2001 was answered in favour of the Department and against the taxpayer.

Muhammad Hussain v. CIT 2003 PTD 1.52; Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others (2006) 94 Tax 317; 2010 PTD 395; Mohsin Raza v. Chairman F.B.R. and others 2009 PTD 1507; Muhammad Umer v. CIT 2009 PTD 284; W.P. No.11166 of 2009; CIT v. Fatima Sharif Textiles Mills, Kasur 2009 SCMR 344 = 2009 PTD 37; 2007 PTD 239; 2009 PTD 20; 2007 PTD 2188; 2008 PTD 1440; PLD 1963 Kar. 182; 2000 SCMR 1017; I.C.A. No. 1250 of 2007; Writ Petition No. 7146 of 2008 and Writ Petition No. 2928 of 2008 ref.

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

----S.177---Audit---Pie-selection notice ---Exclusion of pre-selection notice is essential for effective and smooth workability---Extraordinary jurisdiction could be invoked only on legal ground and on the mixed question of law and facts---If a brief scenario of fact alongwith legal implication is presented before the court order passed will be having complete subjective assessment' of each issue---Court never intends to deprive the assessee to refute the version of the department ---Right of assessee is protected in subsection (6) of S.177 of the Income Tax Ordinance, 2001 as well as in S.122(9) of the Income Tax Ordinance, 2001---Pre-selection notice is not necessary.

Mohsin Raza v. Chairman F.B.R. and others 2009 PTD 1507; PLD 2008 SC 663, 2007 SCMR 330, 2005 S.CMR 678, 2005 SCMR 1814; PLD 2004 SC 441 and Liberty Oil Mills v. Union of India AIR 1984 SC 1271 ref.

Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others (2006) 94 Tax 317; Writ Petition No.11166 of 2009; Union of India v. Tulsi Ram Patel AIR 1984 SC 1416; Lewis v. Heffer and others (1978) 3 All E.R. 354; Wednesbry Corporation v. Minister of Housing and Local Government (1965) 1 All E.R. 186; Hardutt Mull Jute Mills v. State of Bihar AIR 1957 Patna 21 and 2009 99 Tax 272 rel.

(c) Precedent---

----Where the judgments of the same forum with the same strength were in contrast to each other, the judgment being later in time was to be followed due to concept of curative philosophy.

Mohsin Raza v. Chairman F.B.R. and others 2009 PTD 1507 and Writ Petition No.11166 of 2009 ref.

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

----S.177(4)---Audit---Conditions and parameters set forth in sub-clauses (a), (b), (c) and (d) of subsection (4) of S.177 of the Income Tax Ordinance, 2001 are the jurisdictional basis, non-existence whereof is a sine qua non for selection of a person for audit---Existence of such jurisdictional basis must necessarily be determined before power can be exercised---Such determination could only be effected after hearing the department and granting them opportunity to produce the material to displace the case of the assessee, which exercise could only be undertaken on an individual case to be case to case basis.

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

---S.177 (4)---Audit---Exercise of power by the Department---Department may very well issue notice purportedly under S.177 (4) of the Income Tax Ordinance, 2001 but whether in fact and in Law Department was entitled to exercise the powers conferred thereby and whether such powers had in fact been exercised within the parameters prescribed by law can always be challenged by the assessee by responding to the notice including by objecting to the jurisdiction and authority of the Commissioner to issue the same.

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

----S.177 (4)---Audit ---Question of jurisdiction to be decided first---Any objections raised would require to be adjudicated upon through a speaking order, if the very jurisdiction to issue such notice is challenged then obviously, the question of jurisdiction would require to be dealt with and decided first before the Commissioner can proceed further in the matter.

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

----S.177 (4)---Audit ---Jurisdiction---Taxpayer's explanation on all the issues raised in the order including issue of the jurisdiction will be answered in yes' orno', either the proceedings of audit are to be dropped or Commissioner could proceed to amend the assessment under Sub-S.(1) or subsection (4) of S.122 of the Income Tax Ordinance, 2001---Order could be independently passed under subsection (6) of S.177 of the Income Tax Ordinance, 2001 or objection raised by the taxpayer could be answered by discussing in detail in show-cause notices issued under S.122(9) of the Income Tax Ordinance, 2001---Detailed discussion is to be made to refute the explanation/objection raised by the taxpayer.

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

---Ss. 121(1) & 122---Best judgment assessment---Amendment of assessment---Parameters---Sections 121 & 122 of Income Tax Ordinance, 2001 are separate and independent; both are to be applied in two different situations and could not be simultaneously applied---Section 121(1) of the Income Tax Ordinance, 2001 deals with best judgment assessment while S.122 of the Income Tax Ordinance, 2001 could be applied for reopening only where a definite information is available or the order was erroneous and prejudicial to the interest of Revenue---Parameters are entirely separate.

I.T.A. No.30/IB of 2009 rel.

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

---Ss. 121(1), 120, 122 & 177---Best judgment assessment in the presence of deemed assessment; and simultaneously application of Ss.122(1)(5) & 121(1)(d) of the Income Tax Ordinance, 2001 explained.

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

----Ss. 122(1), 122(5) & 121(1)---Amendment of assessment--, Simultaneous proceedings---Validity---Proceedings simultaneously conducted under Ss.121(1), 122(1) & 122(5) of the Income Tax Ordinance, 2001 were unlawful---Issue of simultaneous notice and application of S.121(1)(d) as well as S.122(5) of the Income Tax Ordinance, 2001 was legally not sustainable---Department contended that title of assessment order shows that it was completed under Ss.122(1) & 122(5) of the Income Tax Ordinance, 2001 but contents of the order clearly showed simultaneous application of Ss.121(1)(d) and 122 of the Income Tax Ordinance, 2001---Proceedings conducted were legally defective; and assessment was not sustainable---Appeal of the department was dismissed by the Appellate Tribunal.

I.T.A. No.30/IB of 2009; I.T.A. No.476-477/IB/2009 and I.T.A. No.405/IB/2008 rel.

Ziaullah Khan, D.R. for Applicant.

Ch. Naeem-ul-Haq for Respondent.

2010 P T D (Trib.) 1568

[Income-tax Appellate Tribunal Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.As. Nos.727/LB to 730/LB of 2009, decided on 25th January, 2010.

(a) Income Tax---

----Stay order---High Court restrained the Taxation Officer from passing the final order till the next date of hearing---Stay granted by High Court, on the pervious date, was not extended---Extension in stay could not be presumed so as to nullify the proceedings ---If the appellant had honestly believed the existence of a stay order, it would have taken recourse to the contempt of court proceedings---Such course of action having not been adopted, the appellant may not be allowed to taken advantage of its acquiescence in the continuation of the proceedings.

(b) Income Tax---

---Stay order---No intimation---Effect of---Absence of intimation of a stay order issued by the High Court was not a valid defence for the State functionaries to proceed in the matter---Restraint or stay order becomes operative from the moment it is announced---Despite no knowledge of such order, any proceedings subsequent thereto, shall remain unlawful.

1993 PTD 332 rel.

(c) Income Tax---

----Stay order---Proceedings which, for one reason or the other, continue during the validity of a stay order, or after the issuance of stay order, granted by the High Court would not become ipso facto void or nullity in the eyes of law; it was for the court, granting the stay, to rule upon the validity of such proceedings.

I.T.A. No.2407/LB of 2000 rel.

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

---S. 122---Income Tax Rules, 2002, R. 68---Amendment of assessment---Notice of amended assessment---Jurisdiction---Assumption of----Appellant contended that as the Taxation Officer did not issue the required/prescribed statutory notice; the assumption of jurisdiction by the Taxation Officer became void in the eyes of law; and that there was a difference between the requirement of issuance of a statutory notice' andrequirement of providing an opportunity of being heard'---Validity---Rule 68 of the Income Tax Rules, 2002 gave an option to the Commissioner for issuance of a notice or letter which had to be in the manner or pro forma specified in Part-II of the First Schedule to the Income Tax Rules, 2002---Commissioner or the Taxation Officer, in exercise of its delegated powers, could either issue a notice or a letter---If the Taxation Officer opts to issue a notice then it had to be in the pro forma specified in Part-II of the First Schedule to the Income Tax Rules, 2002; if, however, he opts to issue a letter, then it had to be in the manner of that pro forma---Taxation Officer when deems it sufficient to issue a letter only then necessarily it is to be in the manner specified in the Rules---Letter could be in the manner of pro forma if the requirement of the Rule 68 would be satisfied i.e. the intentions, basis and requirements of the intended action, as those in the notice, were fully disclosed in the letter issued by the Taxation Officer---Requirement of R.68 of the Income Tax Rules, 2002 would stand satisfied through the issuance of letter---Show-cause notice in the present case, was though in the shape of letter but fully disclosed the intention of the Taxation Officer as also the basis of intended actions besides his requirements---Issuance of notice under S.122 of the Income Tax Ordinance, 2001 was not mandatory and law required to provide the taxpayer an opportunity of being heard---Non-issuance of notice was not fatal---Objection raised by the appellant was overruled by the Appellate Tribunal.

1992 PTD (Trib.) 1587 and 2006 PTD 2066 ref.

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

----S.122---Income Tax Ordinance (XXXI of 1979), S.65---Amendment of assessment---Notice---Opportunity of being heard---Difference between the provisions of S.122, Income Tax Ordinance, 2001 and S.65 of Income Tax Ordinance, 1979---Under S.65 of the Income Tax Ordinance, 1979 the proceedings were initiated by issuance of a notice and the assessing authority may take the cognizance of the case by issuing the notice; as the statute itself provides for a specific action in a very explicit manner thus the non-issuance of the notice was fatal and incurable mistake---Under S.122 of the Income Tax Ordinance, 2001 there was no statutory requirement for issuance of notice to initiate proceedings and instead subsection (9) of S.122 of the Income Tax Ordinance, 2001 spoke of providing an opportunity of being heard to the taxpayer.

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

----S.12 (2) (d)---Salary---Perquisites---Payment of 50% above the remuneration---Addition---Taxpayer contended that actual expenses for vehicle running incurred by the Executives were reimbursed on actual expenses basis, which had been incurred by them on behalf of the employer-company in performance of their duties; and such payments stood excluded from the definition of `salary' and perquisites under S.12 (2)(d) of the Income Tax Ordinance, 2001 as the addition had been made on the presumptions that the company maintained vehicles had been provided to its executives for free use---Validity---For immediate preceding year under the similar facts the Assessing Officer had curtailed the claim of expense on account of reimbursement of expenses for vehicle running by 50%---Appellate Tribunal ordered that the addition shall be reduced in all the years by an amount equal to 50% of the payments under the head "reimbursable expenses for vehicle running".

(1994) 208 ITR 649; 1992 PTD 1161 and 2007 PTD (Trib.) 1055 ref.

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

----Ss.28(1) (b), 77(4) & 2(1A)---Depreciation on assets transferred from leased assets to own assets---Residual value---Claim of excess depreciation in respect of assets transferred was calculated and added to the income on the ground that such assets had to be transferred from leased assets to own assets on the residual value---Assessee contended that transfer of assets front the category of leased assets to own asset was past and closed transaction for all intents and purposes; and if the Assessing Officer had any reservations about the claim of cost of acquisition of subject leased assets, he should have first further amended the assessment order; and Taxation Officer was not legally justified to go against the history of the case---Validity---First transfer of assets front the category of leased assets to own assets took place during the tax year, 2003---For the tax year, 2003, the case was properly audited and the issue of claim of depreciation was thoroughly scrutinized, which included the claim of depreciation in respect of assets transferred---To the extent of transfer of assets, it was a past and closed transaction which had attained finality---Without recourse to any retrieval action, the Taxation Officer dealing with the tax year, 2004 was not competent to challenge the veracity or legality of the figures representing written down value of assets brought forward from tax year, 2003---Amended assessment order for the tax year, 2003 was in a way had become hit by limitation so as to debar the Taxation Officer, conducting proceedings for tax year, 2004 onward, from taking any retrieval action---Order of Assessing Officer and endorsement by the First Appellate Authority amounted to side lining express provision of law contained in S.122 of the Income Tax Ordinance, 2001.

Ellahi Cotton Mills Ltd. v. CIT 1997 PTD 1555 and Caltex Oil (Pak.) Ltd. v. CIT 2007 PTR 46 Kar. ref.

(h) Income Tax---

----Estoppel, principle of---Applicability---Scope---No estoppel where an action of one Assessing Officer is statedly held to be in violation of law by a successor in office but there are limits and parameters of such shelter.

(i) Income Tax---

----Administration of justice---Order passed by an officer, which he was duly competent to pass, deserves due respect front his successors.

(j) Income Tax---

----Written down value---Computation of---Written down value of assets shall be computed by taking their cost of acquisition.

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

----S.76(5)---Cost---Foreign Exchange loss---Expenses claimed on account of exchange loss was disallowed being notional and being capital in nature---Assessee explained that he had obtained foreign currency loan to finance the debt portion of its expansion project; and such exchange loss represented the loss incurred due to devaluation of currency---Validity---Expenses incurred was thoroughly scrutinized and some of these expenses had also been proportionately disallowed; while partially disallowing total financial expenses, the Assessing Officer had nowhere objected to the admissibility or otherwise of the interest portion/financial charges attributable to repayment of foreign currency loan---In the absence of objection to repayment of foreign currency loan and interest thereupon, the Taxation Officer could not proceed to reject the claim of resultant exchange loss---Exchange loss claimed by the assessee was directed to be allowed in circumstances.

1991 PTD 171; Sutlej Cotton Mills v. CIT (1979) 116 ITR 1; 2007 PTD (Trib.) 2109 and 1989 PTD 602 rel.

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

----S. 76(5)---Cost---Provisions of S.76 (5) of the Income Tax Ordinance, 2001 were applicable to a loan used for acquisition of asset---Since the proceedings of foreign currency loan had not been used for acquisition of any asset, the exchange difference arising on repayment of foreign currency loan was not hit by mischief of S.76 (5) of the Income Tax Ordinance, 2001.

1991 PTD 171; Sutlej Cotton Mills v. CIT (1979) 116 ITR 1; 2007 PTD (Trib.) 2109 and 1989 PTD 602 rel.

Sutlej Cotton Mills v. CIT (1979) 116 ITR 1 and 2007 PTD (Trib.) 2109 ref.

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

----Ss.67, 28(1A), 6 & 7---Income Tax Rules, 2002, R.13(3)(a)---Apportionment of deductions---Profit on debt, financial costs and lease payments---Curtailment of financial expenses--- Investment in shares---Purchase of capital assets---Assessee was confronted with the issue that investment in acquisitions of share had been made out of borrowed funds, since the assessee had deficiency of funds available for purchase of capital assets as well as for smooth running of business operations thus, why claim of financial expenses should not be disallowed proportionate to investment in shares as cash generated from the operating activities was much less than the cash utilized for investment activities warranting utilization of interest based on borrowed money for investment activities, and there was no rebuttal of the conclusion that the assessee had made investment in acquisition of shares out of long term loans and long term Murabaha, and assessee had not been able to present any evidence in terms of cash book and bank statement showing availability of money other than borrowed money on the dates money was advanced for investment in shares---Assessee contended that Taxation Officer disallowed the claim of exchange loss on foreign currency loan and the assessee had utilized such foreign currency loan on expansion of business by acquisition of capital asset while the same foreign currency loan was treated as related to investment in shares and markup of this loan was curtailed, and contradictory treatment of interest expenses and exchange loss of such loan and of other loans obtained for business purposes established beyond any doubt that the curtailment of financial charges were on flimsy grounds, without establishing the relation of loans with the investments and without any legal basis---Validity---Taxation Officer had unnecessarily saddled the assessee with uncalled for pecuniary burden without factual or legal basis, at some places even taking up contradictory stances---While curtailing financial expenses the Taxation Officer attributed its application towards acquisition of share and on the other hand, while dealing with the `exchange loss' he categorically held that the same had been consumed towards expansion project---One loan cannot be consumed for two different payments---Assessing Officer proportionately disallowed the financial expenses incurred by the assessee during the full 12 months period while the investment in acquisition of share was made in the month of July, 2004 and August, 2004 towards the end of accounting period which was 30-9-2004---Taxation Officer had applied general formula without looking into the facts as to whether the borrowed money was obtained in previous year or obtained during the year before the date of investment/after the date of investment---Taxation Officer without considering the nature and utilization of funds qua allowance of financial expenses even in the immediately preceding years, had curtailed the same without any reasonable cause---Nexus of borrowed funds with the investment in acquisition of share did not stand established---Figures were picked up to reach certain conclusions with the objective of curtailment of financial expenses--- Taxation Officer had only taken into consideration the interest bearing funds while non-interest bearing funds had been ignored-Non-interest bearing resources were available with the assessee in addition to interest bearing resources---Assessing Officer's working that assessee's own sources were tide to fixed assets and stocks was not borne out from record in. view of the details obtaining in the balance-sheet---Taxation Officer restricted his analysis to the cash flow statement ignoring the other entries of the financial statements ---Comparative chart of cash inflow and cash outflow presented by the Department had also the same lacuna---Data presented by the assessee had successfully explained the sources of investment in shares---Apportionment of financial expenses and additions were found non-maintainable by the Appellate Tribunal in circumstances.

2003 PTD (Trib.) 1449 p.1452; 2006 PTD 103; 2007 PTD (Trib.) 1509; 1986 SCMR 968 and 1987 PTD 149 ref.

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

----S.21(g)---Companies Profits (Workers' Participation) Act (XII of 1968), S.3(b) & Sched., Cl.2(2)---Deductions not allowed---Interest on payments to Workers' Profit Participation Fund---Assessee claimed deduction on account of payment of interest on contribution to Workers' Profit Participation Fund---Assessing Officer. disallowed the same on the ground that such interest appeared to be in the nature of fine or penalty paid in violation of rules and regulations of Companies Profits (Workers' Participation) Act, 1968---Validity---Payment of interest did not fall within the category of "find or penalty paid or payable for the violation of any law, rule regulation" as stipulated under S.21(g) of the Income Tax Ordinance, 2001---Perusal of relevant provisions of Companies Profits (Workers Participation) Act, 1968 established that the payment of interest was statutory obligation upon the companies liable to said levy---Interest payment became due with effect from the first day of the financial year when it was practically not possible for a company to determine even its profit not to speak of its liability with regard to Workers' Profit Participation Fund---Disallowance was held to be not maintainable and the same was deleted by Appellate Tribunal.

(1973) 90 ITR 373 (PSH); (1978) 113 ITR (Cal.) and (1985) 153 ITR 275 (Dehli) irrelevant.

1997 PTD (Trib.) 301 rel.

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

----S.67---Income Tax Rules, 2002, R.13 (3) (a)---Apportionment of deductions---Dividend income---Allocation of administrative expenses to dividend income proportionately---Validity---Section 67 of the Income Tax Ordinance, 2001 specifically required that the expenditure shall be apportioned on any reasonable basis taking account of the relative nature and size of activity to which the amount relate---Catch provided in law was determination of nature and size of activity involved for earning an income and incurrence of expense in relation to size and nature of the activity---Earning of dividend needed no hectic activity---Formula provided in R.13(3)(a) of the Income Tax Rules, 2002 could not be applied blindly---Rule 13(4) of the Income Tax Rules, 2002 specifically draws attention of the Authority to consider the nature and source of each class of income---While earning dividend income, a very little activity was required as compared to earning of business income; both could be taken or considered on equal footing---Having announced dividend the dividend warrants were dispatched to the share-holders, which was deposited into bank and the amount was realized by bank itself---Even tax was deducted before issuance of warrant---Practically, a very little expenditure was involved---Taxation Officer without consideration of nature and source of income had unilaterally reckoned the activity involved for earning dividend income and unilaterally applied the formula given in R.13(3)(a) of the Income Tax Rules, 2002---Apportionment of administrative expenses was found not on reasonable basis and could not be sustained in the eyes of law---Addition was not upheld by the Appellate Tribunal in toto and was maintained to the extent of Rs.5000, 000.

2009 PTD (Trib.) 869 and 2005 PTD (Trib.) 2161 ref.

Shahbaz Butt and Hamid Masood, F.C.A. for Appellants.

M. Asif, D.R. and Sajjad Haider Rizvi, LA for Respondents.

2010 P T D (Trib.) 1631

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

S.T.A. No. 1334/LB of 2009, decided on 25th February, 2010.

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

----Ss.36, 7, 8, 8A, 10, 11, 23, 26, 2(14), 2(37) & 73---Sales Tax Refund Rules, 2006, R.12---Recovery of tax not levied or short levied or erroneously refunded---Scrutiny of post refund audit of refund claims for the tax period of December, 2003 and April, 2004 showed that registered person/appellant received refund knowingly and fraudulently against fake/flying invoices issued by the supplier which was blacklisted---Registered person on the basis of such facts, was called upon to show cause as to why input tax received illegally be not recovered along with penalty and default surcharge---Registered person contended that executive order declaring the supplier as blacklisted/suspected unit may not be applied retrospectively---Department contended that the supplier was blacklisted on account of past activities; since audit was conducted with regard to past business/transactions of the unit, and the supplier was only blacklisted after conducting the audit, thus the action would have retrospective effect---Validity---Refund claim related to tax period of December, 2003 and April, 2004 while the supplier was blacklisted in 2007 and adjudication order was passed on 12-03-2008, much after the tax period, when refund was claimed and almost year after the supplier unit was blacklisted---Department, in circumstances, was not within the ambit of law while passing the order against the registered person for the reason that the supplier was blacklisted in 2007---Supplier was operative during the period i.e. December, 2003 and April, 2004 when the business/transaction took place---If it was allowed to happen then. the engine of business would come to grinding halt because no body would know with regard to fate of its business concern if the subsequent events like declaring a business blacklisted were allowed to cover the period when the other business concern with whom it was dealing with, was operative and the registered person who had been called upon to show cause, entered into business transaction with the subsequently blacklisted business in good faith and as per prevailing conditions at that time---Appeal was allowed and orders passed by the lower officers were vacated by the Appellate Tribunal.

1993 PTD 713 and 2005 SCMR 492 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---Registered person contended that no charge-sheet with regard to collusion or deliberate act was given as envisaged under S.36(1) of Sales Tax Act, 1990---Validity---Proper show cause as envisaged under S.36 of the Sales Tax Act, 1990 was not issued, so proceedings conducted in pursuance thereof could not be held legal proceedings.

2007 PTD 2265 and GST 2006 CL 63 rel.

Khubaib Ahmed for the Appellant.

Sardar A. Raza Qazailbash, D.R. for the Respondent.

Date of hearing: 25th February, 2010.

2010 P T D (Trib.) 1643

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Shahnaz Rafique, Accountant Member

S.T.As. Nos. 1148/LB and 1149/LB of 2009, decided on 18th May, 2010.

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

----S.10---Sales Tax General Order No. 32 of 2008 dated 8-7-2008---Refund of input tax---Department himself determined refund on the basis of procedure devised through Sales Tax General Order No. 32 of 2008 dated 8-7-2008; and objected that pending the appeal before the Appellate Tribunal, the fund could not be issued---Validity---Department after having calculated refund by itself, sent the copy of the same to the taxpayer---Inaction on the part of department not to issue refund was not justified in the eyes of law---Appellate Tribunal directed the department to follow its own calculation having been made under Sales Tax General Order No. 32 of 2008 dated 8-7-2008 and in compliance with the directions of Federal Board of Revenue which was binding on them---Department was further directed to issue refund within two months from the date of service of order---Other controversies and grounds had practically become infructuous as the department had itself determined refund by irgnoring the adjudication on the basis of Sales Tax General Order No. 32 of 2008 dated 8-7-2008---Assessee had also no objection on the said treatment provided the same was applied in its actual spirit as directed---Orders of both the authorities below were cancelled by the Tribunal and department was directed to issue refund as per its own calculation.

1984 PTD (Trib.) 308; 2002 PTD 720; Commissioner of Income Tax v. Shahnawaz Limited 1993 SCMR 73 and C.I.T. v. Muslim Commercial Bank Ltd. 2002 PTD 720 ref.

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

----Ss.30, 30A, 30B, 30C, 30D, 3ODD, 30E & 31---Appointment of officer---Instruction of Federal Board of Revenue, being the highest administrative authority in Pakistan, were binding on all its subordinate authorities in terms of S.30 read with Ss.30A, 30B, 30C, 30D, 30DD, 30E & 31 of the Sales Tax Act, 1990.

1984 PTD (Trib.) 308 and 2002 PTD 720 rel.

(c) Interpretation of statutes---

----Retrospective effect---Instructions and circulars issued by the Federal Board of Revenue to cure an ill or provide a remedy was always retrospective.

Commissioner of Income Tax v. Shahnawaz Limited 1993 SCMR 73 rel.

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

----S.10---Sales Tax General Order No.32 of 2008 dated 8-7-2008---Refund of input tax---Revision of return for the year 2003---Directions of Federal Board of Revenue to allow revision of returns from 2004 onwards could not debar the taxpayers to revise their returns for the year 2003 also---All the Oil Extracting Units had filed their returns in the same style and by virtue of exercise on the basis of Sales Tax General Order No. 32 of 2008 dated 8-7-2008 the team constituted for the purpose had come out with an unequivocal answer to the controversy.

C.I.T. v. Muslim Commercial Bank Ltd. 2002 PTD 720 rel.

Monim Sultan for Appellant.

Rana Muhammad Luqman, D.R. for Respondent.

Date of hearing: 5th May, 2010.

2010 P T D (Trib.) 1654

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 6405, 6406, 6407, 6408 6452, 6453 and 6454 of 2005, decided on 22nd December, 2009.

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

----S.13---Income Tax Ordinance (XLIX of 2001), S.111---C.B.R. Circular No.8 (Income Tax) dated 1-8-1973---Unexplained investment etc., deemed to be income---Hypothetical estimate of expenses---Validity---Revenue was firstly required to `find' that assessee had incurred expenses beyond his declaration and then to determine what his actual expenditure should be---If assessee was not in a position to satisfactorily explain its source, the procedure provided in law for addition of such a source could follow---Such was a mandatory procedure as it resulted in an addition which in normal course of business was not an 'income'-First Appellate Authority had already reduced the estimated figure which had replaced the estimate of Assessing Officer---Determination of different figures by two different officers alone made the addition as doubtful---Assessing Officer had felt that expenses should be to a figure for which he had absolutely no calculation in support---Both the authorities below ignored that under deeming income provisions hypothetical estimates were not allowed---For both the eventualities i.e. holding the declared figure to be as low and determination of actual figure of the expenses of the assessee require tangible evidence which makes the Assessing Officer believe and not suspect---Inference that there must have been such excess expenditure and estimate of the said amount was not permitted under the provisions of S.13 of the Income Tax Ordinance, 1979 and now under S.111 of the Income Tax Ordinance, 2001---Addition made under S.13(1)(e) of the Income Tax Ordinance, 1979 were deleted by the Appellate Tribunal.

1997 PTD (Trib.) 1850; (1997) 76 TAX 71 (Trib.); 2005 PTD 2336; 2005 PTD (Trib.) 965; Commissioner of Income Tax v. Messrs Smith, Kline and French of Pakistan Ltd. and others 1991 PTD 999; Civil Appeals No.104-K to 111-K of 1984; Karnani Property Ltd. v. Commissioner of Income Tax West Bengal (1971) 82 ITR 547; India Cement Limited v. Commissioner of Income-tax, Madras (1966) 60 ITR 52; Mrs. Samina Shaukat Ayub Khan v. Commissioner of Income-tax, Rawalpindi PLD 1981 SC 85 ref.

(1963) 8 Tax 1987 (Trib.)(sic); 1994 PTD 1268 and 1987 PTD (Trib.) 36 rel.

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

----Ss.13 & 8---C.B.R. Circular No.8 (Income Tax) dated 1-8-1973---Unexplained investment etc., deemed to be income---Addition in defiance of binding instructions of Central Board of Revenue---Validity---Assessing Officer had not only exceeded beyond the authority and procedure provided under S.13 of the Income Tax Ordinance, 1979 but had also ignored the directions of his superior most authority the Central Board of Revenue---Assessing Officer had on the one hand proceeded against the mandatory procedure of law but had also slacked in following the instructions of the Central Board of Revenue---Such was an act of defiance of binding instructions of Central Board of Revenue---Additions made, in circumstances were not approved.

1982 (136) ITR page 652 H.C. Delhi and 1984 PTD (Trib.) 79 rel.

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

----Ss.13 & 62---Unexplained investment etc., deemed to be income---Burden of proof---When assessee denied ownership, the burden to prove that the same belonged to him shifted to Revenue Department.

1982 (136) ITR page 652 rel.

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

----Ss.13 & 62---Unexplained investment, etc., deemed to be income---Vehicle in the name of company---Addition of, in the hands of one director of the company on the basis of statement of third person (driver)---Validity---Statement by a third person that the asset which was in his possession, in fact, belonged to some body else should have been used against him and not against the assessee---Documentary evidence of ownership of vehicle if was in favour of some body else, stronger evidence was required to prove that it belonged to the assessee---Oral statement of the person should have not been used against the assessee when the record fully proved that the vehicle was registered in the name of company---No body but the said company was required to explain the source---Since the issue with regard to ownership was a factual controversy and .he claim of the assessee of its ownership by company stood proved, if the vehicle was in the name of some company the duty to explain its source was of the said company and not of the assessee who may be one of the Directors in possession of the same---Addition, in circumstances, was considered illegal and was deleted by the Appellate Tribunal.

1982 (136) ITR page 652 and 1984 PTD (Trib.) 79 rel.

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

----S.12(18)---Income deemed to accrue or arisen in Pakistan--Addition was made on the ground that assessee had received loan from company in the manner that liability of the assessee had increased by such amount---Since the increase was not supported by receipt of such amount through cross cheque it attracted the provisions of S.12(18) of the Income Tax Ordinance, 1979---Assessee explained that he had not received any cash at all front the company was totally ignored--Amount was paid by the company on behalf of assessee and that also through normal banking channels---Effect---Very requirement of addition was receipt of "sum" as loan, gift or advance---All other conditions were supplementary and after ascertainment that the amount received in said form was in cash---Use of word `sum' in S.13 of the Income Tax Ordinance, 1979 could not be applied on a book entry or on a transfer entry---Ledger account produced by the assessee had not been brought to discussion at all either by the Assessing Officer or by the First Appellate Authority---Mere claim that, assessee had not received such amount at all was a valid defence and the same should have been discarded with arguments and material---Section 12 (18) of the Income Tax Ordinance, 1979 was deemed income provision and it could be applied strictly after satisfying the requirements mentioned in the said provision of law; same should not be used for showing muscels of the department---In the present case, before the addition neither the evidence produced had been confirmed to be as untrue nor any specific show cause notice for the said addition had formally been issued---Such was an infringement of basic and fundamental right known as audi alteram partem---Assessee had not withdrawn any sum from company, there were certain payments made by the company on behalf of assessee which inter alia included payment of his medical bills, legal charges to his counsel and Auditor, travelling expenses etc.---Such payments were through cross cheques---Even if the same were in cash it could not be added under S.12(18) of the Income Tax Ordinance, 1979 as no "sum" had been received by the assessee---Addition was without any reason and its confirmation was also without application of proper mind---Addition was deleted by the Appellate Tribunal.

Hansa Enterprises, Sialkot v. Revenue 2006 PTD 774 and Commissioner of Income Tax v. Saritow Pakistan Limited 2005 PTD 2386 rel.

2005 PTD (Trib.) 965 irrelevant.

Kh. Riaz Hussain for Appellant (in I.T.As. Nos. 6405 to 6408 of 2005).

Syed Mehmood Jaffar, D.R. for Respondent (in I.T.As. Nos.6405 to 6408 of 2005).

Syed Mahmood Jaffar, D.R. for Appellant (in I.T.As. Nos.6452 to 6454 of 2005).

Kh. Riaz Hussain for Respondent (in I.T.As. Nos.6452 to 6454 of 2005).

Date of hearing: 25th November, 2009.

2010 P T D (Trib.) 1685

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman and Liaquat Ali Khan, Accountant Member

I.T.A. No. 1613/IB of 2005, decided on 19th December, 2006.

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

----Second Sched. Cl. 6(H) & S.13---Exemption---Pre-conditions for exemption from S.13 of the Income Tax Ordinance, 1979: That the amount should be invested for purchase of assets auctioned or sold in consequence of a court order or decree, and the said auction should be by a banking company or DFI controlled by Government.

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

----Second Sched. Cl. 6(H) & S.13---Exemption---Requirement of the management and control of the Federal or Provincial Government is in respect of only DFI and not in respect of a banking company---Banking company' or aDFI' separates DFI whose management or control vests in the Federal or a Provincial Government---Properties purchased from banking companies and from DFls managed and controlled by some government were exempt from application of S.13 of the Income Tax Ordinance, 1979.

Muhammad Ali Shah, D.R. for Appellant.

Atif Waheed for Respondent.

2010 P T D (Trib.) 1692

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Chairperson and Istataat Ali, Accountant Member

I.T.As. Nos. 285/IB to 289/IB of 2008, decided on 25th October, 2008.

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

----Ss. 122(5)---Rectification of mistake---Appeal---Assessee moved application for rectification before First Appellate Authority stating that notice of hearing of appeal issued under the ordinary post was delivered by the postal authority after expiry of date fixed for hearing of appeal; appeal be recalled and restored and be decided after affording a reasonable opportunity of hearing---Order was recalled by the First Appellate Authority with the observation that call notice was not properly served---Department contended that if appeal of a taxpayer was rejected by the First Appellate Authority then he had to file second appeal before the Appellate Tribunal and the First Appellate Authority was not legally empowered to recall its order through rectification and pass a new order in such a manner that a previous judgment was totally reversed---Assessee contended that although there was no express provision empowering the First Appellate Authority to recall his own order but First Appellate Authority being an appellate authority had inherent powers to recall its own order; and the order passed by the First Appellate Authority could not be challenged because of having merged with subsequent order of First Appellate Authority---Validity---First Appellate Authority could not recall its order for rectification, which had very limited scope---Error could be rectified only when it was apparent on the face of record and if the issue required reconsideration/review then the appellate authorities should refrain from making rectification---Appellate authority could not sit as a judge . on its own order---Neither any attempt could be made to circumvent the law---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 Income Tax Ordinance, 2001 to recall any order passed by it---Proper course of action was that the taxpayer should have agitated the matter in appeal before the Appellate Tribunal, who was competent to take into account all the relevant facts to arrive at a judicious conclusion---If appeal of a taxpayer was rejected, then he had to file second appeal and First Appellate Authority was not legally empowered to recall its order for rectifying it in such a manner that a previous judgment was totally reversed---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 his own order by way of sitting as a judge on its own findings.

2003 PTD (Trib.) 1941 and 2007 PTD (Trib.) 2566 distinguished.

1992 PTD 932 (S.C. Pak.); 2008 PTD 216 (Trib.); 2008 PTD 475 (Trib.) and 2004 PTD 832 (Trib.) not relevant.

Civil Petitions Nos. 752, 753 and 754 of 2008; 2007 PTD 967; 1992 SCMR 687; 2003 SCMR 1401 and 2000 PTD 306 rel.

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

----S.221---Rectification of mistake---When a decision is given after careful consideration of facts, rectification cannot be made in a case in the same set of circumstances and in such a situation no attempt can be made to circumvent the law.

Civil Petitions Nos. 752, 753 and 754 of 2008 rel.

(c) Income Tax---

----Doctrine of merger---Illegal order passed without jurisdiction---Doctrine of merger is not applicable in the case of illegal order passed without jurisdiction---Null and void order is considered to be an order which did not exist, therefore, no question of its merger with any order passed in consequence thereof arises---All the subsequent order passed in consequence thereof will also be rendered as illegal and void.

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

----S.184(1)---Penalty for concealment of income---Order of First Appellate Authority on the basis of which penalty was deleted had been vacated---Order of First Appellate Authority in respect of penalty imposed under S.184 of the Income Tax Ordinance, 2001 was also liable to be vacated which was ordered accordingly---Since, other grounds of assessee's first appeal challenging the imposition of penalty were not adjudicated, the case was remanded by the Tribunal to First Appellate Authority for decision on the remaining grounds of assessee's appeal.

Sardar Taj, D.R. for Appellant.

Ch. Naeem-ul-Haq for Respondent.

2010 P T D (Trib.) 1700

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No. 190/IB of 2010, decided on 22nd March, 2010.

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

----S.122---Amendment of assessment---Unless the assessment which was a deemed assessment in terms of S.122 of the Income Tax Ordinance, 2001 was cancelled, there could not be another assessment in the presence thereof.

CIR (Legal Division), RIO, Lahore v. Dr. Yasmin Rashid I.T.A. No. 346/LB of 2010 rel.

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

----Ss.122(5) & 177---Amendment of assessment---Audit---Jurisdiction--Definite information---Definite information was on record but there was nothing to prove that jurisdiction of S.122(5) of the Income Tax Ordinance, 2001 was invoked in continuation thereof and the finalized deemed assessment was cancelled for the purpose of modification---There could not be another assessment in the presence of one in existence---Deemed assessment was not parallel to the return of income, same had attained finality having the sanction of law---Audit proceedings were a process to reach to a conclusion from where the jurisdiction under S.122(5) of the Income Tax Ordinance, 2001 and then an assessment within the said provision could be modified---All assessments had to be under S.122 of the Income Tax Ordinance, 2001 and before embarking upon such proceedings, the requirements of S.I22(5) of the Income Tax Ordinance, 2001 were to be fulfilled in letter and spirit---Selection of audit in itself did not mean an assessment or modification of assessment---Audit was only a route to reach to a stage where the revenue department had reasons to believe that the finalized assessment was either under-assessed or assessed at too low a rate etc. as provided in the provision of S.122(5) of the Income Tax Ordinance, 2001---Assessment could be reversed under S.122(5A) of the Income Tax Ordinance, 2001 also but there again certain separate parameters had been provided---One could modify his earlier assessment after holding that the same was either under-assessed on the basis of definite information under S.122(5) of the Income Tax Ordinance, 2001 or was erroneous and prejudicial to the interest of revenue under S.122(5A) of the Income Tax Ordinance, 2001---Assessment in the present case was not sustainable in the eyes of law and the same was cancelled by the Appellate Tribunal.

Mohsin Raza v. Chairman, F.B.R. and others 2009 PTD 1507 ref.

Fauji Terminal and Distribution Co. Ltd., Karachi v. Additional Commissioner/Taxation Officer-A, Audit Division, Karachi and 2 others 2006 PTD 734 and RTO, Lahore v. Dr. Yasmin Rashid I.T.A. No.346/LB of 2010 rel.

Malik Tahir Masood, I.T.P. for Appellant.

Muhammad Akram, D.R. for Respondent.

2010 P T D (Trib.) 1709

[Income Tax Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No. 346/LB of 2010, decided on 20th April, 2010.

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

----Ss.177, 176, 122(1) & 122(5)---Audit ---Finalization of assessment under S.122(1) of the Income Tax Ordinance, 2001 in continuation to the proceedings of audit without acquiring proper jurisdiction under S.122(5) of the Income Tax Ordinance, 2001---Validity---Audit proceedings under S.177 of the Income Tax Ordinance, 2001 was only a procedure to find out some defects in the accounts and to obtain information to further enter into the jurisdiction of making an assessment after acquiring authority under S.122(5) of the Income Tax Ordinance, 2001---Section 177 of the Income Tax Ordinance, 2001 did not in itself provide any power to modify assessment or re-determine the income of an assessee; it was not a return of income which was being processed by the officer doing audit, he was dealing with a "deemed assessment" which by process of law had acquired a sanctity---Finalized assessment, could not just be modified or disturbed in continuation of the proceedings of audit under S.177 of the Income Tax Ordinance, 2001---In the present case not only that no notice was issued before selecting the case for audit under S.177 of the Income Tax Ordinance, 2001 but even otherwise before modifying or making a re-assessment in continuation of the audit proceedings jurisdiction had not been exercised properly under the provisions of S.122(5) of the Income Tax Ordinance, 2001---Notice before selection was absent and the assessment of the taxpayer had been made ignoring the legal requirements provided under S.122(5) of the Income Tax Ordinance, 2001---Appeal of the department was dismissed by the Appellate Tribunal.

Mohsin Raza v. Chairman, C.B.R. W.P. No.4630 of 2009 dated 14-7-2009 and C.I:T. and others v. Fatima Sharif Textile Kasur 2009 SCMR 344 = 2009 PTD 37 objected.

Fauji Oil Terminal and Distribution Co. Ltd. Karachi v. Additional Commissioner/Taxation Officer-A, Audit Division Karachi and 2 others 2006 PTD 734 rel.

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

----Ss.177 & 122(5)---Audit---For all practical purposes S.177 of the Income Tax Ordinance, 2001 was a just process to reach to a conclusion as to from where the assessing officer could further modify an already assessed income for which law had very clearly provided the provision in terms of S.I22(5) of the Income Tax Ordinance, 2001.

Fauji Oil Terminal and Distribution Co. Ltd. Karachi v. Additional Commissioner/Taxation Officer-A, Audit Division Karachi and 2 others 2006 PTD 734 rel.

(c) Income Tax---

----Modification of assessment---Recovery of tax---Unless a case for which a legal method had been provided for modification of the assessment was not strictly observed, the recovery of tax shall remain a dream.

Dr. Javed Shehryar, D.R. for Appellant.

M. Iqbal Hashmi for Respondent.

2010 P T D (Trib.) 1714

[Income Tax Appellate Tribunal of Pakistan]

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

I.T.As. Nos. 1540 and 1541/LB of 2009, decided on 4th May, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.21(g), 120 & 122(5)---Sales Tax Act (VII of 1990), Ss.33 & 34---Deductions not allowed---Fine or penalty---Returns were filed declaring loss which were taken to be an assessment order---Re-assessments were finalized at net income---Relief was allowed by the First Appellate Authority on the issue of set off of determined/assessed losses as well as addition made under S.21(g) of the Income Tax Ordinance, 2001---Department contended that fine on charged sales tax was also in the nature of fine and was fully covered by S.21(g) of the Income Tax Ordinance, 2001; and the deletion of the same was contrary to law---Assessee contended that Sales Tax Act, 1990 provided charge of additional tax under S.34 of the Sales Tax Act, 1990 while present nomenclature of such action was default surcharge; that section 33 of the Sales Tax Act, 1990 caters for the situation where fine or penalty was to be imposed; that had it the intention of the legislature, default surcharge would have been incorporated under S.33 of the Sales Tax Act, 1990 rather than bringing same under separate head and that First Appellate Authority was quite justified in deleting the disallowance made under S.21(g) of the Income Tax Ordinance, 2001---Validity---Section 21(g) of the Income Tax Ordinance, 2001 referred to the term such as fine/penalty but in the Sales Tax Act, 1990 default surcharge had been categorized independently under S.34 of the Sales tax Act, 1990 while S.33 of the Sales Tax Act, 1990 dealt with the situation where fine would be imposed ---Departmental appeal was dismissed by the Appellate Tribunal being devoid of any merit.

2004 PTD 1179 ref.

Dr. Ishtiaq Ahmad, D.R. for Appellant.

Yousaf Saeed, F.C.A. for Respondent.

2010 P T D (Trib.) 1733

[Income Tax Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Khalid Siddiqui, Accountant Member

I.T.A. No. 868/LB of 2010, decided on 17th April, 2010.

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

----S. 111(1)(b)---Unexplained income or assets---Additional evidence---Deletion of addition---Department objected that balance sheet was not supplied at the time of assessment and its entertainment at the stage of First Appellate Authority was not valid while deleting the addition---Validity---First Appellate Authority had mentioned that balance sheet was on record---Contention that First Appellate Authority should not have entertained same as an additional evidence, could not help---If the accounts indicated that the receipt in bank stood reported in previous year's sale, there was no reason for its addition during subsequent year on its realization in the bank---Same was the position of contra entry in the bank---Amount was deposited and bank gave its credit, it was then reversed for some technical reason and was later again credited after final clearance---Such could not be added twice while totalling the deposit---Facts were so obvious and clear that department's point of view appeared to be as an unnecessary effort.

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

----Ss.111(1)(b), 177(4), 120, 122 (5) & 129(9)---Unexplained income or assets---Audit---Addition---Procedure---Addition without assumption under S.122(5) of the Income Tax Ordinance, 2001---Validity---Issuance of notice under S.129(9) of the Income Tax Ordinance, 2001 after the audit was not enough to further proceed in the matter under law---Before invoking the provisions of S.111(1) of the Income Tax Ordinance, 2001 the department was required to acquire jurisdiction under the provisions of S.122(5) of the Income Tax Ordinance, 2001 and there was no other provisions in law which permitted the Assessing Officer to modify or reassess the already assessed return of income before establishing that his income was either under-assessed or assessed at too low a rate etc. as provided in S.122(5) of the Income Tax Ordinance, 2001---Addition under S.111 of the Income Tax Ordinance, 2001 was a subsequent stage on which the Assessing Officer should not directly reach before crossing the barrier and fulfilling the requirements for cancelling the deemed assessment under S.120 of the Income Tax Ordinance, 2001 in terms of S.122(5) of the Income Tax Ordinance, 2001---Assessing Officer was required to first determine through audit that the deemed assessment was under-assessed etc. in terms of S.122(5) of the Income Tax Ordinance, 2001 or otherwise erroneous and prejudicial to the interest of revenue as provided under Ss.122(5) & 122(5A) of the Income Tax Ordinance, 2001 on the basis and circumstances mentioned in these provisions separately ---Assessee had explained all deposits and so called discrepancies in its accounts to the satisfaction of First Appellate Authority against which no mentionable argument had been advanced; in addition to this, assessment was not in strict compliance of the provisions and the procedure provided in law---Deletion was unexceptionable and the departmental appeal was dismissed by the Appellate Tribunal being devoid of any merit.?

C.I.R. v. Dr. Yasmin Rashid I.T.A. No. 346/LB of 2010 and Fauji Oil Terminal and Distribution Co. Ltd. Karachi v. Additional Commissioner/Taxation Officer-A, Audit? Division Karachi and 2 others (2006) 94 Tax 84 (H.C. Kar.) rel.

Maroof Gilani, D.R. for Appellant.

Ishrat Hussain, I.T.P. for Respondent.

2010 P T D (Trib.) 1740

[Income Tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

S.T.A. No.1572/LB of 2009; decided on 23rd April, 2010.

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

----S.11---Assessment of tax---Value of supply---Estimate of---Assessee contended that even after modification of value of supply by reduction to 22% higher from 100% of the value declared, was still insufficient as the assessee had shown valid and legal invoices which fulfill all the legal requirements of law and rules; and the taxpayer being a manufacturer was treated at par with the retailer which situation had been accepted by the First Appellate Authority, however, while allowing relief said Authority had not accepted the declared version, that it was neither a case of abnormal results nor while fixing the value the parallel cases of the similar type had been brought on record; that since it was a case of one estimate against another for which there was no proper support, the declared version should be allowed to be accepted; and also there was neither any tangible proof on record to hold that the value declared was concealed intentionally or there was no other manufacturer of the same quality of goods---Validity---Estimate of value was one estimate against another---Appellate Tribunal declined to enter into a new controversy of substituting the same with a third estimate---Contentions of the taxpayer to such extent was disallowed by the Appellate Tribunal.

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

----S.34---Additional tax---Charge of additional surcharge is consequential.

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

----S.33---Offences and penalties---Penalty, nature of---Penalty is not a regular collection---Amount recovered as penalty is not a source of revenue---Purpose of promulgation of commercial laws including the Sales Tax Act, 1990, is to collect revenue on sale and purchase of taxable goods from the taxable supplies.

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

----S.33---Offences and penalties---Simultaneous charge of tax and penalty---Validity---Penalty is chargeable by holding a person an offender and is obviously after establishing that an offence had been committed---Such is a severe allegation and is against the normal mode of collection of revenue---Simultaneous charge could not be approved unless the same was based upon proper support, evidence and reasons.

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

----S.33---Offences and penalties--- Demand created on pure estimation---Appellate Tribunal declined to reduce the value further to avoid another estimate---Fact was obvious that there was no tangible evidence for determination of the value and the matter had been confirmed only on the basis of estimates---Charge of penalty was considered to be without determination of the intention to defraud the revenue in circumstances---Phrase "whosoever commits any offence" which was supplemented by subsequent language require commission of an offence before charging penalty---Such an establishment of the offence was missing, penalty was deleted by the Appellate Tribunal in circumstances.

Cape Brandy Syndicate v. Inland Revenue Commissioner (1921 H.B. 69) rel.

Malik Muhammad Arshad for Appellant.

Dr. Javed Shehyar, D.R. for Respondent.

2010 P T D (Trib.) 1743

[Income-tax Appellate Tribunal Pakistan]

Before Abdul Rauf, Accountant Member and Shahid Jamil Khan, Judicial Member

I.T.As. Nos. 3103/LB, of 2000, 2982/LB, 3150/LB and 3151/LB of 2001, decided on 3rd April, 2010.

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

---Ss.60-A, 52, 50(4), 24(c) & 62---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Additions---Issuance of show-cause notice on the grounds that amount due from associated undertakings exceeded the amount of loan payable to banks, the assessee was not entitled to claim deduction on account of mark-up because the entire amount of loan obtained from banks had been passed into associated undertakings, that assessee had not deducted tax on various expenses and Assessing Officer failed to add them to income of assessee under S.24(c) of the Income Tax Ordinance, 1979; that fine and penalties being inadmissible deduction was to be added to income of the assessee and that amount of tax had been retained out of total deductions---Validity---Additional Commissioner of Income Tax had sufficient reasons to believe that assessments finalized under Ss.62 & 52 of the Income Tax Ordinance, 1979 were erroneous and prejudicial to the interest of Revenue because the facts and figures confronted through show-cause notices did establish that Deputy Commissioner of Income Tax had not exercised due care at the time of passing orders under Ss.52 & 62 of the Income Tax Ordinance, 1979 and resultantly State exchequer was deprived of its lawful share---Appeal filed by the assessee against both the orders of Additional Commissioner passed under S.66-A of the Income Tax Ordinance, 1979 were dismissed whereas the appeals filed against the orders passed under Ss.66-A/62 & 66-A/52 of the Income Tax Ordinance, 1979 also failed because they were not competent as they were to be filed with the First Appellate Authority rather than before Appellate Tribunal.

1996 PTD (Trib.) 492 and 1998 PTD (Trib.) 2538 ref.

Edulgee Dinshaw Limited v. Income Tax Officer 1990 PTD 155 and 1997 PTD (Trib.) 1265 rel.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise the Deputy Commissioner's order---Scope---Conditions---Powers under S.66-A of the Income Tax Ordinance, 1979 could be exercised only if two conditions precedent namely erroneousness or assessment due to misapplication of law or otherwise and prejudicial to the interests of Revenue as a result thereof were fulfilled simultaneously; in other words the Additional Commissioner, before exercising reversionary jurisdiction under S.66-A of the Income Tax Ordinance, 1979 had to establish beyond any shadow of doubt that the assessment made by the Assessing Officer suffered from an error of law or fact as a result of which the tax liability of the assessee had been determined at a figure lower than what was due under the law.

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

----Ss.66-A, 52 & 62---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Appeal to First Appellate Authority---Merger of order---Additional Commissioner passed orders under S.66-A of the Income Tax Ordinance, 1979 much before the decision in appeal and in view of S.66(1A) of the Income Tax Ordinance, 1979, both the orders passed under Ss.52 & 62 of the Income Tax Ordinance, 1979 were very much in field and had not merged into the orders of First Appellate Authority when the Additional Commissioner passed orders under S.66-A of the Income Tax Ordinance, 1979---Mere filing of appeal, the orders of Assessing Officer did not merge into the orders of First Appellate Authority.

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

----Ss. 65, 66-A & 62----Additional assessment---Application of provisions of Ss. 65, 66-A & 62 of Income Tax Ordinance, 1979--Scope-Provisions of Ss.65 and 66-A of the Income Tax Ordinance, 1979 could be invoked to retrieve the loss of revenue but in different situations and by different authorities, for instance, an assessment finalized under S.62 of the Income Tax Ordinance, 1979 could be reopened under S.65 of the Income Tax Ordinance, 1979 by the Assessing Officer on the basis of some definite information which could conclusively establish that the income of an assessee had either escaped assessment or under-assessed or assessed at too low a rate or was the subject-mater of excessive relief---Such information was, required to be about material facts which had not been considered by the Assessing Authority while framing the assessment under S.62 of the Income Tax Ordinance, 1979, however, if those facts were found to have been disclosed faithfully by an assessee and also considered by the Assessing Officer, the assessment could not be reopened on the same set of facts under S.65 of the Income Tax Ordinance, 1979 because an authority was not vested with the jurisdiction to change opinion about facts which had already been adjudicated upon by it.

Edulgee Dinshaw Limited v. Income Tax Officer 1990 PTD 155 rel.

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

----S.65---Additional assessment---Scope---Assessing Officer was not empowered to invoke the provisions of S.65 of the Income Tax Ordinance, 1979 on the basis of facts which were disclosed by an assessee and considered by him in the course of making assessment.

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

----Ss.66-A & 65---Powers of Inspecting Additional Commissioner to revise the Deputy Commissioner's order---Change of opinion---Contrary to S.65 of the Income Tax Ordinance, 1979, S.66-A of the Income Tax Ordinance, 1979 contained altogether a different mechanism to plug loss and leakage of revenue by providing vast power of superintendence to Additional Commissioner---Said provision of law could be invoked when an officer, subordinate to the Additional Commissioner was not found to have appraised the facts and drawn conclusions therefrom in accordance with law, and as a result thereof an assessee was not charged with the amount of tax due from him under the law; there may also be cases where an Assessing Authority, in collusion with a taxpayer or through sheer inadvertence may make an assessment in contravention of the relevant provisions of law thus inflicting loss upon the State exchequer---In such situations the Additional Commissioner was vested with the power to substitute the lawful treatment in place of the treatment accorded by Assessing Officer subordinate to him---Reappraisal will essentially entail change of opinion by the revising authority for the simple reason that the opinion formed by an Assessing Officer subordinate to the Additional Commissioner and the conclusion drawn by him were found to be erroneous; in other words, exercise of jurisdiction under S.66-A of the Income Tax Ordinance, 1979 hinged upon change of opinion because the revisionary powers under S.66-A of the Income Tax Ordinance, 1979 could trot be exercised unless and until the Additional Commissioner proved beyond any shadow of doubt that the treatment accorded by the Assessing Officer was erroneous either under the law or fact or on both counts as a result of which the, State exchequer had been deprived of its lawful share.

1997 PTD (Trib.) 1265 rel.

Shoaib Ahmad, C.A. for Appellants.

Dr. Ishiaq Ahmad, D.R. (L.T.U.) for Respondent.

2010 P T D (Trib.) 1759

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Arif Moton, Member (Judicial-II)

S.T. Appeal No. K-54 of 2009, decided on 20th May, 2009.

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

----Ss.25 & 30---S.R.O. 1195(I)/90 dated 17-12-1990---Access to record, documents, etc.---Audit by DRRA---Validity---Audit was conducted by DRRA, which was not a competent authority for conducting audit in terms of provisions of S.30 of Sales Tax Act, 1990---Whole exercise conducted by DRRA was a nullity in law since it had acted as coram non judice.

2007 PTD (Trib.) 1600 rel.

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

----Ss.10(2), 11(2) & 45-B---Sales Tax Rules, 2002, R.6-Excess amount to be refunded---Refund sanction order---Appealable---Refund sanction order passed by the competent authority in terms of S.10(2) of the Sales Tax Act, 1990 read with R.6 of Sales Tax Rules, 2002 and a refund rejection order passed by the competent authority in terms of S.11(2) of the Sales Tax Act, 1990 were both appealable under S.45-B of the Sales Tax Act, 1990---Order so passed attained finality through limitation---Orders attained finality could not be disturbed at any later stage by any authority including Federal Board of Revenue.

2004 PTD 3020 and 1984 MLD 4310 ref.

1989 MLD 4310; 1990 PTD 155 and 2004 PTD 3020 rel.

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

----Ss.10(2) & 45-A---Excess amount to be refunded---Reopening a refund sanctioned order by the DRRA/Audit Group, Collectorate of Sales Tax & Central Excise (Audit)---Validity ---Act of issuance of show-cause notice was ab initio wrong inasmuch as the competent authority who passed the refund sanction order was satisfied in respect of claims and the concerned Collector having jurisdiction had never filed appeal---On the contrary, authority who issued the show-cause notice was not competent to reopen a past and closed transaction within the framework of Sales Tax Law---In terms of provisions of S.45-A of the Sales Tax Act, 1990 any proceedings under the Act were subject to review either by the Federal Board of Revenue or by the respective Collector, and that too for satisfying themselves in respect of legality or propriety of any decision or order passed by a subordinate sales tax officer---No other provision existed in the Sales Tax Act; 1990 authorizing a sales tax functionary to review or re-open a past or closed transaction---Audit by DRRA and its observation and reporting to Collector of Sales Tax (Audit) regarding procedural impropriety in the subject sanctioned refunds, was tantamount to exercise of authority within the purview of S.45-A of the Sales Tax Act, 1990---Act of sanction or rejection of refund claim fell within the purview of word "proceedings "---All happenings and events before Tribunal or an authority on whom the jurisdiction was conferred by law to dispose of contentious matters were covered by the term "proceedings "---Proper way to dispose of the audit objection was to place the same before Collector of Sales Tax (Enforcement) for initiation of proceedings as per relevant provisions---Audit by DRRA officials and their forwarding report to Collector of Sales Tax Audit, as well as issuance of show-cause notice by the Additional Collector involve assumption of wrong jurisdiction and as such exercise carried out right from audit by the DRRA till passing of order by the Additional Collector was without jurisdiction.

2004 PTD 3020; Appeal Nos.K-2352/99; K-106/03, PLD 1971 SC 14; 1992 ALD 449(1); 2004 PTD 624; PLD 1976 SC 37 and PLD 2001 SC 514 rel.

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

----Ss.36 & 10---Recovery of tax not levied or short-levied or erroneously refunded---Refund---Deliberate act and collusion--Invocation of S.36(1) of Sales Tax Act, 1990 in the absence of allegations and material confirming "deliberate act" or "collusion" of the registered tax-payer-Validity-Show-cause notice was completely silent in regard to allegations of a "deliberate act' and "collusion "---It was for the Additional Collector before issuing the show-cause notice to examine the veracity, competency and reliability of the audit report and then issue the show-cause notice under respective subsection of S.36 of the Sales Tax Act, 1990---Additional Collector before issuing the show-cause notice had not determined the veracity of the audit report and hurriedly issued the show-cause notice, which was not relevant in the subject case by virtue of wordings of show-cause notice, which did not remotely hint in the direction of the "deliberate act" of submission of false refund application or supportive documents for processing or regarding the "collusion" with the Sales Tax Officers---Such action 'rendered the show-cause notice and the subsequent proceedings void ab initio.

2003 PTD 1275; 2005 PTD 480; 2003 PTD 1593; 2002 MLD 180; PTCL 2001 CL 558 and 1992 SCMR 1898 rel.

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

----Ss. 36 & 10---Recovery of tax not levied or short-levied or erroneously refunded-Refund-Limitation-Show-cause. notice available on record dated 17-4-2008 for the taxable period of 2003-2004 confirmed with clarity that it was issued after the expiry of stipulated period of three years, rendering same time barred and as such not enforceable.

S.T.A. 274/05; S.T.A. 179/06; 2009 PTD (Trib.) 500; 2007 PTD 117; 2005 PTD 2453; 2008 PTD 981; 1992 SCMR 1898 and 2006 PTD 537 rel.

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

----Ss.36 & 10---Recovery of tax not levied or short-levied or erroneously refunded---Grounds not mentioned in the charter of show-cause notice could not be subsequently taken up and adjudicated by the adjudicating authority in the adjudication order.

2001 PTD 1449 and 1987 SCMR 1840 rel.

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

----S.24---Continuation, of orders, etc, issued under enactments repealed and re-enacted---In terms of S.24 of the General Clauses Act, 1897 every insertion, replacement or amendment runs prospectively and not retrospectively.

PLD 1974 SC 180; 1987 PTD 739; 2009 PTD 1; 2009 PTD 16; 1993 SCMR 73 and 2000 PTD 285 rel.

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

----Ss.25, 30 & 36---Access to record, documents etc.---Audit by DRRA---Limitation Adjudication order in original as well as order in appeal were palpably illegal and void being based and supportive of audit findings of DRRA not recognized under the Sales Tax Regime and on the grounds not mentioned in the show-cause notice which itself was barred by limitation having been issued beyond the stipulated period of three years---Such orders were set aside and the appeal of the taxpayer was allowed by the Appellate Tribunal.

Nadeem Ahmed Mirza for Appellant.

Talha Muhammad, Sr. Auditor for Respondents.

2010 P T D (Trib.) 1777

[Income-tax Appellate Tribunal Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

M.A. (Recalling) No. 168-KB of 2009 in I.T.A. No. 1446/KB of 2005, decided on 25th September, 2009.

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

----Ss. 221, 148 to 156, 233, 234,235 & 236---C.B.R. Circular No.10(1)IT-Jud/04 dated 23-11-2004, First Schedule---Rectification of mistake---Application for recall of order---Jurisdiction of Commis­sioner---Non-taxpayer---Regular taxpayer---Assessee contended that jurisdiction of Commissioner MTU in respect of withholding of taxes was restricted to the cases of persons who were not taxpayers, whereas the assessee was a regular taxpayer and on the basis of clarification letter dated 4-8-2005 of the Central Board of Revenue, Taxation Officer had no jurisdiction over the case and such aspect of the case had not been considered by the Appellate Tribunal while passing the order---Validity---In response to notice regarding monitoring of withholding taxes, Accountant, appeared before the Assessing Officer and filed copies of annual and quarterly statements under S.165 of the Income Tax Ordinance, 2001 and annual audited accounts, instead of challenging the jurisdiction of the Assessing Officer, but in appeal took altogether a different plea on the point of jurisdiction---Initially assessees themselves get them assessed in wrong jurisdiction and later on before appellate forums, get the assessments cancelled, annulled, vacated, nullified and quashed from the appellate forums in order to evade tax, which causes huge loss to the revenue---In view of assessess's own version that it had been assessed in Company Circle, the case was remanded back to Assessing Officer of the Company Circle for de novo proceedings in the matter in accordance with law---Orders passed by forums below were vacated by the Appellate Tribunal in the circumstances.

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

----Ss.209, 148 to 156, 233, 234, 235 & 236---Jurisdiction of income tax authorities--- Non-taxpayer--- Regular taxpayer--- Monitoring of withholding tax---Jurisdiction---Assessee being a taxpayer, will be assessed in the Zone and not in MTU---Taxation Officer MTU, had passed the assessment order in wrongful exercise of jurisdiction, as the clarification letter of Central Board of Revenue exclusively conferred jurisdiction with the Zones in respect of their taxpayers---Where mandatory conditions for the exercise of jurisdiction were not fulfilled, the entire proceedings thereafter will be illegal and without jurisdiction---First Appellate Authority had observed that assessee was taxpayer and was assessed to tax in Company Circle---Appellate Tribunal vacated the order passed by the Taxation Officer.

(c) Income Tax---

----Jurisdiction---Wrong assessment---Remedy against incorrect or wrong assessment was provided by way of appeals, and if such remedies were not invoked, the assessment, even if erroneous on account of wrongful jurisdiction, will be binding on the assessee.

Shamim Pasha for Applicant.

Shamsul Huda, D.R. for Respondent.

2010 P T D (Trib.) 1787

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Arif Moton, Member (Judicial-II)

Customs Appeal No. K-353 of 2003, decided on 25th June, 2009.

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

----Ss.25(15), 32, 223---S.R.O. 412(I)/2001 dated 18-6-2001---S.R.O. 823(I)/2001 dated 1-12-2001---S.R.O. 377(I)/2002 dated 15-6-2002---Standing Order No.17/91---Customs General Order 2 of 1994---Customs General Order No.5/94 dated 8-2-1994---Customs General Order No.12/2002 dated 15-6-2002, Para-78---Value of imported and exported goods---Determination of--- Price-check Committee---Executive Collectorate--- Jurisdiction--- Appellant contended that S. R. O.377(1)/2002 dated 15-6-2002 empowered the adjudicating authorities of Collectorate of Customs, Sales Tax and Central Excise (Adjudication) to adjudicate the cases relating to contravention of the provisions of Customs Act, 1969 and rules and regulation framed there-under which inter alia included the issue of value; that on the contrary officers of Executive Collectorate were entrusted with the job of adjudication given in sub-paras (a) to (h) of Para 2 of the S.R.O.377(I)/2002 dated 15-6-2002, since case of the appellant related to the issue of value the Collector adjudication was the prescribed and competent forum of jurisdiction as against the Executive Collectorate and that department despite being an officer of Executive Collectorate assumed the power of Adjudication Collectorate rendering the order in original and show-cause notice null and void ab initio and suffering from lack of jurisdiction---Validity---Contention that order suffered from lack of jurisdiction carried weight in terms of sub-para. (a) relating to the rejection of refund application (b) relating to Technical violation of manifest clearance and (f) relating to condonation of time or procedural omission of Para 2 of the S.R.O. 377(I)/2002, dated 15-6-2002 whereby Executive Collectorate had been empowered to perform these functions---Subject case pertained to determination of value of goods in terms of S.25 read with S.32 of the Customs Act, 1969 which was outside the purview of the Executive Collectorate---Order was unlawful, illegal, coram non judice and being issued without jurisdiction and based on a deficient and defective show-cause notice in contravention of settled law which explicitly deprecate the determination of valuation of the goods for export through a Valuation Committee---Order was set aside and appeal was allowed by the Appellate Tribunal.

Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Omer and Company v. Controller of Customs, (Valuation) (1992 ALD 449(1); Karachi AAA Steel Mills Ltd v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624); Ali Muhammad v. Hussain Bukhsh and others PLD 1976 SC 514 and Land Acquisition Collectorate, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514 rel.

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

----S.25---Value of imported and exported goods---Show-cause notice without specific allegations---Validity---Show-cause notice was vague and defective for want of necessary particulars---Show-cause notice did not contain specific allegations and was silent in respect of contravention of relevant provisions of Customs Act, 1969 and penal clauses attracted thereto---Show-cause notice and all subsequent proceedings including the order-in-original based on such a defective and deficient show-cause notice were unlawful, illegal and coram non judice.

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

----S.25---Value of imported and exported goods---Valuation of exported goods through Valuation Committee---Validity---Provisions of S.25(15) of the Customs Act, 1969, clearly specify that the customs value of any exported goods shall be the value at the prescribed time on a sale in open market of the country of exportation for the country to which the goods were consigned---Provision of S.25 of the Customs Act, 1969 no where states valuation of exported goods through formulation of any Valuation Committee---Valuation of the goods through Valuation Committee constituted in the absence of legal sanction, amounted to transgression of authority and forced construction of law which was deprecated---Such isolated, unilateral and arbitrary determination of export value were rendered the valuation of subject goods determined as a nullity in the eyes of law.

Collector of Customs, (Exports), Custom House, Karachi v. Messrs Bilal International, Lahore Customs Appeal No. K-332/2003; M/s. Horizon Exports, Karachi v. The Additional Collector, Exports-II, Karachi, Customs Appeal No.K-454 of 2003; M/s. Glaxo Welcome. Pakistan Ltd. v. The Collector of Customs (Appeals), South Zone, Karachi and others, Appeal No. 131/99; M/s. Muhammad Farooq & Sons v. The Collector of Customs, Sales Tax & Central Excise (Appeals) Karachi Customs Appeal No. K-128 of 2005; The Collector of Customs and another v. Abdul Razzak PLD 1996 Kar. 451; Collector of Customs (Appraisement v. H.M. Abdullah and another Yousaf Enterprises v. The Collector 2004 PTD 2993 and Pakistan Dry Battery Manufacturers Association v. Federation of Pakistan 2006 PTD 674 rel.

(d) Customs Rules, 2001----

----R.107(a)---Customs General Order No.12/2002 dated 15-6-2002, para. 78-Definition-At or about the same time"---Limitation---Allegation of wrong declaration/misdeclaration could not be levelled in the absence of any evidence as directed by Federal Board of Revenue in Para 78 of Customs General Order No.12/2002 dated 15-6-2002 for the period contemporaneous as expressed in R.107(a) of the Customs Rule, 2001 and even in terms of principles of natural justice and law.

M/s. National Radio Products, Karachi v. The Collector, Customs, Sales Tax & Central Excise, Karachi, Customs Appeals Nos. K-249/2000/13372; M/s. Iqbal Brothers, Lahore, Karachi v. The Additional Collector, Customs (Adjudication-1), Karachi, Customs Appeal No.K-35/2002; M/s. Tauheed Glass House, Lahore v. The Collector of Customs, (Appraisement), Karachi Customs Appeal No.K-1670/2001 2000 PTD (Trib) 617; M/s. Muhammad Farooq & Sons v. The Collector of Customs, Sales Tax & Central Excise (Appeals), Karachi, Customs Appeals Nos. 1668/LB and 1669/LB of 2002, Customs Appeal No.K-1281/05; M/s. Collector of Customs, MCC, Karachi v. M/s. FACO Trading, Karachi & The Collector, Customs, Sales tax & Central Excise, (Appeals) Karachi Customs Appeals No.K-576/2007; M/s. Punjab Baverages (Pvt.) Ltd. v. Appellate Tribunal (Customs Excise 7 Sales Tax) and 2 others 2002 PTD 2957; Collector of Customs, (Valuation) another v. Karachi Bulk Storage and Terminal Ltd. 2007 SCMR 1357=2007 PTD 1858 and Collector of Customs, Port Muhammad Bin Qasim v. M/s. Zymotic Diagnostics International, Faisalabad 2008 SCMR 438 rel.

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

----S.37---S.R.O. 412(I)/2001 dated 18-6-2001---S.R.O. 823(I)/2001 dated 1-12-2001---Drawback on goods used in the manufacture of goods which are exported---Duty drawback rates---Provisions of notifications S.R.O. 412(I)/2001 dated 18-6-2001 and S.R.O.823(I)/2001 dated 1-12-2001 envisaged the duty drawback rate @ 5.03% and 5.71% under Schedule III attached to said notifications which did not exceed the benchmark of 10% prescribed by the competent authority.

Nadeem Ahmed Mirza, Consultant/A.R. for Appellant.

Hyder Pirwani, Appraiser, D.R. for Respondent.

2010 P T D (Trib.) 1861

[Income Tax Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson

S.T.A. No. 1577/LB of 2009, decided on 22nd April, 2010.

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

----Ss.3A & 2 (25)---Turnover tax---Club---Fair price shop---Taxation of---Assessee contended that all items which were sold by the Club through its fair price shop were on which tax had been charged at its manufacturing as well as whole-sale stage; and he was not liable to pay sales tax as no value addition had been made by the Club while selling the items through its shop---Validity---Assessee being covered within the thresh-hold should have been charged under S.3A of the Sales Tax Act, 1990 and not under the other. normal provision---Items purchased from a fair price shop of a Club which inter cilia included milk, tooth paste, tooth brush, beverages,_ bakery items and such other items of daily use after purchasing from manufacturer or the whole-seller were without charge of sales tax---If there could be a doubt about the same the charge of tax on turnover had taken due care of the situation for the said period----Matter was remanded back to the Assessing Officer; and in the meantime the assessee may at his option apply for registration being liable to be registered under S.2(25) of the Sales Tax Act, 1990 in order to avail the said facility.

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

----S.3A---Turnover tax---Application of---Concept of turnover tax introduced through S.3A of the Sales Tax Act, 1990 was to cater for such like situations where the accounts for claiming the input tax could not be readily made available---Concept of turnover tax was to charge the tax on total turnover as against the other concept of charge of sales tax on the value addition.

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

----Ss.2(28),2(24),2(41),2(35) & 13---Words and phrases---"Goods"---"Taxable goods"-"Supply"-"Taxable supply "---Meaning---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.

(d) Sales Tax----

---"Taxable activity"---Meanings---Taxable activity means an activity which is carried on by any person not necessarily for pecuniary profit and involved in whole or in part the supply of goods to another person irrespective of any consideration and also includes and activity carried on in the form of business, made or manufacture.

Collector of Customs, Sales Tax and Central Excise and others v. M/s. Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 and M/s. Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax Gujranwala and the Central Board Revenue, Islamabad 2008 PTD 60 rel.

(e) Sales Tax---

---"In the course of"---`In furtherance of"---Meanings---In the course of can be taken to mean as connected with, related to and having some nexus with the business/taxable activity and similarly in furtherance of is indicative of the fact that the taxable supply had been made for the enhancement/further development of the business/taxable activity.

(f) Words and Phrases---

---Furtherance---Meaning: act of furthering, helping forward, promotion, advancement, or progress---In furtherance of has been interpreted as in promoting or advancing---Furtherance had been defined as 'fact or State of being furthered or helped forward, the action of helping forward, advancement, aid, assistance.'

Advance Law Lexicon, Third Edition, 2005, p. 1953 and m/s. Super Asia Muhammad Din Sons (Pvt.) v. The Collector of Sales Tax, Gujranwala and The Central Board of Revenue, Islamabad 2008 PTD 60 rel.

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

---S.2 (41) ---Taxable supply---Taxable supply has not been confined or limited to the one which is the product or the goods manufactured but also includes those goods which involve in some way with the progress, promotion, advancement of business/activity/taxable activity.

M/s. Super Asia Muhammad Din Sons (Pvt.) v. The Collector of Sales Tax, Gujranwala and The Central Board of Revenue, Islamabad 2008 PTD 60 and Collector of Customs, Sales Tax and Central Excise etc. v. M/s. Sanghar Sugar Mills Ltd. Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 rel.

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

----S.2 (41) & 3(1)(a)---Companies Ordinance (XL VII of 1984, S.46---Taxable supply -Club---Subscriptions---Taxability---Assessee being a club did not fall in any of the categories like, manufacturer, wholesaler, retailer etc. or distributor, especially in relation to donations, subscriptions.

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

----S.3---Scope of tax---Club---Fee and subscription---Taxation of---Validity---Sales Tax Act, 1990 applied only on sale and purchase of goods and that also the persons mentioned like manufacturers, whole sellers and traders etc.---Club was not covered in either of the said expression, nor the Federation could charge sales tax on services---Membership fee, monthly subscription and such other subscription were not even against the consideration of the providing of services.

Defence Authority Club, Karachi and 5 others v. Federation of Pakistan through Secretary, Revenue Division and 2 others 2007 PTD 398 rel.

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

----Ss.2(35), 3 & 3A---Taxable activity---Club---Fee and subscription---Taxation of---Validity---Facility provided like entrance fee, monthly subscription, annual subscription etc. by club were neither sale of goods nor services which even otherwise was a provincial subject--Except for sale at shop and sale of food at club no other item came within the purview of the supply of goods---Except for the heads which were in relation to sale at shop, supply of food to members etc. on other items the charge of sale tax was deleted by the Appellate Tribunal---Assessee was covered within the exceptions provided in definition of taxable activity---Activity carried on by an individual as a private recreational pursuit or hobby: and an activity carried on by a person other than an individual which, if carried on by an individual,. would fall within sub-cl. (b) after the phrase but it does not include' which meant that the assessee was a person and was involved in private recreationary pursuit and was not covered within the definition oftaxable activity'---Tax could be charged on bakery sale and supply of food in restaurant and on all other receipts its charge was not legally sustainable---Sale of bakery and other food items shall be charged as per S. 3A of the Sales Tax Act, 1990 after due fulfilment of the requirements of law by the Assessing Officer for which case was remanded while no tax was chargeable on other activities of the club.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 H.B. 69; Commissioner of Income Tax/Wealth Tax, Zone-C, (Legal), Lahore' v. Messrs Idrees Cloth House 2008 PTD 1420 (H.C.) Lhr. ref.

Defence Authority Club, Karachi and 5 others v. Federation of Pakistan through Secretary, Revenue Division and 2 others 2007 PTD 398 rel.

Khawaja Muhammad Sarwar for Appellant.

Dr. Javed Shehrar, D.R. for Respondent.

2010 P T D (Trib.) 2050

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Liaquat Ali Khan, Accountant Member

I.T.As. Nos.1635/IB and 1682/IB of 2005, decided on 4th November, 2006.

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

---Ss.59, 59A & 62---Income Tax Ordinance (XLIX of 2001), S.221---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.32---C.B.R. Circular No. 4 of 2001 dated 18-6-2001, Para 9(a)(ii)---Self Assessment---Selection of case for total audit---Complaint against---Assessment was framed under S.62 of the Income Tax Ordinance, 1979 during pendency of complaint---Appeal was filed against such assessment---During pendency of appeal, Federal Tax Ombudsman directed to exclude the case from list of cases selected for total audit and to accept the return under Self-Assessment Scheme---In consequence of directions of Federal Tax Ombudsman another assessment under S.59A of the Income Tax Ordinance, 1979 was passed accepting the declared income---Appeal filed by the assessee against original assessment framed under S.62 of the Income Tax Ordinance, 1979 was dismissed being infructuous in view of order passed under S.59A of the Income Tax Ordinance, 1979---Validity---Original order passed under S.62 of the Income Tax Ordinance, 1979 having not been cancelled, set aside or annulled in the due course of law, another order under S.59A of the Income Tax Ordinance, 1979 was legally not a valid order---Assessment framed by the Assessing Officer was not automatically cancelled or modified with the directions of the order of Federal Tax Ombudsman---For compliance of direction of Federal Tax Ombudsman the income tax authorities were required to proceed in accordance with the provisions of Income Tax Ordinance, 1979---Original order passed under S.62 of the Income Tax Ordinance; 1979 being an order validly passed held the field and the subsequent order passed under S.59A of the Income Tax Ordinance, 1979 in presence of such order was not a valid order---Appellate Tribunal held that original order of assessment passed under S.62 of the Income Tax Ordinance, 1979 held the field being a valid order; that Appellate order of First Appellate Authority to dismiss the assessee's appeal filed against the order under S.62 of the Income Tax Ordinance, 1979 declaring the same as infructuous was not maintainable and the same was vacated; that as a result of vacation of appellate order, the first appeal of the assessee against the original order under S.62 of the Income Tax Ordinance, 1979 stood restored and that both the subsequent orders passed in consequence of the invalid order passed under S.59A of the Income Tax Ordinance, 1979 i.e. the order of First Appellate Authority as well as the order passed by the Assessing Officer under S.221 of the of the Income Tax Ordinance, 2001 were null and void and stood vacated.

(b) Income Tax---

----Assessment---No order of assessment of income could be passed in presence of a valid assessment already having been framed in respect of the said income.

A.A. Sheikh, D.R. for Appellant.

Zahid Hussain ACMA for Respondent.

2010 P T D 1827

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Jawaid Masood Tahir Bhatti, Judicial Member and Mrs. Shahnaz Rafique, Accountant Member

S.T.As. Nos. 236/LB, 1082/LB, 235/LB, 233/LB and 347/LB of 2009, decided on 9th April, 2010.

(a) Interpretation of Statutes---

----Explanation---Scope---Explanation of law has to be retrospective and could not introduce a new law.

(b) Interpretation of Statutes---

----Circular---Scope---Every beneficial circular is retrospective.

(c) Interpretation of Statutes---

----Application of law cannot be altered prospectively or retrospectively through an executive order or interpretation, it is the mandate of lawmakers only.

(d) Interpretation of Statutes---

----Where a law is amended to provide remedy to citizens or is brought to cure an ill, unless otherwise provided therein, it is always considered retrospective.

M/s. Ellahi Cotton Mill's case PLD 1997 SC 582; M/s. A.A. Corporation's case 2004 PTD 2738 and Messrs Army Welfare's case 1992 SCMR 1652 rel.

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

----S.3 3 & First Schedule---C.B.R. Letter No.1 (17) CED/96, dated 24-12-2004---Duties specified in the First Schedule to be levied---Clarifications---Application of ---Ruling issued by the Central Board of Revenue vide Letter No.1 (17) CED/96 dated 24-12-2004 being remedial and in fact curative it will be incorrect to contend that its application is not retrospective---All remedial and curative legislations are retrospective and can also be applied in all pending matters.

Re; Shahnawaz Ltd. 1993 SCMR 73 rel.

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

----Ss.66, 2(37), 3B (1) (2) & 10 ---Central Excise Act (I of 1944), S.3D---Federal Excise Act (VII of 2005), S.19 (5)---C.B.R. Letter No.1 (17) CED/96 dated 24-12-2004---Refund to be claimed within one year---Collection of excess duty, etc.---Payphone companies---Claim .of refund---Limitation---Appellant filed two refund claims with the department within one year of the date of ruling (i.e. 24-12-2004) which reflected that the claims were not time-barred---Granting condonation of time in respect of a claim which was not even time-barred did not constitute any offence---Section 66 of the Sales Tax Act, 1990 clearly stated that where the refund became due on account of any decision of Sales Tax Officer, the period of one year shall be reckoned from the date of that decision---As the refund claims were filed within one year of FBR's ruling of 24-12-2004, the question of limitation became irrelevant and immaterial.

Riflizer's case PLD 1998 SC 64 ref.

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

----S.3D---Sales Tax Act (VII of 1990), S.66---Collection of excess duty, etc.---Once refund is issued it cannot be contended that the technicalities were not met with at the time of issuance of refund.

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

----S.3D---Sales Tax Act (VII of 1990), S.66---Collection of excess duty, etc.---Payphone companies---Claim of refund---Department contended that in case of any excess tax, it was put to Pakistan Telecommunication Authority to apply for the refund and the assessee (company) was ineligible to file any refund claim---Validity---Chain of taxation demonstrated that Pakistan Telecommunication Authority was collecting tax from the assessee and was depositing same into the national exchequer---Assessee was paying tax to Pakistan Telecommunication Authority but did not collect tax from consumers as its services were in a way exempt---Difference between taxable and exempt person was that taxable person at the time of purchase pays and then collects tax---Exempt person while making purchases pays tax but did not later collect same---Chain of taxation stops as the exempt person was not entitled to collect any tax---Chain of taxation in the present case, stopped at the assessee who paid tax to Pakistan Telecommunication Authority but did not collect it and was eligible to file the refund claim on the amount deducted beyond the prescribed limit---Departmental practice in the cases of exporters, suppliers and manufacturers was that tax was collected by withholding agents and deposited in the national exchequer and refund was sanctioned to the said exporters suppliers/manufacturers---Pakistan Telecommunication Authority was not entitled to file refund as it was only acting as a collecting agent and was collecting tax from the assessee.

Federation of Pakistan v. Metropolitan Steel Corporation 2002 PTD 87 rel.

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

----S.3D---Sales Tax Act (VII of 1990), S.66---Collection of excess duty, etc.---Claim of refund of tax which was not payable or was paid in excess could only be made by the person "paying" the tax and not by the one who had "collected" the same.

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

----S.3B---Collection of excess tax etc.---Payphone companies---Provisions of S.3B of the Sales Tax Act, 1990 were only applicable on a person who had "collected tax" or "collects tax"---Chain of taxation stops and ends at the exempt person who pays tax but could not collect tax---Assessee being exempt could not collect any tax and did not fell under the definition of "any person who has collected tax or collects tax"---Overstretching the provisions of S.3B of the Sales Tax Act, 1990 will not be justified as the said provision do not apply to the assessee for being exempt---Section 3B of the Sales Tax Act, 1990 was only applicable in respect of a tax collecting agent who collects tax and passed on the incidence of tax to another person.

Pakeom Ltd. v. Collector Customs, Rawalpindi Appeal No.3136 of 2001, dated 7-3-2003 not applicable.

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

----S.3B (3)---Collection of excess tax etc.---Federal Board of Revenue's ruling 1(124) STT/98 dated 24-8-2004---Payphone companies---Incidence of tax passed on to consumer---Assessee had not been passing on incidence of tax to consumers as the call rates for the consumer remained unchanged before and after 24-12-2004---When rate had remained the same, then it could not be contended that incidence of tax had been passed on to consumers.

2000 SCMR 1266 rel.

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

----S.3B---Collection of excess tax etc.---O.B.R. Letter No.1(17) CED/96 dated 24-12-2004---Payphone companies---Incidence of tax passed on to consumer---After Federal Board of Revenue's ruling, the assessee started paying less tax and became the direct beneficiary of the said ruling---Assessee was paying more tax "on gross amount" before the ruling of 24-12-2004 and started paying less tax "on the discounted amount" after the ruling---Tax discount directly benefited the assessee which proved that the incidence of tax was being borne by the assessee on transactions before 24-12-2004---Issuance of Federal Board of Revenue's ruling of 24-12-2004 and grant of discounts itself proved that the incidence of tax had not been passed on to consumers as there was no change in calling rates for consumers before and after 24-12-2004---When rate had remained the same, then how could the Department argue that in respect of transaction after 24-12-2004, incidence of tax had been passed on to consumers---Being exempt, the assessee was unable to collect tax and could only pass on price of their services---Price which they were charging from consumers was devoid of any tax component proof of which was that their calling rates remained unchanged before and after the issuance of Federal Board of Revenue ruling of 24-12-2004---Federal Board of Revenue allowed collection of tax at discounted rate vide its ruling of 24-12-2004 and seemed satisfied. that incidence of tax was not being passed on to consumers after 24-12-2004, how come it was simultaneously being argued that, on same rates, incidence of tax was being passed on to consumers before 24-12-2004----Section 3B of the Sales Tax Act, 1990 was not applicable on the assessee, incidence of lax having not passed on to the consumers, they were direct beneficiaries of the reduction in tax ratio.

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

----S.3B---Collection of excess tax etc.---Payphone companies---Claim of refund on the basis of Federal Board of Revenue's ruling---Tax fraud---Scope---Whole controversy, in the present case, revolved around multiple and contradictory interpretations of Federal Board of Revenue which created a confusing situation in which excess tax was firstly wrongly charged from the assessee and after sanction, refunds were declared illegal---Nothing was available on record which could demonstrate that while claiming refund, fake documents were utilized or forgery of any kind was committed-- Case could not be construed as tax fraud or a case of illegal sanctioning of refund as the department failed to prove that there existed any forgery, connivance or dishonest act of any kind---Case did involve difference of opinion in, legal interpretation which could not be portrayed as tax fraud specially when Federal Board of Revenue itself erred and issued contradictory clarifications on the same point of law---Assessee adopted the course and filed refund claim with the competent authority on the basis of ruling by Federal Board of Revenue---Refund claims were properly processed and sanctioned, it will be unjustified to blame the assessee for committing tax fraud---Assessee could not foresee that after 8 months, Federal Board of Revenue would again issue another ruling to declare its earlier ruling to be prospective and sanctioned refunds will be recalled.

(n) Sales Tax---

----Authority of Federal Board of Revenue to interpret law---Neither the explanation of the Board was prospective nor the Federal Board of Revenue had any authority to hold an interpretation to be as prospective---Federal Board of Revenue did not figure anywhere in judicial hierarchy---Courts could disagree with its interpretation; similar was the position of interpretation of Law Ministry---Law Ministry also was not a court of law, its opinion which even otherwise was generally unilateral without hearing the parities concerned could not be adopted, Law Ministry also did not figure anywhere in judicial hierarchy of the country, in fact it was not even an administrative authority in the Revenue Department---Federal Board of Revenue's directions were binding on its subordinates while opinion of Law Ministry was not binding on the officers of the Revenue department.

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

----S. 3B---C. B. R. Letter No.1 (17) CED/96 dated 24-12-2004---Collection of excess tax etc.---Payphone companies---Claim of refund--Application of law---Law becomes applicable front the date it is made or from the date it is made applicable by the legislature---Federal Board ' of Revenue, at best can interpret law but cannot determine the date of its application---Excise duty after addition of the 3rd proviso in S.3 of the Central Excise Act, 1944 through amendment in law in 2001 had transferred the levy charge and collection to the sales tax mode---Tax was to be deducted on the discounted price---Said facility could not be delayed by any method by an authority other than legislature---Subsequent explanations, letters were illegal and the letter dated 24-12-2004 by C.B.R. shall hold field for all practical purposes with retrospective effect.

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

----S.3B---Collection of excess tax etc.---Payphone companies---Shifting of incidence---Claim of refund---Validity---Shifting of incidence was conceptual misunderstanding of the department---Law allowed deduction from the taxpayer at Rs.0.24 which under the misinterpretation and misunderstanding of concerned persons was being deducted by Rs.0.31---Such. .07 paisa for all practical purposes belonged to the taxpayer and its reversion was just correction of an error, concept of passing the same to user did not arise at all---Tax payer being chargeable to excise duty at NIL rate had not deducted any sum from the consumer---Additional tax deducted was the entitlement of the taxpayer and refund on the basis thereof should be issued to them by making necessary calculations on the basis thereof---Orders passed creating demand and penalty were cancelled by the Appellate Tribunal and consequently additional charge and penalty were also deleted.

Rana Munir Hussain, Saqib Munir, Zahid Attiq and Syed Irfan Haider for Appellants (in S.T.A. No.236/LB of 2009).

Farhat Nawaz Lodhi, LA and Imran Shah, D.R. for Respondent (in S.T.A. No.236/LB of 2009).

Akhtar Ali for Appellants (in S.T.A. No.1082/LB of 2009).

Sh. Nadeem Anwar, L.A. for Respondents (in S.T.A. No.1082/LB of 2009).

Furqan Naveed for Appellant (in S.T.A. No.235/LB of 2009).

Sh. Nadeem Anwar, L.A. for Respondents (in S.T.A. No.235/LB of 2009).

Rana Munir Hussain, Saqib Munir, Zahid Attiq and Syed Irfan Haider for Appellants (in S.T.As. Nos.233/LB and 347/LB of 2009).

Sh. Nadeem Anwar, L.A. for Respondents (in S.T.As. Nos.233/LB and 347/LB 2009).

2010 P T D (Trib.) 1871

[Inland Revenue Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Abdul Rauf, Accountant Member

M.A. (Stay) No. 342/LB/2010, decided on 17th June, 2010.

Central Excise Act (I of 1944)---

----S. 358(5)---Application by the assessee before Appellate Tribunal to stay the recovery of demand proceedings---Direction of High Court regarding adjudication by the Appellate Tribunal could not be carried out on account of order of Supreme Court, the effect of which had ousted the jurisdiction of Appellate Tribunal vis-a-vis the issue remanded by the High Court to the Appellate Tribunal for consideration---Appellate Tribunal, therefore, could not record any finding even upon an issue ancillary to the main appeal, because of judicial propriety---Appellate Tribunal, in circumstances, expressed its inability to grant stay to the assessee because the jurisdiction of Appellate Tribunal stood ousted even with reference to issues incidental and ancillary to the main appeal---Application was rejected by the Appellate Tribunal.

2008 PLC (C.S.) 551 and PLD 2008 Lah. 57 distinguished.

Ayaz Shaukat for Applicant.

Farhat Nawaz Lodhi for Respondent.

2010 P T D (Trib.) 1874

[Inland Revenue Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed; Chairperson and Shahnaz Rafique, Accountant Member

S.T.As: Nos. 707/LB and 89/LB of 2009, decided on 20th May, 2009.

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

---S.8(1)(b)---S.R.O. No.578 dated May, 2006---Tax credit not allowed---Claim of input tax on utilization of diesel---Disallowance of--Assessee admitted that diesel had been added in the negative list, however, it did not apply on the period which was July, 2005---Mentioning of diesel in the negative list to be as confiscatory and taking an exception was not open; and amendment even otherwise was not in field for the dates applicable on the case---Even if the claim of Department that it could be used for personal purposes was considered as valid its mentioning in the negative list was after the period under discussion---Appellate Tribunal disagreed with the departmental claim that for the presumption or the possibility of the use of certain goods otherwise than the production could be a good ground for disallowance---Disallowance. of input tax on such a product which had direct nexus with the production could only be approved if there was some valid proof giving reasons to believe that the same had been used otherwise than the production---Action confirmed by the First Appellate Authority was reversed with the direction to allow the same.

2007 PTD 413 1999 PTD 1892 and 2006 PTD 1456 rel.

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

----S.8(1)(b)---S.R.O. No.464 dated 9-6-2007---Tax credit not allowed--Claim of input tax on electricity utilized in labour colony---Disallowance of ---Assessee contended that labourers being integral part of the manufacturing process of production the input tax paid on their electricity bills was fully allowable---Legislature had disallowed the input tax on use of electricity for labour colony, however, the same applied from the period on and after 9-6-2007; and period being July, 2005 same could not be applied on it--Validity---Held, it was a fact that labourers were integral part of production---Salaries and perquisites given to them had direct nexuses with the manufacturing process---Disallowance through legislation also create the impression that the same was allowable---Input tax on electric supply of labour colony prior to 3-6-2007 was entitled to input tax and the concerned officer was directed to allow the same.?

2006 PTD 196 and 2000 PTD 473 rel.

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

----S.8(1)(b)---Tax credit not allowed:--Disallowance of input tax on liquidated damages---Taxpayer had to reduce the value of its product at the time of payment by the supplier' by some margin for the reason that the goods were sub-standard or supply was late; it formed on an average almost 15% of the supply---Input tax paid on the said amount had not been adjusted against the supply by holding that it was not covered within definition of supply'---Validity---Disallowance of input tax on liquidated damages by Sales Tax authorities was surprising---If authorities felt that the same was not practically related to supply it even otherwise became a surplus deduction being over and above the quantum of supply---Supply of goods in weight and measures being the same as contracted between the supplier and the buyer, the reduction of value in terms of amount receivable for the reason of some deficiency, quality or delay, did not exclude the reduced amount from value of supply---Total quantity of product remained the same but the value was reduced as per earlier contract---To say that such was not in relation to supply was quite surprising and disallowance was held to be as improper by the Appellate Tribunal.

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

----S.2(46)---Supply---Receipt of rent on pipeline through which Oxygen and Ammonia produced as a byproduct in the factory was supplied---Taxation of by treating the same as supply---Assessee contended that department in another year had accepted rent as not covered within the definition of S.2(46) of the Sales Tax Act, 1990 thus had seized to have the right to charge tax on the same for another year; that department had no jurisdiction to decide one issue on two ways and to have contradiction within department on the same issue---Validity---Deduction of tax on rent of pipeline through which Oxygen and Ammonia was supplied, the pipeline remained ownership of the taxpayer and was not covered within the expression `supply'---Allowance of input tax deduction in one year did not debar the department for not taking a legal action in another year; there was no estoppel in tax---Action of subordinate forum to the said extent was confirmed by the Appellate Tribunal.?

2006 PTD 76 rel.

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

----S. 8(1)(b)---Tax credit not allowed---Charge of Sales Tax on fixed assets---Cooking range---Taxpayer contended that department wanted to charge tax on other items also but later was impressed that the item on which no input was claimed could not subsequently be charged to tax on its sale being a part of fixed assets; and item left now was a cooking range which was sold and on its purchase no input having been claimed it should not had been brought to charge---Validity---Charge to tax on sale of Cooking Range was a factual controversy---Appellate Tribunal could not verify at present stage as to whether there was a claim of input or not---Action of the officers below needed no exception.?

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

----S.73---FBR's Clarification dated 17-9-2009---Certain transactions not admissible---Account settlement in kind---Assessee contended that account having been settled through a consideration other than cash i.e. in kind the provisions of S.73 of the Sales Tax Act, 1990 were not applicable---Department contended that payment of the amount for a transaction exceeding value of Rs..50, 000 was required to be made by a cross cheque and assessee having failed to comply with the legal requirements disentitled itself from the claim of any input as well as output adjustment---Validity---Provisions of S.73 of the Sales Tax Act, 1990 applied on "payment of the amount"---Book transaction did not involve any "payment of the amount"---Purpose of the provision was documentation of economy and the book adjustment by all means covered such situation---Exception provided by S.73 of the Sales Tax Aft, 1990 by declaring certain transactions as inadmissible was 'controlled by the phrase `payment of amount" only and same did not apply on any other mode of payment---No payment of the amount of the transactions between two sister concerns existed and the entire supply and adjustment was through books as claimed by the assessee and confirmed by the Department---Provision of S.73 of the Sales Tax Act, 1990 would not apply on such transactions---Assessing Officer was not justified in denying the benefit of the said transactions to the taxpayer under the garb of claim that the same required payment through cross cheque---Benefits on the transactions made through books by applying S.3 of the Sales Tax Act, 1990, was illegal---Departmental official was directed to allow the same after fulfilment of the formalities---Appeal was accepted by the Appellate Tribunal.

?

The Concise Oxford Dictionary Ninth Edition ref.

Asim Zulfiqar Ali, F.C.A. for Appellant.

Aftab Ali Bhatti, D.R. for Respondent.

2010 P T D (Trib.) 1881

[Inland Revenue Appellate Tribunal Pakistan]

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

I.T.A. No. 643/IB of 2003, decided on 21st February, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S.12 (18)---Income deemed to accrue or arise in Pakistan---Gift of prize bonds---Addition of---Assessee contended that gift of prize bond was in accordance with the provisions of Islamic Law; and Islamic Law being special law would not override the provision of S.12(18) of the Income Tax Ordinance, 1979; and the provisions of S.12(18) of the Income Tax Ordinance, 1979 dealt with loans, gift and advances of cash therefore gift of prize bond did not fall within the scope of said section as the prize bonds were not considered to be cash in terms of provisions of S.12(18) of the Income Tax Ordinance, 1979---Addition was deleted by the First Appellate Authority with the observation that the prize bonds did not fall within the ambit of S.12(18) of the Income Tax Ordinance, 1979---Validity--According to contention of the Department, prize bonds were equivalent to cash which meant that even according to view point of the department the prize bonds in itself were not the cash---Provisions of S.12 (18) of the Income Tax Ordinance, 1979 required the transaction of loan or advance or gift through a cross cheque drawn on bank or through a banking channel which was only possible in the case of transaction in respect of cash and not otherwise---Word "sum" used in S.12 (18) of the Income Tax Ordinance, 1979 could not be stretched to include the other items, even if those were easily convertible into cash---Finding of First Appellate Authority that "prize bonds as such did not fall within the ambit of S.12(18) of the Income Tax Ordinance, 1979" was upheld by the Appellate Tribunal and order was maintained.

(1959) 17 ITR 489; Black Law's Dictionary 1287 (5th Edition); 1987 SCMR 1403; I.T.A. No. 495/IB/1987/1988 and PLD 1985 SC 159 ref.

Abdul Shakoor, D.R. for Appellant.

Sikandar Hayat for Respondent.

2010 P T D (Trib.) 1899

[Inland Revenue Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Syed Aqeel Zafar-ul-Hassan, Accountant Member

I.T.A. Nos. 742/IB and 796/IB of 2003, decided on 23rd January, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.62 & 63---Assessment on production of accounts, evidence etc.---Estimation of sales at 6 times of the average stock---Assessee contended that estimation of turnover at 6 times of average stock was against the principles of accounting, having no legal sanctity, unjustified and without any basis---Department pleaded that First Appellate Authority was not justified in reducing the estimation of sales which was adopted in view of similar treatment being accorded in other parallel cases; and assessee was confronted on the issue of estimate of sales through notice issued under S.62 of the Income Tax Ordinance, 1979; and no objection was raised by the assessee to the proposed estimate of sales by filing any reply---Validity---Assessing Officer was justified in rejecting the declared version, which was not supported with the books of accounts and other documentary evidence----Assessing Officer by quoting the parallel cases and relying on the decision of Appellate Tribunal whereby the sales estimated five to six times of stock were confirmed by the Appellate Tribunal estimated the sales of assessee at six times of the average stock---Before framing ex parte assessment the assessee was confronted with the proposed estimate of sales worked out on the basis of rotation of stock through notice issued under S.62 of the Income Tax Ordinance, 1979, against which no objection was raised by the assessee---Assessee accepted the estimate of sales confronted to him because no objection against the sales proposed to be adopted by the Assessing Officer was raised during the course of assessment proceedings---Service of the notice remained undisputed because neither the issue regarding service of notices was raised in appeal before First Appellate Authority nor it had agitated by assessee before Appellate Tribunal---First Appellate Authority was not justified to allow relief because no objection was raised against proposed estimate of sales specifically confronted to assessee through notice issued under S.62 of the Income Tax Ordinance, 1979---Assessee once having accepted the estimate of sales proposed by the Assessing Officer was not entitled to dispute the same by challenging the basis of estimate adopted by the Assessing Officer---Order of First Appellate Authority was vacated and the original estimate of sales adopted by the Assessing Officer was restored by the Appellate Tribunal.

(1953) 24 ITR 481; (1966) 59 ITR 120; (1954) 26 ITR 775 SC India and (1966) 62 ITR 528 ref.

Order No. 605/IB of 1992-1993 rel.

Abdul Shakoor, D.R. for Appellant.

Sikandar Hayat Khan for Respondent.

2010 P T D (Trib.) 1904

[Inland Revenue Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 338/LB to 344/LB of 2009, decided on 12th May, 2009.

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

----S.134---Appeal to the Appellate Tribunal-Condonation of delay---Service of appellate order---Original record was not produced by the Department to verify that appellate orders were originally served on the assessee as the same was not traceable---Assessee contended that appellate orders were not served and filed an affidavit that orders were never served on the assessee on the dates as stated by the First Appellate Authority and on being informed that the appellate orders were passed, they obtained the duplicate copies of the same and filed appeal---Validity---As the original record of First Appellate Authority was not made available by the Department, Appellate Tribunal condoned the delay in appeals filed by the assessee as being within time---In case of a "doubt" the benefit should go to the taxpayer who did not stand to gain from filing an appeal beyond the "limitation" as provided in law.

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

----Second Sched., Part-1, Cl. (94)--- Exemption--- Voluntary contributions---Charitable institution---Rice Exporter Association, of Pakistan---Voluntary contributions of the Rice Exporters Association of Pakistan were exempt under CI. (94) of the Second Schedule to the Income Tax Ordinance, 1979---Expenses related to voluntary contributions shall be deducted, while allowing exemption under CI. (94) of the Second Schedule of the Income Tax Ordinance, 1979---Objection that assessee had not obtained "exemption" certificate from Federal Board of Revenue, no such exemption certificate was required in law to avail the privilege of exemption.

36 ITR 222; 55 ITR 409 and 27 ITR 535 not relevant.

W.P. No. 10227 of 2002 dated 11-7-2002 ref.

99 Tax 278 (Trib.) rel.

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

----Ss. 52, 86 & 50(4)---Income Tax Ordinance (XLIX of 2001), S.161 & 205---CBR Notification No.586(1)/91 dated 30-6-1991---Liability of persons failing to deduct or pay tax---Assessee in default---Assessee contended that most of the Profit and Loss account expenses were below Rs.25,000 and wherever S.50(4) of the Income Tax Ordinance, 1979 was attracted deduction of tax had been made and necessary documentary evidence was furnished to assessing officer who did not scrutinize the same and disallowed expenditure without citing any instance where deduction of tax had not been made---Validity---Initiation of proceedings under Ss.52/86 of the Income Tax Ordinance, 1979 were not tenable in the eyes of law, as most of the expenses claimed in Profit and Loss account which were brought to taxation, were below the threshold limit of Rs.25,000---Assessing Officer had failed to adhere to direction of Central Board of Revenue and also failed to cite any instance where deduction of tax had not been made by the assessee---When provisions of S.52 of the Income Tax Ordinance, 1979 were invoked to declare a person to be an assessee in default' the particular payments wereidentified' which were attracted by the provisions of S.50(4) of the Income Tax Ordinance, 1979---Assessing Officer failed to identify the parties on account of whom the assessee company had been treated as `assessee-in-default"---Initiation of proceedings under S.52/86 of the Income Tax Ordinance, 1979 read with Ss.161/205 of the Income Tax Ordinance, 2001, were not tenable in the eyes of law which were cancelled by the Appellate Tribunal.

2003 PTD (Trib.) 1167 and (2000) 82 Tax 289 rel.

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

----Ss.52 & 86---Liability of persons failing to deduct or pay tax---Assessee in default---Salary income---Assessing Officer had held the assessee as `assessee-in-default with regard to payment disbursed under the head "Salary", but he clubbed the salary income of two independent employees and then charged same to tax which was illegal as the salary individual disbursed was below the taxable limit.

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

----Ss.52 & 86--- Liability of 'arsons failing to deduct or pay tax---Assessee in default---Payment to foreign companies---Non-deduction of tax upon payments made to foreign companies under the head "Aromatic Rice Conference "---Issue needed reappraisal and should be decided by the assessing authority in the light of documentary evidence available with the taxpayer---Order of First Appellate Authority on the issue of Aromatic Rice Conference was vacated and matter was remanded to Taxation Officer, for de novo consideration.

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

----S.80-D---Minimum tax on income of certain persons---Voluntary contributions---Turnover---Rice Exporter Association of Pakistan---Section 80-D of the Income Tax Ordinance, 1979 was not attracted in the case of assessee, as the voluntary contributions did not constitute "turnover" in terms of S.80-D of the Income Tax Ordinance, 1979.

Raja Sikandar Khan and Hussain Ahmad Sherazi for Appellant.

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

2010 P T D (Trib.) 1918

[Inland Revenue Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Khalid Siddiqui, Accountant Member

I.T.A. No. 606/KB of 2008, decided on 2nd October, 2009.

Per Khalid Siddiqui, Accountant Member

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

----Second Sched., Part-IV, Cl. 47-A---Income Tax Ordinance (XLIX of 2001), Ss.153, 148, 122(5A)---Exemption from specific provisions of law---Department contended that Cl.47-A of Part-IV of Second Schedule of the Income Tax Ordinance, 1979 was applicable where tax stood deducted at import stage @ 6% and since in the case of assessee tax deduction was on reduced rates, they did not fall under the ambit of said clause---Assessee contended that said clause did not attach any condition of `rate of deduction' to qualify to take its advantage---Validity---Department had not been able to put forth any case-law or valid reason on the basis of which the benefit provided in Cl.47-A of Part-IV of Second Schedule of the Income Tax Ordinance, 1979 could be denied while on the contrary there were various decisions of higher appellate forums wherein it was held that no further deduction would be made on suppliers where tax already suffered at import stage---Order of the First Appellate Authority on the issue was quite justified and did not warrant any interference, which was upheld by the Appellate Tribunal.

Per Khawaja Farooq Saeed, Chairperson agreeing with Khalid Siddiqui, Accountant Member.

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

----Ss.148 (7), 153 & 122 (5A)---Income Tax Ordinance (XXXI of 1979), Second Sched., Part-IV, Cl.47-A---Imports---Deduction on sale of imported goods---Through S.148(7) of the Income Tax Ordinance, 2001 the deduction made under S.148(1) of the Income Tax Ordinance, 2001 had been made full and final discharge, meaning thereby, that a person who imported certain goods would not be required to pay any further tax on disposal and sale of the said item.

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

----Ss.153, 148 (7) & 122 (5A)---Income Tax Ordinance (XXXI of 1979), Second Sched: Part-IV, Cl.47-A---Payments for goods and services---If a transaction which had been subjected to withholding tax at the stage of import it shall not be again subjected to withholding in case the item was sold in the same form to some other person---If there was no withholding at the subsequent stage there was no question of its being full and final discharge and the earlier transaction became final and for all practical purposes---Amount of withholding at the stage of import was no consideration, it was the transactions which if complete shall hold good permanently and all subsequent transaction shall remain free from withholding tax at the supply stage---Action of holding deduction at import stage to be as lawful and justified, needed no exception---Appeal was dismissed.

Gohar Ali, D.R. for Appellant.

Nayyar Raza Zaidi, FCA for Respondent.

2010 P T D (Trib.) 1973

[Inland Revenue Appellate Tribunal Pakistan]

Before Syed Muhammad Jamail Raza Zaidi, Judicial Member and Khalid Siddiqui, Accountant Member

M.As. (Rect) Nos. 157/KB to 163/KB of 2008 in W.T.A. Nos. 6 to 12/KB of 2007, decided on 14th June, 2010.

Wealth Tax Act (XV of 1963)---

----S.31B(1)(b)---Additional Wealth-tax---Assessee contended that Appellate Tribunal erred in restoring the additional tax charged for the period from the date till the framing of assessments whereas under the provision of S.31B(1)(a)' of the Wealth Tax Act, 1963 it was chargeable only for the period till the end of the, relevant assessment year---Validity---Held, direction had already been given by the Appellate Tribunal to calculate additional tax keeping in view the provisions of S.31B(1)(b) of the Wealth Tax Act, 1963, there was no reason to make any further finding on the subject.

2002 PTD (Trib.) 221 rel.

Abdul Tahir (ITP) for Appellant.

Nemo for Respondent.

2010 P T D (Trib.) 1975

[Inland Revenue Appellate Tribunal .Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.A. No. 565/IB of 2010, decided on 8th June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.205(1)(b), 147(4) & 168---Default surcharge---Taxation Officer required to file estimate for payment of advance tax or to pay amount of instalment of advance tax not less than 90% of tax chargeable but the taxpayer failed to do so---Additional tax was charged under S.205(1)(b) of the Income Tax Ordinance, 2001---First Appellate Authority vacated the order of Taxation Officer with the observations that when determined refunds were available on record, the additional tax was not chargeable---Department contended that as per provision of S.147(4) of the Income Tax Ordinance, 2001 against advance tax liability; the tax paid in quarter for which credit was allowed under S.168 of the Income Tax Ordinance, 2001, could only be adjusted---Validity---Unadjusted refunds were due from the department at the time of alleged default---Assessing Officer was not justified to charge additional tax under S.205(1B) of the Income Tax Ordinance, 2001---If one uses the money of Government then he had to compensate the Government---In the present case, Government on one hand was collecting tax in advance, and on the other hand determined refunds of taxpayer were still to be adjusted---Finding of First Appellate Authority was very clear and specific that demand note and consolidated order under S.124 of the Income Tax Ordinance, 1979 showed that at the time of levy of additional tax unadjusted refunds were due from the department---When determined refunds were available on record, the additional tax was not chargeable---Departmental appeal being devoid of any merit was dismissed by the Appellate Tribunal.

Sardar Zafar Mehmood, D.R. for Appellant.

Arif Afzal for Respondent.

2010 P T D (Trib.) 1978

[Inland Revenue Appellate Tribunal Pakistan]

Before Syed Jamil Raza Zaidi, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.A. No. 704-KB of 2009, decided on 15th December, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss.85, 80(2)(a), 92, 93 & 122(9)---Change of status from sole proprietorship to association of persons---Assessee was treated as "Association of Persons" on the ground that investing partner (husband of the assessee) purchased the other adjoining properties and contributed the same to the business to expand upon the existing infrastructure, that cost of the premises defined the capital interest of the investing partner in the ownership of the said business; that business's bank account revealed that a considerable amount of money was claimed to have been handed over to the investing partner; and investing partner had been making use of the positive cash flow of the business for personal investment and commitments, without having fulfilled any obligation incidental to obtaining such a loan, not only further established the extent of his authority and control over the assets of the business but also testified to his status of being a partner/member of the business---Assessee contended that by treating her husband as an associate in terms of S.85 of the Income Tax Ordinance, 2001, Assessing Officer failed to pinpoint any transaction between them to arrive at the conclusion that the same was meant for the purpose of avoidance of tax; and change of status of sole proprietorship into a deemed association of persons based on personal incharge without any concrete and plausible evidence did not justify the action of the Taxation Officer; and intention of legislature as envisaged in S.85 of the Income Tax Ordinance, 2001 was to apply the anti-avoidance provisions and it had nowhere empowered the Department to change the status of the taxpayer/assessee---Status declared by the assessee as sole proprietor was restored by the "First Appellate Authority "---Validity---Appellate Tribunal upheld the view taken by the First Appellate Authority that Taxation Officer had no justification to assign the status of an association of persons instead of sole proprietorship of the taxpayer/assessee: and his action, in the absence of any concrete evidence to the contrary was not tenable, hence unlawful and as per provisions of S.85 of the Income Tax Ordinance, 2001, the Department or for that matter the Taxation Officer was not empowered to change the status of the assessee from sole proprietorship to association of persons---Order of First Appellate Authority was confirmed by the Appellate Tribunal.

Ghulam Nabi Sethar for Appellant.

M. Ashraf for Respondent.

2010 P T D (Trib.) 1983

[Inland Revenue Appellate Tribunal Pakistan]

Before Muhammad Arif Moton, Member (Judicial)

Customs Appeal No. K-232 of 2008, decided on 6th August, 2009.

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

----Ss. 32 & 32A---Stainless steel---Quality of goods---Prime or Secondary---First Appellate Authority despite forwarding sample through Pakistan Customs Computerized System (PaCCs) for testing to Pakistan Steel Mills for confirmation of nickel contents in goods, disregarded the test report in which the test was conducted confirming that goods contained nickel content to the extent of 0.95% rendering the goods as secondary quality by virtue of contents of nickel lesser than 3.5% in stainless steel sheets T-200 Series---First Appellate Authority found that report of Pakistan Steel Mills was neither credible nor comprehensive enough to clearly determine the quality and was vague as it did not mention at all about the percentage of chromium---No inquiry in this regard was made by the customs authorities or First Appellate Authority from the Pakistan Steel Mills while forwarding the sample for testing---Straying from the proceedings was not appreciable---In case the chromium was not discussed in the test report by the Steel Mills despite not being asked for, also rendered the product as "secondary" because T-200 series of "prime" quality stainless steel should contain minimum 11% chromium in addition to other components---Goods not containing Chromium to the extent of 11% had a possibility of being something other than stainless steel---Proceeding had been done in a very arbitrary, crude and mala fide manner as was evident from the labels affixed on the consignment, which nowhere indicate that the goods were of prime quality---Labels affixed on prime quality goods produced by the importer as evidence and placed on record prominently indicate such fact---Quality of the goods being secondary was also being confirmed it those were analyzed as per laid down parameters vide minutes of the meeting e.g. (i) prime quality goods should contain mill test certificate (which was missing in the consignment) (ii) manufacturing date of the product was irrelevant in determination of quality of the goods which could either be before or after the date of L/C or contract, shift No. mentioned on the affixed labels were immaterial and did not render the goods as prime (iii) Mode of packing was also irrelevant as the product could be packed in any suitable manner and mode; all products whether prime or secondary were placed in mill packing, mode of packing was not a criterion for determination of the quality of the goods and (iv) value of secondary goods was always lower, which was in the present case---Keeping all the attributes of the goods in the light of examination report, labels, test reports and parameters laid down in the minutes of meeting, Appellate Tribunal held that goods were of secondary quality.

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

----Ss.32 & 32A---Customs General Order No.12/2002 dated 15-6-2002, Para 101, Sub-Para B (ii)---Untrue statement, error, etc.---Description and quality of goods---When description of the goods remained the same and difference of opinion arose regarding the quality of the goods charge of misdeclaration under Ss.32 & 32A could not be invoked by virtue of the fact that no false declaration was submitted.

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

----S.32---Untrue statement, error, etc.---Difference in quality of the goods did not alter its composition except in the appearance, fineness and viability---Description/specification of the contentious goods remain the same.

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

----Ss.25 & 32---Customs Rules, 2001, R.107 (a) & 110---Customs General Order No.12/2002 dated 15-6-2002, Para 78---Value of imported and exported goods---Dispute as to value---Burden of proof---When customs authorities dispute the value of goods, they take upon the responsibility to produce material to substantiate that the value of the goods had been misdeclared, while supplying the evidential invoice of the product in question of the country of export and period of import in Pakistan---Contrary to this, Customs authorities relied upon the data base/repository of assessment, which stood withdrawn by the Federal Board of Revenue---Reliance upon data-base instead of evidential invoices/data of contemporaneous imports was palpably illegal because such valuation or assessment fell under the ambit of Sub-R. (iii) of R.110 of the Customs Rule, 2001 (Prohibited methods)---Department failed in submitting any provision of the Act/Rules or any other notification nullifying the proposition of law and did not rely upon any admissible or convincing material e.g. evidential invoice on the strength of which charge of misdeclaration was levelled against the importer thereby rendering the charge of mis-declaration as unsubstantiated and based on whimsical considerations---Department had failed to discharge the onus of establishing that the price declared by the importer of the imported goods was not correct---Orders were set-aside by the Appellate Tribunal and appeal was allowed with the direction that delay and detention certificate may be issued if so required.

Customs Appeal No. K-151 of 2006; 1986 MLD 190; PLD 1996 Kar. 68; 2002 PTD 2957; 2004 PTD 38; 2005 PTD (Trib.) 617, 2006, PTD 909; 2008 PTD 1250; 2008 SCMR 438 and 2009 PTD 467 rel.

Nadeem Ahmed Mirza, Consultant for Appellant.

Ghulam Yasin, A.O. for Respondent.

2010 P T D (Trib.) 1998

[Inland Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Mrs. Abida Ali, Accountant Member

I.T.A. No. 67 (PB) of 2002, decided on 8th May, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 59(1)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---No order in writing---IT-30 form or demand notice---Order of Inspecting Additional Commissioner was challenged on the ground that no action could be taken under S.66-A of the Income Tax Ordinance, 1979 because no order in writing was passed by the Assessing Officer under S.59 (1) of the Income Tax Ordinance, 1979 and only the demand notice and IT-30 form was issued; that under the provisions of S.66-A of the Income Tax Ordinance, 1979, the action could only be taken when there was any order in writing passed by the Assessing Officer which was erroneous and prejudicial to the interest of revenue; that IT-30 form or demand notice were not the substitute of an assessment order required to be passed in writing by the assessing officer under the provisions of S.59(1) of the Income Tax Ordinance, 1979---Validity---Where declared income was accepted as such the requirement of the provisions of S.59(1) of the Income Tax Ordinance, 1979, to pass an order in writing was fulfilled with the preparation and signing of IT-30 from and demand notice by the Assessing Officer---Initiation of proceedings under S.66A of the Income Tax Ordinance, 1979, on the basis of assessment framed as per IT-30 form was held to be legally justified---Addition in assets shown in wealth statement as on 30-6-2000 against those assets declared as per wealth statement as on 30-6-2005, did not reconcile with the income declared and assessed for the assessment year 1996-97 onwards as per assessment record---Even otherwise no prejudice was caused to the assessee by the order of Inspecting Additional Commissioner whereby he was provided with the opportunity to explain and substantiate his contention regarding the sources of investment---Appeal was dismissed by the Appellate Tribunal.

2003 PTD 2276 (Trib.); 2003 PTD 692 (Trib.) and 2003 PTD (Trib.) 2749 ref.

1998 PTD 3718 (Trib.) rel.

Nazir Ahmed for Appellant.

Khawaja Sadar Ali, D.R. for Respondent.

2010 P T D (Trib.) 2057

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.As. Nos.626/IB to 628/IB, 603/IB to 605/IB of 2010, decided on 18th June, 2010.

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

----Ss.234A, 235, 236, 122(1), 122(3), 122(5A), 122(9) & 122(A)---Contract Act (IX of 1872), Ss.10, 14 & 19---C.B.R. Circular No. 7(5) S.Asstt/2008, dated 16-8-2008---CNG Station---Tax years, 2004 to 2006---Adjustment of withholding tax collected or deducted---Section 234A of the Income Tax Ordinance, 2001 was inserted by Finance Act, 2007 to deduct tax at source which was applicable for the tax year, 2008 and onward; and the taxpayer was entitled to claim the adjustment of the withholding tax collected or deducted under various heads during the year under appeal.

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

----S. 148---Imports---CNG Kits---Fitting of---Manufacturing activity---Held, fitting of kits in vehicle was not manufacturing activity---Fitting of kits in vehicle could not be said as manufacturing activity; further, these were not kits for own use of industrial undertaking---Sales of kits was commercial/trade activity; same would be treated as final discharge of liability---No adjustment would be given regarding deduction of tax at import stage on kits to be fitted in vehicles; same being; not manufacturing activity but would be a final discharge of liability under Presumptive Tax Regime, other tax credit would be allowed.

Ahmed Shahzad for Appellant (in I.TAs. Nos.626/IB to 628/IB of 2010).

Ziaullah Khan, D.R. for Respondent (in I.TAs. Nos.626/IB to 628/IB of 2010).

Ziaullah Khan, D.R. for Appellant (in I.TAs. Nos.603/IB to 605/IB of 2010).

Ahmed Shahzad for Respondent (in I.TAs. Nos.603/IB to 605/IB of 2010).

2010 P T D (Trib.) 2081

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.As. Nos.606/IB to 608/IB of 2010, decided on 8th June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 234A, 235, 236, 122(3), 122(5A) & 122(9)---Contract Act (IX of 1872), Ss.10, 14 & 19---C.B.R. Circular No.7(5) S.Asstt/2008 dated 16-8-2008-C.N.G. Stations---Tax years, 2004 to 2006---Disallowance of adjustment of tax deducted under Ss. 235 and 236 of the Income Tax Ordinance, 2001 on CNG/Petrol filling station against property income of the assessee---First Appellate Authority directed that tax deducted on other income must be adjusted and the remaining amount be refunded--Department contended that First Appellate Authority was not justified in directing that the tax deducted on other income to be adjusted and the remaining amount be refunded when the taxpayer was obliged to follow the conditions laid down in agreement executed with the C.N.G. Association and the assessment was amended under S.122(3) of the Income. Tax Ordinance, 2001 in pursuance of the said agreement on agreed basis; and assessment order contained adjustment of credit of tax deducted which was in violation of the agreement made between the department and C.N.G. owners Association---Validity---Section 234-A of the Income Tax Ordinance, 2001 was inserted by Finance Act, 2007 to deduct tax at source which was applicable for the tax year 2008 and onward---Taxpayer was entitled to claim the adjustment of all the withholding tax collected or deducted under various heads during the year under appeal---As per original return taxpayer had claimed the other business revenue on account of running of service station, alignment centre and workshop at C.N.G. Station, whereas per revised return the taxpayer had claimed that all three business premises were rented out, which had not only reduced the income but also reduced the tax liability---Taxpayer had also claimed that tax withheld on account of bill for electricity consumed by its tenants and tax deduction thereupon could not be claimed by taxpayer and if it had been depositing on telephone and electricity bills relating to CNG business then again it could be adjusted against any income---If workshop, alignment centre, service station, tyre shop were the rent business then the tax deduction on electricity and telephone bills will be claimed by the tenant while filing their return if due under the law---Owner of CNG Station could claim the tax deduction in the said branches if he declared them his own business and the people working there were claimed to be his employees---Such fact was to be thrashed keeping in view the ground realities and revised return filed by the taxpayer---Case was remanded to recalculate tax liability in the light of observations, while analyzing the ground realities after providing an opportunity of being heard to the taxpayer.

Ziaullah Khan, D.R. for Appellant.

Nemo for Respondent.

2010 P T D (Trib.) 2105

[Inland Revenue Appellate Tribunal of Pakistan]

Before Sardar Muhammad Anwar Ahmad Khan, Member (Judicial) and Masood Ali Jamshed, Member (Accountant)

I.T.A. No.1233/LB of 2008, decided on 21st January, 2010.

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

---Ss.148 (7) & 153(1)(a)---Import---Payment for goods and services---Stray or isolated transaction---Sale of imported goods to sister concern without any value addition---Taxation Officer observed that goods were assessable under S.148(7) of the Income Tax Ordinance, 2001 under the Presumptive Tax Regime but no tax could be deducted as the taxpayer had been given a certificate of exemption for import of these items for its on use---Similarly, taxpayer was confronted regarding tax deduction on supply of locally purchased items without value addition and as considered by the Assessing Officer the same fell within purview of Presumptive Tax Regime as provided under S.153(1)(a) read with S.153(b) of the Income Tax Ordinance, 1979---Taxpayer contended that said transactions did not attract any tax liability as no profitability was involved as the same were transferred to related parties on cost price basis---Taxation Officer observed that transactions did not relate to stray or isolated transactions because there were 88 transactions in the year and had occurred with considerable regularity throughout the year---Tax liability was worked out under Presumptive Tax Regime under Ss.148(7) and 153(6) of the Income Tax Ordinance, 2001---Validity---Exemption certificate had been issued to the taxpayer by the department for import of such items for its own use but the same were sold to sister concerns at a later stage; it was misuse of the exemption certificate and the transactions taking place throughout the year with a considerable degree of regularity could not be considered as stray or isolated 'transactions'---Taxation Officer was justified to tax said sales in accordance with the provisions of law---First Appellate Authority misconceived the issuance of exemption certificate which had been issued by the department for import of goods for own use of the taxpayer---Order of First Appellate Authority was vacated and that passed by the Taxation Officer was restored by the Appellate Tribunal.

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

----Ss. 148(7) & 153(1)(a)---Disallowance---Deletion of disallowance on account of proration of expenses between local sales and sales falling under Presumptive Tax Regime---As the tax on sales fell under Presumptive Tax Regime had been restored the disallowance was also restored in the same manner.

(c) Income-tax---

---Capital expenses relevant to development---Deletion of addition--Taxation Officer observed that certain expenses were claimed in respect of land which were not incurred during the tax year and also expenses like demarcation fee, earnest money, drawing approval fee, soil investigation, field testing and physical possession expenses were of capital nature and were not allowable as expenses relevant to. business---Taxpayer contended that the expenses had been incurred in the period prior to the relevant tax year; and expenses incurred on leased land in order to put the land in use and the same were rightly allowable---Addition was made by the Taxation Officer---Taxpayer contended that expenses were wholly and necessarily incurred for taking possession of the leased land and no enduring benefit was secured by spending money under the said head---First Appellate Authority observed that expenses were incurred wholly and exclusively for running the business and the same were of revenue nature and admissible---Addition was deleted by the First Appellate Authority---Validity---Appellate Tribunal declined to agree that no enduring benefit accrued to the taxpayer by incurring such expenses---Expenses were required to be capitalized and the Taxation Officer had, rightly disallowed the claim---Order of First Appellate Authority was vacated and the one passed by the Taxation Officer was restored.

(d) Income-tax---

----Depreciation --- Normal depreciation and initial allowance --- Claim of depreciation as well as initial allowance was disallowed on the ground that taxpayer failed to provide documentary evidence namely: construction plan and completion certificate---First Appellate Authority directed to allow normal depreciation as the machinery was used in the tax year and initial allowance on building---Validity---Assessment order reproduced by the First Appellate Authority made it abundantly clear that the building was in use and the machinery installed therein also resulted in production which was offered for taxation --- Departmental grievance was devoid of substance --- Order of First Appellate Authority was not interfered on this score by the Appellate Tribunal.

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

----S. 78---Non-arm's length transactions---Sale of used vehicles to its associated concerns--Addition was made by determining fair market value---Taxpayer contended that information gathered from car dealers was not entertainable; and any inquiry or statement without cross-examination was not admissible as evidence; and the transaction was between associated undertakings and was fully verifiable but Taxation Officer failed to establish any aspect of unfair deal between the parties that could cause prejudice to revenue---First Appellate Authority observed that contents of inquiry were not confronted to taxpayer which was highly unjustified; and vehicles sold were quite old and fair market value adopted appeared to be on higher side---Addition was reduced by the First Appellate Authority---Department contended that fair market value had been determined after collecting information from renowned car dealers of the city and as such First Appellate Authority was not justified to reduce the addition---Validity---Taxation Officer had collected some information front the third party---Taxation Officer was obliged to confront the taxpayer in this regard and provide him an opportunity of cross-examination, which had not been done---Appellate Tribunal did not interfere in the order of First Appellate Authority.

(f) Income-tax---

----Addition---Freight expenses---Addition on the ground that some expenses claimed had been incurred in the year prior to tax year---Taxpayer contended that expenses were incurred wholly for the purpose of business and not .claimed in the previous year; the transport companies had issued invoices on later dates and expenses were booked in the accounts on receipt of invoices and this method was consistently and regularly employed---Addition was deleted by the First Appellate Authority with the observation that payments made on account of freight expenses was in accordance with the prevalent mercantile accounting system followed by the taxpayer---Validity---Taxation Officer had failed to appreciate the facts of transactions and consistent practice of taxpayer company --- First Appellate Authority had rightly deleted the addition as grievance of the department was found misconceived.

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

---Ss.21 (k) & 165 --- Deductions not allowed --- Addition was made on the ground that Chief Executive of the company was provided a car which was maintained by the company but the said perquisite did not appear in the statement under S.165 of the Income Tax Ordinance, 2001 --- Taxpayer contended that car provided was only for business purpose and the perquisites paid to employees were within the prescribed limit of S.21(k) of the Income Tax Ordinance, 2001 ---Addition was deleted by the First Appellate Authority --- Addition was made on account of gross miscalculation and the order of First Appellate Authority was not interfered by the Appellate Tribunal on this point.

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

----S. 21(e)---Provision for gratuity---Taxation Officer observed that taxpayer had not added back "provision for gratuity" in Annexure IIC of the return: and confronted with the fact that any contribution to an un-approved gratuity fund be disallowed---Taxation Officer concluded that amount claimed in respect of gratuity represented the contribution to an un-approved gratuity fund/scheme and attracted the provisions of S.21(e) of the Income Tax Ordinance, 2001---Taxpayer contended that expenses of gratuity were booked on accrual basis by ascertaining the amounts payable on the basis of detailed working by using statistical tools and taking into account the past experience of employees; and expenses were wholly and exclusively incurred for business purpose and were admissible---Addition was deleted by the First Appellate Authority---Validity---First Appellate Authority had not appreciated the fact that the case law relied upon by the taxpayer was in respect of Income Tax Act, 1922 and after that the law had undergone a major change and under the Income Tax Ordinance, 1979 as well as Income Tax Ordinance, 2001 contribution made to gratuity provident fund had specifically been declared as an inadmissible expenses --- Order of First Appellate Authority with regard to deletion of add back was vacated and the action of Taxation Officer on this score was restored by the Appellate Tribunal.

(1992) 65 Tax 254 distinguished:

2006 PTD 460; 2009 PTD (Trib.) 1187; I.T.A Nos. 764, 1040 and 1041/LB of 2008, dated 24-10-2009; 2006 PTD 460; 2009 PTD (Trib.) 1187 and I.T.A. Nos. 764, 1040 and 1041/LB of 2008 rel.

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

---S.34(5)---Accrual-basis accounting---Fresh evidence before First Appellate Authority---Taxpayer failed to provide details of creditors---Addition was made---First Appellate Authority observed from examination of details furnished by the taxpayer that liabilities were outstanding for more than 3 years and warranted action under S.34(5) of the Income Tax Ordinance, 2001; and addition was curtailed--Department contended that since taxpayer had failed to furnish requisite details before Taxation Officer, First Appellate Authority was not justified to entertain fresh evidence---Even if some evidence was produced before First Appellate Authority, the case should have remanded back to the Taxation Officer for verification---Validity---Order of First Appellate Authority was vacated by the Appellate Tribunal and the case was remanded back to Taxation Officer for fresh adjudication---Taxation Officer was directed to provide the taxpayer fresh opportunity so as to enable the taxpayer to provide details as furnished at the First Appellate forum.

Zulqarnain Tirmizi, D.R. for Appellant.

Mian Ashiq Hussain for Respondent.

2010 P T D (Trib.) 2117

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member

S.T.A. No.470/LB of 2009, decided on 12th August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 33, 34, 36 & 46---Failure of assessee to pay amount of tax payable---Issuance of show-cause notice---Appeal to Appellate Tribunal---During audit of assessee various discrepancies had been noted in the account of the assessee, Deputy Collector issued show-cause notice to assessee as to why sales tax amount should not be recovered from him along with additional tax and penalty---Reply submitted to said show-cause notice having not been found favourable, Deputy Collector passed the impugned order---Validity---Order-in-­original in the case was passed beyond the prescribed time limit of 45 days, moreover the Adjudicating Authority had neither fixed any extended period nor had recorded any reasons for passing order after prescribed period of limitation---Where inaction on the part of a public functionary within the prescribed time was likely to affect the rights of a citizen the prescription of time would be deemed directory, however, where a public functionary was empowered to create liability against a citizen only within the prescribed time, it would be mandatory---Order by the Collector of Sales Tax having been passed after the lapse of statutory period, was declared to have been made without lawful authority and same was annulled.

C.B.R. Sales Tax Department v. Messrs Pace International, Rawalpindi PTCL 2005 CL 841; 2008 PTD 578; 2009 PTD 762; 2009 SCMR 1279 = 2009 PTD 1392; Messrs Super Asia Muhammad Din & Sons v. Collector of Sales Tax 2008 PTD 60 and 2009 PTD 762 ref.

Khubaib Ahmad for Appellant.

Nemo for Respondent.

2010 P T D (Trib.) 2120

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Ishaq, Judicial Member and Muhammad Saeed, Accountant Member

I.T.A. No.200/KB of 2010, decided on 31st May, 2010.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 128, 161, 165, 221 & 131---Deletion of recovery of taxes---Rectification of order---Appeal by department against order of Commissioner Inland Revenue (Appeals) on the grounds; firstly that Commissioner was not justified to hold that the proper opportunity was not provided to the taxpayer; secondly that the Commissioner was not justified in deleting the recovery of tax under S.161 of Income Tax Ordinance, 2001 on account of advertisement expenses, payment made for local purchase, recovery of tax on advance, commission and security expenses, direction to rectify the order under S.221 of Income Tax Ordinance, 2001 and accepting the additional evidence of reconciliation etc.---Validity---Principle of audi alteram partem was not followed in the case as taxpayer submitted sufficient evidences, which were not considered by the Assessing Officer---During the currency of appeal, the taxpayer applied for rectification which application was turned down by the department and taxpayer had appealed against said order---Taxpayer was not given proper opportunity of explaining his position and assessment was framed without issuing proper show-cause notice to the taxpayer specifying the exact intention of the Assessing Officer in quantifying the exact amount of default---Plea of the department that proper opportunity was provided to the taxpayer, was rejected, in circumstances---Commissioner was justified in ordering to delete the entire amount in advertisement expenses as taxpayer had already submitted the necessary details along with rectification application---Departmental appeal in that respect was rejected in circumstances---Regarding acceptance of the additional evidence of reconciliation, Assessing Officer in his order had stated that in case details were provided, the order would be rectified---Despite the fact that said details were provided, request was turned down by the Assessing Officer without assigning cogent reason---Commissioner had rightly directed that rectification order should be carried in the light of reconciliation---Departmental appeal having no locus standi, failed on that issue.

Tariq Hussain Tunio, D.R. for Appellant.

A.M. Laliwala, F.C.A. for Respondent.

2010 P T D (Trib.) 2126

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson

S.T.A. No.672/LB of 2009, decided on 24th June, 2010.

Sales Tax Act (VII of 1990)---

----S.10---Contract Act (IX of 1872), S.24---Refund---Agreements arrived at between the Collector, Sales Tax through a committee formed by him with the Confectioners Association---Said agreement was regarding the deduction of tax on packing material that it would not be claimed beyond the limit of 20% of the total value of the exported goods---Whosoever made an agreement though would bind itself to the extent of said agreement under the law of contract as provided in S.24 of the Contract Act, 1872, however, if an agreement was otherwise void, its application could not be enforced---Agreement in question being against the law of Sales Tax, no exception could be made---Appeal filed by the taxpayer was allowed with the direction that the agreement in question was illegal and the assessee's matter of refund should be processed following the law and rules within one month.

Messrs Mehmood and Company v. Assistant Collector, Sales Tax 2005 PTD 72 ref.

Khubaib Ahmad for Appellant.

Dr. Ghulam Mujtaba Bhatti, D.R. for Respondent.

2010 P T D (Trib.) 2128

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member

S.T.A. No.642/LB of 2009, decided on 15th June, 2010.

Sales Tax Act (VII of 1990)---

----S.10---Refund, claim of---Grievance voiced by the department through appeal was only to the extent of refund claim of the registered person---Representative of the department argued that the objections against the refund as reflected by the STARR System "exceeded declared output tax" and that no document in support of refund claim was filed by the registered person---Validity---Rejection of refund was only on the objections shown by STARR System and department did not bother to get the supported documents verified from the concerned Collectorates. or otherwise---Refund could not be rejected on mere objections shown by the Computer System known as STARR---Department should either point out any deficiency in prescribed supporting documents or could reject the supporting documents with reasons---If no defect was pointed out in supporting documents, the department was under obligation to get the documents verified itself.

Attique-ur-Rehman Mughal, D.R. for Appellant.

Khubaib Ahmad for Respondent.

2010 P T D (Trib.) 2130

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Muhammad Saeed, Accountant Member

I.T.A. No.492/KB of 2005, decided on 25th May, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 62 & 131---Tax credits---Investment in shares---Setting aside of addition made in trading and manufacturing account---Disallowance of expenses---Only on two purchases on which the appellant/taxpayer was liable for deduction of tax, while rest of the list of the purchases were below the taxable limit---Onus lay on the Assessing Officer who should have conducted proper inquiries from the parties from whom taxpayer had purchased the raw material and packing material---Assessing Officer failed to fulfil his obligation of natural justice thereby making the case of taxpayer strong one---Having failed in his duty to do the natural justice, Assessing Officer had committed infirmity of law by making his own estimate of income and that too without any reasonable basis---Taxation Officer defaulted in following the canon of justice--Commissioner Income Tax (Appeals) also overlooked the facts of the case and disallowed claim of expenditure of the tax payer---Order passed by the Commissioner Income Tax (Appeals) was vacated on that count---Rationale for disallowing expenses was inadequately explained by the Assessing Officer; apart from that he especially omitted to pinpoint the items through a notice under S.62 of Income Tax Ordinance, 2001---Order of Commissioner Income Tax (Appeals) upholding order of Assessing Officer, was liable to be vacated on that count and declared version of assessee/taxpayer should have been accepted under that head---Order accordingly.

2002 PTD 407; 1994 PTD 123; 1974 PTD 200; 1984 PTD 239; 2002 PTD 700; 2006 PTD 2654; I.T.A. No. 1857/KB of 1999-2000 and I.T.A. No.2232/KB of 2001 of the ITAT, Karachi ref.

Arshad Siraj for Appellant.

Azhar Erum Memon, D.R. for Respondent.

2010 P T D (Trib.) 2139

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahnaz Rafique, Accountant Member

I.T.A. No.714/LB of 2009, decided on 10th March, 2010.

Income Tax Ordinance (XLIX of 2001)---

----S.170(4)---Refund---First Appellate Authority directed the Taxation Officer to issue refund voucher as the Taxation Officer had not issued the same in accordance with law---Order of First Appellate Authority was upheld and not interfered with by the Appellate Tribunal---Appeal filed by the Department was dismissed.

Shahid-ul-Hassan, D.R. for Appellant.

Shoaib Ahmed Sheikh for Respondent.

2010 P T D (Trib.) 2140

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Saeed, Accountant Member

I.T.A. No.225/KB of 2010, decided on 12th May, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 121, 131 & 177---Appeal to Appellate Tribunal---Filing return showing loss---Appellant/taxpayer filed return for the relevant year declaring loss--Taxation Officer disallowed claim of the taxpayer and Commissioner Inland Revenue (Appeals) confirmed action of the Taxation Officer---Taxpayer in appeal before the Commissioner (Appeals) had taken only one ground that Assessing Officer had erred in passing the order under S.121 of Income Tax Ordinance, 2001---Commissioner, however, 'did not consider the said ground for the reason that representative of the appellant did not press the same in his written arguments---Validity---Grounds of appeal were the statutory requirement, while written arguments were not---Commissioner (Appeals) was under obligation to decide the appeal on the basis of ground taken before him, irrespective of what had been stated in the written arguments---Orders of both the Authorities below, were not sustainable in the eyes of law---Both orders were vacated by the Tribunal and appeal of the taxpayer, was accepted.

(2010) 101 Tax 153 (Trib.); 2010 PTD 1067; 2004 PTD 1052 and 2010 PTD 30 ref.

Syed Riazuddin for Appellant.

Gohar Ail, D.R. for Respondent.

2010 P T D (Trib.) 2144

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member

S.T.A. No.684/LB of 2009, decided on 15th June, 2010.

Sales Tax Act (VII of 1990)---

---S.10---Refund, claim of---Appellant/registered person had challenged order-in-appeal passed by Collector (Appeals)---Issues involved in the appeal stood settled upto the level of Supreme Court---High Court in its judgment had held that appellant was entitled to input tax or for refund without there being any time limit and he could not be subjected to disallowance of adjustment of input tax or claim of refund and department was directed to scrutinize the claim of refund filed by the appellant---Federal Board of Revenue had also directed all concerned officers to process the, refund applications of the appellant---Right of scrutiny, however, could not be snatched from the department and appellant was under obligation to prove his assertions on facts before the concerned officer---Officer having jurisdiction in the matter was directed to process the claimed refund within 60 days from the receipt of that letter and appellant was directed to appear before the concerned officer along with all necessary and supporting documents.

Khubaib Ahmad for Appellant.

Attique-ur-Rehman Mughal, D.R. for Respondent.

2010 P T D (Trib.) 2146

[Inland Revenue Appellate Tribunal of Pakistan]

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

I.T.A. No.352/LB of 2008, decided on 16th June, 2010.

Income Tax Ordinance (XXXI of 1979)---

----Ss.66(1)(C), 13(1)(aa) & 13(1)(d)---Limitation for assessment in certain cases---Addition---Re-assessment---Assessee contended that re-assessment should be finalized within one year from the end of financial year in which such order was received by the Taxation Officer---Assessment was cancelled by the First Appellate Authority for the sole reason that the same was hit by limitation---Admittedly, order of Appellate Tribunal was received on 13-5-2003 and according to which re-assessment proceedings should have been completed by 30-6-2004---Department failed to rebut the assertions made by the assessee---Order of First Appellate Authority was maintained by the Appellate Tribunal and appeal of the Revenue being without any force was rejected.

Manzoor Hussain Shad, D.R. for Appellant.

Shoaib Ahmed for Respondent.

2010 P T D (Trib.) 2148

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Ehsan ul Haq, Accountant Member

I.T.A. No.647/IB of 2004, decided on 30th March, 2005.

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

----Ss. 13(1), 56, 61, 63,-C B.R. Circular No. 7 of 1997 dated 21-7-1997, Para-5---Income Tax Rules, 1982, Part-IIA---Addition---Amnesty---Contention of the assessee that no addition could be made in respect of investment made in property declared under the Amnesty Scheme, 1997 under provision of relevant law was not tenable---In the Amnesty Scheme, 1997 as laid down in para.5 of Circular No.7 of 1997 dated 21-7-1997 it had been provided that valuation of undisclosed asset shall be made in accordance with the rule contained in the Part-IIA of the Income Tax Rules, 1982---Value of property was admittedly not in accordance with the prescribed rates as provided in Part-IIA of the Income Tax Rules, 1982---Appeal was dismissed.

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

----Ss.111 (1)(b) & 239(1)(2)---Income Tax Ordinance (XXXI of 1979), S. 13(1), 56, 61, 63, 155, 129(4)---C.B.R. Circular No.7 of 1997 dated 21-7-1997, Para-4---Income Tax Rules, 1982, Part-IIA-Unexplained income or assets---Amnesty Scheme, 1997---Addition---Assessee contended that addition under the provision of S.111(1) of the Income Tax Ordinance, 2001 could not be made when the assessment proceedings were initiated under the provisions of S.56 of the Income Tax Ordinance, 1979 and assessment was completed under S.63 of the Income Tax Ordinance, 1979---Validity---Determination of income and tax paid thereon in respect of an income year ending on or before the 30th June, 2002 was to be made under the provisions of Income Tax Ordinance, 1979 which meant that income chargeable to tax in such a case was to be determined under the relevant provisions of Income Tax Ordinance, 1979 and could not be charged to tax under the provisions of Income Tax Ordinance, 2001---In case of assessment of income in respect of an income year pertaining to period prior to promulgation of Income Tax Ordinance, 2001 the deemed income could only be charged to tax under the relevant provision i.e. S.13 of the Income Tax Ordinance, 1979---Difference in corresponding provisions of the two statutes under consideration i.e. S.13(1) of the Income Tax Ordinance, 1979 and 111(1) of the Income Tax Ordinance, 2001 was of substantive nature and error in making addition under S.111(1) of the Income Tax Ordinance, 2001 instead of S.13(1) of the Income Tax Ordinance, 1979 was fatal to the addition made under S.13(1) of the Income Tax Ordinance, 1979 which was not covered under S.155 of the Income Tax Ordinance, 1979---No addition could be made under the provision of S.111(1) of the Income Tax Ordinance, 2001 in a case where assessment proceedings had been initiated and completed under the provisions of Income Tax Ordinance, 1979---Order of First Appellate Authority to annul the assessment was maintained by the Appellate Tribunal.

2004 PTD 1173 not applicable.

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

----S.111 (1), 209 & 210---Income Tax Ordinance (XXXI of 1979), S.13(1)---Substantial difference between the two provisions---Approval of Inspecting Additional Commissioner was a mandatory requirement for making any addition under the provisions of S.13(1) of the Income Tax Ordinance, 1979---Such addition made without the approval of Inspecting Additional Commissioner were not maintainable at the appellate forums---No such approval was required under the corresponding provision i.e. S.111(1) of the Income Tax Ordinance, 2001 as there was no concept of approval in the scheme of Income Tax Ordinance, 2001---Under the provisions of Income Tax Ordinance, 1979, the powers of assessment were generally assigned to the Deputy Commissioner of Income Tax whereas in Income Tax Ordinance, 2001, Commissioner was the authority who was basically vested with such powers---Section 210 of the Income Tax Ordinance, 2001 empowers the Commissioner to delegate to any Taxation Officer all or any of powers and functions conferred upon or assigned to a Commissioner under the Income Tax Ordinance, 2001; however, Taxation Officer could also exercise all or any of the powers and functions of Commissioner in respect of any person or persons or classes of persons or areas where such powers were specially conferred upon or assigned to him by the Central Board of Revenue or Regional Commissioner of Income Tax under subsection (2) of S. 209 of the Income Tax Ordinance, 2001.

2004 PTD 1173 applicable.

Amjad Khan Khattak D.R., for Appellant.

Ishfaq Ahmed Razi for Respondent.

2010 P T D (Trib.) 2157

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member

S.T.A. No.793/LB of 2009, decided on 22nd June, 2010.

Sales Tax Act (VII of 1990)---

----S.10---Refund, claim of---Departmental appeal was against order­-in-appeal, whereby appeal of the registered person was accepted on the ground that the reason for rejection of refund claim given in order-in-­original was not confronted in the show-cause notice---Held, order-in­-original passed on the ground which was not mentioned in the show-cause notice was illegal and void---Rejection of refund claim through order-in-original, was illegal and void.

1987 SCMR 1840 rel.

Attique-ur-Rehman Mughal, D.R. for Appellant.

Khubaib Ahmad for Respondent.

2010 P T D (Trib.) 2158

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.A. No.6935/LB of 2005, 7th October, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 207, 210, 111 & 190---Income Tax Ordinance (XXXI of 1979), S.13(1)(aa), 13(2A) & 62---Income Tax authorities---Jurisdiction---Assessment by Deputy Commissioner (Audit)---Assessee contended that Deputy Commissioner (Audit) had acted in flagrant violation of law to pass the order under S.63 of the Income Tax Ordinance, 1979 as no such authority existed under Income Tax Ordinance, 2001; that the assessment order was not sustainable in the eye of law; that since jurisdiction to assess the case was not assigned by the Commissioner of Income Tax in terms of S.210 of the Income Tax Ordinance, 2001, the order passed under S.62 of the Income Tax Ordinance, 1979 was without jurisdiction which was liable to be annulled/cancelled; and that further addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 had been made after obtaining approval from the Inspecting Additional Commissioner (Audit), which was also not maintainable under the law since no such authority was available in the hierarchy of Income Tax Ordinance, 2001---Validity---Assessment was framed by the Deputy Commissioner (Audit) whereas no such authority existed under the Income Tax Ordinance, 2001 with the powers to frame assessment---Under S.207 of the Income Tax Ordinance, 2001, it was the "Taxation Officer" who was empowered to pass the order---Term "Taxation Officer" means Additional Commissioner of Income Tax, Deputy Commissioner of Income Tax, Assistant Commissioner of Income Tax, Income Tax Officer, Special Officer, but did not include 'Deputy Commissioner of Income Tax (Audit)'---Similarly requisite approval could only be accorded by either the Regional Commissioner or the Commissioner and, that too, after having due authorization from the Federal Board of Revenue---Authorities which have been invested with the power of granting approval were Regional Commissioner or the Commissioner, while the approval was granted by the Inspecting Additional Commissioner (Audit)---Assessment made was corm non judice for the obvious reasons that, firstly, the assessment was framed by the Deputy Commissioner of Income Tax (Audit) who had no jurisdiction to formulate assessment, secondly, requisite approval as envisaged under the law was not accorded by the competent authority---Order passed by the First Appellate Authority was vacated and assessment framed by the Deputy Commissioner of Income Tax (Audit) was cancelled by the Appellate Tribunal being in flagrant violation of law.

Shoaib Ahmed for Appellant.

Nemo for Respondent.

2010 PTD (Trib.) 2162

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrasab Khan, Judicial Member

I.T.A. No.602/IB of 2010, decided on 10th June, 2010.

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

----S.177(4)---Audit---Pre-selection show-cause notice---Not necessary for the Department to issue a pre-selection show-cause notice---Commissioner was also competent to select cases for audit and mentioning of specific clause of S.177(4) of the Income Tax Ordinance, 2001 was not essentially required.

2009 PTD 1507; Messrs Sadar Anjuman-e-Ahmedia through General Attorney v. CIT (Audit Division), Faisalabad and 3 others 2010 PTD 571; Muhammad Hussain v. CIT 2005 PTD 152; Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others 2009 SCMR 344 = 2009 PTD 37; 2010 PTD 395; 2007 PTD 239; 2009 PTD 20; 2009 PTD 284; 2007 PTD 2188; 2008 PTD 1440; PLD 1963 Kar. 182; 2000 SCMR 1017; I.C.A. No.125 of 2007; Writ Petition No.7146 of 2008 and W.P. No.2928 of 2008 ref.

2009 PTD 284 and Writ Petition No.11166 of 2009 rel.2009 PTD 1507 reversed.

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

----S.177 (4)---Audit- Disclosure of the criteria/reasons for selection of case for audit---While selecting a taxpayer's case for audit, the Department should intimate about same and also disclose the criteria/reasons of selection of the case for audit---Such condition was obligatory in the nature in the present scenario---If the case of the tax payer was selected for audit, criteria/reasons had to be communicated to the taxpayer.

Commissioner of Income Tax and other v. Fatima Sharif Textile, Kasur and others 2009 SCMR 344 2009 PTD 37 rel.

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

----S.177 (4)---Audit---Issuance of intimation letter to tax payer for selection of its case for total audit---Intimation letter was issued through which the taxpayer was informed that his case was selected for audit---Legal requirements for selection of the case for audit was duly fulfilled by the Department---Objections raised in that respect were not maintained by the Appellate Tribunal.

Commissioner of Income Tax and other v. Fatima Sharif Textile, Kasur and others 2009 SCMR 344 = 2009 PTD 37 and Marius Bercea Sorin v. Commissioner of Income Tax I.T.A. No.946/IB/2009 rel.

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

----Ss.122 (5) & 120---Income Tax Rules, 2002, R.30---Amendment of assessment---Definite information---Admittedly return filed by the assessee under S.120 of the Income Tax Ordinance, 2001 was being treated as deemed assessment order which could not be further amended unless department possessed definite information---Law permitted for such amendment under S.122(5) of the Income Tax Ordinance, 2001 on the basis of definite information---Taxation Officer failed to make out case properly as he amended the order under S.122(1) of the Income Tax Ordinance, 2001 without any definite information---Taxpayer in response to notice under 5.176 of the Income Tax Ordinance, 2001, made compliance partially and did not produce accounts required to be maintained under Sub-R.(3) of R.30 of Income Tax Rules, 2002---Deemed assessment order could only be amended further on the basis of definite information under S.122(5) of the Income Tax Ordinance, 2001---Taxation Officer, in the present case, was not in possession of tangible information which could be termed as definite information---Law required that proceeding which culminated in amendment of assessment under S.122(1) of the Income Tax Ordinance, 2001 should only be undertaken if definite information was in possession of department---Unless any definite information within meaning of Sub-section (5) of S.122 of the Income Tax Ordinance, 2001 was with the Assessing Officer, no proceedings for the purpose of amendment of order under S.122(5) of the Income Tax Ordinance, 2001 could be initiated---Action of Taxation Officer, in circumstances, was illegal ab initio void---Since initial amendment order under S.122(5) of the Income Tax Ordinance, 2001 passed by the Taxation Officer was illegal ab initio void, the subsequent proceedings whatsoever, including that of order were also illegal and the same had no legal consequences---Appeal of the assessee was allowed by the Appellate Tribunal.

1993 PTD 766 = 1993 SCMR 1232 rel.

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

----S.122(5)---Amendment of assessment--- "Definite information"---Meanings---Whereas the word 'definite' carries inter alia meaning, defined having distinct limit, fixed, exact, clear, bounded, every information cannot be treated as the basis for reopening of the assessment, but the information should be of the nature which should qualify, as a definite information, in other words, mere guesses gossip or rumors cannot be treated as definite information'.

1993 PTD 766 = 1993 SCMR 1232 rel.

Syed Ali Imran for Appellant.

Mrs. Shehar Bano, D.R. for Respondent.

2010 P T D (Trib.) 2174

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Saeed, Accountant Member

I.T.As. Nos. 386/KB and 387/KB of 2010, decided on 15th June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 108, 122(5-A), 131 & 183(1)(b)---Transaction between associates---Amendment of assessment order-Non-payment of tax, penalty for---Counsel for appellant/taxpayer company had contended that Commissioner (Appeals), had erred in maintaining the order passed under S.122(5-A) of Income Tax Ordinance, 2001 by Additional Commissioner; that the Commissioner had not considered the fact that the provisions of S.108 of Income Tax Ordinance, 2001 were not applicable in the appellant's case; that sister concern had utilized 90% of the loan borrowed by the appellant; that Commissioner (Appeals) had not considered the facts that the appellant had requested to keep the recovery proceedings in abeyance till the decision of Commissioner of appeal zone and that the demand created under S.183(1)(b) of Income Tax Ordinance, 2001 be deleted---Validity---Appellant itself had charged interest on the loan which was advanced to a sister concern, which the appellant had partially set off against the interest payable---Such interest was taxable---Appellant having failed to discharge its tax liability raised through order passed under S.122(5-A) of Income Tax Ordinance, 2001, imposition of penalty under S.183(1)(b) of Income Tax Ordinance, 2001 was in accordance with law and suffered from no infirmity to warrant any interference, which was confirmed---Action of Assessing Officer was undoubtedly in accordance within the income tax law and orders of both the officers below were factually and legally on sound footing---Default having stood established, order under S.183(1)(b) of Income Tax Ordinance, 2001, was also in accordance with the law---Orders of both the officers below were upheld as there was no infirmity in the exercise of jurisdiction by the Additional Commissioner under S.122(5-A) of Income Tax Ordinance, 2001---Assessing Officer had. rightly exercised his jurisdiction under S.108 of Income Tax Ordinance, 2001 in accordance with facts and legal provisions of the case and Commissioner (Appeals) had rightly upheld order of the Additional Commissioner---Orders of both the Authorities below did not call for any interference---Order passed by the Commissioner (Appeals) was upheld.

2004 SCMR 1319 = 2004 PTD 2255; 1992 PTD (Trib.) 298; PLD 1992 SC 562 = 1992 PTD 954; 2001 PTD 1675; Messrs Genertic Pakistan Ltd.'s case 2004 PTD 2255 (SC Pak); CIT v. Khiratul Hayat Amin 2000 PTD 363; 1999 PTD (Trib.) 708 and 2004 SCMR 1319 = 2004 PTD 2255 ref.

Z. Lakhani, C.A. for Appellant.

Asim Siddiqui, D.R. for Respondent.

2010 P T D (Trib.) 2178

[Inland Revenue Appellate Tribunal of Pakistan]

Before S. Nadeem Saqlain; Judicial Member and Muhammad Saeed, Accountant Member

I.T.A. No.73/KB of 2010, decided on 28th May, 2010.

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

----Ss. 131, 156, 161 & 205---Advertisement and sales promotion expenses---Failure to deduct tax---Charging of tax and additional tax---Taxation Officer during monitoring proceedings, observed that taxpayer under the head "advertisement and sales promotion expenses" had claimed amount on account of expenses recorded to settle the distributors' claim for free goods being issued to distributors on account of various sales promotion schemes---According to Taxation Officer said expenditure was basically and specifically incurred on account of sales promotion; and taxpayer who was legally bound to deduct tax under S.156 of Income Tax Ordinance, 2001, had failed to do so---Taxation Officer being not satisfied with explanation given by the taxpayer, proceeded to charge tax at the rate of 20% and also charged additional tax under S.205 of the Ordinance---Appeal filed by the taxpayer against order of Taxation Officer, was allowed by the Commissioner (Appeals) and order passed by the Taxation Officer was annulled and the department had filed appeal before Appellate Tribunal---Factually the taxpayer had given free units to its distributors at the time of achieving the requisite target by the distributors which the department had rightly taken as prize on sales promotion---Giving a different colour to any event which squarely came within the ambit of S.156 of the Income Tax Ordinance, 2001 would not help the case of taxpayer---Under S.156 of Income Tax Ordinance, 2001 words prize' andsales promotion' had never been restricted to either general public at large or distributors---Commissioner (Appeals) had overstepped beyond the boundaries of the phrase used by the Legislature in S.156 of the Income Tax Ordinance, 2001 in establishing that the taxpayer's case did not fall under ambit of S.156 of the Income Tax Ordinance, 2001---Word Prize' covered the free units given by the taxpayer to the distributors---Similarly, the wordssales promotion' had to be construed in the scheme of things carried out by the taxpayer bringing the same within the four walls of the provisions of S.156 of the Income Tax Ordinance, 2001---Impugned order of the Commissioner (Appeals) was annulled and appeal filed by -the department was allowed and order of the Taxation Officer was restored.

(2004) 141 Taxman 615 (Kar.); Clacutta High Court CIT v. Santosh Agencies 78 ITR 2010; PLD 1969 SC 57; 1965 PTD 540; PLD 2000 SC 111; (2003) 87 Tax (SC Pak.) (sic) and 2002 PTD SB (SC Pak) ref.

(b) Words and phrases---

----`Prize', defined and explained.

Ayaz Mughal, D.R. for Appellant.

Amjad Javed Hashmi for Respondent.

2010 P T D (Trib.) 2197

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Saeed, Accountant Member

I.T.A. No.147/KB of 2010, decided on 8th July, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122(5-A), 131, 170 & 171---Compensation paid on delayed payment of refund, whether a 'capital receipt' or 'revenue receipt'---Commissioner (Appeals) in the impugned judgment had found that compensation paid on delayed payment of refund was capital receipt, whereas claim of appellant department was that it was revenue receipt--Order passed under S.120 of Income Tax Ordinance, 2001 was amended under S.122(5-A) of the Ordinance, on the ground that compensation received on delayed payment of refund was not declared as an income, rendering the order erroneous insofar as it was prejudicial to the revenue, resultantly an amount was added to the total income---Commissioner (Appeals) on appeal deleted the addition and department had agitated against the order of Commissioner (Appeals)---Contention of taxpayer was that any damages/compensation/interest etc., were capital receipts not chargeable to tax---Contention of department was that compensation for delayed payment amount was a revenue receipt-Question as to nature of a receipt or an expenditure, as either capital or revenue, was a highly intricate matter, requiring minute examination---Order was set aside with the directions that the officer of Inland Revenue could decide the matter afresh after taking into consideration the law on the subject.

2003 PTD 1436; 2006 PTD 1800; (1993) 199 ITR 303 (Ker.); (1970) 76 ITR 467 (SC); (1979) 3 SCC 150; (1989) 179 ITR 157and CIT Bengal Muffassil v. Burdhan Kuti Wards Estate (1960) 2 Tax (Suppl-1). 285 ref.

Gohar Ali, D.R. for Appellant.

Ms. Lubna Pervez for Respondent.

2010 P T D (Trib.) 2201

[Inland Revenue Appellate Tribunal of Pakistan]

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

W.T.As. Nos. 45/LB and 46/LB of 2008, decided on 7th June, 2010.

Wealth Tax Act (XV of 1963)---

----Ss. 16(3)/23---Wealth Tax Rules, 1982, R.8(3)---Re-assessment of finalized assessment---Original assessment in the present case was finalized under Ss.16(3)/23 of the Wealth Tax Act, 1963---Being aggrieved, the assessee approached First Appellate Authority who set aside the case with the direction that valuation of immovable assets be made as per R.8(3) of the Wealth Tax Rules, 1982 and ownership of the plot in question be determined in the light of judgment passed by the High Court---In pursuance of the said order, re-assessments were completed, however, the issue of ownership of the plot was remanded to Member Provincial Board of Revenue/Chief Settlement Commissioner for hearing and decision of the case afresh as per direction of High Court---High Court declared the order of the Deputy Settlement Commissioner to be without lawful authority and of no legal effect---Assessee, in circumstances, was not owner of the property in question---Even otherwise, the Assessing Officer had himself admitted that Housing Society concerned had cancelled the membership of the assessee in the record of ownership of the plots---Assessee was assessed during the dispute regarding ownership---Assessee being not owner of the property in. question the valuation date as the property allotted to the assessee had been cancelled by the Authorities, assessee, in circumstances, could not be burdened with the incidence of wealth tax---Impugned order passed by Commissioner (Appeals) was directed to be vacated.

Mian Ashiq Hussain for Appellant.

Manzoor Ahmad Shad, D.R. for Respondent.

2010 P T D (Trib.) 2210

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Syed Nadeem Saqlain, Judicial Member and

Amjad Ikram Ali, Accountant Member

S.T.A. No.350/LB of 2009, decided on 6th February, 2010.

Per Nadeem Saqlain, Judicial Member, Khawaja Farooq Saeed, Chairperson agreeing; Amjad Ikram Ali, Accountant Member, Contra.---[Majority view.]

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

----Ss. 2(33), (44), 3, 13, 33, 34 & 46---Imposition of Sales Tax together with additional tax and penalty on amount received as security deposit' by appellant from the dealer---Amount together with additional tax and penalty had been adjudged by Adjudicating Officer on account of amount received by appellant company from its dealer assecurity deposit' against display of cars at their premises---Contention of appellant was that no supply had taken place and goods (cars) remained the property of the appellant at all times until the same were sold to the buyers---Said cars were the property of the appellant at the factory premises and remained the property of the appellant when parked at the dealers' premises---Appellant did not dispose of the vehicle so as to constitute the supply---Since no supply had taken place, the charge of tax did not accrue and the authorities below were not justified in levying tax in the case of the transaction under consideration---Even otherwise, the department had not refuted the payment of tax at a subsequent stage by the appellant itself---Impugned orders of the authorities below were vacated holding that no tax was legally payable in respect of 'security deposit' received by the appellant from its dealer as no sale' orlease' had taken place in the case.

1973 PTD 453; 2006 PTD 1459; 2006 PTD 1459; 2002 PTD 976; 2007 96 Tax 264; D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 1'TD 1179; Goli Eswarian v. Commissioner of Gift Tax AIR 1970 SC 1722; Collector v. Sanghar Sugar Mills Ltd., PLD 2007 SC 517 = 2007 PTD 1902; Collector v. Customs Tribunal, Karachi Bench 2007 SCMR 1705 = 2007 PTD 2275 and D.G. Khan Cement v. 2007 SCMR 1705 = 2007 PTD 2275 ref.

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

---Ss. 3, 33, 34 & 46---Levy of Sales Tax with additional tax and penalty on account of free replacement of spare parts' under the warranty claims---Appellant had claimed that Collector (Appeals) was not justified in holding the levy of sales tax with the additional tax and penalty on account of free replacement ofspare parts' under the "warranty claims "---Validity---Replacement parts constituted a distinguishable `supply' on which tax was required to be charged and deposited under the law at the time of supply/replacement---No relationship could legally be made with the defective parts---No tax was charged and paid on the replacement part by the appellant---Appeal filed by the appellant was dismissed on that point concluding that the authorities below were justified in treating the appellant under default---Consequential additional tax and penalty, however, were annulled in view of applicability of amnesty on the basis of which the first Appellate Authority, in the impugned order, decided the issue in favour of the appellant.

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

----Ss. 3, 33, 34, 46 & 73---Non-compliance of S.73 of Sales Tax Act, 1990---Effect---Provisions of S.73 of Sales Tax Act, 1990 had provided that Input Tax adjustment was only valid if payment to supplier was made through prescribed banking modes/channels---Appellant admittedly provided the proofs which demonstrated that the payments were made through prescribed/permissible modes; and on that basis it was submitted that no adverse inference was warranted---Adjudicating Officer, however, proceeded to disallow the input tax adjustment on the ground that though the payments were made through legitimate modes, but as the appellant did not settle the invoice within 180 days of the issuance of invoice, as prescribed in the law, the Input Tax adjustment was not valid and case of the appellant was hit by the mischief of those provisions---First Appellate Authority while disposing of the appeal of the appellant, upheld the order and confirmed the disallowance---Orders of the authorities below were not sustainable being in violation of principles of natural justice---No party could be condemned unheard and any proceedings that were undertaken without providing a right of defence to accused, were a nullity in law---Fact that the appellant was never confronted on the threshold of 180 days, was not disputed/denied; such being the case both the disallowances and its confirmation by the First Appellate Authority, were cancelled---Appeal on that point was also accepted.

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

---Ss. 3, 7, 33, 34 & 46---Input Tax adjustment in respect of invoices of other company---Appellant had contended that Collector (Appeals) was not justified in upholding the disallowance of Input Tax amount together with the additional tax and penalty on account of alleged inadmissible Input Tax adjustment in respect of invoices issued by other company---No denial was there as to the proposition that Input Tax in respect of clearing services constituted valid deduction and there was no disagreement to the effect that in that case large scale imports were made by the appellant, which could not have been cleared without the involvement of Clearing Agent---Such was also not controversial that the appellant held invoices issued by other company which met the conditions spelled out in S.7 of the Sales Tax Act, 1990---Departmental Authorities, in circumstances could not disallow the deduction when all legal requirements had been complied with by the appellant---Reason that had been made basis for disallowance, was nothing but presumption, guess work and surmises and could not be approved being settled legal position---Discriminatory treatment accorded to the appellant was also unjust as in no other case such disallowance had been made---Orders of the authorities below on that account were annulled, in circumstances.

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

----Ss. 3, 8(1)(a), 33, 34 & 46---Inadmissible Input Tax adjustment on certain purchases---Contention of the appellant was that Collector (Appeals) was not justified in upholding the disallowance of Input Tax and penalty on account of alleged inadmissible Input Tax adjustment in terms of S.8(1)(a) of Sales Tax Act, 1990---Adjudicating Officer, in the order-in-original disallowed an adjustment for Input Tax claimed in terms of provisions contained in S.8(1)(a) of Sales Tax Act, 1990---None of the Authorities below had given reason on the basis of which it had been concluded that the Input Tax suffered on the said items, did not qualify for adjustment under the relevant provisions of law---Provisions of. law authorized deduction for all such Input Tax that related to goods that contributed directly or indirectly; and even remedy towards furtherance of taxable activity---Held, that except for flower pot and lawn mover, Input Tax on other. items had been wrongly disallowed on said two items, no infirmity existed in the orders of the Authorities below and the same, was confirmed to that extent; and for remaining amount the orders were vacated---Consequential additional tax and penalty, however, would not remain payable due to applicability of amnesty on the basis of which the first Appellate Authority decided the issue in the favour of the appellant.

Sanghar Sugar Mill's case PLD 2007 SC 517 = 2007 PTD 1902 ref.

Per Amjad Akram Ali, Accountant Member.---[Minority view].

1973 PTD 453; 2006 PTD 1459; '2002 PTD 976; Sanghar Sugar Mills PLD 2007 SC 517 = 2007 PTD 1902; 2007 PTD 2275 = 2007 SCMR 1705 and 2004 PTD 1179 ref.

Asim Zulifqar Ali, FCA for Appellant.

Zulqurnain Tirmizi, D.R. for Respondent.

2010 P T D (Trib.) 2248

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

S. T. As. Nos. 44/IB to 50/IB of 2010, decided on 31st August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 11, 21(2), 36, 46, 66 & 73-Refund, claim for---Recovery of tax erroneously refunded---Deputy Collector (Adjudication) allowed refund to the taxpayer against the invoices of those registered persons who were not traceable/blacklisted---Said refund being recoverable in terms of S.36(1) of Sales Tax Act, 1990, Deputy Collector (Adjudication) rejected claim of refund after issuing show-cause notice to "the taxpayer---On filing appeal by the taxpayer against order of Deputy Collector (Adjudication) same was vacated by Collector (Appeals) and sale tax charged was held to be unjustified---Department had filed appeal before the Appellate Tribunal---Basic ingredients of refund were that if any amount was deposited in government exchequer that could only be refunded, if the taxpayer had taken the refund and Authority issuing refund had lost sight of that aspect---Blacklisted units' registration having been suspended by the Board, as per provisions of subsection (2) of S.21 of the Sales Tax Act, 1990 input tax/refund could not be allowed against false invoices, even if the requirement of S.73 of the Sales Tax Act, 1990 were fulfilled---Order passed by Collector (Appeals) stood vacated---Input tax claimed as refund by the taxpayer had rightly been rejected under S.11 of Sales Tax Act, 1990---Only that penny would be refunded which had been deposited in government exchequer---If in chain, one of transacting party had not deposited the sales tax in government exchequer, the claimant would be deprived of that amount of refund---Remedy of claimant would be inter se the transacting parties and not with the Government.

Ziaullah Khan, D.R. for Appellant.

Faraz Fazal Sheikh, ITP for Respondent.

2010 P T D (Trib.) 2252

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Shahnaz Rafique, Accountant Member

S.T.A. No.91/LB of 2009, decided on 4th August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 36 & 45---Sales Tax Refund Rules, 2006, R. 12---Issuance of show-cause notice for recovery of tax amount of Rs.11,39,380 by Assistant Collector Sales Tax (Refund)---Plea of assessee that such amount was part of earlier show-cause notice, whereagainst their appeal had been accepted by Appellate Authority in first round of litigation---Validity---Issuance of show-cause notice regarding same period would amount to imposition of double taxation, which could not be given legal credence---Assistant Collector had power to deal with cases involving amount of Rs.1 million, but not beyond that---Assumption of jurisdiction by Assistant Collector in such matter was void ab initio---Appellate Tribunal vacated impugned notice in circumstances.

Adnan Ahmed Ch. for Appellant.

M. Numan Malik, D.R. for Respondent.

2010 P T D (Trib.) 2254

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Abdul Raul; Accountant Member

I.T.A. No.735/IB of 2010, decided on 9th August, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 2(13) (65), 120, 122(5-A), 131 & 210---Amendment of assess­ment---Powers of Additional Commissioner to amend assessment---Return of income filed by assessee for the relevant year was deemed to be assessed under S. 120 of Income Tax Ordinance, 2001---Later on said completed assessment was required to be auctioned under S.122(5-A) of the Ordinance---Additional Commissioner who found assessment erroneous as well prejudicial to the interest of Revenue, amended the same under S.122(5-A) of Income Tax Ordinance, 2001---Being aggrieved by judgment of Additional Commissioner, assessee filed appeal before Commissioner (Appeals)---Contention of assessee was that Additional Commissioner, was not empowered to amend the assessment as original order under S.120(1) of Income Tax having been passed by the Commissioner, Additional Commissioner could not exercise powers under S.122(5-A) of Ordinance---Commissioner (Appeals), annulled the order of Additional Commissioner, and department had filed appeal before Appellate Tribunal---Although under the scheme of Income Tax Ordinance, 2001, the focal authority was the Commissioner, but under S.210 of the 'Ordinance, delegation of powers and functions had been made by him for streamlining the functions of assessment---Amendment of assessment could be made under S.122(5-A) of Income Tax Ordinance, 2001 by the Additional Commissioner---Impugned order passed under S.122(5-A) of Income Tax Ordinance, 2001 by Additional Commissioner, was legally correct and objections raised by the asseesee about its legality, were misplaced---Order passed by Commissioner (Appeals) was set aside and case was remanded to him for deciding the appeal on merits after providing an opportunity of being heard to the assessee.

Ziaullah Khan, D.R. for Appellant.

Nemo for Respondent.

2010 P T D (Trib.) 2259

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeern Saqlain, Judicial Member and Shahnaz Rafique, Accountant Member

S.T.A. No.509/LB of 2009, decided on 4th August, 2010.

Sales Tax Act (VII of 1990)---

----S.36(3)---Order-in-original, passing of---Limitation---Issuance of show-cause notice on 30-6-2003---Passing of order-in-original on 16-10-2004---Validity---Order-in-original, if passed after expiry of period provided under. third proviso to S.36(3) of Sales Tax Act, 1990, would have no legal sanctity---Impugned order had been passed beyond time limit provided in Sales Tax Act, 1990---Appellate Tribunal set aside impugned order in circumstances.

2009 PTD 762 rel.

Adnan Ahmad Ch. and M. Iqbal Awan for Appellants.

M. Nouman Malik, D.R. for Respondent.

2010 P T D (Trib.) 2261

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minims, Judicial Member

I.T.A. No.472/IB of 2010, decided on 2nd June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 137(2), 172 & 131---Service of notice/assessment order on non-resident assessee---Appointment of representative of assessee---Assessee, in the present case was a non-resident individual and return for the assessment year under consideration was filed by brother of assessee and Taxation Officer recorded ex parte assessment order---As gssessee was residing in foreign country during the period of assessment, notice/assessment order was neither served upon the assessee himself nor any statutory representative of assessee was appointed---First step, in assuming valid jurisdiction when it came to knowledge of Taxation Officer that assessee was non-resident, was appointment of Agent/representative of said assessee, that too after providing him an opportunity of being heard---Philosophy behind was that department should serve a notice on non-resident whose address was generally not known and he himself came to know, then he could appoint his attorney in writing---In absence of such situation, to proceed further, law had given authority to department to appoint his representative who would become equally responsible for payment of assessed dues---In the present scenario, because assessee was neither "served nor had given attorney in writing to his brother who filed the return, with whom relations had alleged to be strained and he lost interest in pursuing the matter---Assessment in question was not enforceable against the assessee as he had neither been served in person nor he appointed his brother as his attorney---Assessment in question, in circumstances, was liable to be annulled---Delay in filing appeal before the First Appellate Authority was condoned and case was remanded to the First Appellate Authority for decision of the case on merits.

96 Tax 119 (Trib.); 33 Tax 5 (Trib.); 1989 PTD (Trib.) 252; 1981 PTD 192; 1996 SCMR 856; 2001 MLD 1101; 2000 PTD 2407; 2008 PTD (Trib.) 1466; 2002 PTD 1035; 56 Tax 130 (S.C. Ind); 1967 PTD 189; 2008 PTD (Trib.) 154; 2007 PTD 389; 1986 PTD (Trib.) 188; 2009 PTD 1067 (Trib.); 1986 PTD (Trib.) 188; 2002 PTD 102 (Kar. H.C.); and 6 Tax 1 (Trib.) ref.

Atif Waheed Advocate/A.R. for Appellant.

Ziaullah Khan, D.R. for Respondent.

2010 P T D (Trib.) 2270

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Ishaq, Judicial Member and Muhammad Saeed, Accountant Member

I.T.As. Nos.861/KB and 862/KB of 2009, decided on 2nd June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 67 & 131---Income Tax Rules, 2002, R.13---Apportionment of deduction---Taxpayer/Banking company filed return of income for relevant tax year declaring loss---Same was deemed to have been assessed under S.120 of Income Tax Ordinance, 2001---After completion of proceedings Additional Commissioner/Taxation Officer, recomputed the taxpayer's income and amended the order---On filing appeal by the taxpayer, Commissioner Income Tax (Appeals), vide impugned order, disposed of appeal partially---Validity---Questions needed to be framed envisaging the grounds of appeal were; (i) whether Additional Commissioner had rightly allocated/apportioned the profit and loss expenses towards the exempt income, (ii) whether Commissioner Income Tax (Appeals) was justified in confirming order of Additional Commissioner and whether the Commissioner Income Tax (Appeals) was justified in confirming the order of Additional Commissioner, who had confirmed the disallowance of provision of non performing loans which were allowable under S.29 of Income Tax Ordinance, 2001---Held, Commissioner Income Tax (Appeals) was justified in upholding the treatment meted out by the Assessing Officer and answer to the questions was in the affirmative---All the grounds of appeal had properly been addressed by the Commissioner Income Tax (Appeals) in judicial and lawful manner---Appeal filed by taxpayer being meritless, was dismissed.

2008 PTD (Trib.) 679; 2005 PTD 344; ,(2004) 92 Tax 128(sic); 1986 SCMR 1114; 1993 SCMR 1232; 1993 PTD 766; I.T.A. No.1615/KB of 200; 2005 PTD 2586; PLD 1974 Kar. 6; (1966) 13 Tax 210 (S.C. Pak.) and 2002 PTD (Trib.) 1898 rel.

Muhammad Athar for Appellant.

Abdul Hameed Sheikh, D.R. for Respondent.

2010 P T D (Trib.) 2281

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.As, Nos.263/IB and 264/IB of 2009, decided on 14th November, 2009.

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

----Ss. 111, 122(5) & 131-Addition made in income of taxpayer chargeable to tax---Amendment of assessment---Taxpayer had challenged order of Taxation Officer whereby amount was added in his income chargeable to tax---Case of taxpayer having not been selected for audit, such jurisdiction vested with Commissioner Income Tax (Enforcement and Collection Division) and not with the Commissioner (Audit)---Order of amendment passed under S.122(5) of Income Tax Ordinance, 2001 was without jurisdiction for the relevant assessment year, which was nullity in law and same was cancelled---Deemed assessment stood restored for the said assessment year---Impugned orders of both the authorities below stood vacated being not maintainable---Appeal to that extent succeeded.

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

----Ss. 39(3), 122(5), 190 & 131---Addition of amount in income which was received as loan, advance or deposit etc.---Amendment of assessment---Representative of the assessee contended that specific clause of subsection (5) of S.122 of Income Tax Ordinance, 2001 was not confronted to the assessee---Contention of Representative could not be given due weight, because non-mentioning or even wrong mentioning of a section in any assessment documents would not render the assessment order void---Subject matter and substance of the notice was to be considered for determination of the question of provision of law under which ,action was contemplated irrespective of the section referred therein---Accretion shown in wealth statement was not satisfactorily explained, finding of the Commissioner (Appeals) was not open to any exception which was upheld and maintained---Assessee's appeal for the relevant year stood dismissed, in circumstances.

CIT v. Abdul Ghani 95 Tax 353 (S.C.) ref.

Syed Shahzad Mahmood for Appellant.

Ziaullah Khan, D.R. for Respondent.

2010 P T D (Trib.) 2285

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Saeed, Accountant Member

I.T.A. No.389/KB of 2010, decided on 22nd June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 24, 122 & 131---Amalgamation of two Banks---Disallowance of claim for amortization of intangible goodwill---Appellant/Bank, claimed that `goodwill' arising on the merger transaction between the Appellant-Bank and seller Bank was an intangible asset under definition of the term "intangible" as defined in S.24(11). of Income Tax Ordinance, 2001---Amortization allowance claimed by the appellant was disallowed by Additional Commissioner and Commissioner (Appeals) had confirmed the said disallowance---Validity---Additional Commissioner in his order which was confirmed by Commissioner (Appeals) had found the deduction claimed on account of goodwill on amortization basis was not admissible because the same already stood qualified and admitted as part of the cost of shares of seller Bank---Seller Bank's business seized to exist on the date of its amalgamation with appellant Bank---Said scheme of amalgamation did not specifically provide for transaction of any goodwill, which was created contrary to the factum of characterization of the accounting entries to give a different colour---To indulge in the discussion of goodwill would be of no consequence as the very essence of that asset had no locus standi in the scheme of amalgamation, and as well as the issue under consideration from the stand point of Income Tax Ordinance, 2001---Commissioner (Appeals) had rightly found that no documentary evidence had been given for the claimed payment for acquiring goodwill of the seller Bank.

2008 PTD (Trib.) 679; CIT v. Gammon (Pak.) Ltd. Karachi 14 Tax 304 (H.C. Kai); CIT v. Trustee of Estate of Late C.E. Beven Petman 84 Tax 421 (H.C. Lail.), 2001 PTD 2829; 2007 PTD 2521 and AIR 1970 SC 564 ref.

Soli R. Parakh, F.C.A. for Appellant.

Dr. Muhammad Ali Khan, D.R. and Dr. Farrukh Ansari, D.R. for Respondent.

2010 P T D (Trib.) 2302

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Abdul Rauf, Accountant Member

I.T.A. No.708/IB of 2010, decided on 13th August, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122, 127, 174(3), 177 & 131---Amendment of the assessment by Taxation Officer---Cancellation of order of amendment---Taxation Officer amended assessment under S.122(1) of Income Tax Ordinance, 2001---Appeal filed by assessee against order of Taxation officer having been accepted by Commissioner (Appeals) department had filed appeal before Appellate Tribunal---Amendment of assessment was time barred in terms of S.174(3) of the Income Tax Ordinance, 2001, because the accounts and documents required to be maintained under said section would be maintained for five years after the end of tax year to which they related---Limitation in circumstances was expired on 31-12-2008, while assessment order was passed on 30-9-2009---Section 122(2) of Income Tax Ordinance, 2001 had provided that assessment order, would only be amended under subsection (1), within five years after the Commissioner had issued or was treated as having been issued the assessment order on the taxpayer---Contention that the taxpayer was using delaying tactics, was without any force, because Taxation Officer himself was supposed to be vigilant about the limitation---No edge could be given to the department which had made the amended assessment which was beyond the clock---Order passed by the Commissioner (Appeals) was upheld.

2002 PTD 1195; 2008 PTD (Trib.) 1354 and 2002 PTD 1195 ref.

Shahid Iqbal, Advocate/L.A. for Appellant.

S.A. Kazmi, ITP for Respondent.

2010 P T D (Trib.) 2306

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Farooq Shah, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

I.T.As. Nos.393/KB and 270/KB of 2010, decided on 18th June, 2010.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 49, 122(5-A) & 131---Claim for tax exemption---Appellant/Port Trust, claimed that Port Trust was not a Corporation, a Company, Regulatory Authority, a Development Authority, other body or institution as envisaged in subsection (4) of S.49 of Income Tax Ordinance, 2001, but being Federal Government, its income was not chargeable to tax and claimed exemption under S.49(1) of Income Tax Ordinance, 2001---Validity---Superior courts had been very rigid on the question of grant of exemption from tax---Onus invariably in all cases relating to claim of exemption had been put on the taxpayer or the person claiming exemption---Grant of exemption on one hand was the discretion and prerogative of the competent authority; and it was for the person claiming exemption to show that he had been exempted---Appellant (Port Trust) had not been able to bring any evidence to support its claim of exemption as being Federal Government or an adjunct or department of Federal Government---Onus to prove that Port Trust had been exempted, had not been discharged by the appellant---Department had brought incontrovertible evidence in the shape of letter conveying approval of Federal Finance Minister that appellant's request for tax exemption had not been acceded to---Unlike the past practice, Federal Government now had disowned and distanced itself from the claim of appellant for exemption from income tax---Claim of appellant that Port Trust was Federal Government, was never made by it in the past---Appellant, in circumstances was not Federal Government and thus not exempt from payment of income tax---Income of Port Trust was chargeable to income. tax within the meaning of subsection (4) of S.49 of the Income Tax Ordinance, 2001 like all other bodies, institutions, development and regulating authorities---Provisions of S.49(4) of Income Tax Ordinance, 2001, being declaratory in nature, were applicable retrospectively; as a consequence, the charges brought in subsections (1)(2) of S.49 of Income Tax Ordinance, 2001 being clarificatory in nature, would also apply with retrospective effect---Additional Commissioner, had rightly invoked provisions of S.122(5-A) of Income Tax Ordinance, 2001 under delegated authority on an order deemed to have been made by the Commissioner (Appeals).

2008 PTD (Trib.) 901; (Allied Bank Ltd. v. CIT LTU, Lahore.) I.T.A. No 306/LB of 2009; (Bank of Punjab v. CIT LTU Lahore) I.T.A. No. 370/LB of 2009; I.T.A.- No. 1210/LB of 2006 and No. 1209/LB of 2006 (CIT Legal Division, LTU Lahore v. Messrs Rupafil Limited and Prime Commercial Bank Limited), 2007 PTD (Trib) 1226: PTR 540 of 2007; 1998 PTD 789; Commissioner of Income Tax/Wealth Tax Zone `C' (Legal) Lahore v. Messrs Idrees Cloth House, Lahore 2008 PTD 1420; Deputy Managing Director, National Bank of Pakistan v. Atta-ul-Haq PLD 1965 SC 201; Madras Provincial Cooperative Bank Ltd. v. Commissioner of Income Tax Madras AIR 1933 Madras 489; Commissioner of Income Tax Madras v. S.L. Mathias AIR 139 PC 1; CIT v. River side Chemicals (Pvt.) Ltd. 2008 PTD 1157; Messrs Best Buy Computers v. Director Intelligence and Investigation Customs and Excise, Lahore 2008 PTD 2019; Runaq Ali v. Chief Settlement Commissioner PLD 1973 SC 236; The Chief Settlement Commissioner, Lahore v. Raja Muhammad Fazil Khan and other PLD 1975 SC 331; Province of the Punjab through Secretary Health Department v. Dr. S. Muhammad Zafar Bukhari PLD 1997 SC 351; Ahmed Sher Khan and another v. Additional Commissioner (Revenue) Settlement Commissioner (Lands) Sargodha 1998 SCMR 408; Messrs Vulcan Company (Pvt.) Ltd. v. Collector of Customs Karachi and others PLD 2000 SC 825; Abdul Haque Indhar and other v. Province of Sindh through Secy. Forest Fisheries and Livestock Department, Karachi and other 2000 SCMR 907; Muhammad Sharif through L. Rs. and other v. Sultan Hamyun and others 2003 SCMR 1221; Muhammad Shoaib and other v. Government of N.-W.F.P. through the Collector, D.I. Khan and others 2005 SCMR 85; Executive District Officer School and Literacy District Dir Lower and other v. Qamar Dost Khan and others 2006 SCMR 1630; 1993 PTD 766; Nazir Ahmed v. Pakistan and 11 others PLD 1970 SC 453; Asian Food Industries Ltd. and others v. Pakistan and others 1985 SCMR 1753; Army Welfare Sugar Mills Ltd. v. Federation 1992 SCMR 1652; 2002 PTD 388; SME Bank Ltd. v. Additional Commissioner Income Tax Audit and 4 others 2010 PTD 1506; Commissioner of Income Tax v. Idrees Cloth House 2008 PTD 1420 HC (Lah.) and CIT v. Eli Lilly Pakistan Ltd. 2009 PTD 1392 ref.

Khaleeq-ur-Rehman, FCA and Arshad Rizwan, ITP for Appellants.

Syed Riazuddin, Advocate/Legal Advisor, Rajabuddin and Asim Siddiqui D.Rs. for Respondent.

2010 P T D (Trib.) 2345

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

S.T.A. No.84/IB of 2010, decided on 30th August, 2010.

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

----Ss. 33, 34, 36, 46 & 73---Deduction of input tax---Failure to provide proof of payment---Imposition of penalty---Respondent/registered person deducted the input tax involved on the purchase of certain items, but he failed to provide the proof of payment thereof through cross banking instruments---Assistant Collector found that respondent/ registered person was liable to pay Sales Tax with default surcharge under S.34 of Sales Tax Act, 1990 and for the violation of S.73 of the Act and also imposed penalty under S.33 of the Act---First Appellate Authority vacated said order-in-original and deleted the penalty---Department had filed appeal before Appellate Tribunal---Record had shown that payment of due sales tax was deposited by registered person by some way or the other---Proof thereof i.e. summary of statement under S.26 of Sales Tax Act, 1990 was available on record, which was accepted by the department---Only point against registered person was that he failed to provide the record of banking instruments according to S.73 of Sales Tax Act, 1990 to the department---No allegation of fraud, cheating was levelled against the registered person for claiming input tax adjustment against false and bogus invoices and department had also admitted that fact---Allegation against registered person was of technical nature and contravention was made only for non producing banking instrument record--Registered person could not be deprived from his legal money due against the Government, when there was no misstatement, forgery, collusion, cheating, fraudulent activities, were alleged; or any false claim was submitted by registered person with the view to obtain the illegal gain or causing loss to the government---Allegation against registered person was only of contravention that he had made the payment to the amount exceeding Rs.50,000; on such contravention, registered person was liable to pay only the penalty of 3% of the amount of tax adjustment involved under S.33 subsection (1) item No.16 of the Sales Tax Act, 1990.

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

----S. 73---Inadmissible transaction---Spirit and objective of S.73 of Sales Tax Act, 1990, was to streamline the transaction of registered person through bank and also to avoid the input tax adjustment from the false and forged Sales Tax invoices---If the contravention of S.73 of Sales Tax Act, 1990 was made by the registered person, then S.33 subsection (1), item No.16 of the Act was also relevant---Contravention of S.73 of Sales Tax Act, 1990 did not absolutely debar the registered person to claim the input adjustment, if there was no allegation of fraud, cheating, collusion, false and forged invoices had been levelled against the registered person.

Ziaullah Khan, D.R. for Appellant.

Muhammad Ishtiar, ITP for Respondent.

2010 P T D (Trib.) 2356

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.A. No.468/KB of 2010, decided on 9th August, 2010.

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

----Ss. 20, 21(1) & 122---Deduction in computing income---Amendment of assessment---Return of income tax for relevant year filed by the taxpayer was selected for audit---Audit proceedings were conducted by the concerned Taxation Officer who made addition of amount of Rs. 60,864,447 on the ground that wheat purchased by the taxpayer during the period being on cash basis, the transaction was hit by provision of S.21(1) of Income Tax Ordinance, 2001---Said action of Taxation Officer had been upheld by Commissioner (Appeals)---Validity---Every expenditure whether debitable to trading or manufacturing account or profit and loss account would fall within the purview of amended S.21(1) of Income Tax Ordinance, 2001-Taxpayer had purchased wheat in cash from the farmers to the tune of Rs. 60,864,447 and Taxation Officer had held that since purchases were made in cash, those could not be allowed being more than Rs.50, 000 under S.21(c) of Income Tax Ordinance, 2001---Since payments against purchase of wheat exceeded the limit of Rs.50,000 provision of S.21(1) of Income Tax Ordinance, 2001 had rightly been invoked by the Taxation Officer and Commissioner (Appeals) had rightly upheld order of Taxation Officer---Contention of the counsel for the taxpayer that the words "any expenditure of a transaction" used in S.21(b) of Income Tax Ordinance, 2001 would not apply to trading account, and only to profit and loss account expenses, was totally out of context and contrary to the meaning of word "transaction "---Interpretation of provisions of S.21(1) of Income Tax Ordinance, 2001 as given by counsel for the taxpayer would restrict the scope of the provisions of law by giving a very narrow and restricted meaning to the words used in the statutes---Said interpretation was rejected---Orders of the two officers below, were accordingly upheld.

?

PLD 2000 SC 111 ref.

(b) Words and phrases---

----Word `transaction', defined and explained.

Muhammad Fareed for Applicant.

Dr. Abdul Sattar Abbasi, D.R. for Respondent.

2010 P T D (Trib.) 2367

[Inland Revenue Appellate Tribunal of Pakistan]

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

I.T.As. Nos.336/IB and 417/IB of 2009, decided on 6th January, 2009.

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

----S.177(4)(b) & (d)---Audit---Selection of case for audit without issuance of prior show-cause notice---Assessee contended that selection of case for audit in terms of Cls. (b) and (d) of subsection (4) of 5.177 of the Income Tax Ordinance, 2001 having been made without issuance of prior show-cause notice, was illegal and void; and further such selection was made in the absence of criteria as laid down under subsection (2) of S.177 of the Income Tax Ordinance, 2001---Validity--Departmental action with regard to selection of the case for audit as well as the passage of the amended order under 5.122 of the Income Tax Ordinance, 2001 was ab initio void and of no legal effect---When language of fiscal statute was ambiguous and several interpretations of the same provision were possible, doubt should be resolved in favour of the citizen---Matter was decided by the Appellate Tribunal in favour of the taxpayer, disapproving the selection for audit under S.177(4) of the Income Tax Ordinance, 2001.

Mohsin Raza v. Chairman F.B.R. 2009 PTD 1507; I.T.A. No.476-477/IB of 2009 and M/s. Ebrahim Brothers Ltd. v. Wealth Tax Officer 1996 SCMR 1470 rel.

2008 PTD 1440; CIT v. Fatima Sharif Textile 2009 SCMR 344 = 2009 PTD 37; PLD 2008 SC 663; 2007 SCMR 330, 2005 SCMR 778, 2005 SCMR 1814; PLD 2004 SC 441; Writ Petitions Nos. 1858 of 2008, 209, 453, 709, 816 and 1080 of 2009; Writ Petitions Nos. 20340 and 20339 of 2009; Writ Petition 20306 of 2009; I.T.A. No.565/1B of 2009; I.T.As. Nos.601 to 603/IB of 2009; 2009 PTD 284; 2008 PTD 1440; Civil Petitions Nos.1664 and 1665 of 2009 and I.T.As. Nos. 30 to 32 of 2009; I.T.As. Nos. 476-477/IB of 2009 and I.T.A. No.816/IB of 2009 ref.

(b) Interpretation of statutes---

----Fiscal statute---When language of fiscal statute was ambiguous and several interpretations of the same provision were possible, doubt should be resolved in favour of the citizen.

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

----S.174(2)---Record---Add back by using stock phrases---Validity---Reason for add-back showed that the same had been done on the basis of conjectures/surmises using stock phrases---Assertions in the order at assessment stage indicated that the add-back was made on conjectures and suppositions--Taxation Officer had also opined that Chief Executive of the Assessee (a private limited company) need not undertake foreign tours for procurement of machinery and should have done so using modern technology of internet---Such observations were tantamount to suggesting the taxpayer to do business as the department perceived---Such was not within the domain of the department---No instances had been given where evidence was lacking---Observation made by the First Appellate Authority that"...I agree with the contention of the learned AR that add backs were made on the basis of stock phrases without pointing out a single instance of personal and non-business element, yet one cannot rule out the existence of personal element particularly in case of a private limited company...." were not tenable under the law---Such findings were based on whims/ conjectures/surmises and were contrary to the provisions of law as contained in subsection (2) of S.172 of the Income Tax Ordinance, 2001---Add-back was not endorsed by the appellate Tribunal on legal as well as factual premises in circumstances.

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

----Ss. 161 & 205---Jurisdiction Order C. No. 1(14)IT-Jud/2007, dated 28-3-2008---Failure to pay tax collected or deducted---Levy of additional tax---First Appellate Authority observed that as per jurisdiction, "it was the powers and functions of the Commissioner of Income Tax (Enforcement and Collection Division) to charge additional tax under Part XII of Chapter X---Additional tax levied under S.161 and S.205 of the Income Tax Ordinance, 2001 was deleted being illegal and without jurisdiction; since levy of tax and additional tax under Ss.161/205 of the Income Tax Ordinance, 2001 was deleted on legal grounds, other grounds on this issue were not adjudicated upon"---First Appellate Authority had done so as the Taxation Officer had travelled beyond his jurisdiction by assuming the additional role of enforcement wing as well---Observation of First Appellate Authority were upheld by the Appellate Tribunal being unexceptionable.

Hafiz M. Idrees Advocate and Abdul Basit, F.C.A. for the Appellant.

Shahid Iqbal, L.A. and Sardar Ali Khawaja, D.R. for the Respondent.

2010 P T D (Trib.) 2379

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Ishaq, Judicial Member and Shahnaz Rafique, Accountant Member

S.T.A. No.1530/LB of 2009, decided on-11th June, 2010.

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

----Ss.3(3)(a), 33. & 34---Ginning Rules, 1996, R.6(3)---S.R.O. No.520(I)2005 dated 6-6-2005---Scope of tax---Input tax adjustment---Nonpayment of sales tax on purchases---Show-cause notice for the recovery of sales tax on the ground that registered person could only claim input tax which had been paid by him during the relevant period and if the registered person failed to remit the sales tax payable on ginned cotton purchased by him within the due date, he shall not be entitled to claim adjustment or refund of the input tax in respect of such purchases unless he pays the amount of additional tax or penalty chargeable on such remittances---Registered person/appellant contended that show-cause notice was ab initio void and illegal as the amount of sales tax attributed to be payable in no way was relatable to the appellant and that according to S.3(3)(a) of the Sales Tax Act, 1990, the liability to pay the sales tax fell on the person making the supplies and not on the person to whom the supplies were made (the recipient)---Validity---Sales tax liability shall be paid by the supplier under S.3(3)(a) of the Sales Tax Act, 1990---Appellant was not liable to pay sales tax which were squarely the liability of the ginners ---Amount of sales tax had erroneously and illegally been added by the Department in the show-cause notice which was deleted by the Appellate Tribunal.

Collector of Sales Tax v. Superior Textile Mills 2001 PTD 1486 rel.

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

----Ss. 3---Scope of tax---Goods had not been purchased by the appellant on which sales tax was payable---Amount added erroneously in the show-cause notice was deleted by the Appellate Tribunal.

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

----S. 3 --- Scope of tax---Amount of sales tax had been inadvertently summed up two times owing to repetition which was deleted by the Appellate Tribunal.

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

----S. 33---Offences and penalties---No tax fraud---Imposition of penalty equivalent to 30% of the sales tax involved---Validity---Penalty proceedings would not necessarily be followed in each and every case rather facts of each and every case were required to be independently visualized as to whether any tax fraud had been committed by the registered person or not---Since, proceedings to establish tax fraud were criminal in nature, same had to be established with concrete and solid or material evidence---Mere mentioning in notice did not absolve the department from the responsibility to attribute the tax fraud against the registered person---Contents of show-cause notice did not show that the appellant was ever involved in tax fraud neither had the department been able to produce any supportive material to prove that the appellant had committed any tax fraud --- Sales tax charged, the additional tax and the penalty imposed by the Sales Tax Department had no legal sanctity in the eye of law consequent upon which the order was held to be vague and illegal which was cancelled/annulled by the Appellate Tribunal.

2006 PTD 97; 2005 PTD 2392 and 2005 PTD 1850 rel.

Shoaib Ahmed Sheikh for Appellant.

Nouman Malik, D.R. for Respondent.

2010 P T D (Trib.) 2386

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.A. No.347/KB of 2010, decided on 4th August, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5-A), 131 & 221---Amendment of order to rectify mistake---Original deemed assessment under S.120 of Income Tax Ordinance, 2001 was amended by Additional Commissioner under provisions of S.122(5-A) of the Ordinance---Successor Additional Commissioner after examination of cases record came to the conclusion that said amendment was erroneous and prejudicial to the interest of Revenue and rectified said order---Validity---Successor Additional Commissioner could not amend the first amendment order on the same issue under provisions of Ss.221 and 122(5-A) of Income Tax Ordinance, 2001---Contention of representative of the department that only computational mistake had been rectified, was not correct as successor Additional Commissioner had given a different treatment to proportion of expenses as compared to the treatment given by his predecessor Additional Commissioner in the first amendment order---Successor Additional Commissioner, in circumstances had not corrected computational mistake, but had made a substantial change in the method of proportion of expenses which tantamount to change of opinion---Action of the successor Additional Commissioner under provisions of S.221 of Income Tax Ordinance, 2001 was beyond his legal jurisdiction---Commissioner (Appeals), in circumstances, had rightly annulled order of successor Additional Commissioner.

1992 SCMR 687 = 1992 PTD 570; 1991 PTD 850; 2004 PTD (Trib.) 1104 and 2008 SCMR 204 = 2008 PTD 253 ref.

Dr. Abdul Sattar D.R. for Appellant.

Shahid Jamal for Respondent.

2010 P T D (Trib.) 2391

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Muhammad Faiyaz Khan, Accountant Member

I.T.As. Nos.278/IB to 281/IB of 2005, decided on 20th July, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 138, 62 & 13(I)(aa)---Revision by Commissioner---Remand of case---Assessee contended that while exercising the powers under 5.138 of the Income Tax Ordinance, 2001, the Commissioner had no jurisdiction to remand the case to Assessing Officer for re-assessment; and revisional powers of Commissioner were not judicial in nature---Validity---Held, Commissioner was empowered to set aside the assessment while disposing of the revision petition under S.138 of the Income Tax Ordinance, 1979---Only restriction upon the Commissioner while passing an order under S.138 of the Income Tax Ordinance 1979 was that no order prejudicial to the assessee was to be passed by him---Order of remanding back of the case by the Commissioner to the Assessing Officer could not be called prejudicial to the assessee unless the liability of the assessee was increased because of enhancement made in the income or refund was reduced as a result of such order--No addition was made as against the addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 in the original order---Business income was adopted at the same figures as originally assessed which meant that no enhancement had been made in the income assessed as per original order---Assessment framed under Ss.62/138 of the Income Tax Ordinance, 1979 in accordance with the directions of the Commissioner as per order passed under S.138 of the Income Tax Ordinance, 1979 could not be considered as an order prejudicial to the assessee.

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

----Ss.66(1)(b), 66A & 138---Limitation for assessment in certain cases-Assessee contended that Assessing Officer was not entrusted with powers to make the reassessment in consequence of an order passed by the Commissioner under S.138 of the Income Tax Ordinance, 1979 for the reason that no limitation for reassessment in the case of an order passed under S.138 of the Income Tax Ordinance, 1979 was provided in law i.e. either in S.64 or S.66 of the Income Tax Ordinance, 1979---Department contended that it was not correct that no limitation was provided in the statute for reassessment to be framed in consequence of an order passed under S.138 of the Income Tax Ordinance, 1979; and that in case of an order passed under S.138 of the Income Tax Ordinance, 1979 limitation for reassessment was provided in Cl. (b) of subsection (1) of S.66 of the Income Tax Ordinance, 1979 which was two years from the end of the financial year during which such order was received by the Assessing Officer---Validity---For purpose of an order to be passed in consequence of S.66A of the Income Tax Ordinance, 1979 the limitation was provided in S.66 of the Income Tax Ordinance, 1979---In consequence of or to give effect to any finding or direction contained in any order made under Chapter XIII, S.138 of the Income Tax Ordinance, 1979 having been included therein, the provisions of Cl.(b) of subsection (1) of S.66 of the Income Tax Ordinance, 1979 were also applicable in such cases---If view point of assessee was accepted then the appeal filed by him before the Commissioner (Appeals) against the order passed by the Assessing Officer in consequence of the order of Commissioner passed under S.138 of the Income Tax Ordinance, 1979 was also not legally maintainable---Order of First Appellate Authority being justified and reasonable was maintained by the Appellate Tribunal.

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

----S. 61---Income Tax Ordinance (XLIX of 2001), S. 239(2)---S.R.O. 633(I)/2002 dated 14-9-2002---Assessment year 2000-2001---Issuance of notice under S.61 of the Income Tax Ordinance, 1979---Legality---Assessee contended that since no notice under S.61 of the Income Tax Ordinance, 1979 could be issued for the assessment year 2000-2001, the assessment framed by the Taxation Officer on 25-6-2003 was legally not maintainable; and assessment framed on the basis of proceedings initiated under S.61 of the Income Tax Ordinance, 1979 should have been annulled by the First Appellate Authority instead of having been set aside---Department pleaded that under the provisions of S.62 of the. Income Tax Ordinance, 1979 the Assessing Officer was required to consider the evidence produced under S.61 of the Income Tax Ordinance, 1979 and the provisions of S.61 of the Income Tax Ordinance, 1979 being a part of the procedure of assessment were also covered under S.62 of the Income Tax Ordinance, 1979---Validity---Mandatory provisions of S.61 of the Income Tax Ordinance, 1979 were although procedural but were of substantive in nature---No assessment under S.62 or 63 of the Income Tax Ordinance, 1979 could be framed without issuance of a notice under S.61 of the Income Tax Ordinance, 1979---Assessment proceedings were initiated through issuance of notice under S.61 of the Income Tax Ordinance, 1979; and jurisdiction of assessment proceedings for making assessment under S.62 or 63 of the Income Tax Ordinance, 1979 was assumed by the Assessing Officer by issuing a notice under S.61 of the Income Tax Ordinance, 1979 because the Assessing Officer was required to consider the evidence if any was produced under S.61 of the Income Tax Ordinance, 1979 which could not be produced without issuance of such notice---Provisions of S.61 of the Income Tax Ordinance, 1979 originally were not saved under subsection (2) of S.239 of the Income Tax Ordinance, 2001 until the amendment to this effect made therein vide Finance Act, 2003 being applicable w.e.f. 1-7-2003---No notice under S.61 of the Income Tax Ordinance, 1979 could be issued during such period i.e. till the insertion of words "or 61" made in S.239(2) of the Income Tax Ordinance, 2001 vide Finance Act, 2003---Amendment made by the Central Board of Revenue vide S. R.O. 633(1)/2002 dated 14-9-2002 was declared to be illegal by the superior courts---Assessment framed by the Taxation Officer under S.62 of the Income Tax Ordinance, 1979 on 25-6-2003 for the assessment year 2000-2001 in the absence of a valid notice issued under S.61 of the Income Tax Ordinance, 1979 was legally not maintainable---Assessment framed by the Assessing Officer under S.62 of the Income Tax Ordinance,. 1979 as well as the order of First Appellate Authority to set aside the same was vacated by the Appellate Tribunal.

2005 PTD 1621 and 2006 SCMR 109 rel.

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

----S. 239(2)---Income Tax Ordinance (XXXI of 1979), Ss. 59, 59A, 62 A 63---Assessment year 2000-2001---Savings---Assessments---Authority competent to frame the assessment under the Income Tax Ordinance, 2001 was empowered to make the assessment in respect of any income year ending on or before 30th day of June, 2002---Taxation Officer who was a competent authority under the Income Tax Ordinance, 2001, to make the assessment in respect of any tax year was also empowered under provisions of Sub-S. (2) of S.239 of the Income Tax Ordinance, 2001, to frame the assessment in respect of any income year ending in or before 30th June, 2002, however, such assessments according to the provisions of law were required to be made in accordance with the procedure laid down in Ss.59 or 59A or 62 or 63 of the Income Tax Ordinance, 1979 as the case may be.

Mir Ahmed Ali for Appellant.

Ch. Nasim Ilyas, D.R. for Respondent.

2010 P T D (Trib.) 2406

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member and Malik Abdul Samad, Accountant Member

S.T. Appeal No.61/K of 2009 (Old S.T. Appeal No.139/K-097) and Order-in-Appeals Nos.114 to 120 of 2007, decided on 15th June, 2007.

Sales Tax Act (VII of 1990)---

---Ss. 4, 7, 10 & 46-Refund claim---Rejection of---Appeal against---Appellants claimed benefit of refund of input tax to the tune of Rs.9,46,111, but out of that amount, Processing Officer rejected the claim for Rs.277,200 after lapse of more than three years---Tax paid by the appellants on the purchase was refundable as input tax, but the department did not sanction such refund on the ground of law of blacklisting and suspension of registration pertaining to the tax period concern---No authority had been cited to support the proposition that if the person from whom the exporter purchased the goods was found to be blacklisted, the input tax that had been charged by the seller from the exporter; and had been deposited into the government treasury, could not be refunded---Assistant Collector's order by which sales tax registration of supplier had been suspended, could not operate retrospectively---Rejection of refund claim on alleged "suspension of registration of supply" alone, was totally illegal and absolutely arbitrary, which sounded arrogantly, whimsical and discriminatory, when different treatments were meted out to different applications under exactly the same circumstances; and that too by the same Adjudicating Officer---Impugned adjudication order-in-original as well as order-in-appeal, being palpably illegal and void, passed without jurisdiction and lawful authority, were set aside---Deputy Commissioner of Sales Tax (Refund), was directed to sanction appellants' pending sales tax refund claim under the provisions of Sales Tax Act, 1990.

1969 SCMR 212; PLD 1964 SC 410; 1984 PTD 150; 2000 PTD 399; PLD 2001 SC 600; 2010 PTD 883 (Trib.); 2007 PTD (Trib.) 445; 2010 PTD (Trib.) 893; PLD 1974 SC 180; 1987 PTD 739; 2009 PTD 1; 2009 PTD 16; 2000 PTD 285; Messrs Firdouse Textile Printing Mills (Pvt.) Ltd., Faisalabad v. Federation of Pakistan through Secretary Finance and 5 others 1993 PTD 713; Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652; Commissioner of Sales Tax (West), Karachi v. Kurddsons Ltd., PLD 1974 SC 180 and Kohinoor Textile Mills Ltd. v. Commissioner of Income Tax, Lahore PLD 1974 SC 284 ref.

Shafqat M. Sagar for Appellant.

Abdul Jabbar, D.R. for Respondent.

2010 PTD (Trib.) 2414

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Syed Aqeel Zafar-ul-Hasan, Accountant Member

I.T.A. No.767/IB of 2003, decided on 27th February, 2004.

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

----Ss. 132(1)(a)(i) & 13(1)(aa)---Decision in appeal---Setting aside of assessment ---Service of notice---First Appellate Authority set aside the assessment with the observation that contention of the assessee relating to service of notice was found to be correct and directed the Assessing Officer to verify the source of investment after providing fresh opportunity to assessee---Validity---Contention of the assessee regarding the investment in the purchase of shares having been made from the sale proceeds of agrarian land of forefathers was not accepted by the Assessing Officer for the reason that no proof of transaction of money in the form of gift or loan or inheritance was filed---Order of First Appellate Authority on the other hand revealed that necessary evidence and reconciliation could not be produced before the Assessing Officer as the then Authorized Representative had fallen ill who later on expired---Objection relating to issue of jurisdiction also remained unsubstantiated since no arguments or evidence was produced by the assessee---Finding of First Appellate Authority to set aside the assessment was upheld by the Appellate Tribunal to be justified considering the facts of the case.

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

----S.13(1)(aa)---Addition---Approval---Permission---Assessee contended that assessment should have been annulled since the approval of the Inspecting Additional Commissioner and no permission was required, for addition to be made under S.13(1)(aa) of the Income Tax Ordinance, 1979---Validity---Expression "permission" of Inspecting Additional Commissioner had been used in the same sense and had the same meaning as that of "Approval" of Inspecting Additional Commissioner which was required to be obtained by the Assessing Officer for making addition under the provision of S.13(1) of the Income Tax Ordinance, 1979---Findings of First Appellate Authority were upheld by the Appellate Tribunal being justified in the circumstances of the case.

2000 PTD 3788; 2003 PTD (Trib.) 1238; 1994 PTD (Trib.) 1288 and 1998 PTD (Trib.) 1935 distinguished.

1994 PTD (Trib.) 1288 rel.

Tabraz Ahmed Qureshi for Appellant.

Abdul Shakoor, D.R. for Respondent.

2010 P T D (Trib.) 2421

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Ishaque, Judicial Member

S.T.A. No.704/LB of 2009, decided on 30th June, 2010.

Sales Tax Act (VII of 1990)---

----Ss.10(4), 11(2), 7, 8, 73, & 3---Sales Tax Refund Rules, 2002, Rr.8, 9 & 4---Sales Tax---Standing Order No. 4 of 2006 dated 20-12-2006---Refund of input tax---Refusal of---Limitation---Registered person contended that Department was mandated to issue a show-cause notice of any discrepancy within 14 days of the application for refund under R.8 of the Sales Tax Rules, 2002 but the Department failed to do the same; that show-cause notice dated 14-3-2007 was issued after a lapse of three years which was admittedly time-barred as audit was conducted in 2006 as an investigation under S.10(4) of the Sales Tax Act, 1990 and limitation under R.8 of the Sales Tax Rules, 2002 was clearly attracted and that allegations in the Show-cause notice were not spelt out in the audit report---Validity---Department failed to confront the registered person regarding discrepancies with the prescribed limit as provided by the Rules for which there would be no escape---Return was filed in time and the input tax claim on the invoices was fully claimed under law after which no show-cause notice was issued as required by law and the rules on the subject---After lapse of three years, the department issued the show cause which itself was contradictory to the audit report---Such belated notice was coram non judice and could find no legal support---Show-cause notice was invalid and all the subsequent proceedings taken thereunder shall have no legal effect as against the rights of registered person---Orders passed below were recalled and the claim for refund was allowed to be sanctioned as per rules.

Shoaib Ahmad Sheikh for Appellant.

M. Nouman Malik, D.R. for Respondent.

2010 P T D (Trib.) 2425

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member

S.T.A. No.759/LB of 2009, decided on 22nd June, 2010.

Sales Tax Act (VII of 1990)---

----Ss.36(3) & 74---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Rejection of refund---Appeal was rejected due to non filing of invoice summary of the supplier required to be filed by the registered person---Validity---Objection of limitation was raised before First Appellate Authority but remained unattended---Show-cause notice was issued on 15-11-2007 whereas the order-in-­original was passed on 23-9-2008, which was beyond 180 days, ended on 15-5-2008---Application for extension by the Department dated 20-6-2008 was filed under proviso to S.36(3) of the Sales Tax Act, 1990 and not under S.74 of the Sales Tax Act, 1990 and extension given by the Federal Board of Revenue was also under the same proviso---Order-in-original was passed beyond 180 days, was held beyond jurisdiction and illegal by the Appellate Tribunal---Appeal of the department was dismissed and that of registered persons accepted.

Messrs Hanif Straw Board Factory v. Additional Collector (Adjudication) 2008 PTD 578 rel.

Attique-ur-Rehman Mughal, D.R. for Appellant.

Shoaib Ahmad for Respondent.

2010 P T D (Trib.) 2457

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.As. No9081/KB and 382/KB of 2009, decided on 19th January, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 236, 161, 205 & 137---Collection of tax and advance tax on amount of prepaid cards for telephones'---Assessee engaged in the business of operating Public Call Office, had been held by the Taxation Officer as an "assessee in default" of non fulfilling of his obligation as a withholding agent and "prescribed person" under the provisions of S.236(1) of Income Tax Ordinance, 2001; and the tax and advance tax were levied upon him under Ss.161 & 205 of Income Tax Ordinance, 2001---Validity---Smart Card was not similar to a "prepaid card" and both said cards were not one and the same thing---Provisions of S.236(1) (b), (3) Income Tax Ordinance, 2001 were not applicable to the "Payphone operators" as they were not recognized collecting agents in terms of 5.161 of Income Tax Ordinance, 2001, whereas subscriber of telephone, mobile telephone and prepaid telephone cards had been held as "Collecting Agents "---Under S.236(1)(b) of Income Tax Ordinance, 2001 "Prepaid Cards for telephones" did not involve functions prescribed by "Pay Phone Operators" as the business carried out by thePay Phone Operators' was completely different and distinguishable---As all the Payphone Operators made payment of advance income tax in terms of S.236(1)(a) of Income Tax Ordinance, 2001 by virtue of fact that they were subscribers to all the lines of which a corporate bill was raised, there was no further rationale to insist on yet another category of levy under the same provisions on the same transaction---Consolidated order passed by Commissioner (Appeals) was upheld, when no legal infirmity, irregularity or illegality was found therein.

Ali Akbar Deeper, D.R. for Appellant.

Ghulam Hussain Kalya for Respondent.

Date of hearing: 5th December, 2009.

2010 P T D (Trib.) 2463

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Ishaq, Judicial Member and Muhammad Saeed, Accountant Member

I.T.As. Nos.236/KB and 309/KB of 2010, decided on 2nd June, 2010:

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

----Ss. 120, 122 & 123---F.B.R. Circular No. 4(78)ITP/2009, dated 16-1-2009---Assessment---Powers of Assessing Officer/Commissioner to audit case---Representative for the taxpayer had contended that Assessing Officer had no jurisdiction to audit the case in view of F. B. R's. decision to drop audit proceedings in all cases selected for Tax Year 2008 which was properly advertised in the press and circulated through circular dated 16-1-2009---Validity---Record had shown that the impugned case was decided earlier than the issuance of said Circular---Such case would lie outside the purview of the Circular---Such ground raised by the taxpayer in appeal therefore, failed---Assessment proceedings, in circumstances, were legally correct and did not suffer from any procedural infirmity.

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

----Ss. 39 & 131--Direct, administrative and general expenses---Issues with regard to direct, administrative and general expenses, related to add-back of direct expenses which had been agitated by taxpayer as well as the department---Commissioner (Appeals) in his order had observed that add-back 30% each out of direct expenses, administrative and general expenses, was not the case of taxpayer and that non-business involving personal element or unverifiability of the claim could be ruled out totally---Action of the officer Inland Revenue was upheld in principle; however the disallowances out of direct expenses would not be restricted under the head miscellaneous expenses at 25%--Such treatment meted out was a bit harsh---Directions of the Commissioner (Appeals) were not in consonance with the factual position of the case---Expenses were restricted accordingly in order to be rational.

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

----Ss. 122 & 131---Amendment of assessment---Department had objected that Commissioner (Appeals) was not justified to hold that Taxation Officer concluded the amendment proceeding in haste---Record had revealed that sufficient opportunities were provided to the taxpayer---Commissioner (Appeals) was not justified to entertain the material evidence/reconciliation of credit entries which the taxpayer did not produce before the Taxation Officer at the time of assessment proceedings---Record had shown that findings of the Commissioner were against the facts of the case---Sufficient opportunities were already provided to the taxpayer, but he had not availed the same---Assessment proceedings stretched over a period of more than a year during which taxpayer could have produced evidence favouring him, but he failed to do so---Remarks of the Commissioner were deleted, however, the issue of reconciliation/credit entries was remanded to the concerned authorities for proper assessment.

2008 PTR 128 ref.

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

----Ss. 39, 122 & 131---Amendment proceedings---Deletion of additional amount---Commissioner (Appeals) was alleged to be not justified to delete the addition of amount when the taxpayer did not submit/prove before the Taxation Officer-Commissioner (Appeals) did not apply mind properly to the nature of transaction and the reasonability as expounded by the Assessing Officer in his order---However, in order to be judicious another opportunity could be provided to the taxpayer; and that market rate at the time of evaluation should be worked out properly, duly based on proper evidence---Remarks of the Commissioner, were deleted on that score---Case was remanded for fair assessment.

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

----Ss. 39, 122 & 131---Amendment of assessment---Entertaining bank certificate---Department had claimed that Commissioner (Appeals) should not have entertained the bank certificate at the appellate stage as the taxpayer did not furnish the same at the assessment stage and that Commissioner was not justified to delete the addition of amount---Validity---Commissioner being not entitled to accept the evidence in that respect, his direction to that effect were vacated---Veracity of said certificates should also be taken up afresh by the department and necessary treatment as provided under the law should be meted out---Addition of amount in question was also remanded to the concerned authorities for a judicious outcome.

Asim Siddiqui, D.R. for Appellant.

Shahid Jamal for Respondent.

2010 P T D (Trib.) 2483

[Inland Revenue Appellate Tribunal of Pakistan]

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

I.T.As. Nos.78/LB and 79/LB of 2010, decided on 19th May, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5) & 177---Amendment of assessment---Appeal by assessee---Taxability of Income of Co-operative Housing Society---Assessee's contention was that doctrine of mutuality was applicable in the case of Housing Society specifically created for the members as per cooperative laws; that society was formed with the intention to provide benefits to its members without personal advantage to the members; that profits earned were used for running of the Society and for the general welfare of its members; that cooperative society was an association wherein members deal with themselves as a class; that no profit making motives arise in any shape and no one could be called as beneficiaries and did not fall in the definition of a "commercial organization" and that Cooperative Society was already paying tax on the income received from Transfer Fee and other charges---Validity---Appellate Tribunal vacated the order of First Appellate Authority , and case was remanded to the Assessing Officer with the direction to pass lawful and speaking order after having given an opportunity of being heard to the assessee.

2000 PTD (Trib.) 1172; PLD 1977 Lah. 345 and Writ Petition No.11166 of 2009 rel.

Zia H. Rizvi for Appellant.

Muhammad Jameel Bhatti, D.R. for Respondent.

2010 P T D (Trib.) 2486

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.As. Nos.609/IB and 610/IB of 2010, decided on 8th June, 2010.

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

----Ss. 205, 221 & 124---Default surcharge---Determination of due date for payment of additional tax---Theory of merger--Department's contention was that First Appellate Authority was not justified to direct imposition of additional tax/default surcharge from the date of issuance of rectification order on 9-6-2008 passed under Ss.221/124 of the Income Tax Ordinance, 2001 and application of rates in 2008 as against the fact that the demand remained outstanding from the due date of payment as a result of original order passed on 6-3-2004 and additional tax/default surcharge was charged on reduced/settled figure of demand---Assessee's contention was that original order passed on 6-3-2004 merged in order passed under S.221 on 9-6-2008 and notice issued on 9-6-2008 determined due date---Validity---Assessee could claim relief on the basis of merger theory in the period since 6-12-2004---Order dated 9-6-2008 was nothing but giving the tax credit and did not relate to finding on merits with regard to quantum of income in dispute which was already settled in December, 2004--Merger could only be related with reduction of quantum of income in appeal and not with the period of non-payment of finally determined tax liability---Additional tax would be on the amount finally determined after giving tax credit in order passed under S.221 of the Income Tax Ordinance, 2001, not payable from the original date of demand but after the period of time within which payment was asked to be made by the department---Default period would start after the expiry of one month given by the department to deposit the tax if, in demand note assessee was asked to pay the tax within a period of one month---Relief could only be given if the date for payment was extended by the department or for the period when demand was stayed by the competent judicial forum or the department itself---Order passed by the First Appellate Authority was modified accordingly by' the Appellate Tribunal.

PLD 1976 Lah. 761 distinguished.

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

----S. 205---Default surcharge---Merger---Determination of due date for payment of additional tax---Principle---Order passed by the Taxation Officer merges into order passed by the Appellate forum---Demand crystallized in final order will be considered as demand against the tax payer from the day one---Foundation of the additional tax was the existing demand that too existing at the time when order under S.205 of the Income Tax Ordinance, 2001 was passed---If the assessment order raising some demand had been set aside in appeal either by First Appellate Authority or Appellate Tribunal or other higher forum, the period in which no demand was in existence will be deducted even if stay was granted by Appellate Tribunal or any other forum, that would amount to suspension of demand---Taxpayer could reap the benefit of period of suspension also.?

Ziaullah Khan, D.R. for Appellant.

Ch. M. Iqbal, ITP for Respondent.

2010 P T D (Trib.) 2490

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No.750/IB of 2009, decided on 4th May, 2010.

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

----Ss. 161, 12(6), 149(2) & 205---Failure to pay tax collected or deducted---Voluntary Separation Scheme---Deduction of tax at average/concessoinal rates---Assessee in default---Appeal---Validity---Deductoin of withholding tax had to be made by 30th June of the relevant year---Option for,assessment at average/concessional rates had to be filed by 30th September of the relevant year by the taxpayers, who were the retiring employees of assessee company---Duties and functions of Company (withholding agent) and retiring employees were totally different---Company was required to make deduction of tax according to law but failed to do so---Company made deduction of tax according to the liability of retiring employees after working out on the basis of their options for assessment at average/concessional rates---Withholding tax was not deducted according to prescribed rates, rather deducted on reduced rates after taking into account the reduced liability Of-each employee on the basis of their options for assessment of their income on such rate---Tax deduction was made on concessional/ average rates and not according to prescribed rates, the default was established on record that tax was not deducted on prescribed rates.

Central Exchange Bank Limited v. CIT (1951) 2 Tax 121 (H.C. Pak.); CIT v. National Taj Traders AIR 1980 SC 485; AIR 1976 SC 314; AIR 1963 SC 1062; 1982, ALI 1140; India United Mills Ltd., v. CEPT AIR 1955 SC 79 at 82; Commissioner of Income Tax, North Zone, Lahore v. Warris Silk Weaving and Knitting Mills, Gujranwala (1972) 28 Tax 181 (Lah.); 2006 PTD (Trib.) 288 and 2003 PTD 2689 ref.

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

---S.12(8)---Salary---Notice to elect the amount to be taxed at average/concessional rate---Company claimed that options of employees were filed with different functional units of the Income Tax Department---Claim was not supported with any evidence, because no proof was brought on record in its support---Options collected by Company were sent in bulk to the Commissioners of various regions but there was no proof of their receipt in the respective regions---Even postal or courier receipts had also not been annexed showing that these elections were sent through courier or postal services---Cl. (8) of S.12 of the Income. Tax Ordinance, 2001 clearly empowers the Commissioner to allow such elections even submitted late to him after specified date--Information/details of elections had been provided by the assessee---Verification of receipt and passing of order to accept or reject such elections vested with the Commissioner---Fate of the case would hinge upon passing of order of the Commissioner in positive or negative---Appellate Tribunal declined to by-pass the powers of Commissioner contemplated in provisions of Cl. (8) of S.12 of the Income Tax Ordinance, 2001 and the matter was remanded to the Taxation Officer with the directions to verify as to how many employees were there and when they actually filed their options with the concerned Commissioners in the light of provisions of S.12(8) of the Income Tax Ordinance, 2001 for assessment of tax on their income at average rates---Tax liability could only be re-determined after passing of order by the Commissioner under S.12(8) of the Income Tax Ordinance, 2001---Action was directed to be taken against the remaining employees as provided under the law after providing a reasonable opportunity of hearing to the Company.

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

----S. 205---Default surcharge---Short deduction of tax---Levy of additional tax---Tax was not deducted at source by the withholding agent, but it was subsequently paid by the recipient---In such situation, it was held by the Appellate Tribunal that Government had received its share of tax and no further tax could be collected from the withholding agent---However, Additional tax could be charged on the defaulted amount for the period during which, it remained unpaid, because government money was utilized in an unauthorized manner and the cost of such utilization had to be paid in the shape of additional tax under S.205 of the Income Tax Ordinance, 2001.

2003 PTD 6.89 (Trib.) and 2000 PTD 2872 ref.

(d) Income-tax---

----Withholding tax regime---Object of---Withholding tax regime is based on pay-as you-earn principles---It provides for efficient machinery for payment of tax, which is also convenient for the concerned stakeholders---Basic object of this regime is that tax should be paid on time in an efficient and convenient manner.

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

Shahid Iqbal, L.A. and Sardar Ali Khawaja, D.R. for Respondents.

2010 P T D (Trib.) 2559

'Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Khalid Siddiqui, Accountant Member

I.T.A. No.986/IB of 2009, decided on 21st June, 2010.

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

----Ss. 161 & 205, Second Sched: Part-I, Cls. (8), (12) & (25) & Sixth Sched., Part-II, R.5---Rules of Pakistan Telecommunication Corporation Employees Pension Fund, Rr.9 & 15---Failure to pay tax collected or deducted---Assessee in default---Voluntary Separation Scheme---Payments to employees retired under Voluntary Separation Scheme/pension---Assessee was treated as taxpayer in default due to non-deduction of tax on the pension/payments made to employees retired under Voluntary Separation Scheme---Claim of exemption---Department contended that taxpayer had rightly been treated as taxpayer in default for non-deduction of income tax on the payments made on account of commutation of pension as payments of commutation/pension did not qualify the provision of exemption under Cl. (12) of the Second Schedule of the Income Tax Ordinance, 2001 and exemption under CI. (25) of the Part-I of Second Schedule to the Income Tax Ordinance, 2001 had no applicability---Validity---Stand of taxpayer to claim exemption was Cl. (25) of Part-I of Second Schedule to the Income Tax Ordinance, 2001 was an afterthought because taxpayer itself applied to Federal Board of Revenue for exemption under Cl. (12) of the Part-I of Second Schedule to the Income Tax Ordinance, 2001 which was not granted---Order of refusing exemption could not be assailed before the Appellate Tribunal rather it might have been challenged by invoking extraordinary jurisdiction of High Court---Department, in an other case, had itself admitted that separate approval under Cl. (12) of the Part-I of Second Schedule to the Income Tax Ordinance, 2001 was not a requisite and earlier approved fund will suffice to serve the purpose---Majority out of thousands people employees were still receiving remaining pension periodically and withholding agent had option to deduct tax while making remaining payments---Huge number of employees whose pension payments were to fall under exemption shall suffer either due to the fault of Company/ taxpayer---Exemption had been provided through legislation but subject to approval which was just a procedural aspect for analyzing certain requirement---Approval was judicious exercise of discretion---Payments out of approved fund under Cl. (25) of Part-I of Second Schedule to the Income Tax Ordinance, 2001 had been alleged by the assessee for first time before the Appellate Tribunal---Admittedly, payments were not made by the approved fund but the company/taxpayer had made the payments on behalf of the approved fund---Case was remanded to the Taxation Officer to analyze the details and record its impacts after providing an opportunity of being heard to the assessee.

PLD 1996 SC 222 = 1996 PLC (C.S.) 545; 1999 SCMR 1526 and PLD 1973 SC 514 ref.

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

----Second Sched., Part-I, Cl. (12)---Exemption---Request for exemption was moved to Federal Board of Revenue---Non-decision of the issue within a reasonable time---First Appellate Authority allowed exemption on the ground that taxpayer could not be held responsible for .the inefficiencies and delays of the Department---Department contended that if the exemption was not specifically granted, the First Appellate Authority could not presume grant of exemption by a competent authority merely that it had not been decided within a reasonable time---Validity---Application of the assessee was not decided and the approval had not been granted or rejected timely---Application was pending before the Federal Board of Revenue and it was responsibility of the Federal Board of Revenue to dispose of the application of the assessee timely---Ground of rejection was quite against the logic that benefits of Cl. (12) of Part-I of Second Schedule to the Income Tax Ordinance, 2001 could not be stretched retrospectively---Fact of the matter was that application was moved much earlier---By not disposing the application; if the authority while passing order says that benefits could not be extended retrospectively, taxpayer was not at fault---Fault lay with the authority who did not pass the order in yes or no.

69 Tax 176 (H.C. India) and 67 Tax 23 (H.C. India) ref.

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

----S.161---Withholding tax---Principles---Withholding tax is to be deducted at the time of payment and whatever the status of the payment, deduction is made according to the procedure and rules laid under the Ordinance---Each and every provision of the Income Tax Ordinance, 2001 is required to be followed in letter and spirit to avoid any type of default or loss of revenue.

Shahid Iqbal, LA and Miss Nazia Zaib, D.R. for Appellants.

Azhar Hameed, ACA for Respondent.

2010 P T D (Trib.) 2602

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khalid Waheed Ahmed, Chairperson, Muhammad Jahandar, Judicial Member and Istataat Ali, Accountant Member

I.T.As. Nos.12/IB, 30/IB to 32/IB of 2009, decided on 25th April, 2009.

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

----Ss.177 & 120(1) & (1A)---Income Tax Ordinance (XXXI of 1979), Ss. 61, 62 & 63---Audit---As soon as a complete return of income was furnished it was taken to be an assessment order' issued to the taxpayer by the Commissioner on the day the return was furnished---Subsection (1A) of S.120 of the Income Tax Ordinance, 2001 does not provide that the operation of subsection (1) of S.120 of the Income Tax Ordinance, 2001 should be suspended on selection of the case of a person for audit under S.177 of the Income Tax Ordinance, 2001---Subsection (1A) of S.120 of the Income Tax Ordinance, 2001 provides for the powers of the Commissioner to select any person for the audit of his income tax affairs under S.177 of the Ordinance and in such a case the operation of the provisions of subsection (1) of S.120 of the Income Tax Ordinance, 2001 was not effected---Contention that in case of selection of a person for audit the return was automatically excluded from the ambit of subsection (1) of S. 120 of the Income Tax Ordinance, 2001 was not plausible being practically not workable as that will be negating the basic concept of universal self-assessment introduced by the Income Tax Ordinance, 2001---Under the Income Tax Ordinance of 2001 neither any authority had been empowered, nor any procedure had been provided to frame the assessment on the basis of return filed by a taxpayer---Such fact was also obvious from the non-existence of any corresponding provisions in the Income Tax Ordinance 2001 to those of the provisions of S.61, 62 or 63 of the Income Tax Ordinance, 1979---Under the provisions of subsection (1) of S.120 of the Income Tax Ordinance, 2001 a complete return filed by the taxpayer fulfilling all the requirements of subsection (2) of S.114 was unexceptionally taken as anassessment order' issued by the Commissioner. Only a return not fulfilling the requirements of subsection (2) of S.114 would not be an order deemed to have been passed under subsection (1) of S.120 of the Income Tax Ordinance, 2001.

2008 PTD 1440 rel.

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

----Ss. 177, 120(1)(4) & 121(1)---Income Tax Ordinance (XXXI of 1979), Ss.59(1), 59-A, 61, 62 & 63---Audit---Deemed order---Scope---Department contended that on selection of the case of a person for Audit under S.177 of the Income Tax Ordinance, 2001, the return was automatically excluded from the purview of subsection (1) of S.120 of the Income Tax Ordinance, 2001 and that it was not to be treated as a deemed order---Validity---Return was not automatically excluded from the purview of subsection (1) of S. 120 of the Income Tax Ordinance, 2001 on selection of the case of a person for audit under S.177 of the Income Tax Ordinance, 2001 because of the reasons that unless declared invalid under subsection (4) of S.120 of the Income Tax Ordinance, 2001 a return filed by a taxpayer was to be taken as an assessment order under subsection (1) of S.120 of the Income Tax Ordinance, 2001; that it was nowhere provided in the Income Tax Ordinance, 2001 that on selection of a case for audit under S.177 the return in such case shall stand excluded from the ambit of S.120(1) of the Income Tax Ordinance, 2001 and that even otherwise a valid return could not be taken as excluded from the purview of subsection (1) of S.120 of the Income Tax Ordinance, 2001 because there was no provision in the Income Tax Ordinance, 2001 for framing of assessment on the basis of the return furnished by a taxpayer---No procedure for assessment of income like those of Ss.61, 62 & 63 of the Income Tax Ordinance, 1979 having been provided in the Income Tax Ordinance, 2001, no assessment order could be passed in such cases by the Assessing Officer---Income Tax Ordinance, 2001 did not provide that on selection of a case for audit under S. 177 of the Income Tax Ordinance, 2001 the return shall be excluded from the ambit of S.120(1) of the Income Tax Ordinance, 2001 and if after the completion of audit no discrepancy is found it shall again become under the purview of S.120(1) of the Income Tax Ordinance, 2001---To exclude the return from the ambit of S.120(1) of the Income Tax Ordinance, 2001 it had to be first declared invalid which could only be done within the year of its filing under'S.120(4) of the Income Tax Ordinance, 2001.

2008 PTD 1440 ref.

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

----Ss. 177 & 114(3) & (4)---Audit---Cases of persons who did not furnish return in response to notice issued under subsection (3) or (4) of S.114 of the Income Tax Ordinance, 2001 for any reason including the one that according to the taxpayers the income was not chargeable under the Income Tax Ordinance, 2001 could also be selected for audit---Insertion of Cl. (d) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 vide Finance Act, 2003 provided for the Assessing Officer to call for record and other documents etc. and proceed for carrying out of audit and framing of assessment in such cases.

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

----Ss.2(66), 114(3)(4), 121(1) Cls. (a) to (d) & 144---Income Tax Ordinance (XXXI of 1979), Ss.61, 62 & 63---Best judgment assessment---Clauses (a) to (d) of S.121 of the Income Ordinance, 2001---Connotation---Whether conjunctive or disjunctive---Ex parte assessment---Clause (d) of subsection (I) of 5.121 of the Income Tax Ordinance, 2001 was not to be read in isolation---Provisions of S.121(1)(d) of the Income Tax Ordinance, 2001 could not be invoked in the absence of the default of clause (a) of subsection (1) of S.121 of the Income Tax Ordinance, 2001---Person who had been served with a notice for furnishing of return issued under subsection (3) or (4) of S.114 of the Income Tax Ordinance, 2001 became a `taxpayer' as defined in subsection (66) of S.2 of the Income Tax Ordinance, 2001---Case of such person could be selected for audit under S.177 of the Income Tax Ordinance, 2001 even if no return was filed by him---Taxpayer in such a case may be required to produce record and documents etc. by the Assessing Officer under the provisions of Cl. (d) of Sub-S.(1) of S.121 of the Income Tax Ordinance, 2001---Concept of issuance of notice for production of documents etc. in the case where no return was filed in response to statutory notice issued for furnishing of the same was not alien to law---Under the provisions of Income Tax Ordinance, 1979 a notice under S.61 was required to be issued even in case of passing of an ex parte order to frame the best judgment assessment---Unlike S.63 of the Income Tax Ordinance, 1979 the provisions of S.121(1)(d) of Income Tax Ordinance, 2001 were not universally applicable to other provisions regarding the procedure for assessment of income such as S.122(5) of the Income Tax Ordinance, 2001, which in itself provided for complete procedure and manner of assessment by making addition and alteration which could only be done in case of an existing order---On the other hand the provisions of section 121 of the Income Tax Ordinance, 2001 also in itself provided complete procedure of assessment of taxable income in case of taxpayer whose income had not been assessed earlier---Provisions of S.121 and those of S.122 of the Income Tax Ordinance, 2001 both of which laid down complete procedure of assessment in themselves were independent of each other for catering two entirely different situations---View that the provisions of clause (d) of S.121 of the Income Tax Ordinance, 2001 were applicable only in the cases of taxpayer in whose case there was no order existed in field either by way of return treated to have been made under S.120(1) of the Income Tax Ordinance, 2001 or an order earlier passed under the provisions of S.121 or S.122 of the. Income Tax Ordinance, 2001 was strengthened from the absence of any provisions under the Ordinance, 2001 providing for the procedure to frame assessment on the basis of return like those of provisions of Ss.61 and 62 of the Income Tax Ordinance, 1979---No procedure for framing of normal assessment on the basis of return having been provided in the Income Tax Ordinance, 2001 also no question of framing of an ex parte order in such cases would arise.

1999 PTD 1060 rel.

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

----Ss. 177, 114(6) & 122(3)---Audit---Concept and procedure of assessment on the basis of results of audit---Under the new scheme of assessment a valid return of income in all the cases of taxpayers was deemed to be an assessment order under the provisions of subsection (1) of S.120 of the Income Tax Ordinance, 2001 on the day it was furnished without there being any exception---Similarly in case of a revised return filed under subsection (6) of section 114 it was treated to be an amended assessment order under the provisions of subsection (3) of section 122 of the Income Tax Ordinance, 2001---Where return was furnished, only situation in which Assessing Officer could proceed to frame the assessment under the provisions of subsection (1) of S.121 of the Income Tax Ordinance, 2001 was where after selection of case under the provisions of S.177 of the Income Tax Ordinance, 2001 during the audit proceedings it was discovered by him that the return filed by the taxpayer did not fulfil the requirements of subsection (2) of section 114 of the Income Tax Ordinance, 2001 and the Assessing Officer declared it. as an invalid return under subsection (4) of S.120 of the Ordinance, 2001---Such could not be done after the end of the financial year in which the return was furnished in view of the provisions of subsection (6) of section 120 of the Income Tax Ordinance, 2001 according to which no notice under subsection (3) of section 120 of the Income Tax Ordinance, 2001 could be issued after the prescribed limitation period---Action of Assessing Officer for framing of a new assessment by invoking the provisions of Cl.(d) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 without first declaring the return invalid was thus legally not sustainable because of already existence in field of a valid order deemed to have been passed under S.120(1) of the Income Tax Ordinance, 2001.

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

----Ss. 121(1)(d) & 177---Best judgment assessment---Non-compliance of notices-Ex parte assessment---Validity---Department's contention that in every case of non-compliance of notice issued by the Assessing Officer under Ss.122 & 177 or in case of non-compliance of the provisions of S.174 irrespective of the return having been filed by the taxpayer, the provisions of S.121(1)(d) automatically became applicable was not correct---Interpretation of the department was based on misconception of the provisions of clause (d) of subsection (1) of S.122 of the Income Tax Ordinance, 2001 introduced through substitution of S.121 of the Income Tax Ordinance, 2001 vide Finance Act, 2003---In the original provision of S.121 of the Ordinance, 2001 it was provided that an order of best judgment assessment could only be passed where a person required to furnish a return of income for a tax year failed to do so by the due date---After substitution of S.121 of the Income Tax Ordinance, 2001 vide Finance Act, 2003 the Assessing Officer was also empowered to frame the best judgment assessment where a person fails to furnish a return in response to notice issued by the Commissioner under subsection (3) or (4) of S.114 of the Income Tax Ordinance, 2001 or failed to file the statement under S.143 or 144 of the Income Tax Ordinance, 2001 as well as for non fling of statement under S.116 of the Income Tax Ordinance, 2001---Provisions of Cl. (d) of S.121(1) of the Income Tax Ordinance, 2001 were misconceived by the Revenue in the manner that as if these empowered the Assessing Officer to frame an ex parte assessment in every kind and in each case of default on the part of taxpayer to comply with and to produce the documents etc. in compliance of notice issued by the Assessing Officer like those of the provisions of Ss.61 & 63 of the Income Tax Ordinance, 1979 which was not correct.

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

----Ss.121, 120(1) & 122(5)---Best judgment assessment---Procedure---Assessing Officer, according to new scheme of assessment, was no more empowered to frame the assessment on the basis of return filed by a taxpayer which was obvious from the fact that there were no corresponding provisions in the Income Tax Ordinance, 2001 like those of Ss.61, 62 & 63 of the Income Tax Ordinance, 1979---Under the provisions of S.121 of the Ordinance, 2001 a best judgment assessment could be framed by the Assessing Officer in case of failure of the taxpayer to furnish a return or failure to file return as well as to produce documents etc. required by the Assessing Officer---According to universal self-assessment scheme introduced through the Income Tax Ordinance, 2001 the assessment was made by the taxpayer himself in each and every case and not by the Assessing Officer as was obvious from the provisions of subsection (1) of S.120 of the Income Tax Ordinance, 2001---Assessing Officer could only make alteration or addition in such cases on the basis of definite information as provided under S.122(5) of the Ordinance, 2001.

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

---S.177---Audit---Possible situations which could emerge as a result of audit carried out after selection of a case under S.177 of the Income Tax Ordinance, 2001 were that Account books, documents or record required to be maintained under S.174 of the Income Tax Ordinance, 2001 or any other document or record requisitioned by the Assessing Officer relevant for purpose of making of assessment of income was not produced by the taxpayer; that account books and documents required to be maintained under the relevant provisions of Income Tax Ordinance, 2001 were produced but the evidence produced to substantiate the claims as per return was not complete meaning thereby that partial compliance was made and that accounts and all the relevant documents were produced and no defect or discrepancy was found therein by the Assessing Officer as a result of audit proceedings.

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

----Ss. 120 & 114---Assessment---Procedure---Income Tax Ordinance, 2001 do not provide any procedure for the assessment of income on the basis of return filed by a taxpayer.

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

----Ss. 122, 120 & 177---Amendment of assessment---Partial compliance---Effect---In case of partial compliance the Assessing Officer could only proceed under the provisions of S.122 of the Income Tax Ordinance, 2001 for amendment of the order deemed to have been made under S.120 (1) of the Income Tax Ordinance, 2001 by making alteration and additions to the extent of discrepancies/ deficiencies noted by the Assessing Officer as a result of the audit proceedings, however this will not be possible in the case if the return was considered to be excluded from the purview of S.120(1) of the Ordinance or not to be a deemed order under S.120(1) of the Income Tax Ordinance, 2001.

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

---Ss.122, 120 & 177---Income Tax Ordinance (XXXI of 1979), Ss.59-A & 59(1)---Amendment of assessment---No default---Effect---In case there being no default on the part of the taxpayer of any provision of law or of the notices issued by the Assessing Officer during the audit proceedings and no deficiency was found in the declared income as a result of audit the Assessing Officer will not be able to frame the assessment of income even by accepting the declared income because of there being no such provisions in the Income Tax Ordinance, 2001 like those of S.59-A of S.59(1) of the Income Tax Ordinance, 1979.

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

----S. 120(1)(4)---Assessment---Return in each and every case, as soon it was furnished, was treated to be an assessment order under the provisions of subsection (1) of S.120 of the Income Tax Ordinance, 2001 and remains the same even after the selection of case for audit until and unless same was declared as an invalid return under subsection (4) of S.120 of the Ordinance.

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

----S. 121(1)(d)---Best judgment assessment---Limitation---Provisions of S.121(1)(d) in case of taxpayer who furnished return could not be invoked after the end of relevant tax year because the return could not be declared invalid after the period as prescribed under S.120(6) of the Income Tax Ordinance, 2001.

2008 PTD 1440 rel.

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

----Ss.122, 121(1) & 114(3)(4)---Amendment of assessment---Best judgment assessment---Under the provisions of Income Tax Ordinance, 2001 the Assessing Officer was only empowered to make addition or alteration under S.122 of the Ordinance in an existing order; however, the Assessing Officer could frame a best judgment assessment under. S.121 (1) only in a case where no return was filed in response to notice issued under subsections (3) & (4) of S.114 of the Income Tax Ordinance, 2001.

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

----Ss.121 (1)(d), 177 & 114---Best judgment assessment---Scope---Stretch of scope of Cl. (d) of S.121(1) of the Income Tax Ordinance, 2001 to assume the powers of assessment in respect of the taxpayers who have furnished valid returns and whose cases were selected for audit under S.177 of the Income Tax Ordinance, 2001 was against the concept and spirit of universal Self-Assessment Scheme introduced through the Income Tax Ordinance, 2001.

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

----S. 177---Audit---Limitation---Declaration of invalid return after the end of relevant tax year---Validity---No provision exists to deal with the cases where after the end of relevant tax year of furnishing of return the accounts, record and documents etc. were not produced during the course of audit proceedings in which case neither the return could be declared invalid because of prescribed limitation nor there was any other provision in the Income Tax Ordinance, 2001 to render the assessment invalid in such cases on account of default.

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

----S.174 (2)---Record---Deficiencies---Deficiency in the provisions of subsection (2) of S.174 of the Income Tax Ordinance, 2001 which deals with the disallowance or reduction of any claim for expenses in the case where no record or evidence was produced in support of any claim but did not provide for any treatment to be accorded in respect of declared turnover or receipts in the cases where no accounts, record or evidence was produced but the same could not be touched by the Assessing Officer even if these were highly unreasonable.

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

----S.121(1)---Best judgment assessment---Necessity---Reason for introduction of the provisions of clause (d) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 by the legislature appears to provide the adequate opportunity of being heard to the taxpayer before framing of the best judgment assessment.

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

----S.121(1)(d)---Best judgment assessment one of the purposes of introduction of Cl. (d) of S.121(1) of the Income Tax Ordinance, 2001 was to provide another opportunity to the taxpayer to establish his claim by producing account books, record or other evidence etc. that his income was not chargeable to tax; thus a more judicious assessment could be framed irrespective of any return having been filed by him or not by confronting him with the information available with the Assessing Officer during the course of assessment proceedings.

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

----Ss.114(3)(4), 177, 120(1) & 121(1)(d)---Best judgment assessment---Scope---Scope of clause (d) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 was limited to the case in which no return was filed and did not cover the cases of taxpayer who had furnished a return which had been treated to be an assessment order under S.120(1) of the Income Tax Ordinance, 2001---With the insertion of S.121(1)(d) of the Income Tax Ordinance, 2001 the Assessing Officer was vested with the powers to call for the accounts, records and documents etc. from a taxpayer who had not furnished the return of income despite issuance of notice under subsection (3) or (4) of S.114 of the Income Tax Ordinance, 2001---Provisions of Cl. (d) of subsec­tion (1) of S.121 were applicable only in the cases where neither any return was filed in response to notice issued by the Commissioner under subsections (3) and (4) of S.114 of the Income Tax Ordinance, 2001 nor the accounts, record or any other document etc. requisitioned for the purpose of assessment of income were produced by the taxpayer and in the cases where after selection of case for Audit under S.177 of the Income Tax Ordinance, 2001 no accounts, record or documents etc. were produced by the taxpayer and for which default the return furnished by him was declared invalid under the provisions of subsection (4) of S.120 of the Income Tax Ordinance, 2001 subject to provisions of subsection (3) and within the period prescribed under S.120(6) of the Income Tax Ordinance, 2001.

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

----Ss.122(5) & 121(1)(d)---Amendment of assessment---Best judgment assessment---Simultaneous application of provisions of Ss.121 & 122 of the Income Tax Ordinance, 2001---Validity---Provisions of Ss.121 & 122 of the Income Tax Ordinance, 2001 were independent of each other and both were complete in themselves providing the procedure for assessment in different manners for different situations---Assessment order passed under the provisions of S.121 of the Income Tax Ordinance, 2001 was an order of original nature whereas the order of amendment passed by the Assessing Officer under the provisions of S.I22 of the Income Tax Ordinance, 2001 was of revisional nature---For passing of an order of amendment under the provisions of S.122 of the Income Tax Ordinance, 2001 there must be an order existing in the field whereas for passing an order under the provisions of S.121 of the Income Tax Ordinance, 2001 the filing of return or existence of any such order was not required---Three main changes brought in the procedure of assessment under the scheme of Income Tax Ordinance, 2001 were that there were no provisions for framing of assessment under the Income Tax Ordinance 2001 like those of Ss.61 & 62 of the Income Tax Ordinance, 1979 nor there were provisions in Income Tax Ordinance, 2001 for framing of an ex parte assessment like those of S.63 of the Income Tax Ordinance, 1979; that under the new scheme of Income Tax Law, although the taxpayer. was provided with the opportunity of being heard and to submit the documents etc. and for furnishing of his explanation, however his attendance personal or through Authorized Representative was not compulsory as was provided in S.61 of the Income Tax Ordinance, 1979 and that the Assessing Officer had no power to frame the assessment on the basis of return filed by the taxpayer which was deemed to be an assessment order under S.120(1) of the Income Tax Ordinance, 2001 in every case as soon it was furnished and to which no exception was provided therein--Contention of the Department that since the amended assessment was included in the definition of `assessment' the provisions of S.121(1)(d) or S.122 of the Income Tax Ordinance, 2001 could be applied simultaneously or one could be applied in place of the other was devoid of any force.

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

----Ss.121(1)(d), 122(5) & 177---Income Tax Ordinance (XXXI of 1979), S.65---Best judgment assessment---Contention was that passing of an order under S.121(1)(d) of the Income Tax Ordinance, 2001 instead of that under S.122(1)(5) of the Income Tax Ordinance, 2001 would render the assessment illegal and void---Validity---Provisions of S.65 of the Income Tax Ordinance, 1979 provided that for the reasons mentioned in clauses (a), (b), (c) & (d) of subsection (1) of the said section a notice containing all or any requirements of notice under S.56 of the Income Tax Ordinance, 1979 could be. issued to the assessee---On the contrary both the provisions of S.121 and S.122 of the Income Tax Ordinance, 2001 dealt entirely with two different situations---Order of best judgment assessment was passed under S.121 of the Income Tax Ordinance, 2001 when a taxpayer failed to comply with the requirement of the provisions of subsection (1) of the said section while under the provisions of S.122(1)/(5) an assessment order already existing in the field was amended on the basis of information obtained through audit or otherwise---Department was not justified to cover each and every case of negligence, non-application of mind by the Assessing Officer or failure on his part to proceed in accordance with the manner prescribed under the law---When a law required a certain thing to be done in a specified manner it must be done in the said manner---Orders in contradiction of mandatory provisions of law were nullity in the eyes of law---Neither the provisions of S.121(1)(d) and those of S.122(1)/(5) of the Income Tax Ordinance, 2001 could be simultaneously applied nor these could be applied in place of each other---Issuance of simultaneous notice under S.177 along with notices under S. 121 or 122 was also legally not sustainable---Provisions of S.122(1)/(5) could only be invoked in the presence of any definite information which could be obtained through audit or by some other means---Unless such information was available with the Assessing Officer there would be no justification for initiation of proceedings under S.122(1) of the Income Tax Ordinance, 2001---Similar would be the position in case of the provisions of S.121(1)(d) of the Income Tax Ordinance, 2001 which could not be initiated unless the default on the part of the taxpayer in filing the return and/or in producing the account books or other evidence etc. was committed---Assessing Officer could only initiate proceedings under S.122 of the Income Tax Ordinance, 2001 if, he, after conducting the audit had found any defect constituting a definite information regarding the concealment or suppression of income or the Assessing Officer has obtained any information of concealment/escapement of income etc. from any other source---Invoking the provisions of S.121(1) shall not be justified unless taxpayer had failed to file a return or statement required to be furnished under the relevant provisions of law or the taxpayer had not produced the account books, document etc. required by the Assessing Officer.

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

----Ss.174, 121(1) (d) & 122---Record---Provision of subsection (2) of S.174 empowers the Assessing Officer to disallow or reduce a taxpayer's claim for deduction where accounts were maintained but the taxpayer failed to substantiate such claim by producing evidence in support thereof and did not in any way authorize the Assessing Officer to frame a best judgment assessment and determine the tax payable thereon by resorting to the provisions of Cl. (d) of subsection (I) of S.121 of the Income Tax Ordinance, 2001 instead of passing an order of assessment under the provisions of section 122 of the Ordinance, 2001.

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

---Ss. 177, 121(1)(d) & 122---Audit---Principles---On selection of a case for audit under S.177 of the Income Tax Ordinance, 2001 a return filed by a taxpayer did not automatically stand excluded from the operation of subsection (1) of S.120 of the Income Tax Ordinance, 2001 unless the return had been declared invalid under the provisions of subsection (4) of S.120 of the Income Tax Ordinance, 2001---Return could be declared invalid under the provisions of subsection (4) of S.120 read with subsections (3) & (6) of the said section if after selection of case for audit it was found by the Assessing Officer that the taxpayer had filed a false declaration under clause (b) of subsection (2) of S.114 of the Income Tax Ordinance, 2001 with regard to the maintaining of record---Return could not be treated as an invalid return after the end of the financial year in which it was furnished under the provisions of subsection (6) of S.120 of the Income Tax Ordinance, 2001---Initiation of assessment proceedings through simultaneous issuance of notice under Ss. 177 and 122 or 121(1)(d) was legally not justified and orders passed in consequence thereof being unlawful were not sustainable and ab initio void, unless any definite information came in the hands of the Assessing Officer as a result of audit carried out by him no proceedings for amendment of order under S.122 of the Income Tax Ordinance, 2001 could be initiated; similarly until the taxpayer had committed default in producing the accounts, record and other documents etc. required by the Assessing Officer for the purpose of assessment the provisions of Cl.(d) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 were not attracted---Provisions of S.121(I)(d) of the Income Tax Ordinance, 2001 and those of subsections (1) & (5) of S.122 of the Income Tax Ordinance, 2001 were different in nature dealing with entirely different situations therefore could neither be simultaneously applied while passing an order in the case of taxpayer nor the application of one could be replaced by the other---Provisions of Cl.(d) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 were attracted only in the case of absence of a valid return i.e. either the return furnished by the taxpayer had been declared invalid under the provisions of subsection (4) read with subsections (3) & (6) of 5.120 of the Income Tax Ordinance, 2001 or no return was filed in compliance of notice issued under subsection (3) or (4) of S.114 of the Income Tax Ordinance, 2001---Order of amendment under S.122 of the Income Tax Ordinance, 2001 could be passed by the Assessing Officer even if no compliance of all or any statutory'notices issued under S.177 or 122(9) of the Income Tax Ordinance, 2001 was made by the taxpayer and/or no accounts, record or evidence etc. required by the Assessing Officer was produced by him---In case of total non-compliance of statutory notice or non-production of account books or documents etc. by a taxpayer the options of the Assessing Officer could be that Assessing Officer could proceed to frame the best judgment assessment under Cl.(d) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 by declaring the return invalid in case the limitation period provided in subsection (6) of S.120 of the Income Tax Ordinance, 2001 had not expired; that for the cases not falling in the above category where the limitation period of S.120(6) of the Income Tax Ordinance, 2001 had expired, the only option with the Assessing Officer was to proceed for amendment of assessment under the provisions of 5.122 of the Income Tax Ordinance, 2001 in such cases the Assessing Officer could disallow or reduce any claim of deduction as provided in subsection (2) of S.174 of the Income Tax Ordinance, 2001 and could also make the additions to the income under S.122 of the Income Tax Ordinance, 2001 on the basis of definite information available with him.

PLD 2006 SC 787 = 2006 PTD 2502; 2008 PTD 1440 and 2009 PTD 284 ref.

1999 PTD 1060; 2003 PTD 1805 and C.I.T., Karachi v. Abdul Ghani PLD 2007 SC 308 = 2007 PTD 967 distinguished.

1971 SCMR 681 and (2000) 82 Tax 135 rel.

Mrs. Rakhshanda Aziz Babar, D.R. Khalid Javed, Additional Commissioner and Shakeel Ahmed Shakeel, DCIT, for Appellant (in I.T.As. Nos. 30/IB to 32/IB of 2009).

Rakhshanda Aziz Babar, D.R. and Sultan Iftikhar, DCIT, for the Appellant (in I.T.A. No. 12/IB of 2009).

Hafiz Muhammad Idris and Abdul Basit, FCA for Respondent.

2010 P T D (Trib.) 2649

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.A. No.624/IB of 2010, decided on 18th June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122, 131 & 177---Assessment---Amendment of assessment--Assessment already. passed/deemed or otherwise, could be amended or rectified under the specific provision of law---Regarding the cases selected for audit, it was specifically mentioned in subsection (6) of S.177 of Income Tax Ordinance, 2001 that after obtaining taxpayer's explanation on all the issues raised in audit, the assessment would be amended under subsection (1) or subsection (4) of S.122 of Income Tax Ordinance, 2001---Proceedings under S.122(5-A) of Income Tax Ordinance, 2001 had to be based on fresh evidence---Placing reliance on the audit report for considering the assessment as erroneous so far as prejudicial to the interest of Revenue, was not proper; as the proceedings in that respect had not been initiated with independent mind---In the present case, after the selection of case for audit by the Commissioner, matter was assigned to the Taxation Officer (Audit) and the proceedings were pending before him, but Additional Commissioner without considering that fact, had amended the assessment, that too without considering the explanation given by appellant---Cases which were selected for audit, in the field practice were finalized by the Taxation Officer, however, S.122(5-A) of Income Tax Ordinance, 2001 could be invoked by Additional Commissioner in those cases wherein he would feel that deemed assessment or any other order was erroneous, and prejudicial to the interest of Revenue---In cases selected for audit, it was exclusive domain of Taxation Officer; and revisional jurisdiction by the Additional Commissioner could only be exercised after finalization of amended assessment ordered by Taxation Officer.

Messrs Fauji Oil Terminal and Distribution Company Ltd. v. Additional Commissioner 2006 PTD 734; 2002 PTD 441; PLD 2008 SC 663; 2007 SCMR 330, 2005 SCMR 678-1814 and PLD 2004 SC 441 ref.

Ziaullah Khan, D.R. for Appellant.

Hafiz M. Idrees for Respondent.

2010 P T D (Trib.) 2656

[Inland Revenue Appellate Tribunal of Pakistan]

Before Mrs. Zareen Saleem Ansari, Accountant Member and Syed Muhammad Jamil Raza Zaidi, Judicial Member

S.T. No.236/KB of 2009, decided on 30th June, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 73, 33, 34, 36 & 46-Non-payment of amount for a transaction exceeding value of fifty thousand rupees by cross-cheque etc.---Object and scope of S.73, Sales Tax Act, 1990---Spirit and objective of S.73 of Sales Tax Act, 1990 was to streamline the transaction of registered person through bank and also to avoid the input tax adjustments from the false and forged sale tax invoices---Imposition of penalty---Under provisions of S.73 of Sales Tax Act, 1990 payment of the amount for a transaction exceeding value of fifty thousand rupees would be made by a cross-cheque or any other crossed Banking instrument---In the present case recovery of sales tax refund claims of Rs.1,087,278 (which was already sanctioned by the competent Authority) was found illegal, arbitrary and against the principles of natural justice on the plea of non-compliance of S.73 of the Sales Tax Act, 1990 alone---Appellant/taxpayer, was condemned unheard as evidence produced was not considered at later stage, whereas the claim was sanctioned by the competent Authority, earlier on the basis of same evidence---Order-in-­original being without jurisdiction was illegal which was set aside.

Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64; Additional Commissioner Income Tax v. Narayandas Ramsishaw 1994 PTD 199; Messrs D.G. Khan Cement Company Ltd. v. Federal of Pakistan and others 2004 SCMR 456 =-2004 PTD 1179; Messrs Attock Cement Pakistan Ltd. v. Collector of Customs, CE Quetta and 4 others 1999 PTD 1892; Messrs Pioner Cement Ltd. v. Assistant Collector of Sales Tax 2000 PTD 319; Messrs Ideal Glass (Pvt.) Ltd. v. Federal of Pakistan 1999 Tax 615; Messrs Mamy Beverages 1995 PTD 91; 2010 PTD (Trib.) 893; Federation of Pakistan through Secretary Federal Board of Revenue, Islamabad and others v. Messrs New Ammur Industries Lahore 2010 PTD 352; Messrs AGECO (Pvt.) Ltd. Islamabad v. The Collector, Customs Sales Tax (Appeal), Islamabad and others 2010 PTD (Trib.) 975 ref.

Shafqat M. Sagar for Appellant.

Abdul Sattar Abbasi, D.R. for Respondent.

2010 P T D (Trib.) 2663

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member

S.T.A. No.1311/LB of 2009, decided on 4th October, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 2(14), 4, 7, 8, 10, 11, 13, 26, 36, 46 & 73---Refund claim, rejection of---Appeal against---Scrutiny of refund claim of the assessee showed that an amount was deferred due to objections that invoice required verification, non filer, and date mismatched etc.---Assessee, on account of such irregularities, was charged with violation of Ss.2(14), 4, 7, 8(1), 10, 26 & 73 of Sales Tax Act, 1990 and Refund Rules, 2006---Order passed by Assistant Collector, had been upheld by Collector (Appeals)---Validity---Contention of representative of assessee that impugned order had been passed after a gap of, five and a half months from the date of hearing of arguments was substantiated from the date of dispatch---Impugned order was vacated and case was remanded to CIR (Appeals) for deciding the matter afresh, within a reasonable time.

PLD 1960 (AJ&K) 11 rel.

Khubaib Ahmad for Appellant.

Nemo for Respondent.

2010 P T D (Trib.) 2665

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

S.T.A. No.521/LB of 2009, decided on 27th September, 2010.

Sales Tax Act (VII of 1990)---

---Ss. 3(3), 13, 23, 36 & 46---Refund claim---Rejection of claim and recovery of refunded amount---Refund claim of the assessee was rejected and recovery of already refunded amount was ordered without invoking provisions of S.36 of Sales Tax Act, 1990---Assessee claimed that refund claim did not exceed output tax declared by the supplier in his monthly sales tax return, but refund sanctioning authority did not consider that fact and passed impugned order---Recovery of refund was ordered without any show-cause notice---Order of Assistant Collector (Refund) being illegal, void and unlawful, no time limit would run against same---Impugned order-in-appeal as well as the order-in-­original deserved to be set at naught being not sustainable---Both the orders/order-in-original and order-in-appeal, were set aside by the Tribunal.

2003 SCMR 1505; Messrs United Exports Company's 2000 PTD 1798; Messrs Fatima Sugar Mills Ltd. GST case 2003 CL 413; Messrs Ahmed Vegetable Oil GST case 2002 CL 115; 2008 PTD 60; 2009 PTD 762; 2010 PTD 1522; 2001 SCMR 838; 2005 CL 213; 2004 CL 423; 2007 PTD (Trib.) 728; 2006; PTD 1412; 1996 SCMR 856; 2005 SCMR 69 and 2002 PTD 87 rel.

Khubaib Ahmed A.R. for Appellant.

Muhammad Jamil Bhatti, D.R. for Respondent.

2010 P T D (Trib.) 2670

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member

S.T.A. No.1005/LB of 2009, decided on 12th August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 11(2), 13, 36(3) & 46---Refund claim---Collector (Refund) after examination of supportive documents in respect of refund claims, partly accepted said claim of assessee---Assessee being aggrieved had filed appeal before the Collector who upheld treatment given by Assistant Collector (Refund)---Validity---Order of Collector (Refund) was filed after about 5 months of issuance of notice, whereas under provisions of S.36(3) of Sales Tax Act, 1990, time limit was 90 days which had expired---Where inaction on the part of a public functionary within the prescribed limit was likely to affect the right of a citizen, the prescription of time was deemed directory---Where a public functionary was empowered to create liability against a citizen only within the prescribed time, it was mandatory---When the prescribed limit was beneficial for the citizen and restricted the executive power to touch the pocket of a taxpayer thereby creating certainty that after its expiry even if there was a good case for creation of liability, he would not be dragged in---In the present case, order-in-original was passed beyond the prescribed time limit of 90 days, moreover the adjudicating authority had neither sought any extension from the competent Authority nor had recorded any reason for passing of order after 90 days, order passed by the Collector being made after the lapse of statutory period was declared to have been made without lawful authority---Order was annulled by the Tribunal.

C.B.R./Sales Tax Department v. Messrs Pace International, Rawalpindi PTCL 2005 CL 841; 2008 PTD 578; 2009 PTD 762; 2009 PTD 1978 and Messrs Super Asia Muhammad Din and sons v. Collector of Sales Tax 2008 PTD 60 ref.

Khubaib Ahmad for Appellant.

Nemo for Respondent.

2010 P T D 763

[Islamabad High Court]

Before Muhammad Munir Peracha and Syed Qalb-i-Hassan, JJ

COMMISSIONER OF INCOME TAX, ZONE, ISLAMABAD

Versus

CAP GAS (PVT.) LTD., RAWALPINDI

Tax References Nos. 7 and 24 of 2004, decided on 14th April, 2009.

Income Tax Ordinance (XXXI of 1979)---

----S.12---Assessment under cost of sales account of by Gas Supply Company---Expenditures incurred on maintenance of its roads and loss on sale of cylinders---Deduction of such expenditures and loss from income of company---Scope---Roads were damaged due to heavy vehicles carrying gas cylinders---Such expenditures being necessary were not capital in nature---Company would be entitled to deduct such expenditures and actual loss on sale of cylinders.

Ms. Shaheena Akbar.

Hafiz Muhammad Idrees for Respondent.

2010 P T D 802

[Islamabad High Court]

Before Muhammad Munir Peracha and Syed Qalb-i-Hassan, JJ

TNB LIBETY POWER LTD.

Versus

COMMISSIONER OF INCOME TAX

Tax Reference Nos.26, 27, 51 of 2005, T.R. No.58, 59, 60, 61 of 2007, T.R. No.1, 2, of 2006, T.R. No.1, 2, 3 of 2008, T.R. No.161, 162, 163 and 164 of 2008, T.R. No.63 of 2008, T.R. No.17, 19, 21 and 22 of 2009, decided on 19th May, 2009.

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

----Second Sched. Part-I, Entry 176---Interest income derived by assessee-company from electric power generation projects---Deduction of such interest from income of assessee---Scope---Interest business of such assessee whether in pre or post production period was liable to tax and not exempt.

Genertech Pakistan Ltd. and others v. Income Tax Appellate Tribunal of Pakistan Lahore and others 2004 SCMR 1319 ref.

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

----Ss. 23(1)(vii) & 31(1)(b)---Interest paid by assessee-company in respect of capital borrowed for business purpose---Deduction of such paid interest from income of assessee---Scope---Such interest paid by assessee could not be said to be wholly and exclusively for purpose of earning interest income, thus, same could be deducted while computing its income under head `business or profession' in view of S.23(1)(vii) of Income Tax Ordinance, 1979---Such interest paid by assessee pre-production period might prove to be a loss in business, which could be set-off against interest income of assessee.

Commissioner of Income Tax v. Pioneer Cement 2005 PTD 2086 and AES Pak Gen (Pvt.) Ltd. v. Commissioner Income Tax, decided 16-6-2006 ref.

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

----S.34---Set-off of loss---Scope---Business loss under any head of income, if exempt from income tax, could be allowed as set-off against income of assessee---Principles.

Waseem Sajjad, Mustafa Ramday, Rashid Hafeez, Suleman Faisal vice Sardar Shahbaz Khan Khosa and Hafiz Muhammad Idrees for Petitioners.

Syed Nayab Ali Gadezi with Mumtaz Ahmed, Member (Legal), Sardar Shahbaz Khan Khosa and Shaher Bano Walajahi, Additional Commissioner for the respondents.

Dates of hearings: 6th, 8th and 15th May, 2009.

2010 P T D 1119

[Islamabad High Court]

Before Muhammad Munir Peracha and Muhammad Ramzan Chaudhry, JJ

COMMISSIONER OF INCOME TAX/COY ZONE, ISLAMABAD

Versus

PAKISTAN BROADCASTING CORPORATION

Tax Reference No.5 of 2003, decided on 27th July, 2009.

Income Tax Ordinance (XXXI of 1979)---

----S.80(2), Explanation---Turnover', meanings explained---Gross receipts derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts, fell within the definition of 'turnover'---Licence fee or the subsidy from the government did not fall within the definition of `turnover'.

Hafiz Munawar Iqbal for Petitioner.

Hafiz Muhammad Idrees for Respondent.

Date of hearing: 10th June, 2009.

2010 P T D 1194

[Islamabad High Court]

Present: Muhammad Munir Peracha and Muhammad Ramzan Chaudhry, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, COYS ZONE, ISLAMABAD

Versus

AL-MUSTAFA TRUST, RAWALPINDI

Tax Reference No. 33 of 2007, decided on 27th July, 2009.

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

----S.2(16)(bb)---Trust Act (II of 1882), S.5---Trust formed under provisions of general law i.e. Trusts Act, 1882 and not under a special law, would not fall within scope of definition of `company' given in S.2(16) of Income Tax Ordinance, 1979.

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

----S.2(16)---Trusts Act (II of 1882), S.5---Phrase "a trust formed, under any law for the time being in force "---Connotation---Trust formed under a special law would fall into the definition of a company for the purposes of Income Tax Ordinance, 1979 and a trust formed under the provisions of general law, i.e. Trust Act, 1882, is outside the scope of the definition of a company given in S.2(16) of the Income Tax Ordinance, 1979.

Qazi Ghulam Dastagir for the Petitioner.

Hafiz Muhammad Idrees for the Respondent.

Date of hearing: 10th June, 2009.

2010 P T D 1506

[Islamabad High Court]

Before Muhammad Munir Peracha, J

PAKISTAN MOBILE COMMUNICATIONS LTD.

Versus

COMMISSIONER OF INCOME TAX AUDIT DIVISION and 5 others

Writ Petitions Nos.517, 518 and 653 of 2009, decided on 16th July, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122 & 210---Constitution of Pakistan (1973), Art.199---Constitutional petition---Amendment of assessment---Powers of Commissioner to amend assessment----Scope---Merger, doctrine of---Applicability---Delegation of powers---Scope---Under S.122 sub-sections (1) & (4) of Income Tax Ordinance, 2001, the Commissioner had been given the power to amend and further amend the assessment orders---Powers under S.122(5-A) of Income Tax Ordinance, 2001 was a kind of revisional power possessed by the Commissioner, which under repealed law vested in Inspecting Additional Commissioner---Powers under subsection (5-A) or (5-B) of S.122 of Income Tax Ordinance, 2001, were exercisable on the basis of date already available in shape of return and other documents annexed with the return---Jurisdiction could be exercised, if Commissioner on the basis of the available date would consider that assessment order was erroneous and was prejudiced to the interest of the Revenue---However, if the Commissioner would acquire some additional information from audit or through any other source, he could exercise his powers under subsection (1) of S.122 of Income Tax Ordinance, 2001 to amend assessment order treated as the one issued under S.120 of the Ordinance or passed under S.121 of Ordinance---Since the power under S.122(5-A) of the Income Tax Ordinance, 2001 was exercisable on the basis of the material already available, if order passed was appealed against and the appellate order would come into field the doctrine of merger would be applicable---Appellate order could not be amended, however, powers under subsections (1) and (4) of S.122 of Income Tax Ordinance, 2001, were altogether different---Even in presence of appellate order, if the Commissioner would acquire definite information, he could proceed under the law to amend or further amend the assessment order---Section 210(1) of Income Tax Ordinance, 2001 had conferred power on the Commission to delegate its powers subject to subsection (1-A) of S.210 of Income Tax Ordinance, 2001 to a Taxation Officer.

Karachi Properties Investment Co. v. ITAT Karachi, 2004 PTD 948; Mrs. Anjuman Shaheen, Film Artiste v. Inspecting Assistant Commissioner of Income Tax Zone A, Lahore 1993 PTD, 1113; Glaxo Laboratories Ltd. v. Inspecting Assistant Commissioner of Income Tax and others (1992) 66 Tax 74 and Noble (Pvt.) Ltd. Karachi v. Federal Board of Revenue through Chairman and others 2009 PTD 84 ref.

Naveed A Andrabi for Petitioner.

Shahid Iqbal for Respondent.

2010 P T D 104

[Karachi High Court]

Before Mushir Alam and Muhammad Athar Saeed, JJ

ARSHAD HUSSAIN

Versus

COLLECTOR OF CUSTOMS and 2 others

Constitution Petition No. 735 of 2002, decided on 8th September, 2009.

Customs Act (IV of 1969)---

----Ss.25, 194-A & 196---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Maintainability---Enhancement of the declared value of the imported goods---Appeal to Appellate Tribunal---After the filing of the constitutional petition, authorities had initiated action to decide the issue which had been impugned in the constitutional petition and had passed an order-in-original-Petitioner instead of impugning said order in original in constitutional petition filed an appeal against the same before the Appellate Tribunal which was ultimately dismissed by the Tribunal for non-prosecution-Without going into the legality or otherwise of the order of the Tribunal dismissing the appeal for non-prosecution and the order in original as same had not been challenged before the High Court, it was observed that under the theory of merger, the order in original had merged in the order of the Tribunal and had become a past and closed transaction---Petitioner at his own sweet will and whims could not be allowed to impugn the same cause of action in a constitutional petition filed before the High Court and at the same time pursue the remedies available under the relevant law---Once after the passing of the order in original, the petitioner opted to file appeal before the Tribunal instead of impugning same in the constitutional petition before the High Court and the Tribunal had also dismissed his appeal in the meantime---Only remedy available to the petitioner was to file reference application before the High Court; or seek restoration or recall or rectification of the order of the Tribunal---Petition pending before High Court for all practical purposes had become infructuous and not maintainable.

Noor Elahi and others v. Member, Board of Revenue and others 2003 SCMR 1045; Commissioner of Income Tax, Companies-II and others v. Hamdard Dawakhana (WAQF), Karachi PLD 1992 SC 847; Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Commissioner of Income Tax, Karachi and 2 others v. N. V. Philif's Gloeilampen­-fabriaken, Karachi PLD 1993 SC 434 = 1993 PTD 865 and Messrs Pak-Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679 ref.

Khawaja Shamsul Islam for Petitioner.

Raja Mohammad Iqbal for Respondent.

2010 P T D 147

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Siraj Memon, JJ

COLLECTOR OF SALES TAX AND FEDERAL EXCISE (RTO)

Versus

Messrs ZEAL PAK CEMENT FACTORY, HYDERABAD

Special Sales Tax Reference Application No.267 of 2008, decided on 2nd July, 2009.

Sales Tax Act (VII of 1990)---

----S.47---Central Excise Rules, 1944, Rr.197 & 226(2)---Central Excise Act (I of 1944), S.33---References to High Court---Application for---Main contention of counsel for applicant was that Appellate Tribunal while relying on the judgment of Supreme Court (1987 SCMR 571) had held that since jurisdiction was wrongly assumed by the Senior Intelligence Officer, which according to the Tribunal, was not warranted by law, impugned action was without jurisdiction and on that basis set aside the order-in-original---Matter of jurisdiction under R.226(2) of Central Excise Rules, 1944 was neither raised in the show-cause notice nor in order-in-original and the Tribunal had failed to point out as to how it had based its judgment on said facts---Even otherwise it had not given proper reasons for holding that the case fell within the ambit of said judgment of the Supreme Court---It would be in the interest of justice, if the matter was remanded to the Tribunal to be decided de novo after giving both the parties an opportunity of being heard; and to present all their arguments, legal as well as factual including arguments on the jurisdiction of the officer and then decide the case on merits.

Government of Pakistan v. Shahi Bottlers Ltd. 1987 SCMR 571 ref.

Mohsin Imam for Applicant.

Abid H. Shahban for Respondent.

2010 P T D 251

[Karachi High Court]

Before Muhammad Athar Saeed and Salman Ansari, JJ

Messrs GULISTAN TEXTILE MILLS LTD., KARACHI

Versus

COLLECTOR (APPEALS) CUSTOMS SALES TAX AND FEDERAL EXCISE, KARACHI and another

Special Customs Reference Application No.2 of 2007, decided on 5th May, 2009.

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

----S.11(4) [as amended by Finance Act (I of 2008)] & S.47---Default in filing of Tax return---Issuance of show cause more than five years after alleged default and its receipt by assessee on 19-4-2003 and finalization of order-in-original on 1-10-2004---Amendment in S.11(4) of Sales Tax Act, 1990 made by Finance Act, 2008 providing period of limitation of five years for issuance of such show-cause notice--Pendency of reference application of assessee before High Court at the time of such amendment---Plea of assessee that such amendment being beneficial would apply to all proceedings pending at appellate level or before High Court---Validity---Such amendment having all characteristics of a remedial statute would have retrospective operation and would apply to all proceedings pending on 30-6-2008---Pending proceedings would include proceedings pending in High Court in reference application---Where no limitation was provided for certain actions impairing vested rights, then court could impose reasonable limitation for carrying out such actions---Court could hold that such period for being reasonable should apply to all cases, where show-cause notice had been issued for such default, even if no period for taking action was prescribed at the time of issuance of such show-cause notice---Such show-cause notice on basis of which proceedings culminating in order-in-original were initiated was barred by period of limitation, thus, entire proceedings emanating from such show-cause notice stood extinguished.

Nawabzada Muhammad Shah Khan, v. Federal Land Commissioner, Islamabad 1991 SCMR 732; Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR: 1652; Syed Wajid Ali v. Globe Automobiles Ltd. 1993 SCMR 819; Lahore Development Authority v. Abdul Shafique and others PLD 2000 SC 207; Syed Match Company Ltd. v. Authority Under Payment of Wages 2003 SCMR 1493 Kumar Stya Bijoy Ghosal Bhadur v. Deb Prosad Chakrabarty PLD 1952 Dacca 119; Divisional Superintendent P.W.R. v. Bashir Ahmad PLD 1973 SC 589; Nusrat Ali Abbasi v. Maqsood Ali Qureshi PLD 1982 Karachi 712; CIT v. Shahnawaz Limited 1993 SCMR 73; Corpus Juris Secundum, Vol.82 (paragraph 388) and "Statutory Construction" 1940 Edn. in para 282 ref.

(b) Limitation---

----Where no limitation is provided for certain actions, which impair vested rights, then court is empowered to impose reasonable limitation for carrying out such actions.

Khalid Mehmood Siddique for Applicant.

Nadeem Qureshi for Respondent.

Date of hearing: 31st March, 2009.

2010 PTD 278

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Siraj Memon, JJ

COMMISSIONER OF INCOME TAX

Versus

SANAULLAH WOOLLEN MILLS LTD.

I.T.A. No.235 of 1998, decided on 3rd June, 2009.

Income Tax Ordinance (XXXI of 1979)---

----S.23 & Third Sched., Rr.1, 3---Extra depreciation allowance for multiple shift working---Computation of---Principles stated.

Extra depreciation - allowance shall be proportionate to the number of days during which double or triple shift worked. The claim for double or triple shift working has to be worked out according to the actual working of the shift in which such plant and machinery are used. The scope of sub-rules (2) and (3) of rule 1 of third schedule, Income Tax Ordinance, 1979 is of the restrictive nature and provides that depreciation allowance shall be only allowance for the period for which the building, machinery, plant or furniture is used for the purposes of business and profession.

Aqeel Qureshi holding brief on behalf of Jawaid Farooqui for Appellant.

Nemo for Respondent.

2010 P T D 343

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF APPRAISEMENT, KARACHI

Versus

Messrs CHINA NATIONAL WATER RESOURCES AND HYDROPOWER ENGINEERING, KARACHI

Special Customs Reference Application No. 154 of 2008 decided on 3rd November, 2009.

Customs Act (IV of 1969)---

----Ss. 25, 81 (2) (4) & 196---Provisional assessment, finalization of---Limitation---Price of imported goods---Determination---Customs authorities assailed decision of Customs, Excise and Sales Tax Appellate Tribunal on the ground that provisional assessment was finalized within time and the same had been made on proper evidence regarding price of imported goods---Validity---Demand notice which stated that provisional assessment had been finalized and made additional demand, was within one year time as provided under S.81(2) of Customs Act, 1969 and such finalization of assessment and demand could not be termed to be out of time---Customs, Excise and Sales Tax Appellate Tribunal in its finding took date of order-in-original to be the date of final assessment which order was not order of final assessment but had been passed on the basis of representation made by importer against final assessment conveyed to him by notice of demand which had all ingredients of final assessment in terms of S.81(2) of Customs Act, 1969---Tribunal was not right in coming to conclusion that final assessment was made beyond one year period and that in terms of S.81(4) of Customs Act, 1969, provisional assessment had become final---No price list or certificate from traders was attached to letter of Embassy of Pakistan nor Commercial Counselor gave his own certified assessment regarding value of imported consignment---Demand raised by authorities regarding additional import duty did not find support as to valuation of imported consignment and to that extent High Court agreed with finding of Customs, Excise and Sales Tax Appellate Tribunal that it was based merely upon heresy and did not reflect either transaction value or correct value of imported consignment---Reference was dismissed accordingly.

Messrs Golden Plastic (Pvt.) Ltd. v. The Collector of Customs and others PLD 2002 Kar. 54 and Messrs Abdul Aziz Ayoob v. Assistant Collector of Customs and 3 others PLD 1990 Kar. 378 ref.

Raja Muhammad Iqbal for Applicant.

Ziaul Hassan for Respondent.

Date of hearing: 14th October, 2009.

2010 P T D 421

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

COMMISSIONER OF INCOME TAX, SPECIAL ZONE, KARACHI

Versus

Messrs AQEEL KARIM DHEDHI, KARACHI

I.T.R.A. No.406 of.2007, decided on 15th December, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(aa) & 80(c)(5)---Filing of return under Self-Assessment Scheme---Revenue claiming to be in possession of positive evidence of concealment of income by assessee---Burden of proof---Onus would lie on revenue to prove such claim with cogent material so as to exclude return from purview of such Scheme.

Javed Farooqui for Appellant.

Irfan Aziz for Respondent.

2010 P T D 465

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF PaCCS, KARACHI

Versus

Messrs KAPRON OVERSEAS SUPPLIES CO. (PVT.) LTD., KARACHI

Special Customs Reference Application No. 101 and C.M.A. No. 1281 of 2009, decided on 22nd December, 2009.

(a) Jurisdiction---

----Orders passed without jurisdiction would be non-est in eyes of law.

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

----S.179(1)---Pecuniary jurisdiction of Customs Officers prescribed in S.179(1) of Customs Act, 1969---Scope---Any transgression of such jurisdiction for not being a technical defect would render entire exercise of authority to be ab initio void and illegal---Illustration.

Shamoon Traders v. Customs, Excise, Sales Tax Appellate Tribunal and others 2006 PTD 2177; Mansab Ali v. Amir and 3 others PLD 1971 SC 124; Reckitt Benckiser Pakistan v. Federation of Pakistan 2009 PTD 642 and Zarghoon Zarai Corporation v. Collector of Customs 2006 PTD 534 ref.

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

----S.196---Reference to High Court---Origin of imported goods---Determination of----Order of Tribunal deciding such point without discussing merits of case---Validity---Such point was a question of fact---No question of law arose from impugned order---Reference application was dismissed in circumstances.

(d) Jurisdiction---

----Exercise of---Mandatory condition stated.

The exercise of jurisdiction by an authority is a mandatory requirement and its non-fulfilment would entail the entire proceedings to be coram non juidice.

Mansab Ali v. Amir PLD 1971 SC 124; 2006 SCMR 783; 2007 SCMR 729; 2007 SCMR 1835; Faqir Abdul Majeed Khan v. District Returning Officer and others 2006 SCMR 1713; Yousuf Ali v. Muhammad Aslam Zia and 2 others PLD 1958 SC 104 and Saeed Farooq v. State and 2 others 1996 MLD 434 rel.

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

----S.196---Reference to High Court---Finding given by Tribunal regarding jurisdiction of an authority not controverted by Revenue---Effect---Such finding would be treated as question of fact.

Commissioner of Income Tax Zone `A' Lahore v. Mst. Iqbal Begum 2001 PTD 1414 rel.

Zain A. Jatoi for Applicant.

M. Junaid Ghaffar for Respondent.

Ashiq Raza, Dy. A.-G. on Court notice.

2010 PTD 553

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Siraj Memon, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Versus

N.I.T. LIMITED

I.T.A. No.316 of 2000, decided on 30th April, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(12), 80-D & Second Sched., Cl. (104)---Capital gains, declaration of---Non-inclusion of receipts derived from sale of shares by assessee (N.I.T Limited) in its turnover---Validity---Such receipts could not be included in turnover for purpose of charge under S.80-D of Income Tax Ordinance, 1979 for being restricted only to gross receipts derived from sale of goods and not extended to sale of capital assets---Exemption granted to assessee against charge under S.80-D of Income Tax Ordinance, 1979 for being beneficial in nature was retrospective and would attract to pending proceedings---Principles.

Commissioner of Income Tax v. Gates (Pvt.) Ltd. 2002 PCTLR 888 and Commissioner of Income Tax v. Shahnawaz Limited 1993 SCMR 73 rel.

Jawaid Farooqui for Appellant.

Nemo for Respondent.

Date of hearing: 30th April, 2009.

2010 PTD 592

[Karachi High Court]

Before Mushir Alam and Aqeel Ahmed Abbasi, JJ

COLLECTOR OF SALES TAX AND FEDERAL EXCISE

Versus

Messrs ABBOTT LABORATORIES (PAKISTAN) LTD., KARACHI

Spl. Sales Tax Ref. No.279 of 2007, decided on 9th December, 2009.

(a) Taxation---

----Tax, levy/charge of---Exemption---Burden of proof---Principles stated.

To bring a subject to charge and levy of tax, the burden is upon the Revenue to establish that said subject is chargeable to tax. When such burden is discharged by the Revenue, then burden shifts on the assessee, who seeks exemption from the levy of such charge. "Charge and exemption" are two different concepts in taxation laws. An assessee though chargeable to tax can claim exemption by virtue of an exemption clause provided in the relevant law/schedule. In such situation, the claimant of exemption has to establish and prove such claim.

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

----Ss.2(35)(41)(46), 3(1) & 72---C.B.R's Circular No.18-STT/2002, dated 22-3-2002---Medicines supplied as samples free of cost to medical practitioners by pharmaceutical company---Charging of sales tax on such medicines---Scope---ht order to bring a supply within ambit of sales tax, there must be a taxable supply by registered person in consideration of money or kind and sales must be made during course or in furtherance of any taxable activity---Supply of medicines by company "free of cost" without receiving any "consideration in money or kind" could not be termed as taxable supply, thus, would not be liable to levy of sales tax---C. B. R's Circular No. C. No.19-STT/2002, dated 22-3-2002 declaring such medicines not chargeable to sales tax was binding on all officers of Sales Tax Department in discharge of their administrative functions---Principles.

(c) Interpretation of statutes---

----Fiscal statutes---Charging provision---Interpretation of---Principles stated.

In taxing statutes, charging provisions are regarded as most significant as these define the scope and application of the proposed charge of tax upon a subject.

Charging provisions are required to be construed strictly. In taxing statute, a tax on any person is to be levied by clear and unambiguous words and the expressions used in charging sections are not to be stretched by any process of interpretation, so as to bring a person within the tax net not falling under the clear and plain language of the statute.

(d) Interpretation of statutes---

----Taxing statute---Ambiguity in---Effect---Such ambiguity would be resolved in favour of subject.

Province of Punjab v. Muhammad Aslam 2004 SCMR 1649; Commissioner of Income Tax Companies-II, Karachi v. Messrs Muhammad Usman Hajrabai Trust Imperial Courts, Karachi Division Bench 2003 PTD 577; Collector of Customs (Appraisement), Karachi and others v. Messrs Abdul Majeed Khan and others 1977 SCMR 371; Messrs Hirjina & Co. (Pakistan) Ltd. Karachi v. Commissioner of Sales Tax Central, Karachi 1971 SCMR 128 and Lt.-Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty PLD 1961 SC 119 rel.

Syed Mohsin Imam for Applicant.

Fazle Rabbi for Respondent.

Siraj-ul-Haq Memon, Amicus Curiae.

2010 P T D 657

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs SHAHRUKH ENTERPRISES through Proprietor and another---Appellants

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 another---Respondents

S.C.R.A. No.248 of 2008 and C.M.A. No. 1930 of 2009, decided on 1st December, 2009.

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

----S.194---Appeal before Appellate Tribunal without signature of appellant filed by his counsel, whose power of attorney was not signed by appellant---Dismissal of appeal by Tribunal for being not maintainable---Plea of appellant that such defect in appeal was not removed due to absence of objection by office of Tribunal---Validity---Appellant could not show any rule or law requiring office of Tribunal to raise such objection---Appeal being a substantive and statutory right vested in an aggrieved person, who either himself or through his authorised representative could file same before forum provided by laws--Appeal not filed by an aggrieved person himself or through his authorised representative would not be maintainable in law---Impugned order was not suffering any illegality---High Court dismissed reference application in circumstances.

PLD 1971 SC 550 and PLD 1997 Kar 62 ref.

Director, Directorate-General of Intelligence and Investigation v. Messrs Al-Faiz Industries (Pvt.) Ltd. 2006 SCMR 129 rel.

(b) Appeal (civil)---

----Appeal being a substantive and statutory right vested in an aggrieved person, who either himself or through his authorised representative could file same before forum provided by law---Appeal not filed by an aggrieved person, himself or through his authorised representative would not be maintainable in law---Illustration.

Director, Directorate-General of Intelligence and Investigation v. Messrs Al-Faiz Industries (Pvt.) Ltd 2006 SCMR1 29 rel.

Usman Shaikh for applicant.

2010 P T D 674

[Karachi High Court]

Before Mushir Alam and Aqeel Ahmed Abbasi, JJ

Messrs RAJA WEAVING MILLS LIMITED, KARACHI

Versus

COMMISSIONER OF INCOME TAX, KARACHI

Income Tax Reference Application No.D-8 of 2008, decided on 9th December, 2009.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 25(c) & 133---Addition in income by Assessing Officer without confronting same to assessee---Non-raising such question before appellate authority---Dismissal of appeal by Tribunal for reason that such ground being factual in nature could not be raised as a legal ground for first time before Tribunal---Validity---Record showed that before making impugned addition and finalizing assessment order, assessee had been confronted same through various notices, but he had failed to offer any explanation therefor---Findings of fact given by Tribunal would not require any interference by High Court---Reference application was dismissed in circumstances.

Messrs Ahmed Karachi Halwa Merchant Ahmed Food Products v. Commissioner of Income Tax South Zone, Karachi 1982 SCMR 489; Japan Storage Battery Limited v. Commissioner of Income Tax Karachi, 2003 PTD 2849 and Lungla (Sylhet) de Company v. Commissioner of Income Tax Dacca 1970 SCMR 872 rel.

Mukhtar Ahmed Kuber for Applicant.

Jawaid Farooqi for Respondent.

2010 P T D 704

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

COMMISSIONER OF INCOME TAX, SPECIAL ZONE, CORPORATE REGION, KARACHI

Versus

Messrs SHAISTA ESTATE (PVT.) LTD.

I.T.R.A. No.405 of 2007, decided on 3rd October, 2009.

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

----S. 111(1)(c)---Addition in income by authority without notice to assessee---Validity---Assessee must have been given an opportunity of hearing before making any addition---Impugned addition was deleted in circumstances.

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

----S.133---Reference to High Court---Findings of fact by Tribunal---Validity---High Court could not disturb such findings, unless same were found to be perverse or contrary to record.

Javed Farooqui for Appellant.

Khaleeq Ahmed for Respondent.

2010 P T D 716

[Karachi High Court]

Before Muhammad Athar Saeed and Arshad Siraj Memon, JJ

PAKISTAN PAPER PRODUCTS LIMITED

Versus

SECRETARY TO THE GOVERNMENT OF PAKISTAN, REVENUE DIVISION and others

Constitutional Petition No. D-1049 of 1994, decided on 3rd June, 2009.

Sales Tax Act (VII of 1990)---

----Ss.3(2), 6 & 8(2)---Central Excise Rules, 1944, Rr.7, 9, 52-A, 54, 55, 220, 236, 241, 244 & 246---Constitution of Pakistan (1973), Art.199---Constitutional petition---Import of Diazo Base Paper for manufacturing sensitized papers required for preparation of blue prints/sketches---Use of waste of Diazo Base paper for wrapping/ packing end product i.e. rolls of sensitized papers---Demand of sales tax and excise duty on such paper wastage as packing material---Validity---Wrapping papers were neither manufactured distinguishably nor produced in style and shape that they could be used independently, but could only be used as wrapping paper for end product---Such waste paper could not be considered a new inter-mediatory item---Wrapping paper had already undergone levy of sales tax and excise duty on its value and weightage, thus, tax credit availed on such wastage could not be disallowed by department---High Court quashed impugned show-cause notice in circumstances.

Collector of Central Excise and Sales Tax (Central), Karachi and another v. Hilal Steel Industries (Pvt.) Ltd. 2001 PTD 3945 ref.

Madina Ghee Mills (Pvt.) Ltd. v. Collector of Customs, S.T. & C.E. (Adjudication), Faisalabad, 2002 YLR 2999 and Sheikhoo Sugar Mills Ltd., and others v. Government of Pakistan and others 2001 SCMR 1376 rel.

Ms. Pooja Kalpana for Petitioner.

Umer Hayat Sandhu, Dy. A.-G. for Respondent.

Date of hearing: 21st May, 2009.

2010 P T D 737

[Karachi High Court]

Before Muhammad Athar Saeed and Muhammad Karim Khan Agha, JJ

COMMISSIONER OF INCOME TAX

Versus

NATIONAL REFINERY LIMITED, KARACHI

Income Tax Appeal No. 594 of 2000, decided on 27th April, 2009.

Income Tax Ordinance (XXXI of 1979)--

----S.23---Allowable deduction---Scope---Penalty or fine---State owned company deriving income from, refining crude oil---Import of crude oil by assessee-company under loan from a foreign Bank on guarantee of State Bank of Pakistan---Liability of assessee-company to deposit counter part rupee fund with State Bank within specified period---Charging of excess amount by State Bank for late payment of loan amount under Para. 44 of Ch. XIII of Foreign Exchange Manual---Such excess amount charged by State Bank claimed by assessee-­company to be an allowable expense, but Assessing Officer added same to its total income---Validity---Expenditure incurred on account of fine or penalty or in nature of fine or penalty would not be allowed as deduction---Expenditure incurred by an assessee on account of infringement of a provision of a statute, but not in nature of fine or penalty, could be allowed as admissible deduction, provided same was incurred wholly and exclusively for purpose of business---Any excess amount fixed as compensation for delay or default, if paid by or charged from an assessee, would not be deemed to be penalty or fine---Payment of excess amount for delayed payment of an original liability would not be deemed as penalty or fine, if same was automatic, without initiation of any separate proceedings and order and exercise of discretion by competent authority---Damages or compensation paid for breach of any contract were expenses incurred exclusively for purpose- of business---Such excess amount paid by assessee-company was not for violation of any law, but was for a breach of contract as compensation for late payment of loan amount---Assessee-company had paid such excess amount wholly and exclusively for business consideration in exercise of option available to company under contract, thus, same was not penalty or fine, but was an admissible expenditure under S.23 of Income Tax Ordinance, 1979---Principles.

I.T.C. No.32 of 1996, I.T.Cs. Nos. 51, 52 and 53 of 1996; I.T.C. 57 and 58 of 1996; I.T.C. No.48 of 1996; (2001) 83 Tax 113; Ata Hussain Khan Limited v. Commissioner of Income Tax, East Pakistan, Dacca (1970) 21 Tax 1; Commissioner. of Income Tax, Central Zone `B' v. Messrs Farrokh Chemical Industries 1992 SCMR 523; Beecham Pak v. Commissioner of Income Tax 1995 PTD 577 and Commissioner (Legal Division) Large Taxpayer Unit, Karachi v. Bawany Metals Ltd. Karachi 2006 PTD 2256 ref.

Hassan Associates (Pvt.) Ltd. v. C.I.T. 2009 PTD 66 and CIT y. Premier Bank Ltd, 1999 SCMR 1213 rel.

Muhammad Farid for Appellant.

Iqbal Salman Pasha for Respondent.

Date of hearing: 27th April, 2009.

2010 P T D 755

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs ANSARI SUGAR MILLS LTD.

Versus

COMMISSIONER OF INCOME TAX, KARACHI

Income Tax Reference Application No.272 of 2007, decided on 18th February, 2010.

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

----S.12(9) & First Sched. Cls. (108), (118D)--S. R. O.1283(I)/90, dated 30-12-1990---Companies Ordinance' (XLVII of 1984), Ss.2(20) & 251(I)---Bonus shares declared on 30-1-1997 by company in Annual General Meeting (AGM)---Tax holiday being enjoyed by company under Cl. (118D) of First Schedule to Income Tax Ordinance, 1979 through S.R.O. 1283(I)/90, dated 30-12-1990---Charging of tax on such bonus shares as income of company---Scope---According to S.12(9) of Income Tax Ordinance, 1979 and S.251(1) of Companies Ordinance, 1984, amount of bonus shares declared by a company on date of AGM be deemed to be its income during that year---Five years tax holiday being enjoyed by company under Cl. (118D) of First Schedule to Income Tax Ordinance, 1979 ended on 22-10-1996---Exemption from tax provided by Cl. (108) of First Schedule to the Ordinance was for the period from 1-7-1997 to 30-6-2001---No specific exemption was available during the period 1-7-1995 to 30-6-1997---Bonus shares fell under definition of `dividend' as given in S.2(20) of Companies Ordinance, 1984, thus, its approval in AGM held on 30-1-1997 would be considered as date of its declaration and income of that year---Clause (108) of First Schedule to Income Tax Ordinance, 1979 was not retrospective in operation, thus, assessee-company was entitled to its benefit---Year under consideration being first assessment year after expiry of tax holiday period, regarding which no exemption could be granted to the assessee-company---Principles.

PLD 1997 SC 582 = 1997 PTD 1555; 1993 SCMR 39 = 1992 PTD 1681 and 1993 SCMR 73 ref.

(b) Interpretation of statutes---

----Courts while interpreting any provision of law would neither add nor supply something, which has not been provided under law.

(c) Interpretation of statutes---

----Every statue would be read prospectively, until and unless expressed to be retrospective.

Commissioner of Income Tax v. Elli Lilly 2009 SCMR 1279 rel.

Muhammad Aleem for Applicant.

Javed Farooqi for Respondent.

2010 P T D 777

[Karachi High Court]

Before Gulzar Ahmed and Irfan Sadaat Khan, JJ

MAROOF OIL COMPANY through Authorized Representative

Versus

COLLECTOR OF CUSTOMS, KARACHI and another

C.M.As. Nos.1080, 2108 and 2109 of 2009 in Customs Reference No.237 of 2006, decided on 23rd October, 2009.

Customs Act (IV of 1969)---

----S.196---Sales Tax Act (VII of 1990), S.3---Review of judgment---Scope---Petitioner sought review of the judgment passed by High Court on the ground that he was not served with the notice fixing date of hearing---Validity---Review application which was filed in High Court in sales tax proceedings was not maintainable as Sales Tax Act, 1990, did not make provision giving jurisdiction to High Court to review its own order---Similar was the position in respect of Customs Act, 1969, and petitioner failed to show that there was any provision under which High Court could review its own order exercising jurisdiction under Customs Act, 1969---Review application was dismissed in circumstances.

Mst. Nigar Bibi v. Salahuddin Khan and others PLD 1990 SC 76 and Collector of Sales Tax East, Karachi v. Custom Excise and Sales Tax Appellate Tribunal 2003 PTD 1477 ref.

Yousaf Iqbal for Petitioner.

Raja Muhammad Iqbal for Respondent.

2010 P T D 808

[Karachi High Court]

Before Mushir Alam and Aqeel Ahmed Abbasi, JJ

COLLECTOR OF SALES TAX AND FEDERAL EXCISE, LARGE TAXPAYER UNIT, KARACHI

Versus

Messrs PAKISTAN STATE OIL CO. LTD., KARACHI

Federal Excise Reference Application No.242 of 2006, decided, on 19th January, 2010.

(a) Interpretation of statutes---

----Fiscal statute---Exemption from tax, grant of---Principles.

The provisions relating to grant of exemption are to be strictly construed and burden to claim such exemption is upon the claimant/ assessee/taxpayer.

The claim of exemption is to be granted to the extent it is specified in the exemption granting clause and not beyond the specific word used therein through process of interpretation etc.

Berger Paints Pakistan Ltd. v. Government of Pakistan 1991 CLC 1277 and Muhammad Ashraf v. The Collector of Customs (Appraisement), Karachi PLD 1991 Kar. 281 ref.

Pakistan Machine Tool Factory (Pvt.) Ltd., Karachi v. Commissioner of Sales, Central, Zone-B, Karachi 2006 SCMR 1577; Genertech Pakistan Ltd. v. Income Tax Appellate Tribunal of Pakistan, Lahore 2004 PTD 2255; Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Craies on Statute Law, Seventh Edition, page 431; Crawford on Statutory Construction page 506; N.A. Bindra on the Interpretation of Statutes, Third Edition page 488; Bisvil Spinners Ltd. v. Superintendent Central Excise and Land Customs Circle. Sheikhupura PLD 1988 SC 370; Commissioner of Income Tax/Wealth Tax Companies Zone Faisalabad v. Rana Asif Tauseef c/o Rana Hoisery and Textile Mills Ltd. 2000 PTD 497 and Commissioner of Income Tax/Wealth Tax, Multan Zone, Multan v. Allah Yar Cotton Ginning and Pressing Mills 2000 PTD 2958 rel.

(b) Federal Excise Act (VII of 2005)---

----S.34(3)---Reference---Jurisdiction of High Court---Scope---High Court in such jurisdiction could not examine factual controversy or deficiency, if any in such regard.

Syed Mohsin Imam for Applicant.

Aziz A. Shaikh for Respondent.

Khalid Javed Khan, Amicus Curiae.

Date of hearing: 25th November, 2009.

2010 P T D 817

[Karachi High Court]

Before Faisal Arab, J

GHANI AND TAYUB (PVT.) LTD., KARACHI

Versus

FEDERATION OF PAKISTAN through

Secretary, Finance Division, Islamabad and 2 others Suit No.303 of 2000, decided on 24th December, 2009.

Customs Act (IV of 1969)---

----S.25-B---Specific Relief Act (I of 1877), Ss.42 & 54---S.R.O. KE/99 dated 21-12-99---Suit for declaration and permanent injunction---Maintainability---Determination of value of imported goods---Plaintiff imported various consignments consisting of LLDPE film from different countries---Minimum ITP value of said goods was fixed under Notification No. S.R.O. (sic)(KE)/99 dated 21-12-1999 on the basis of powers conferred by clause 1 of S.25-B of the Customs Act, 1969, but the Customs Authorities evaluated the imported goods on the declared value on the Bill of Entry---Counsel for the plaintiff had contended that since other importers had imported consignments at a value which was near about the ITP value of goods declared under S.25-B of the Customs Act, 1969, the plaintiff must also be entitled to get its consignments released at the ITP value as specified in the Notification; and not at the actual C & F value of the import---Validity---Plaintiff could not seek release of the goods on the value determined under ITP when the actual value of import was higher than the ITP value---Where special forum for adjudicating the controversy had been provided then the parties could not agitate the same before the court of general Jurisdiction---Claim of the plaintiff was not maintainable in law, through the suit for declaration and permanent injunction which was dismissed.?

Messrs Flying Board and Paper Products v. Deputy Collector Customs 2006 SCMR 864 and Messrs Binaco Traders v. Federation of Pakistan 2006 PTD 1491 ref.

Anjum Ghani Khan for Plaintiff.

Secretary Finance Division Defendant No.1.

Chairman C.B.R. House for Defendant No.2.

Raja Muhammad Iqbal for Defendant No.3.

Date of hearing: 23rd December, 2009.

2010 P T D 826

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs REAL TRADING CO. through Wali Muhammad, Karachi

Versus

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF PaCCS, KARACHI

Special Customs Reference Application No.58 and C.M.As. Nos.586, 587 of 2009, decided on 8th January, 2010.

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

----S.27-A---Importer seeking benefit of S.27-A of Customs Act, 1969 after filing declaration of goods---Validity---Such benefit could be extended to importer, if same was claimed by him prior to filing of said declaration, but not thereafter in any case---No provision would be read in a manner to render same as redundant or superfluous---Granting of such benefit to importer as claimed by him would render provision of S. 27-A of Customs Act, 1969 as redundant---Such benefit was not available to importer in circumstances---Principles.

Collector of Customs v. Muzammil Ahmed 2009 PTD 266; Sunny Traders v. Federation of Pakistan 2009 PTD 281 and Messrs K&N's Poultry Farms (Pvt.) Ltd., Karachi v. Additional Collector of Customs, Karachi and others 2006 PTD 2780 ref.

Tanveer Hussain v. Ravi Ryan Ltd. 2007 SCMR 737; Master Molty Foam v. Government of Pakistan PLD 2005 SC 373; Afteb Shaban Mirani v. Muhammad Ibrahim PLD 2008 SC 779 and Accountant General Sindh v. Ahmed Ali U. Shaikh PLD 2008 SC 522 rel.

(b) Interpretation of statutes---

----No provision would be read in a manner to render same as redundant or superfluous.

Tanveer Hussain v. Ravi Ryan Ltd. 2007 SCMR 737; Master Molty Foam v. Government of Pakistan PLD 2005 SC 373; Afteb Shaban Mirani v. Muhammad Ibrahim PLD 2008 SC 779 and Accountant General Sindh v. Ahmed Ali U. Shaikh PLD 2008 SC 522 rel.

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

----S.196---Reference to High Court involving question of fact or law not arising from impugned order for the Tribunal-Validity-High Court had no jurisdiction to decide such question.

Ammar Yaseer for Applicant.

Sibtain Mahmood for Respondent.

Ashiq Raza, Dy. A.-G. on court notice.

2010 P T D 870

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs P & G INTERNATIONAL, LAHORE

Versus

ASSISTANT COLLECTOR OF CUSTOMS, (APPRAISEMENT GR-II), KARACHI and 3 others

Customs Reference Application No.100 of 2009, decided on 14th January, 2010.

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

----S.196---High Court, jurisdiction of---Scope---No question of fact can be raised and decided by High Court in exercise of powers vested under S.196 of Customs Act, 1969.

Pakistan State Oil Co. Ltd. v. Collector of Customs, E&ST and others 2006 SCMR 425 rel.

(b) Administration of justice---

----Practice contravening law/rule---Effect---Practice cannot override a provision of law---If any practice is being carried out in contravention of law/rule, such practice has to be stopped.

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

----Ss.32 (3) & 196---Customs General Order 21 of 1973 and Customs General Order 21 of 1989---Sales Tax Act (VII of 1990), S.65---Short levy---Recovery---PCT heading---Determination---Goods imported were assessed under PCT heading 2823.0020 as it was declared to be Titanium Dioxide---Subsequently on post importation audit it was found that the consignments were classified under PCT heading 3206.1100 and notice for recovery of short levy was issued---Plea raised by importer was that department had erred in application of changed classification to its goods with retrospective effect---Validity---Department did not err in application of changed classification, as there was no imposition of new levy---All that was done was that on declaration of importer its goods were cleared under a wrong PCT heading and when such fact was discovered during post importation audit, a show cause notice under S.32(3) of Customs Act, 1969, was issued and escaped tax was recovered---Importer was only called upon to pay the difference of short levied duties/taxes etc.---High Court declined to interfere in the order passed by authorities---Reference was disposed of accordingly.

Messrs Nazir Ahmed v. Pakistan PLD 1970 SC 453; Messrs Radhka Corporation v. Collector of Customs 1989 SCMR 353; Collector v. Messrs S.M. Ahmad and Company 1999 SCMR 138; Messrs Shahnawaz Enterprises v. Collector 2005 PTD 1172; Collector v. Messrs New Electronics PLD 1994 SC. 363; Messrs Muzzamal Brothers v C.B.R., PLD 1997 Lah. 36; Ms. H. Sheikh Nooruddin and Sons Ltd. v. C.B.R., PLD 1989 Kah. 601; Messrs Happy Manufacturing's case 2003 PTD (Trib.) 293; Messrs Prime Ent. v. Collector K-678/2001; Messrs Super Asia Muhammad Din Sons case 2008 PTD 60; Messrs Tariq Irshad v. The State PLD 2006 Kar. 25; Messrs Atta Muhammad Qureshi v. Settlement Commissioner, PLD 1971 SC 61; Messrs Crescent Sugar Mills' case PLD 1982 Lah. 1; Messrs Mazari & Mazari Ltd. v. Pakistan 1971 SCMR 681; 1981 SCMR 101; PLD 1958 SC 104; Adamjee Jute Mills Ltd. v. The Province of East Pakistan PLD 1959 SC 2721; Gouranga Mohan Sikdar v. Controller Imports and Exports PLD 1970 SC 158; Mollah Ejahar Ali v. Government of East Pakistan PLD 1970 SC 173; Messrs Muhammad Ibrahim Khan v. Ministry of Labour 1984 SCMR 1014; 2005 PTD 480; 1999 SCMR 138; 2009 PTD 266; Messrs Waqas Enterprises v. Assistant Collector (Customs) and 2 others 2002 PTD 2977; 2005 PTD 2446; A-One Feeds v. Deputy Collector Adjudication-I 2008 PTD 1029 and Pakistan State Oil Co .Ltd. v. Collector of Customs E&ST and others 2006 SCMR 425 ref.

Zia-ul-Hassan for Applicant.

Raja Muhammad Iqbal for Respondent.

2010 P T D 900

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

COLLECTOR OF CUSTOMS

Versus

Messrs PAK ARAB RAFINERY, KARACHI

Special Customs Reference Applications Nos.89 and 90 of 2008, decided on 15th October, 2009.

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

----Ss. 79 & 81(1)---Release of imported goods provisionally after obtaining postdated cheques from importer in respect of difference of duty and taxes between declared value and provisionally determined customs duty in absence of any cogent documentary evidence in support of enhancement of declared value---Validity---Power given to Customs Officer under S.81(1) of Customs Act, 1964 was not an arbitrary, whimsical or mechanical one, but same had to be exercised with due diligence and application of mind and his order of provisional assessment must be reasoned---Provisional assessment made in such manner for being beyond competence of authority was set aside in circumstances---Principles.

Messrs Dewan Farooque Motors Ltd., Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi 2006 PTD 1276 and Collector of Customs (Appraisement), Karachi v. Messrs Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116 rel.

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

----S.194-C, Second proviso---Appeal---Jurisdiction of Member (Technical) of Tribunal while sitting singly---Scope---Such Member could decide appeal only on basis of facts, but could not decide any question of law involved therein.

Collector of Customs, Model Collectorate of PACCS, Karachi v. Muzammil Ahmed 2009 PTD 266; Port Muhammad Bin Qasim, Karachi v. Messrs Mia Corporation (Pvt.) Ltd., Islamabad 2009 PTD 1127; Collector of Customs, Model Customs Collectorate of Appraisement, Karachi v. Messrs Superior Steel Karachi 2009 PTD 1239 and Collector of Customs v. Noman Chughtai 2007 PTD 153 rel.

Ghandara Nissan Diesel Limited v. Collector of Customs 2007PTD 117 and Collector of Customs v. Kaghan Ghee Mills (Pvt.) Ltd. 2006 PTD 541 ref.

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

----S.196---Reference application involving question of fact or question not arising from order of Tribunal---Validity---High Court in exercise of its advisory jurisdiction could not decide any of such questions.

Raja Muhammad Iqbal for Applicant

Zia-ul-Hasan for Respondent.

2010 P T D 922

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

MUHAMMAD YOUSAF

Versus

COLLECTOR OF CUSTOMS (PREVENTIVE), KARACHI and 3 others

C.P. No.D-1409 and C.M.A. No. 7640 of 2009, decided on 25th January, 2010.

Customs Act (IV of 1969)---

----Ss. 82 & 169(4)---Imports and Exports Control Act (XXIX of 1950), S.3(1)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Seizure and confiscation of Jewellery (gold and silver) brought under passenger baggage---Sending of gold jewellery to Mint and depositing of silver jewellery with State Bank by authority---Order­-in-Original directing refund of sale proceeds of such goods to petitioner in terms of provisions of S.82 of Customs Act, 1969---Issuance of notice under S.169(4) of Customs Act, 1969 by authority for disposal of such goods---Validity---Term "entire sale proceeds" as used in S.82 of Customs Act, 1969 would denote amount received by authority in case goods were sold during pendency of an appeal etc. and authority was legally bound to refund sale proceeds to its owner after deducting necessary charges---Unchallenged order-in-original did not show as to whether such goods had been sold or not, and if gold had been sent to Mint for melting purposes, what happened afterward---If authority had sent melted gold to State Bank, then petitioner would be entitled to its return for re-export pending his departure abroad---If authority had disposed of gold, then petitioner would be entitled to receive its sale proceeds after deduction of necessary charges---Price of gold would be price fetched on date of actual disposal of such gold---Authority had agreed to return silver to petitioner pending his departure abroad---High Court quashed such notice in circumstances with such observations.

Nadeem Qureshi for Petitioner.

Khalil Dogar for Respondents Nos. 1 to 3.

Mian Khan Malik, D.A.G. for Respondent No.4.

2010 P T D 940

[Karachi High Court]

Before Gulzar Ahmad and Irfan Saadat Khan, JJ

Messrs DAWLANCE ELECTRONICS (PVT.) LIMITED through Director, Karachi

Versus

COLLECTOR OF CUSTOMS, KARACHI

Customs Reference Applications Nos.3 to 10 of 2009, decided on 25th January, 2010.

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

----S.194---Appeal to Tribunal involving questions of law---Disposal of appeal by Member (Technical) while sitting singly---Validity---Such Member had no jurisdiction to decide questions of law raised before him.

Rehan Umer v. Collector of Customs 2006 PTD 909; Messrs Khan Trade International through Proprietor v. Assistant Collector Customs (Group-VIII), Appraisement Collector, Karachi and 4 others 2006 PTD 2807; Collector of Customs, Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International Faisalabad 2008 SCMR 438; Messrs Pakistan Dry Battery Manufactures Associates through Vice-Chairman and another v. Federation of Pakistan through Secretary, Revenue Division, Islamabad and 9 others 2006 PTD 674; Messrs Dewan Farooq Motors Ltd., Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi and 2 others 2006 PTD 1276; Messrs S. Fazal Ilahi and sons through Registrar v. Deputy Collector Customs and others 2007 PTD 2119; Collector of Customs, Central Excise and Sales Tax, Quetta v. Messrs Haji Ahmadullah and Company; PLD 2005 SC 461 = 2005 PTD 1654; Messrs Rabeel's Lahore v. Collector of Customs, Dry Port, Mughalpura Lahore and another 2003 PTD 78; Government of Pakistan v. Sandoz (Pakistan) Ltd. 2006 SCMR 1403; Messrs Cool Fridge, (Pvt.). Ltd. through Commercial Manager v. Central Excise, Sales Tax and Customs Appellate Tribunal Lahore and another 2004 PTD 417; Messrs Nissho SRI, Lahore v. Assistant Collector of Customs (Import) Dry Port Trust, Faisalabad and 2 others PTCL 2003 CL 688; Pakistan State Oil Company Ltd. v. Collector of Customs E&ST (Adjudication-Il) and others 2006 SCMR 425; Towellers Ltd. through Chief Operating Officer v. Government of Pakistan 2006 PTD 310; Messrs Lever Brothers Pakistan Ltd. v. Customs, Sales Tax and Central Excise Appellate Tribunal 2005 PTD 2462; Collector of Customs E&ST (Adjudication-II) and others v. Pakistan State Oil Company Ltd. 2005 PTD 2446; Manhattan International, (Pvt.) Ltd. Karachi and others v. Director General Intelligence and Investigation Customs and Excise Karachi and others 2006 PTD 2609; Madina Traders v. The Federation of Pakistan and 4 others 1999 SCMR 95; The Collector of Customs Karachi v. New Electronic, (Pvt.) Ltd. and 59 others PLD 1994 SC 363 and 1970 SCMR 158 ref.

Collector of Customs, Model Customs Collectorate of PACCS, Karachi v. Muzammil Ahmed 2009 PTD 266 rel.

(b) Customs Rules, 2001---

----R.420---Customs Act (IV of 1969), 5.196---Reference to High Court---Non-filing of reference on prescribed form---Effect---Requirement of filing of reference on prescribed form being a mere technicality, would not affect its substance.

Abdul Ghani and Co. v. Commissioner of Income Tax (1962) 6 Tax 185 rel.

Muhammad Najeeb Jamali for Applicant.

Raja Muhammad Iqbal for Respondent.

2010 P T D 967

[Karachi High Court]

Before Mushir Alam and Aqeel Ahmed Abbasi, JJ

Messrs TELECARD LTD. Through Deputy General Manager Finance, Karachi

Versus

COLLECTOR SALES TAX AND CENTRAL EXCISE (ENFORCEMENT), KARACHI and another

Sales Tax Reference Application No.76 of 2009, decided on 2nd February, 2010.

(a) Taxation---

----Direct and indirect taxes---Distinction stated.

The federal taxes including customs, excise duty and sales tax are indirect taxes, the burden of which is always borne by the end, consumers and not by the seller/registered person or importer/assessee. Whereas in direct taxes such as income tax and wealth tax, burden is borne by the person upon whom the tax is levied. In 'other words, in indirect taxes the assessee, importer or the registered person is only an intermediary or a tax collecting agent. In case of indirect taxes due to an inbuilt mechanism, the duty or taxes are inclusive in the cost/value of the goods sold, therefore, the same passes on to the end consumer at the time of such transaction.

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

----Ss.3(B) & 66---Central Excise Act (I of 1944), S.3(D)---Sale of pay-phone cards by Pakistan Telecommunication Company Limited through its sale agent, a tele-card company----Collection of sales tax and excise duty on gross amount of such cards---Refund claim by tele-card company (applicant)---Validity---In sale of air time service, role of applicant was nothing more than merely of sale agent of PTCL and not provider of such service---Amount of duty and taxes charged on such cards was included in their cost, which had been paid by end customers while purchasing such cards---Applicant being a intermediary and not provided of such service could not claim refund of such taxes/duty---Refund claim was rejected in circumstances.

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

----S.47---Reference to High Court---Questions proposed in reference involving factual controversy---Effect---Such questions could not be allowed to be converted into legal issues only by dint of draftsmanship or employment of legal language in framing thereof.

Fecto Belarous Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 rel.

Ayyaz Shoukat for Applicant. Respondent in person.

Siddiq Mirza and Mian Khan Malik, D.A.-G. for Respondent No.1.

Date of hearing: 19th November, 2009.

2010 P T D 989

[Karachi High Court]

Before Gulzar Ahmad and Irfan Saadat Khan, JJ

GHULAM HUSSAIN RAMZAN ALI through Attorney

Versus

COLLECTOR OF CUSTOMS (PREVENTIVE), KARACHI

Customs Reference No.49 and C.M.A. No. 1976 of 2007, decided on 2nd February, 2010.

(a) Limitation---

----Appeal---Limitation, reckoning of---While counting period of limitation the same has to be reckoned from the date of knowledge of the order against which appeal is sought to be preferred before higher forum.

Haji Hussain Haji Dawood v. M.Y. Kherati 2002 SCMR 343 and Muhammad Nawaz and 3 others v. Mst. Sakina Bibi and 3 others 1974 SCMR 223 rel.

(b) Counsel and client---

----Knowledge of counsel about decision of case amounts to knowledge of client.

Allied Bank of Pakistan Azad Kashmir v. Chaudhry Amir Baz PLD 1997 SC (AJ&K) 15 rel.

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

----S.196---Qanun-e-Shandat (10 of 1984), Art.85---Reference---Limitation---Knowledge of counsel---Dispatch of judgment---Appellate Tribunal dismissed appeal on 17-2-1998 and the order was assailed before High Court on 29-7-2006---Plea raised by appellant was that neither the order was ever received by him nor any reply was given by Appellate Tribunal in respect of various letters written for providing a copy of decision---Contention of the authorities was that the order passed by the Appellate Tribunal was sent to appellant through registered post---Validity---Documents of Appellate Tribunal were public documents and carried a great deal of sanctity with them and did not require any verification---Receipt of delivery of order via post and dispatch register established that the order had been duly served on the counsel of appellant and no adverse inference could be drawn---Reference application was barred by limitation and High Court declined to condone the delay---Reference application was dismissed accordingly.

Altaf Hussain and 2 others v. Muhammad Nawaz and 2 others 2001 SCMR 405; Shaikh Muhammad Saleem v. Faiz Ahmad PLD 2003 SC 628 and Bashir Ahmed Bhanbhan and another v. Shaukat Ali Rajpur and others PLD 2004 SC 570 ref.

Sohail Muzaffar for Applicant.

Raja Muhammad Iqbal for Respondent.

2010 P T D 1016

[Karachi High Court]

Before Gulzar Ahmad and Irfan Saadat Khan, LI

COMMISSIONER (LEGAL DIVISION), LARGE TAXPAYERS UNIT, KARACHI

Versus

PARACHA TEXTILE MILLS LTD., KARACHI

I.T.R.A. No.181 of 2007, decided on 2nd February, 2010.

Income Tax Ordinance (XXXI of 1979)---

----Ss.60, 80-C & 156---Rectification of mistake---Income Tax Appellate Tribunal, jurisdiction of---Scope---Income Tax Appellate Tribunal earlier allowed appeal filed by income tax authorities but subsequently recalled its order and reversed its findings---Plea raised by authorities was that Income Tax Appellate Tribunal had no authority to review or recall its earlier order---Validity---Income Tax Appellate Tribunal previously allowed the appeal of department by recording some incorrect facts which did not pertain to the appeal of parties and the same were apparent and patent on record---When application for rectification was filed, Income Tax Appellate Tribunal recalled its order and replaced one paragraph of its previous order with fresh paragraph in subsequent order---Income Tax Appellate Tribunal though had no power to review its own order, however, it was fully empowered to rectify any mistake in its order provided the mistake was apparent and patent on the record---Mistake might not have been arithmetic or clerical mistake but it could be substantive or procedural mistake---Earlier mistake committed by Income Tax Appellate Tribunal caused prejudice to assessee as in the earlier order passed by it, it had recoded totally incorrect fact which was subsequently rectified and corrected by it---Income Tax Appellate Tribunal was fully authorized under S.156 of Income Tax Ordinance, 1979 to rectify its mistake apparent and patent on the record subject to the condition that a notice of hearing in that regard should be provided to both sides---As Income Tax Appellate Tribunal recalled its order only after reaching to the conclusion that in its previous order they had recorded an incorrect finding of fact which was apparent and floating on the surface of record, therefore, High Court declined to interfere in subsequent judgment passed by Income Tax Appellate Tribunal---Reference application was dismissed in circumstances.

Commissioner of Income Tax v. Mr. Abdul Ghani PLD 2007 SC 308 = 2007 PTD 967; Commodity and Equipment Int'1 (Pvt.) Ltd. v. Commissioner of Income Tax 2005 PTD 2534; Commissioner of Income Tax, Compromise-III, Karachi v. Krudd Sons Ltd. (1993) 68 Tax 41; Black's Law Dictionary VIth Edition; Judicial Dictionary by K.J. AIYAR 13th Edition, Concise Oxford Dictionary; Black's Law Dictionary VIth Edition Judicial Dictionary by K.J. AIYAR 13th Edition; Concise Oxford Dictionary; Champa Lal Chopra v. State of Rajhistan-257 ITR 74; Deeksha Suri and 3 others v. Income Tax Appellate Tribunal 2000 PTD 905; H.H. Maharaja Martant Singh Ju Deo v. Commission of Income Tax 171 ITR 586; Commissioner of Income Tax v. Mithalal Ashoke Kumar 158 ITR 755 and Pakistan through Ministry of Finance Economic Affairs and another v. Fecto Blarus Tractors Limited PLD 2002 SC 208 ref.

Javed Farooqui for Appellant.

Iqbal Salman Pasha for Respondent.

2010 P T D 1060

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

HAKEEMUDDIN and another

Versus

DIRECTOR GENERAL OF INTELLIGENCE AND INVESTIGATION (CUSTOMS AND EXCISE) through Director, Karachi and 4 others

Constitutional Petition No. D-1047 of 2005, decided on 22nd January, 2010.

Customs Act (IV of 1969)---

----Ss. 32, 154, 171 & 187---Constitution of Pakistan (1973), Art.199---Constitutional petition---Smuggled vehicle---Ownership--proof---Customs authorities seized vehicle of petitioner as the same was alleged to be a smuggled vehicle---Petitioner produced registration book of the vehicle and produced three letters issued by Pakistan Coast Guards showing purchase of the same in auction---Validity---Merely filing of registration book without showing payment of consideration to Pakistan Coast Guard did not itself constitute a valid document of ownership of vehicle---Any transaction of sale had to be fully supported by further documents more particularly of payment of consideration amount to Pakistan Coast Guards from whom the vehicle was said to have been purchased---In absence of challan showing depositing of consideration amount of vehicle, its mere registration did not constitute valid ownership of the vehicle---Pakistan Coast Guards denied having sold or auctioned vehicle in question and labelled the letters relied upon by petitioner as forged and fabricated---Petitioner did not file any counter/rejoinder affidavit to such stand of Pakistan Coast Guards---Plea of customs authorities that the vehicle was a smuggled one also remained Undisputed, therefore, the vehicle was not bona fide owned or purchased by petitioner---Vehicle in question was smuggled one, therefore, Customs authorities were justified in confiscating and impounding the same---Customs authorities issued notice under S.171 of Customs Act, 1969, but petitioner avoided to receive the same---High Court declined to interfere in the order passed by Customs authorities--Petition was dismissed in circumstances.

Iftikhar Ahmed v. Secretary Revenue Division 2003 PTD 1739; Shehzad Ahmed Corporation v. Federation of Pakistan 2005 PTD 23 and Collector of Customs Sales Tax and Central Excise Customs House Quetta v. Nematullah 2003 PTD 2118 ref.

Khawaja Shamsul Islam for Petitioners.

Shafi Muhammadi for Respondent No.1.

Ashiq Raza, D.A.-G. for Respondents Nos. 2 & 5.

Adman Karim, A.A.-G. Sindh along with Ejaz Ali for Respondents Nos. 3 and 4.

Date of hearing: 21st October, 2009.

2010 P T D 1094

[Karachi High Court]

Before Mushir Alam and Aqeel Ahmed Abbasi, JJ

JAMSHED AHMED AZMI

Versus

COMMISSIONER OF INCOME TAX (APPEALS)

I.T.C. No. 49 of 1995, decided on 19th January, 2010.

Income Tax Ordinance (XXXI of 1979)---

----S. 13(1)(e), Second Proviso & 13(2) [as amended by Finance Act (VII of 1992)]---Non-declaration of value of property purchased by assessee in wealth assessment for year 1987-88---Admission of assessee regarding his failure to declare actual value of purchased property---Addition of such actual value of property in income of assessee on basis of his such admission by Income Tax Officer with single prior approval of Inspecting Additional Commissioner (I.A.C.)---Validity---Requirement of two prior approvals for making such addition remained operative till promulgation of Finance Act, 1992 having deleted first approval required by S.13(2) of Income Tax Ordinance, 1979---No estimation or enhancement/increase in value of such property was involved, thus, double approvals of I.A.C. was not required, in circumstances.

Commissioner of Income Tax Zone-B Lahore v. East Pakistan Chrome, Lahore (2001) 84 Tax 27 (H.C. Lah.) ref.

Commissioner of Income Tax v. Muhammad Kassim (2000) 81 Tax 229 (H.C. Kar.) rel.

Anwer Kashif Mumtaz for Applicant.

Nasrullah Awan for Respondent.

2010 P T D 1159

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs EFU GENERAL INSURANCE LTD. through Joint Managing Director, Karachi

Versus

FEDERATION OF PAKISTAN through Ministry of Law and Parliamentary Affairs, Government of Pakistan, Islamabad and 3 others

Constitutional Petitions Nos.D-1141 to 1149, 1177 and 2308 of 2009, decided on 8th March, 2010.

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

----Ss. 99, 101, 107 & 152(1AA) [as inserted by Finance Act (I of 2008)]---Insurance Ordinance (XXXIX of 2000), S.2(xxvii) & (Hi)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Re­insurance premiums paid by Pakistani company to foreign non-resident Insurance companies not having Permanent Establishment in Pakistan, but belonging to countries having Agreements with Pakistan for Avoidance of Double Taxation---Non-deduction of tax at source on such re-insurance premiums remitted by Pakistani company to such foreign companies after insertion of S.152(1AA) in Income Tax Ordinance, 2001, by Finance Act, 2008---Demand of such tax by department---Validity---Agreement of Avoidance of Double Taxation contained a condition that no tax would be charged from such foreign company---Prior to amendments introduced by Finance Act, 2008, Pakistani company was not required to deduct tax at source on re-insurance remittances to such foreign companies---After amendments introduced by Finance Act, 2008, such re-insurance remittances would be deemed as Pakistan source income obliging Pakistani company to deduct therefrom tax at source---Petitioner was obliged to satisfy authority that provisions of Finance Act, 2008 were applicable to such foreign companies for not having Permanent Establishment in Pakistan, thus, such re-insurance remittances could not be considered as their Pakistan source income---Question of deduction of tax would not arise, where payments made to non-residents were exempt from tax---According to term "Permanent Establishment" as defined in the Agreement of Avoidance of Double Taxation insurance enterprise of contracting State would be deemed to have permanent establishment in other contracting State, if same collected premium in respect of other State except "re-insurance premium "---According to S.107 of Income Tax Ordinance, 2001, provisions of such Agreement had an overriding effect over tax law including Ss.102 & 152 thereof---Such re-insurance remittances could not be taxed as Pakistan source income nor could be legally deemed to be income accruing or arising in Pakistan---Mere use of word "shall" in S.152(5) of Income Tax Ordinance, 2001 would not make such provision mandatory for not specifying penal consequences in event of not obtaining approval from Commissioner for remitting payment to non-resident without deduction of tax---Taxpayer could not be penalized for not following directory provisions of S.152(5)(5A) of Income Tax Ordinance, 2001---Without establishing first that certain payment was chargeable to tax in Pakistan, action under S.161 of Income Tax Ordinance, 2001 against taxpayer could not be taken merely for its failure to obtain approval from Commissioner in terms of S.152(5) thereof---Such re-insurance remittances covered by the Agreement of Avoidance of Double Taxation were entitled to exemption from tax, thus, authority had wrongly refused to issue exemption certificate to petitioner---High Court quashed impugned demand in circumstances.

I.T.A. No. 197 of 1997; Messrs American Express Bank Karachi v. Commissioner of Income Tax 2009 PTD 1791; Mountains Estate Mineral Enterprises v. Commissioner of Income Tax 2008 PTD 1087; Niaz Muhammad Khan v. Mian Fazal Raqib PLD 1974 SC 134; Mian Asif Islam v. Mian Muhammad Asif and others PLD 2001 SC 499; Hemalatha Gargya v. CIT (2003) 259 ITR 1 and Union Bank Limited v. Federation of Pakistan 1998 PTD 2116 rel.

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

----Ss.99, 101, 107, 152(1AA) [as inserted by Finance Act (I of 2008) & S.161---Insurance Ordinance (XXXIX of 2000), S.2(xxvii)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Re­insurance premiums paid by Pakistani company to foreign non-resident Insurance companies not having Permanent Establishment in Pakistan but belonging to countries having Agreements with Pakistan for Avoidance of Double Taxation---Non-deduction of tax at source on such re-insurance premiums remitted by Pakistani company to such foreign company after insertion of S.152(1AA) in Income Tax Ordinance, 2001 by Finance Act, 2008---Constitutional petition challenging validity of such demand for being mala fide and based on misinterpretation of statutory provisions---Objection of department as to non-maintainability of constitutional petition for petitioner having an alternate legal remedy of filing appeal/revision against impugned demand---Validity---Question raised in constitutional petition would require an authoritative pronouncement---Department had already refused to issue nil withholding certificate to petitioner and again its going to department for revision etc., would be an exercise in futility and mere illusory in nature---High Court overruled such objection in circumstances.

Usmania Glass Sheet Factory v. Sales Tax Officer PLD 1970 SC 2005; National Bank of Pakistan v. Wafaqi Mohtasib (Ombudsman), Karachi PLD 1992 Kar. 339; Pak Land Cement v. C.B.R. and others 2007 PTD 1524 and Pirani Engineering v. Federal Board of Revenue 2000 PLD 809 rel.

(c) Interpretation of statutes---

----Mandatory or directory provisions---Test---Mere use of word "shall" in a statutory provision would not make the same mandatory.

Niaz Muhammad Khan v. Mian Fazal Raqib PLD 1974 SC 134; Mian Asif Islam v. Mian Muhammad Asif and others PLD 2001 SC 499 and Hemalatha Gargya v. CIT (2003) 259 ITR 1 rel.

(d) Interpretation of statutes---

----Duty of court, while interpreting a provision, has to find out as to what intention of legislature was and what its object was---Intention is essence of statute---Intention of legislature as embodied in statute constitutes law thereof.

(e) Interpretation of statutes---

----Where a provision is open to two reasonably possible inter­pretation, then interpretation favouring taxpayer would be adopted.

Sirajul Haque Memon and Arshad Siraj Memon for Petitioners.

Jawaid Farooqui for Respondent.

Ashiq Raza, D.A.G. for the State.

2010 P T D 1183

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

COLLECTOR OF CUSTOMS (PREVENTIVE), MCC OF PREVENTIVE, KARACHI

Versus

Shaikh NASIR ALI

Special Customs Reference Application No.43 and C.M.As. Nos. 487 and 488 of 2009, decided on 10th March, 2010.

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

----Ss.16, 32 & 196---Reference application---Delay of 180 days, condonation of---Release of gold weighing 3400 grams by Appellate Tribunal---Revenue's plea that Tribunal had released such gold in violation of statutory provision, thus, impugned order was illegal and void, whereagainst no limitation would run---Validity---Tribunal before passing impugned order had gone through record and come to conclusion that respondent had not tried to conceal such gold on his arrival at Pakistani port---Tribunal in impugned order had observed that respondent had neither infringed any law nor transgressed any circular/scheme issued in such regard---Impugned order could not be termed as a void order---After expiry of limitation period, vested rights had been created in favour of respondent, which could not be taken away---High Court dismissed reference application in limine for being hopelessly barred by limitation.

2001 SCMR 19; 2003 SCMR 83; Civil Appeal No. 126 of 2005; 2003 PTD 60; 2002 MLD 296; PLD 2005 SC 461; 2003 PTD 456; 2001 SCMR 827; PLD 1975 SC 331; 2002 PTD 83; PLD 1997 SC 351; 2008 SCMR 240; 2004 CLC 1482; Federation of Pakistan v. Metropolitan Steel Corporation 2002 PTD 87; Muhammad Hussain Munir and others v. Sikandar and others PLD 1974 SC 139 and PTCL 2008 CL 173 ref.

PTCL 2008 CL 173; 2007 PSC 169 and 2002 SCMR 1903 rel.

(b) Void order---

----Limitation---No limitation would run against a void order---Principles stated.

It is only a void order against which the limitation does not run, but in the cases where the orders passed by an authority is neither void nor contrary to the provisions of the law or sustainable in the law, then under such circumstances, the same are very much hit by laches and if no appeal is filed against such an order with the stipulated period of time, the same gets time-barred, barring exceptional circumstances where delay of each day is to be explained with sufficient cause to the satisfaction of the court. No limitation runs against a void order, and there is a distinction between a void and voidable order and the issue of limitation is applied only to void order. No doubt, a void order is a nullity in the law, when the same has been passed in flagrant violation of a provision of the law or the same lacks jurisdiction. Indeed a broadened scope of the expression "void order" might upset the entire judicial system and particularly the provision for invoking appellate remedies within the time prescribed by statutes of limitation as every unsuccessful litigant could sleep over a court order, which in his opinion is void or defy the same with impunity in the hope that he could ultimately plead that the order was void and non-existent in law, which could be ignored.

PLD 1975 SC 331; 2004 CLC 1482; Federation of Pakistan v. Metropolitan Steel Corporation 2002 PTD 87 and Muhammad Hussain Munir and others v. Sikandar and others PLD 1974 SC 139 ref.

(c) Limitation---

----Vested rights created in favour of opposite side due to expiry of limitation period could not be taken away.

2007 PTD 1418; 2007 PSC 169 and 2002 SCMR 1903 rel.

Raja Muhammad Iqbal for Applicant.

Khalid Javed Khan for Respondent.

2010 P T D 1203

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

STATE LIFE INSURANCE CORPORATION OF PAKISTAN through Divisional Head (Law)

Versus

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, GOVERNMENT OF PAKISTAN, COLLECTORATE OF SALES TAX AND EXCISE (EAST), KARACHI

Special S.T.R.A. No. 364 of 2007, decided on 24th February, 2010.

Central Excise Act (1 of 1944)---

----First Sched., Part-II, Item 14.14 [as inserted by Finance Act (XXII of 1991] and replaced by Heading 9813.0000 by Finance Act (XII of 1994)---Insurance Ordinance (XXXIX of 2000), S.89---Life Insurance Company---Company allowing its policy-holders to withdraw upto 90% of their paid-up premium as surrender value of their policies---Treating such withdrawal as services provided or rendered by company in respect of advances and loans and its liability to payment of excise duty under Item 14.14 or Heading 9813.0000 of Part-II of First Sched. to Central Excise Act, 1944---Validity---Such transaction between company and its policy-holders was not similar to that of Bank and its customer---In case of Bank, customer after withdrawing money from his account was not obliged to refund same to Bank nor was he liable to pay any mark-up thereon to Bank while in case of Insurance company, its policy-holders were obliged to refund such amount to company with mark­up---Such services provided by company to its policy-holders were liable to levy of excise duty---Principles.

Hirjina & Company v. Islamic Republic of Pakistan and another 1993 SCMR 1342 and ICC Textile Ltd. v. Federation of Pakistan and others 2003 PTD 1017 ref.

ICC Textile Ltd. v. Federation of Pakistan 2003 PTD 101 and Federation of Pakistan v. Muhammad Sadiq and others PLD 2007 SC 133 fol.

Ghulam Ali for Applicant.

Raja Muhammad Iqbal for Respondent.

2010 P T D 1225

[Karachi High Court]

Before Mushir Alam and Muhammad Athar Saeed, JJ

Messrs KHATRI BROTHERS through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and Chairman Federal Board of Revenue, Islamabad

Constitutional Petition No. D-304 of 2008 and C.M.A. No. 8804 of 2009, decided on 21st December, 2009.

Customs Act (IV of 1969)---

---Ss. 193, 194-A & 195---Customs Rules, 2001, R.103---Civil Procedure Code (V of 1908), Ss.47(1) & 114---Constitution of Pakistan (1973), Art.199---Constitutional petition---Appeal to Appellate Tribunal under S.194-A, Customs Act, 1969---Scope---Petitioner filed review application against the order passed by Single Bench of the High Court on the ground that counsel for petitioner had stated before the High Court that he could have availed the remedy of appeal before the Tribunal and the Single, Bench on the admission of the petitioner dismissed the constitutional petition being not maintainable--Contention of the petitioner was that he had wrongly submitted that the remedy of filing an appeal under S.194-A of the Customs Act, 1969 against the impugned order was available to him before the Tribunal---Validity---Order passed by the Collector (Appraisement) or any other Collector in accordance with powers vested to him under the proviso to sub-rule 2 of R.103 of the Customs Rules, 2001, was not an order passed either by Collector (Appeals) under S.193 nor an order passed by the Board or Collector of Customs under S.195 and therefore no appeal could be filed against such order before the Tribunal under S.194-A of the Customs Act, 1969---Single Bench had passed order on mistaken admission made by counsel for the petitioner---High Court allowed the review application and recalled the order passed by Single Bench and held that constitutional petition should be considered to be pending before Single Bench.

Muhammad Yousuf Alvi for the Petitioner.

Raja Muhammad Iqbal for Respondent.

2010 P T D 1233

[Karachi High Court]

Before Anwar Zeeheer Jamali, C. J. and Muhammad Karim Khan Agha, J

Mrs. ROHI CHAUDHRY and 2 others

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Ministry of Finance, Islamabad and 3 others

Constitutional Petition No. D-542 of 2009, decided on 17th June, 2009.

Customs Act (IV of 1969)---

----S. 162---Criminal Procedure Code (V of 1898), Ss. 182, 185 & 561-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Territorial jurisdiction---Scope---Constitutional petition was filed to quash proceedings and actions emanated from inquiries initiated at "L".---Cause of action had arisen at "L" that would be the appropriate forum for the activities of the respondents to be challenged by the petitioner---Courts at "K" would confuse and complicate an ongoing investigation which had its origin at `L"--- Appropriate forum to challenge the acts of the respondents would be based at "L" rather than at "K"---Constitutional petition was dismissed by High Court.

Al-Iblagh Limited v. Copyright Board 1985 SCMR 758; Ibrahim Fibres Ltd. v. Federation of Pakistan 2009 PTD 248 and New Jubilee Insurance Co. Ltd. v. Collector of Customs 1995 SCMR 1535 ref.

Ibrahim Fibres Ltd. v. Federation of Pakistan 2009 PTD 248; Al-Iblagh Limited v. Copyright Board 1985 SCMR 758; Ijaz Khan v. APA Barra, Pesh. PLD 2006 Pesh. 180; Benazir Bhutto v. Federation of Pakistan PLD 1999 Kar. 39 and Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue PLD 1997 SC 334 rel.

Iqbal Haider and Siddiq Mirza for the Petitioners.

Aqeel Ahmed Abbasi for Respondents Nos. 2 to 4.

Mian Khan Malik, D.A.G. representing the Federation of Pakistan also put to notices of this Petition.

S.M. Abbas Jafri, I.O. of the case, Senior Intelligence Officer, Directorate General, Intelligence and Investigation, F.B.R., Lahore.

2010 P T D 1245

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

FIRST WOMEN BANK LIMITED through Head of Finance Planning & Operation, Karachi

Versus

COMMISSIONER OF INCOME TAX, LEGAL DIVISION, KARACHI

Income Tax Reference Applications Nos.D-459 to 464 of 2006, decided on 10th March, 2010.

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

----S.80-D---Income Tax Ordinance (XLIX of 2001), S.113---Banking company incorporated under Companies Ordinance, 1984 working under licence issued by State Bank of Pakistan---Turnover tax, levy of---Scope---Purpose of introducing S.80D in Income Tax Ordinance, 1979 was not merely to enhance exports of country---Lawmakers by adding explanation to S.80D(2) of Income Tax Ordinance, 1979 had in fact removed doubt, it any, in interpreting term "turnover" by giving descriptions of certain items, which could be included in its definition--No distinction existed between S.80D of Income Tax Ordinance, 1979 and S.113 of Income Tax Ordinance, 2001---Section 80D of Income Tax Ordinance, 1979 starting with non obstente clause stipulated that if either no tax was payable or tax paid by a company was less than half per cent of amount representing its turnover from all sources, then company would have to pay a tax known as turnover tax, which would be half per cent of amount of its turnover---Turnover would mean gross receipts, exclusive of discounts shown on invoices or bills, derived from giving or supplying services also---Such company was giving and supplying services---Banking companies used to give discounts and rebate to its customers in respect of amounts charged by them from its customers---Such company was liable to pay turnover tax in circumstances.

PLD 1993 Kar. 799 ref.

Commissioner of Income Tax v. Orix Leasing Pakistan Ltd. 2007 PTD 115 rel.

(b) Interpretation of statutes---

----No part of section of a statute would be read in isolation without making reference to other parts of same section.

Humayoon Muhammad Khan v. Province of Sindh 2009 CLC 909 rel.

Furqan Ali for Applicant.

Javed Farooqui for Respondent.

Date of hearing: 4th March, 2010.

2010 P T D 1275

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs BOSTAN INTERNATIONAL

Versus

COMMISSIONER OF INCOME TAX, ZONE C, KARACHI

Income Tax Reference No.186 of 2006, decided on 10th March, 2010.

Income Tax Ordinance (XXXI of 1979)---

----Ss.13, 22, 62, 65 & 136(2)---Income Tax Ordinance (XLIX of 2001), S.133---Reference to High Court---Self assessment, re-opening of---Re-assessment order making additions to income to assessee under Ss.13 & 22 of Income Tax Ordinance, 1979---Appellate Authority set aside re-assessment order and remanded case to Assessing Officer for its fresh trial---Tribunal upheld such rert and order---Validity---Tribunal had not given any finding thus, there was no final order, which could be said to have given rise to any question of law for determination by High Court---Reference under S.133 of Income Tax Ordinance, 2001 and S.136 of Income Tax Ordinance; 1979 would lie only against final order, but not against an interlocutory or remand order as no question of law would arise therefrom---Assessing Officer, while examining case afresh would consider all legal aspects arising in such matter---High Court disposed of reference application with directions of Assessing Officer that before making any addition to .income of assessee, he should be provided full opportunity of hearing and decision should be based on sound reasoning, proper appreciation of legal aspect, facts and evidence on record.

Abdul Ghani and Company v. C.I.T. PLD 1962 (WP) Kar. 635 and C.Y.T. v. National Refinery Limited 2003 PTD 2020 ref.

Gap. Inc. Daware Corporation USA v. Gap Departmental Store, Karachi 2006 CLD 1477; Muhammad Akram Malik v. Dr. Ghulam Rabbani PLD 2006 SC 773; The Commissioner of Income Tax, Central Zone `B', Karachi .v. Messrs Electronic Industries Ltd. 1988 PTD 111; Islamuddin and 3 others v. The Income Tax Officer and others 2000 PTD 306; Dr. Abdur Rauf Hamid v. Commissioner of Income Tax, Faisalabad 65 Tax 207; Haji Muhammad Yousaf v. Commissioner of Income Tax and Wealth Tax Companies Zone, Faisalabad 2006 PTD 72; Commissioner of Income Tax and Wealth Tax, Sialkot Zone v. Messrs Maqbool Ahmad Gill 2007 PTD 1757; Commissioner of Income Tax v. Bihar Alloy Steels Ltd. 1993 PTD 1189 and Commissioner of Income Tax v. Grand Bazaar (1991) 187 ITR page 471 rel.

Muhammad Naseem for Applicant.

Mohsin Imam for Respondent.

2010 P T D 1293

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs P.M. INTERNATIONAL through Special Attorney

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division (F.B.R.) and 3 others

Constitutional Petition No. D-219 and C.M.As. Nos.1678 - 1204 of 2010, decided on 18th February, 2010.

Customs Act (IV of 1969)---

---Ss. 25-A, 25-D, 80 & 193---Constitution of Pakistan (1973), Art.199---Declaration filed under S.79 of Customs Act, 1969 showing assessment of imported goods by importer himself---Non-acceptance of importer's assessment and re-assessment of goods by Customs Officer---Filing of review by importer against re-assessment order of Customs Officer---Dismissal of review by Director-General of Valuation---Constitutional petition by importer challenging both such orders---Maintainability---Order of dismissal of review for being ancillary and incidental to re-assessment had merged in order of re-assessment passed by Customs Officer---Importer had a remedy of appeal against re-assessment order---High Court dismissed constitutional petition in circumstances.

Zain A. Jatoi for Petitioner.

2010 P T D 1397

[Karachi High Court]

Before Gulzar Ahmad and Irfan Saadat Khan, JJ

COMMISSIONER OF INCOME TAX, SPECIAL ZONE, KARACHI

Versus

Messrs DEWAN KHALID TEXTILE MILLS LTD., KARACHI

I.T.C. No. 200 of 2003, decided on 9th March, 2010.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 50(2A), 57, 65, 80-B & 136(2)---Reference---Re-opening of case---Public limited company---Interest income---Assessee was a public limited company, and its return was revised under S. 57 of Income Tax Ordinance, 1979, for the reason that in original return, interest income on which tax was deducted under S.50 (2A) of Income Tax Ordinance, 1979, was inadvertently declared in the head `business income', whereas the same fell under S.80-B of Income Tax Ordinance, 1979---Validity---In case of public limited company, provision of S.80-B of Income Tax Ordinance, 1979, was not applicable---Interest income earned by such company was to be taxed as its income from other sources---Original order passed by Assessing Officer suffered with illegal infirmity and was a case of excessive relief or that of assessment made at too low rate which was rightly reopened under the provisions of S.65 (1) of Income Tax Ordinance, 1979, by the department---High Court answered the reference in negative i.e. in favour of department and against assessee.

Genertech Pakistan Ltd. and others v. Income Tax Appellate Tribunal of Pakistan Lahore and others 2004 SCMR 1319; Inspecting Assistant Commissioner and Chairman Panel 20, Companies and another v. Pakistan Herald limited through Director 1997 SCMR 1256 = 1997 PTD 1485; Edulji Dinshaw Limited v. Income Tax Officer 1990 PTD 155; Arafat Woolen Mills Limited v. The Income Tax Officer, Companies Circle C-1, Karachi 1990 PTD 338; Pakistan Tobacco Co. Ltd. v. Government of Pakistan through Secretary Ministry of Finance and 3 others 1993 SCMR 493; Commissioner of Income Tax, Zone-D, Karachi v. Jenning Private School 1993 SCMR 96; Philips Electrical Company of Pakistan (Pvt.) Limited v. Income Tax Officer, Karachi 1990 PTD 389; Republic Motors Limited v. Income Tax Officer and others Karachi 1990 PTD 889; M.R. Sons v. Income Tax Officer 1989 PTD 1010; Muslim Commercial Bank Limited v. Deputy Commissioner of Income Tax and others 2004 PTD 1901; Muhammad Shafi and 3 others v. Income Tax Officer 2005 PTD 1014 and Citibank N.A. through Resident Vice President v. Commissioner of Income Tax 2007 PTD 1560; 1999 PCTLR 496; Sandal Engineering (Pvt.) Limited, Faisalabad v. The Inspecting Additional Commissioner of Income Tax/Wealth Tax, Faisalabad 2001 PTD 1467; Commissioner of Income Tax, East Zone, Karachi v. Ata Muhammad Faiz 1986 PTD 874; Glaxo Laboratories Limited v. Inspecting Assistant Commissioner of Income Tax and others 1992 PTD 932; Commissioner of Income Tax, Rawalpindi v. Begum Mumtaz Jamal PLD 1976 Lah. 761; Hong Kong Chinese Restaurant v. Additional Commissioner of Income Tax 2002 PTD 1878; Commissioner of Income Tax v. Jay Kumar B. Patil 236 ITR 469; 224 ITR 658; 227 ITR 216; 231 ITR 215 and 245 ITR 838 ref.

Javed Farooqui for Applicant.

Iqbal Salman Pasha for Respondent.

Date of hearing: 16th February, 2010.

2010 P T D 1411

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs T.M. ENTERPRISES through Authorized Attorney

Versus

DIRECTOR, INTELLIGENCE AND INVESTIGATION, KARACHI

Spl. Customs Reference Applications Nos.59 and 60 of 2009, decided on 4th March, 2010.

Customs Act (IV of 1969)---

----Ss.32, 156 (I)(14) & 194-B (3)---False declaration---Fictitious Bills of Entries---Applicant was a clearing agent who was alleged to have removed liquor from Bonded Warehouse on the basis of fake record---Appellate authority had specifically observed that as a shipping agent, applicant was required to complete transaction by delivering goods at the port for which no plausible explanation was given by him---Appellate authority had also observed that had there been a fraudulent act comprising of two-three bills then it could be inferred that the same was not in the knowledge of applicant but such act of deceit was spread over a span of number of years and applicant could not claim itself to be unaware about such act---Appellate Tribunal also came to the conclusion that applicant did not furnish any material/evidence to divulge itself from charges levelled upon it---Appellate Tribunal further observed that Clearing Agent played an important role in not only in-bonding of goods but also ex-bonding of the same and no goods could be ex-bonded without the aid of Clearing Agent---Appellate Tribunal also observed that applicant had miserably failed to prove itself in absence of any adequate material/evidence, oblivious and unconcerned with the occurrence and affirmed the action of authorities---Validity---Findings recorded in criminal proceedings were not binding or relevant in deciding reference applications which were decided on the basis of preponderance of evidence---Report of Handwriting Expert was not before High Court and decision referred by applicant had no relevancy with the facts---High Court affirmed penalty imposed under relevant provision of law upon applicant---Reference application was dismissed in circumstances.

Shahi Carpet (Pvt.) Ltd. v. Commissioner of Wealth Tax 2003 PTD 1377; Muhammad Sadequan v. Collector of Customs, Karachi 2006 PTD 2742; Government of Pakistan through Secretary v. Muhammad Ahmed Qureshi and others PTD 2002 CL 579 and Amjad Pervez and others v. Additional Collector, Customs 2005 PTD 1817 ref.

Ghulam Rasool v. Muhammad Waris Bismil 1995 SCMR 500 rel.

M. Junaid Ghaffar for Applicants.

Mohsin Imam for Respondent.

2010 P T D 1652

[Karachi High Court]

Before Mrs. Yasmin Abbasey and Qamaruddin Bohra, JJ

KARACHI SHIPYARD AND ENGINEERING WORKS LTD.

Versus

GOVERNMENT OF PAKISTAN and others

Sales Tax Reference No. 153 of 2005, decided on 16th May, 2008.

Sales Tax Act (VII of 1990)---

----Ss. 4, 7, 8 & 47---Claim and adjustment of input tax---Reference to High Court---Sales Tax Reference had been preferred against the judgment passed in Sales Tax Appeal, whereby the input tax claimed by the applicant was disallowed with the observation that without paying or intent to pay the output tax on the taxable supply of barges, no adjustment of input tax could be made---Perusal of show-cause notice did not reflect that the applicant had adjusted input tax for the goods detailed under S.8 of Sales Tax Act, 1990---Vague allegations that applicant had adjusted input tax payable by him on other taxable supplies, without specifying the use of those taxable material, appeared to be misinterpretation of the provision---Otherwise non-adjustment of input tax claim for material/equipment, which was used in taxable supplies, would invariably result in unnecessary hardship to the taxpayer for being vexed twice---Registered person was entitled to adjust the input tax claim during the tax period for the taxable supplies made by him---No justification was available for not allowing the applicant to adjust the input tax claim for the relevant year when he had imported the material for construction of self-propelled split hopper-barges, supply of which had been subjected under S.4 of Sales Tax Act, 1990.

Aziz A. Sheikh for the Applicant.

Mohsin Imam for the Respondents Nos. 2 and 3.

Date of hearing: 26th February, 2008.

2010 P T D 1703

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs SUPREME TUBE INDUSTRIES, KARACHI

Versus

COLLECTOR OF CUSTOMS, (ADJUDICATION-I) and 2 others

Special Customs Appeal No. 354 of 2007, decided on 16th June, 2010.

Customs Act (IV of 1969)---

----S.156---Customs Rules, 2001, Rr. 110 & 125---Import of banned goods---Confiscation of such goods---Admission of charge by importer and his readiness to pay fine equal to 25% of ascertained value in lieu of its confiscation---Contravention report showed ascertained value of goods at Rs.62,37,300, while show-cause notice showed such value at Rs.7,48,516---Order of Collector rectifying typographical error made in show-cause after providing due opportunity of hearing to importer---Validity---No violation of principles of natural justice had taken place in circumstances.

Collector v. Ms. Rahim Din 1987 SCMR 1840; Ms. Mansab Ali. v. Amir Ali PLD 1971 SC 124; PLD 1979 SC 124 and 2006 PTD 2609 and PLD 2005 SC 461 ref.

Amir Malik for Applicant.

Raja Muhammad Iqbal for Respondents.

2010 P T D 1717

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

Messrs DEWAN CEMENT LTD. Through Authorized Representative

Versus

PAKISTAN through Secretary Ministry of Finance, Revenue Division and Ex-officio Chairman, F.B.R., Islamabad and 2 others

C.P. No. D-750 of 2009, heard on 26th January,-2020.

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

----Ss.4, 8(1)(b) & 10(1)---S.R.O. 389(I)/2006, dated 27-4-2006-S.R.O. 391(I)/2006, dated 27-4-2006---S. R. O. 1212(I)/2006, dated 2-12-2006---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Maintainability---Input tax credit adjustment and refund of tax being availed by petitioner on export of cement falling under PCT Heading 25.23 denied on basis of S.R.O. 389/(I)/2006 and S.R.O. 391(I)/2006, both dated 27-4-2006---Issuance of S.R.O. 1212(I)/2006, dated 2-12-2006 rescinding S.R.O. 389(I)/2006 giving right to exporter to avail input tax credit---Show-cause notice questioning input tax credit adjustment availed by petitioner on export of cement during period of 27-4-2006 to 2-12-2006---Constitutional petition challenging S. R.O.389(1)/2006 to be ultra vires zero rating tax under S.4 of Sales Tax Act, 1990, while S.R.O. 391(I)/2006 being ultra vires of S.19(1) of Sales Tax Act, 1990; and that S.R.O. 389(1)/2006 rescinded through S.R.O.1212(I)/2006 being beneficial should have been given retroactive effect by extending its benefit to petitioner---Maintainability---Petitioner had challenged the very legality of such S.R.Os., whereunder authority had initiated proceedings against him---Appellate Authority and Tribunal had no jurisdiction to make determination on vires of such S. R.Os.---Constitutional petition involving such pure questions of law of fiscal rights was, maintainable in circumstances.

Collector of Customs, Customs House, Lahore and 3 others v. Messrs S.M. Ahmad and Company (Pvt.) Ltd., Islamabad 1999 SCMR 138 and Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250 rel.

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

----Ss.4, 8 (1)(b) & 10(1)---S.R.O. 389(I)/2006, dated 27-4-2006--S.R.O. 391(I)/2006, dated 27-4-2006---S.R.O. 1212(I)/2006, dated 2-12-2006---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Input tax credit adjustment and refund of tax being availed by petitioner on export of cement falling under PCT Heading 25.23 denied on basis of S.R.O. 389/(I)/2006 and S.R.O. 391(I)/2006, both dated 27-4-2006---Issuance of S.R.O. 1212(I)/2006, dated 2-12-2006 rescinding S.R.O. 389(I)/2006 giving right to exporter to avail input tax credit---Show-cause notice dated 16-1-2009 questioning input tax credit adjustment availed by exporter on export of cement during period of 27-4-2006 to 2-12-2006---petitioner's plea that S.R.O. 389(1)/2006 was ultra vires zero rating tax under S.4 of Sales Tax Act, 1990, while S.R.O. 391(1)/2006 was ultra vires of S.10(1) of Sales Tax Act, 1990: and that S.R. O.389(1)/2006 rescinded through S.R.O. 1212 (1)/2006 being beneficial should have been given retroactive effect by extending its benefit to petitioner---Validity---Expression "tax at the rate of zero per cent" as used in S.4 of Sales Tax Act, 1990 being total exemption on goods exported---Legislature restricted such concept of total exemption by giving powers to Federal Government under second proviso to S.4 of Sales Tax Act, 1990 by issuing notification to restrict amount of credit for input tax actually paid and claimed by a person making zero rated supply of goods otherwise chargeable tax---Section 8(1)(b) of Sales Tax Act, 1990 in similar fashion gave power to Federal Government by notification disentitling a registered person to reclaim or deduct input tax paid on any goods or services specified---Provisions of Ss.4 & 8(i)(b) of Sales Tax Act, 1990, though being independent, but their purpose would seem to be common of restricting such rights of exporter---S.R.O.389(1)/2006 directed that no input credit of sales tax paid on account of manufacture or import of cement falling under such heading would be allowed, if cement so manufactured or imported into Pakistan was exported out of Pakistan--S.R.O. 389(1)/2006 achieving such mandate of law was, thus, not ultra vires of S.8(1)(b) of Sales Tax Act, 1990 read with second proviso to S.4 thereof--- S.R.O.391(1)12006 neither violated nor was in excess of, provision of second proviso to S.10(1) of Sales Tax Act, 1990, which gave powers to Board of Revenue by notification to restrict amount of refund claimed by a registered person as input tax credit to such extent and in such manner as Board might specify therein---S. R. O.1212(1)/2006 for being made operational from date of its making could not be given retrospective effect, rather same would amount to destroy, disturb or impair obligators and rights created while S.R.O. 389(1)/2006 remained in field---High Court dismissed constitutional petition in circumstances.

Commissioner of Income Tax v. Olympia (1978 PTD 739); State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited 1997 SCMR 1244; Dawood Cotton Mills v. Commissioner of Income Tax 2000 PTD 285; Messrs Kamalia Sugar Mills Ltd. v. Superintendent, Intelligence and Investigation (Customs and Central Excise), Regional Office Lahore and another 2002 PTD 632; Collector of Income Tax v. A.A. Corporation, Lahore 2004 PTD 2738; Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652; Commissioner of Income Tax v. Shah Nawaz Ltd. 1993 SCMR 73; Messrs Ilahi Cotton Mills Ltd and others v. Federation of Pakistan and 6 others PLD 1997 SC 582 and PTCL 2007 ST 1205(i) ref.

(c) Interpretation of statutes---

----Beneficial legislation being remedial and curative would be given retrospective effect--principles.

Beneficial legislation being retrospective effect is that it should be remedial and curative and that its purpose should be to correct the existing law, redressing an existing grievance or introducing regulations conducive to public good and remedies defect in the pre-existing law. The remedial statutes are usually looked upon with favour by the courts and liberally construed. The law is to be given retrospective operation, if such operation does not destroy or disturbed the vested right, impair the obligations of contract, create new liabilities, violate due process of law or contravenes some other constitutional provisions.

(d) Interpretation of statutes---

----Beneficial notification ---Retrospective application---Principles.

It has to be seen for application of beneficial notification being given retrospective effect that it' should not disturb vested right, impair obligations of contract, crate new liabilities, violate due process of law or contravene some other constitutional provisions. If these rights, obligations, liabilities and law are not disturbed or violated, then notification can be given retrospective effect.

Dr. Farough Naseem for Petitioner.

Mohsin Imam for Respondent.

Ashiq Raza, D.A.G.

Date of hearing: 26th January, 2010.

2010 P T D 1739

[Karachi High Court]

Before Faisal Arab, J

Messrs STAR COTTON CORPORATION (PVT.) LTD., KARACHI

Versus

COLLECTOR OF CUSTOMS, KARACHI and another

Sales Tax Reference Application No. 171 of 2006, decided on 22nd May, 2010.

Sales Tax Act (VII of 1990)

----S.46---Limitation Act (IX of 1908), S.3---Time barred appeal without application for condonation of delay---Effect---Such appeal would be liable to be dismissed---Principles.

Ammar Yasir for Applicant.

Raja Muhammad Iqbal for Respondent.

2010 P T D 1772

[Karachi High Court]

Before Maqbool Baqar and Salman Hamid, JJ

Messrs UNITED BANK LIMITED through Group Executive

Versus

DEPUTY COMMISSIONER INLAND REVENUE and 3 others

C.Ps. Nos. D-1109, 1120, 1200, 1135, 1211, 1222, 1584, 1585, 1586, 1618 and 1660 of 2010, decided on 2nd June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.21(c), 31,151,158(a), 161 & 205---Constitution of Pakistan (1973), Art.199---Constitutional petition---Amounts of profit charged by Bank in respect of term deposits of its customers and credited to its profit and loss account and ledger accounts of respective customers---Non-deduction and non-deposit of tax amount by bank in Federal Treasury---Demand of tax amount by Revenue along with default surcharge from Bank---Plea that Banks were maintaining their accounts on accrual basis and at close of each financial year, mark up was accrued on estimated return on profit for unpaid period of deposit in financial statement; and that mere credit entries in ledger accounts would not entitle customers to withdraw such amount and withdrawal could only be made or claimed at time of maturity of deposit---Plea of Revenue that Bank was enjoying benefits under S.31 of Income Tax Ordinance, 2001 by showing ledger entries as their liability, but refusal to deduct and pay tax in respect of ledger entries was not permissible under law; and that Revenue would seek permission to proceed against Bank for misusing provisions of S.31 of Income Tax Ordinance, 2001 in violation of S.21(c) thereof---Validity---Phrase `to the account of recipients' as used in S. 158 of Income Tax Ordinance, 2001 would imply that deduction required thereunder would be made when amount was either paid or credited to account of recipient, wherefrom he might withdraw amount falling within his power and control---Bank had not effected any credit entries in respective accounts of their customers, but had effected same in ledger accounts---High Court quashed impugned demand after declaring same to be illegal and allowed Revenue to proceed against Bank for misusing provisions of S.31 of Income Tax Ordinance, 2001 in violation of S. 21(c) thereof---Principles.

Naveed A. Andrabi for the Petitioner.

Ali Mumtaz Shaikh for Respondent.

2010 P T D 1924

[Karachi High Court]

Before Gulzar Ahmad and Irfan Saadat Khan, JJ

Syed NASIR ALI and 33 others---Petitioners

Versus

PAKISTAN through Secretary Ministry of Law, Islamabad and 3 others---Respondents

C.Ps. Nos. D-1901 to D-1905, D-1931 to 1941, D-1971 to 1973, D-1980 to 1983, D-2062, 2063, D-2104, 2136, D-2146, 2147, 2168, 2169, D-2244, 2268, 2278, 2282 to 2285, D-2342, 2392, 2570, 2631, 2632, 2728, 2903 of 2009, D-41, D-167 and D-180 of 2010, decided on 16th July, 2010.

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

----Ss.2(20)(63), 4, 12(2)(a) Second Proviso [as added by Finance Act (I of 2009)], First Sched. Part-1, Division-1, Para (1-A), Third proviso [as added by Finance Act (I of 2009] & Para (2)---Constitution of Pakistan (1973), Arts. 142, 25, 199 & Fourth Sched. Part-1, Entries 47, 48--Constitutional petition---Imposition of Internally Displaced Persons Tax (IDPT) on taxable income of one million rupees or more @ 5% for tax year 2009---Imposition of IDPT on bonus paid or payable to corporate employees receiving salary income of one million or more @ 30% for tax year 2009---Petitioner's plea that IDPT was unconstitutional for being a triple tax as person paying IDPT would have to pay (i) income tax on his salary, (ii) a tax on income tax paid by hint on his salary, and (iii) tax on bonus---Validity---Federal Government had imposed such tax in order to obtain resources for helping out about three million poor and needy persons displaced from areas of Swat, Wana, Malakand and other areas on account of action taken against terrorists---Any Entry in Legislative List should be given widest possible meaning---Word "income" used in Entry 47 of Fourth Sched. of the Constitution should be construed in a very wide manner and power to legislate would be taken in all incidental and ancillary matters---Financial resources would be needed for running a State, which had to impose taxes for achieving its cherished goals---Helping such poor and needy persons was a noble cause---Pakistan being a welfare State was bound to take care of its citizens and help them whenever found to be in distress---Legislature would enjoy plenary powers to impose taxes at its discretion within framework of the Constitution-Entries in Legislative List of the Constitution were not powers of Legislature, but only fields of legislative heads---Legislature was competent to levy IDPT as Entry 47 of Fourth Sched. of the Constitution was wide enough not only include tax but also tax on tax--Intention of legislature as revealed from third proviso added by Finance Act, 2009 to Para (1-A) of Division-1, Part-1 of First Sched. of Income Tax Ordinance, 2001 was to treat IDPT as. "income tax"---As per provisions of Ss.2(20) & 12 of Income Tax Ordinance, 2001, no distinction existed between employees working in corporate sector and employees working in any other sector---Corporate employees receiving salary income of one million or more had been charged with IDPT on bonus, which did not appear to be a reasonable classification as employees working in other sectors receiving same salary income had been left out---For purpose of income taxation, a corporate employee earning more than one million rupees would stand on same footing as any other individual or un-salaried employee of a company earning same amount---Courts had power to strike down fiscal laws found to be not based on reasonable classification---Imposition of IDPT on corporate employees only was discriminatory and violative of Art. 25 of the Constitution---High Court disposed of constitutional petition in such terms---Principles.?

PLD 1992 Kar. 183; 2007 CLC 1687; PLD 2006 Lah. 240; AIR 1981 SC 1922; PLD 1994 Lah. 347; PIDC v. Pakistan 1992 SCMR 891; Mst. Nawab Bibi and 3 others v. Ch. Allah Ditta and others 1998 SCMR 2381; Haji Altafuddin Kazi v. The Province of East Pakistan and others PLD 1963 Dacca 472; Syed Arif Raza Rizvi v. Messrs Pakistan International Airlines PLD 2001 SC .182; Shah Jahan v. Dr. Adnan and another 1996 MLD 934; N.D.F.C. v. Anwar Zaib White Cement Ltd. 1999 MLD 1888; K.E.S.C. Progressive Workers Union and others v. K.E.S.C. Labour Union and others 1991 SCMR 888; Muhammad Nawaz Khan v. Pir Salahuddin Collector, Campbellpur and another PLD 1967 Pesh. 99; Life Insurance Corporation of India v. United Commercial Bank and others PLD 1962 (P.W) Kar. 837; Hakim Aziz Ahmad v. Ijazul Malik PLD 1971 Lah. 305; Khan Bahadur Mian Feroz Shah (represented by 10 heirs) v. The Commissioner of Income-Tax, North Zone, (West Pakistan), Lahore PLD 1970 Pesh. 83; Messrs Shahi Bottlers Limited, Lahore v. The C.I.T. Central Zone, Lahore 1999 PTD 3518; The State v. Ghulam Rasool and others 1991 MLD 1923; Bibojee Services Ltd. v. Interasia Lines Ltd. and another 1986 MLD 38; Messrs East and West Steamship Company v. Pakistan and others (PLD 1958 SC (Pak.) 41; Haji Muhammad Idrees and 17 others v. Inayat and 2 others PLD 2006 Lah. 240; Messrs Muzaffar Poultry Farm v. Pakistan Poultry Association, Sindh Zone, Karachi and 2 others PLD 1992 Kar. 181; Nelofer Sameera Jamshaid Qureshi v. Board of Intermediate and Secondary Education, Lahore, through Chairman and another 2007 CLC 1687 and Inamur Rehman v. Federation of Pakistan and others 1992 SCMR 563 ref.

Elahi Cotton Mills v. Federation of Pakistan and others PLD 1997 SC 582; United Provinces v. Mst. Atiqa Begum and others AIR 1941 FC 16; Navinchandra Mafatlal v. CIT (1954) 25 ITR 758; K.P. Varghese v. I.T.O. AIR 1981 SC 1922; Volume 85 of Corpus Juris Secumdum page 73; Commission of Sales Tax v. Monza Central Asia Textile and Woolen Mills Ltd. 1999 SCMR 526; Sohail Jute Mills Ltd's case. PLD 1991 SC 329; I.A. Sherwani and others v. Government of Pakistan and others 1991 SCMR 1041; Central Board of Revenue and others v. Seven-up Bottling Company (Pvt.) Ltd. 1996 SCMR 700; Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279; C.P. Nos. 76 to 80 of 2007 and 59 of 2009 and HRC Nos. 14328-P to14331-P and 1508-P of 2009; Kunnathat Thathunni Noopil Nair v. The .State of Kerala and another 1961 3 SCR 77; 178 ITR 97; 183 ITR 401; Inamur Rehman v. Federation of Pakistan and others 1992 SCMR 563 and Zaman Cement Company (Pvt.) Ltd. V. Central Board of Revenue and others 2002 SCMR 312 rel.

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

----Fourth Sched.---Legislative List, interpretation of---Scope---Such List should be given widest possible and most liberal construction.?

Elahi Cotton Mills v. Federation of Pakistan and others PLD 1997 SC 582; PLD 1992 Kar. 183; 2007 CLC 1687; PLD 2006 Lah. 240; AIR 1981 SC 1922; 1992 SCMR 891; PLD 1994 Lah. 347; United Provinces v. Mst. Atiqa Begum and others AIR 1941 FC 16; Navinchandra Mafatlal v. C.I.T. (1954) 26 ITR 758; K.P. Varghese v. I.T.O. AIR 1981 SC 1922 and Commissioner of Sales Tax v. Hunza Central Asia Textile and Woollen Mills Ltd. 1999 SCMR 526 rel.

(c) Constitution of Pakistan (1973)---

----Fourth Sched.---Legislative List, entries in---Validity---Such Entries not powers, of Legislature, but only fields of legislative heads.

(d) Interpretation of statutes---

----Fiscal statutes---Schedule in a statute---Object---Conflict between charging _ section and Schedule---Effect---Charging section would be given preference over Schedule---Principles.

In case of inconsistency between the charging section and the Schedule, the Schedule is to yield to the Act.?

Schedules are an aid to the charging section and cannot be applied in derogation of the main section. In case of any conflict between the main provision and the Schedule, the main provision shall always prevail and has to be given preference over the Schedule. The Schedule helps to determine the ambit of the charging section since they both constitute an integrated code. The charging section deals with chargeability of something and the schedule deals with the rate of such chargeability meaning thereby that they both come hand in hand together.?

Commissioner of Income Tax v. Messrs Phillips Holzman A.G. Ameejee Valeejee & Sons, Karachi (PLD 1968 Karachi 95); 66 ITR 664 and 50 ITR 798 ref.

(e) Taxation---

----Person to be taxed must be shown to be falling under charging section of the statute---No tax could be imposed by way of implication simplicitor---Principles.

It is a binding rule of construction that before taxing a person, it must be shown that he falls under the charging section as no tax could be imposed by way of implication simpliciter. If a person has to be brought within the ambit of a tax, the same has to be specifically mentioned that the said person falls within the ambit of the charging section by clear words, otherwise he cannot be taxed at all.?

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

----Art. 25---Equality of citizens before law and equal protection of law---Reasonable classifications---Criteria---Persons placed in similar situations must be .given similar treatment both in privileges conferred and liabilities unposed---Principles.

Under Article 25 of the Constitution, all citizens are equal before law and are entitled to equal protection of law. This Article enshrines the basic concept of the religion of Islam also. As per this Article, the persons placed in similar situations are to be given similar treatment. All citizens are equal before the law and are entitled to equal protection and the State is not precluded to treat its citizens on the basis of classification and that reasonable classification depends upon reasonable distinction on reasonable basis. No doubt that no standard or universal application to this reasonableness of classification can be laid down, however, it may be borne in mind that reasonable classification should be founded on reasonable distinction. A law applicable to one person or one class of persons may be constitutionally valid, if there is sufficient basis or reason for it, but a classification which is arbitrary and is not founded on any rational basis is not a reasonable classification and is clearly hit by Article 25 of the Constitution. Equal protection of law means that all persons equally placed be treated alike both in privileges and liabilities. In order to make a classification reasonable, it should be based on intelligible differentia, which distinguishes persons or things that are grouped together from those which have been left out and that differentia must have rational nexus to the object sought to be achieved by such classification.?

Equality has to be between persons, who are placed in the same state of circumstances.?

I.A. Sherwani and others v. Government of Pakistan and others 1991 SCMR 1041; Inamur Rehman v. Federation and others 1992 SCMR 563 and Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 ref.

Central Board of Revenue and others v. Seven-up Bottling Company (Pvt.) Ltd. 1996 SCMR 700; Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279; C.P. Nos. 76 to 80 of 2007 and 59 of 2009 and HRC Nos. 14328-P to14331-P and 1508-P of 2009; Kunnathal Chathunni Noopil Nair v. The State of Kerala and another 1961 3 SCR 77; 178 ITR 97 and 183 ITR 401 rel.

(g) Constitution of Pakistan (1973)---

---Art. 25---Tax laws should be imposed on similarly placed persons. ?

I.A. Sherwani and others v. Government of Pakistan and others 1991 SCMR 1041 rel.

(h) Constitution of Pakistan (1973)---

----Art.25---Tax law not based on reasonable classification---Validity---Courts had power to strike down such law.?

PLD 2005 Kar. 55 rel.

Dr. Muhammad Farogh Nasim for Petitioners (in C. P. Nos.D-1901 to 1905 of 2009).

Sajid Bashir for Petitioner (in C.P. No. D-2104 of 2009).

Hasan Akbar for Petitioner (in C.P. D-2136 of 2009).

Mazharul Hassan for Petitioner (in C.P. Nos.D-2278 of 2009 and 180 of 2010).

Asim Iqbal for Petitioner (in C.P. No. 2392 of 2009).

Aminuddin Ansari for Petitioner (in C.P. Nos. D-2631 and 2632 of 2009).

Rehan Hassan Naqvi and Miss Lubna Pervez for Petitioner (in C.P. D.2728 of 2009).

Obaid-ur-Rehman for Petitioner (in C.P. Nos.D-2803 of 2009 and D-167 of 2010).

Ashiq Raza, Deputy Attorney-General for Respondent No.1.

Chaman Lal Oad for Respondents Nos. 2 and 3.

Abdul Ghaffar Khan for Private Respondents (in C.P.D. 1902 of 2009).

Muhammad Izhar for Private Respondents (in C.P. Nos. 1938 and 1971 of 2009).

Atif Awan for Private Respondents (in C.P. No. D-2392 of 2009).

Dates of hearing: 20th, 22nd, 25th, 27th January, 1st, 2nd, 3rd and 8th February, 2010.

2010 P T D 2012

[Karachi High Court]

Before Gulzar Ahmad and Irfan Saadat Khan, JJ

COMMISSIONER OF INCOME TAX, KARACHI

Versus

Messrs GRINDLAYS BANK PLC, KARACHI

I.T.As. Nos. 607 and 608 of 2000, decided on 23rd February, 2010.

Income Tax Ordinance (XXXI of 1979)---

----Ss.24(e), 24-C & 163---Income Tax Rules, 1982, R.20---Non­resident Banking Company doing business in Pakistan---Head Office expenses, addition of---Scope---Provisions of Tax Treaty made for Avoidance of Double Taxation would prevail over provisions of Income Tax Ordinance, 1979 by virtue of S.163 thereof---No such addition could be made in income of such company.

American Express Bank Limited Karachi v. Commissioner of Income Tax, Karachi 2009 PTD 1791; I.T.C. No. 71, 75 and 76 of 1992, dated 8-10-1998 and I.T.A. No. 534 of 1999, dated 8-3-2005 rel.

Javed Farooqui for Appellants.

Iqbal Salman Pasha for Respondents.

2010 P T D 2036

[Karachi High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

FILTERS PAKISTAN (PRIVATE) LIMITED---Petitioner

Versus

FEDERAL BOARD OF REVENUE through Member Customs and 2 others---Respondents

Constitutional Petition No. 252 of 2009, heard on 9th March, 2010.

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

---S.4---Constitution of Pakistan (1973), Art. 199--- Constitutional petition---Maintainability---Demand of tax by authority on ground of non-applicability of exemption notification to goods imported by petitioner---Validity---Authority had not issued show cause to petitioner before raising such demand, thus, he had no occasion to avail remedy of appeal before Tribunal---Petitioner had sought determination of fiscal rights on substantial question of law to be arrived at upon interpretation of impugned notification---Constitutional petition was maintainable in circumstances.

Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 PTD 1; Messrs Usmania Glass Sheet Factory Limited, Chittagong v. Sales Tax Officer, Chittagong PLD 1971 SC 205 and Messrs Kamran Industries v. The Collector of Customs (Exports) and 4 others PLD 1996 Kar. 68 rel.

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

----S.4(c)---S. R. O. 509(I)/2007, dated 9-6-2007---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Import of Artificial Filament Cellulose Acetate Tow (AFCAT) for manufacturing of cigarette filter rods---Importer claimed exemption from tax on basis of S.R.O. 509(1)/2007 for such goods to be falling in PCT Heading. 5502.0090---Refusal of authority to accept such claim on ground that such exemption applied to textile and articles thereof and not to AFCAT to be used exclusive in manufacturing of cigarette filter rods---Validity---Terms "Textile and articles thereof" used in such Notification were not conditioned by purpose of its use or use by any sector or industry, but only condition placed for application thereof was that same should be falling under PCT heading provided in Chaps. 50 to 63 and other respective headings---Factum of importing AFCAT by petitioner for last ten years by without demand and payment of tax and AFCAT being a textile and falling in PCT Heading 5502-0090 was not disputed by authority---Petitioner could not be deprived of benefit of such notification merely on imagining or reading words, which were not written therein---Interpretation given to such notification by C.B.R. and authority seemed to be based upon purpose and use of AFACT than its nature as basis of its classification---AFCAT being clearly textile and falling PCT heading, thus, was covered by such notification and petitioner was entitled to its benefit---High Court accepted constitutional petition in circumstances.

Commissioner of Income Tax, Companies-II and another v. Hamdard Dawakhana (Waqf), Karachi PLD 1992 SC 847; Assistant Collector, Central Excise and Sales Tax, Mardan v. Al Razad Synthetic (Pvt.) Ltd 1998 SCMR 2514;, Noor Elahi and others v. Member Board of Revenue and others 2003 SCMR 1045; Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore 2002 CLC 705; Messrs Sargodha Jute Mills Limited through Director v. Additional Collector-II, (Adjudication), Collectorate of Customs, Sales Tax and Central Excise (Adjudication), Lahore and another 2006 PTD 515; Muhammad Iqbal Siddiqui v. Province of Sindh, Ministry of Food and Cooperation through Secretary and others 2007 YLR 1457; Messrs Sui Southern Gas Company v. Federation of Pakistan and others 2002 PTD 150; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle-XVIII South Zone, Karachi and others 1992 PTD 1; Messrs Usmania Glass Sheet Factory Limited, Chittagong v. Sales Tax Officer, Chittagong PLD 1971 SC 205; Pakistan Tobacoo Co. Ltd. v. Pakistan through the Secretary, Ministry of Finance, Islamabad and 4 others 1991 PTD 359; Messrs Ahmed Abdul Ghani Textile Mills v. Chairman, Central Board of Revenue and 2 others 1990 CLC 493; Messrs Razzak Industries Employees Union (C.B.A.) v. Second Sindh Labour Court, Karachi and another (1986 PLC 109); Messrs Kamran Industries v. The Collector of Customs (Exports) 11th Floor, Customs House, Karachi and 4 others PLD 1996 Kar. 68; Nazir Ahmad v. Pakistan and 11 others PLD 1970 SC 453; Messrs Radaka Corporation and others v. Collector of Customs and another 1989 SCMR 353; Messrs Nizamuddin Faridul Haq v. The Collector of Customs, (Appraisement), Karachi and 2 others PLD 1994 Kar. 480; Central Board of Revenue, Islamabad and others v. Sheikh Spinning Mills Limited, Lahore and others 1999 SCMR 1442; Messrs Ihsan Sons (Pvt.) Ltd., Karachi v. Federation of Pakistan through Secretary Revenue Division, Ministry of Finance, Islamabad and 2 others 2006 PTD 2209; Ghandhara Nissan Diesel Ltd., Karachi v. Collector of Customs Appraisement, Karachi and another 2006 PTD 2030; Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232; Messrs Swadeshi Ploytex Ltd. v. Collector of Central Excise (1990) 2 SC 358; Messrs Bombay Chemical Private Ltd. v. The Collector of Central Excise, Bombay-1, Bombay AIR 1995 SC 1469; Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, Surat and others AIR 1970 SC 755 and Messrs Gujarat State Fertilizers Co. v. Collector of Central Excise AIR 1997 SC 3620 ref.

(c) Interpretation of statutes---

----Taxing statute---Words used in a statute including taxing statute---Meanings to be assigned to such words---Principles.

The words are to be taken in -their literal meaning, and plain, ordinary and natural meanings are to be assigned to them, and same principle will also be applicable to the taxing statute, unless the plain, ordinary and natural meaning does not make sense, then resort has to be made to discover the intent and meaning of the word used in the statute.

Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs, Circle Sheikhupura and another PLD 1988 SC 370 and Government of Pakistan and others v. Messrs Hashwani Hotel Ltd. PLD 1990 S 68 rel.

(d) Interpretation of statutes---

----Fiscal statute---Language of such statute must not be stained to tax a transaction not allowed by legislature to be taxed---Principles.

The language of the statute must not be stained to tax the transaction, which otherwise the legislature has not allowed to be taxed as there is no room for any intendment, there is no equity about a tax, there is no presumption as to tax, nothing is to be read and nothing is to be implied, but one can only look fairly at the language used.

Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs, Circle Sheikhupura and another PLD 1988 SC 370 and Government of Pakistan and others v. Messrs Hashwani Hotel Ltd. PLD 1090 S 68 rel.

(e) Interpretation of statutes---

----Fiscal statute---Exemption notification would be construed strictly at point of entry, but liberally once goods found to be falling in any category thereof.

Yousuf Sayeed for Petitioner.

Zain A. Jatoi for Respondent No.1.

Raja Muhammad Iqbal for Respondent No.2.

Date of hearing: 9th March, 2010.

2010 P T D 2338

[Karachi High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

IQBAL HUSSAIN through Authorized Attorney

Versus

FEDERATION OF PAKISTAN through The Secretary, Revenue Division and 2 others

C.P. No.D-2536 of 2009, decided on 9th August, 2010.

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

----S. 18 & First Sched. (Import Tariff)--- West Pakistan Arms Ordinance (XX of 1965), S. 11-A---Pistols of non prohibited bore/caliber of .9 MM (equal to 0.3533 inches), import of---Declaration of such pistols under PCT Heading 9302.0012 chargeable to customs duty @ 15%, but exempt from regulatory duty---Classification of such pistols by Department and Revenue Board under PCT Heading 9302.0092 chargeable to customs duty @ 35% and regulatory duty @ 15%---Validity---Term "prohibited bores" used in First Sched. of Customs Act, 1969 was neither defined therein or West Pakistan Arms Ordinance, 1965 nor did have any ordinary grammatical meaning---Federal Government in exercise of its powers under S. 11-A of West Pakistan Arms Ordinance, 1969 had issued Notification dated 18-8-1991 specifying therein "Revolvers or Pistols over 46 inches Bore" to be falling in category of "prohibited bores" --- While taking term "prohibited bore" to have same meaning as assigned thereto in West Pakistan Arms Ordinance, 1965, then expression "Revolvers and Pistols... of prohibited bores and calibers higher than 0.32 inches" as used in Import Tariff would mean all pistols falling within term "prohibited bore" would be of a bore in excess of 46 inches, then additional condition of being a caliber/bore in excess of 32 inches would become redundant---Word "and" as used in Import Tariff would be read disjunctively and not conjunctively as same would avoid latter part of heading from becoming redundant---PCT Heading 9302.0012 would apply to an imported pistol of prohibited bore or of a bore greater than 32 inches---High Court set aside impugned classification made by Revenue Board and Department.

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

----S. 18 & First Sched. Import Tariff---West Pakistan Arms Ordinance (XX of 1965), S. 11-A---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Alternate remedy---Availability of---Effect---Pistols of non prohibited bore/caliber of .9 MM (equal to 0.3533 inches), import of---Declaration of such pistols by petitioner under PCT Heading 9302.0012 chargeable to customs duty @ 15%, but exempt from regulatory duty---Classification of such pistols by Department and Federal Board of Revenue under PCT Heading 9302.0092 chargeable to customs duty @ 35% and regulatory duty @ 15%---Question involved in constitutional petition pertained to interpretation of Import Tariff and classification headings and true meaning thereof---Interpretation of a statute or any party thereof including a schedule thereto was function and duty of courts specially High Court under Art. 199 of the Constitution---Federal Board of Revenue being final authority for classification purposes had already given its ruling in such matter---No purpose, thus, would be served in requiring petitioner to pursue alternative remedies, even if such be available---Constitutional petition was maintainable in circumstances.

(c) Interpretation of statutes---

----Word "and" can be read as "or" or vice versa in appropriate circumstances.

Khadim Hussain and others v. Additional District Judge Faisalabad and others PLD 1990 SC 632 ref.

(d) Interpretation of statutes---

----When two reasonable interpretations possible, one leads to redundancy, while other avoids surplusage, then later interpretation has to be preferred.

Junaid Ghaffar for Petitioner.

Raja M. Iqbal for Respondents.

2010 P T D 2427

[Karachi High Court]

Before Muhammad Ather Saeed and Munib Akhtar, JJ

COMMISSIONER (LEGAL) INLAND REVENUE, L.T.U., KARACHI

Versus

Messrs INTERNATIONAL FOUNDATION GARMENTS LTD., KARACHI

I.T.R.A. No. 116 and C.M.A. No.792 of 2010, decided on 26th August, 2010.

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

----S. 133---General Clauses Act (X of 1897), S.24-A---Reference to High Court---Exercise of power under enactments---Nome Tax. Appellate Tribunal, in the present case, had observed in its order that "Departmental Representative, who represented the appellant department before the Tribunal, had not much to say to support the grounds of appeal and after perusing the order of the Commissioner of Income Tax (Appeals), the Tribunal was of the opinion that the order of the Commissioner of Income Tax was very clear on the issues and did not require any interference" which meant that the Tribunal fully subscribed to the reasons given by the Commissioner for dismissing the appeal, Tribunal presumably adopted them---Departmental Representative had not argued before the High Court that Commissioner had not given any reason for allowing the appeal which had led to the filing of the appeal before the Tribunal by the appellant--Held, impugned order of the Tribunal did not violate the provisions of S.24-A, General Clauses Act, 1897.

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

----S. 133---Reference to High Court---Questions which had arisen from the factual findings of the forums below being questions of facts could not be adjudicated by High Court in advisory jurisdiction under S.133 of the Income Tax Ordinance, 2001.

Ali Mumtaz Shaikh for Applicants.

2010 P T D 2673

[Karachi High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

Messrs PAKISTAN BEVERAGE LIMITED, KARACHI

Versus

LARGE TAXPAYER UNIT (L.T.U.) through Chief Commissioner, Land Revenue, Karachi

Sales Tax Reference Nos.97 to 116 of 2010, decided on 14th September, 2010.

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

----Ss.3(1)(b), 4, 7 & 47---Customs Rules, 2001, Chap.XII (7) & R.296(1)(f)---Duty and Tax Remission for Export Rules---Reference---Value Added Tax (VAT), levy of---Principles---Imports and exports of goods---Zero-rating---Duty and Tax Remission for Exports (DTRE)---Grievance of assessee was with regard to entitlement of input tax adjustment/refund in respect of sales tax paid on raw materials consumed in manufacturing/export of goods by assessee, whether under DTRE Scheme or otherwise---Validity---First point to keep in mind was that Sales Tax Act, 1990, currently in force was a value added tax or VAT-When sales tax was levied in VAT mode, it was charged at each stage in the supply chain as the goods move from point of origin to ultimate destination---At each stage, sales tax was paid on the value added by supplier concerned---Such was done by taking sales tax charged by supplier for the goods sold by him (known as output tax) and subtracting from it the sales tax paid by him for the goods purchased by him (known as input tax)---If difference (i.e. output tax minus input tax) was positive over the relevant tax period, i.e. the output tax was more than input tax, that meant that the supplier had to pay the difference to the State---If difference was negative (i.e. output tax was less than input tax), then supplier was entitled to a refund of such amount or its adjustment in the next tax period---In respect of each transaction, other than the first and the last, the sales tax involved had a dual characteristic---For the person making the supply (i.e. the seller) it was his output tax and for the person acquiring the goods (i.e. the buyer) it was his input tax and such were the two sides of the same transaction---In VAT, the output-input adjustment and payment of tax in terms thereof, was of the essence of the tax---Without such (or any equivalent) adjustment, the tax would simply cease to be a value added tax---In case of sales tax, the principle was given statutory effect in S.7 of Sales Tax Act, 1990, and the same was the basic provision of the statute---In supply chain that ended in goods being exported, the State might choose the stage most convenient to it to give effect to zero-rating---In most cases, it was at the end of supply chain i.e. at the stage of actual exporter but there was nothing preventing the State from choosing any prior stage in the supply chain and that was what had happened in the case of input goods supplied under DTRE Rules---Insofar as any other goods supplied to exporter were concerned, their position remained the same as before: the output-input adjustment resulting from zero-rating took place at the end of supply chain i.e. at the stage of actual export---Such position was not touched in the statute, there could be nothing in DTRE Rules that could detract or derogate from the same---Appellate Tribunal failing to keep the basic principle in mind ended up completely misreading and misapplying DTRE Rules, therefore, order passed by the Tribunal was wrong and could not be sustained---Reference was disposed of accordingly.?

Additional Collector, Sales Tax v. Associated Industries Ltd. 2009 PTD 1799; Great Sea Industries and others v. Federation of Pakistan and another C.P. No. 1684 of 2007; decided on 18-3-2009; Agro International (Pvt.) Ltd. v. Federation of Pakistan and another C.P. No. 2225 of 2008, decided on 11-3-2008; G.P. Singh, Principles of Statutory International, 9th Ed., 2004; Collector of Central Excise Jaipur v. Raghubar India Ltd. AIR 2000 SC 2027; Foleming (t/a Badycraft) v. HM Revenue and Customs (2009) UKHL 2; Metcash Trading Ltd. v. Commissioner of South African Revenue Service and another 2002 (4) SA 317; Value Added Tax A Comparative Approach by Alan Schenk and Oliver Oldman, 2007 and Benyon and Partners v. HM Commissioner of Customs and Excise (2004) UKHL 53 ref.

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

----Ss.3 (1)(b) & 4---Imports and exports of goods---Zero-rating---Imports are specifically under S. 3(1)(b) of Sales Tax Act, 1990, have been brought to tax, while exports are specifically and expressly zero rated by S. 4 of Sales Tax Act, 1990---Sales Tax Act, 1990, embodies a destination principle of value added tax (VAT)---Since zero rating of exports is a fundamental principle of VAT levied in such manner, therefore, it is an essential element of Sales Tax Act, 1990.?

Khalid Jawed Khan for Applicant.

Ali Mumtaz Sheikh for Respondent.

Date of hearing: 14th September, 2010.

2010 P T D 1

[Lahore High Court]

Before Sh. Azmat Saeed, J

GAS LINKS CNG (PVT.) LTD. through Director, Faisalabad

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Islamabad and 3 others

Writ Petition No. 3018 of 2009, decided, on 6th November, 2009.

Sales Tax Act (VII of 1990)---

----Ss.3(1), 7-A & 71---Sales Tax Special Procedure Rules, 1990, Rr.13, 16 & 20(2)(c)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Sales tax, charging of---Supply of electricity---Double taxation---Petitioners were engaged in running Compressed Natural Gas stations and were consuming electric power supplied by various distribution companies---Petitioners contended that levy and collection of sales tax on the bill for electric power consumed by Compressed Natural Gas stations amounted to double taxation---Validity---Sales tax was a tax on consumption charged upon taxable supply collected by registered person making such supply as agent and trustee of Federal Government---Where such taxable supplies were consumed, the burden of tax had to fall upon consumer, however, where such supplies were converted into another taxable supply, the same were liable to collection of sales tax---In order to avoid duplication of tax burden upon ultimate consumer, sales tax already-paid by recipient of supplies was liable to be adjusted against sales tax payable on converted further taxable supply---Petitioners were unable to point out any illegality in levy of collection of sales tax on the electric power supplied to Compressed Natural Gas stations--Entitlement of petitioners to claim refund of input tax was a matter not, only alien to the lis at hand having not been specifically asserted but also premature as not such claim for adjustment or refund of tax had been made by petitioners and declined by authorities---Petition being premature was misconceived---High Court directed the authorities to pass an order if and when any claim for refund or adjustment of input tax would be made by petitioner in terms of Rs.13 of Sales Tax Special Procedure Rules, 1990, and petitioner could seek their remedy available under law---Petition was dismissed accordingly.

Messrs Mayfair Spinning Mills Ltd. Lahore v. Customs, Excise and Sales Appellate Tribunal Lahore and 2 others PTCL 2002 CL 415 rel.

Ch. Anwar-ul-Haq, Aamir Sohail, Khalid Nawaz Ghuman, Majid Saeed Butt, Rana Muhammad Afzal, Muhammad Saqib Sheikh, Bilal Ahmed Qazi, Syed Ali Imran Rizvi, Muhammad Nadeem Mirza, Muhammad Akram Nizami, Zeshan Amir, Ajmal Khan, Zulkernen Khan, Muhammad Saleem Ch., Ch. Liaqat Ali Sandhu, Rana Muhammad Abdul Qadoos, Abdul Qadoos Mughal, Muhammad Waseem Ch. Sajjad Sarwar Saqib for Petitioners.

Sh. Izhar-ul-Haq, Kausar Parveen and Dr. Irteza Awan for Respondents.

Date of hearing: 29th October, 2009.

2010 P T D 395

[Lahore High Court]

Before Imtiaz Rashid Siddiqui, J

Messrs ROOTS MONTESSORI AND HIGH SCHOOL, RAWALPINDI

Versus

COMMISSIONER OF INCOME TAX (AUDIT), RAWALPINDI and 3 others

Writ Petitions Nos.1858 of 2008, 209, 453, 709, 816 and 1030 of 2009, heard on 8th June, 2009.

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

----S. 177(1)---Selection of a person for total audit---Criteria for such selection not prescribed by Board---Effect---Such criteria being confidential and having no nexus with the taxpayers: would merely Provide guidance for tax officials---Such selection could be done by Commissioner in exercise of his powers under section 177(4) of Income Tax Ordinance, 2001 and had nothing with such criteria---Principles.

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

---S. 177---Selection of person for total audit---Absence of period of limitation in S.177 of Income Tax Ordinance, 2001 would not mean that only assessment of current year could be audited---Principles.

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

----Ss. 177 & 207---Selection of person for total audit---"Commissioner" appointed under S.207 of Income Tax Ordinance, 2001 might be known as "Commissioner Audit for purposes of S.177 thereof.

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

----S.177(4)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Selection of petitioner's assessment for audit without issuing prior notice or inviting his explanation thereto---Validity---Audit was not a conclusion of any proceedings, but was only a beginning thereof---Balance had to be maintained for protecting rights of taxpayer, thus, compliance with norms of justice was imperative while selecting an assessment for audit---High Court accepted constitutional petition while directing authority to give an opportunity of hearing to petitioner before selecting his assessment for audit.

Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others 2009 SCMR 344 =2009 PTD 37 rel.

Hafiz Muhammad Idris for Petitioner (in Writ Petitions Nos.1858 of 2008 209, 453 and 709 of 2009).

S.A. Mahmood Khan Saddozai for Petitioner (in Writ Petitions Nos.816 and 1030 of 2009).

Babar Bilal for Respondents (in Writ Petition No.1858 of 2008).

Ms. Shahina Akbar for Respondents (in Writ Petitions Nos.209 and 1030 of 2009).

Muhammad Naeem Qazi for Respondents (in Writ Petition No.453 of 2009).

Syed Nayyar Hussain for Respondents (in Writ Petition No.816 of 2009).

Date of hearing: 8th June, 2009.

2010 PTD 453

[Lahore High Court]

Before Irfan Qadir, J

Messrs TOUHEED LEATHER through Proprietor

Versus

ADDITIONAL COLLECTOR (ADJUDICATION) OF SALES TAX AND FEDERAL EXCISE, REGIONAL TAX OFFICE, LAHORE and another

Writ Petition No. 4955 of 2009, decided on 26th March, 2009.

Sales Tax Act (VII of 1990)---

----S.36---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.32---Constitution of Pakistan (1973), Art.199---Constitutional petition---Recovery of tax along with additional taxes and penalties---Reference to the President of Pakistan---Petitioner by show-cause notice was asked to make payment of amount along with additional taxes and penalties---Contention of the petitioner was that. according to S.36(3) of Sales Tax Act, 1990, the Additional Collector was to determine the amount of tax after considering the objection of the person served with a notice to show-cause under subsections (1)(2) of S.36 of the Sales Tax Act, 1990---Such determination in terms of proviso of subsection (3) of S.36 of Sales Tax Act, 1990 was to be made within 90 days from the date on which show-cause notice was initially served---Counsel further contended that Additional Collector failed to comply with the proviso to S.36 of Sales Tax' Act, 1990 which proviso had made it clear that time was of the essence in such matters---Petitioner was well within his right to have moved an application to the Federal Tax Ombudsman for redressal of his grievance to the extent that the petitioner was not obliged to pay the amount enumerated in the show-cause notice, especially when the essential condition of 90 days contained in the proviso had not been fulfilled---Federal Tux Ombudsman, however decided that matter against petitioner---Prima facie, the order of Federal Tax Ombudsman was silent as regarded the non-compliance of Proviso to S.36 of Sales Tax Act, 1990---Appeal in that regard had been filed before the President of Pakistan and a period of more than 5 months had elapsed, but no decision had been taken by the President of Pakistan---Impugned recovery was stayed till such time the matter was decided by the President of Pakistan. ?

Muhammad Ozaid Chughtai for Petitioner.

Khawar Ikram Bhatti for Respondents.

2010 P T D 487

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs ELGA CONTROLS through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Islamabad and 6 others

Writ Petitions Nos.16589, 16020, 16021 and 16022 of 2009, decided on 9th October, 2009

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

----Ss.3-A, 3-E [as amended by Finance Act (VII of 2005)], Ss. 25, 26, 80, 156 & 168---Constitution of Pakistan (1973), Art.199--Constitutional petition---Import of "Spraying Lorries"---Conversion into truck chassis---Examination and assessment---Seizure of imported goods after clearance---Petitioner/importer imported used "Spraying Lorries", which were examined and assessed on the basis of valuation fixed by the valuation committee---Petitioner paid customs duties and taxes duly assessed by the appropriate officer of the customs department and said imported consignments were made out of charge/cleared---Later on Intelligence Officer, seized said vehicles on the plea that petitioner had changed spraying mechanism fitted in said Spraying Lorries and converted into truck chassis frames fitted with engine and cab and that such trucks as converted by the petitioner, were not importable under Import Policy Order, 2008---Sprinkler Lorries, which the petitioner had imported, were classified under PCT Heading 8705.9000, whereas truck mounted on chassis with cab, fell under PCT Heading 8706.0000---Customs duty in the former case was more than the import of vehicle under the latter Heading---Importer had to pay additional taxes and duties in case of import of Spraying Vehicle, as such Lorry. was equipped with Spraying System for which the tax was separately leviable---Element of evasion of customs duty and taxes, was not involved in the case, in circumstances---No ban, prohibition or restriction existed under the Import Policy Order 2008-09 for conversion of vehicle into any other shape, like truck, bus or a trailer---Such vehicles, in circumstances were not liable to be seized or detained on the plea of conversion/modification---Impugned seizure of the vehicles on the basis of their conversion and modification was not justified, more so when those vehicles were importable under the policy without any condition or restriction---Impugned order/action of the authorities qua seizing, detaining the vehicle, was declared as illegal and without lawful authority---Authorities were directed to release forthwith the seized vehicles of the petitioner.

Messrs Zeb Traders through Proprietor v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 3 others 2004 PTD 369; Mazhar Iqbal v. Collector of Customs (Preventive) Karachi and 2 others 2004 PTD 2994; Messrs Ali Trade Linkers, Lahore v. Federation of Pakistan through Secretary, Ministry of Finance Government of Pakistan, Islamabad and 4 others 2005 PTD 1164 and Shahzad Ahmed Corporation through Shahzad Ahmed v. Federation of Pakistan through Secretary, Ministry of Finance, Government of Pakistan, Islamabad and 2 others 2005 PTD 23 ref.

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

----Ss.2, 3-A, 3-E, 4 & 80 [as amended by Finance Act (VII of 2005)]--Constitution of Pakistan (1973), Art.199---Constitutional petition--Powers to re-examine and re-assess goods which were out of charge after assessment by the concerned Collectorate of Customs---Under provisions of amended Ss. 3-A, 3-E of Customs Act, 1969, F.B.R. was vested with the powers to specify the functions, jurisdiction and powers of the Directorate--Various officers of the Directorate of Intelligence had been conferred the powers to discharge the duties of the Officers of the customs under the provisions of Customs Act, 1969---Director had full powers to investigate and re-examine even if the goods were out of charge after the completion of the process of appraisement, if it had reason to believe that goods were possessed by the importer in contravention of provisions of Customs Act, 1969---Authorities had ample powers under the amended law to re-examine and re-assess goods even if the same were out of charge after assessment by the concerned Collectorate of Customs.?

F.A. Corporation through Proprietor v. Director-General Customs, Intelligence and Investigation and 3 others' 2008 PTD 1365 ref.

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

----S.168---Seizure of goods---Power to seize goods was an extraordinary power and it could be exercised in the extraordinary circumstances---Condition precedent for seizure of the goods under S.168(1) of the Customs Act, 1969 was that the goods seized should be liable to be confiscated---Appropriate officer of the customs had to see that some prima facie material was available with him to the effect that the goods were liable to be confiscated---Goods (vehicles) could be seized or taken into possession by the Customs Authorities provided they were being plied or possessed in contravention of provisions of Customs Act, 1969---Phrase "Anything liable to confiscation under the Customs Act, 1969" made it clear that liability of confiscation had already been determined and was no longer in dispute.?

Collector of Customs and others v. S.M. Yousaf 1973 SCMR 411 ref.

Mian Abdul Ghaffar for Petitioner Izhar ul Haq Sheikh for Respondents.

Date of hearing: 24th September, 2009.

2010 PTD 571

[Lahore High Court]

Before Sh. Azmat Saeed, J

Messrs SADAR ANJUMAN-E-AHMEDIA through General Attorney

Versus

COMMISSIONER OF INCOME TAX (AUDIT DIVISION), FAISALABAD and 3 others

Writ Petitions Nos. 11166, 273, 12332, 11771, 19842, 14508, 19630, 19687, 19511, 12545, 16128, 18337, 12540, 16277, 16356, 18363, 19153, 11714, 11715, 12600, 12125, 13181, 13534, 13078, 12270, 12478, 13075, 12475, 9576, 11778, 11083, 13151, 12130, 12914, 18473, 12712, 10378, 17065, 11167, 12584,`12482, 12100, 13154, 198843(sic), 16915, 19785, 11608, 20446, 20454, 21866, 22055, 21981, 21568, 21982, 22010, 12326, 20846, 17445, 17447, 18451, 18452, 21387, 17064, 8700, 17067, 10112, 14824, 10111, 14399, 14147, 15765, 2389, 15516, 17722, 18334, 10152, 17936, 1749, 17643, 17322, 17642, 14037, 14038, 4293, 17721, 17066, 18126, 15489, 15491, 17069, 8535, 15398, 15399, 10128, 17068, 10113, 22614, 22656, 22657, 22746, 21828, 16694, 21829, 22157, 22176, 22245, 22254, 22328, 16015, 15965 and 17063 of 2009, decided on 7th December, 2009.

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

----S.177(1), (2) & (4)---Selection of case for audit---Criteria---Provisions of S.177(1) and (2) of Income Tax Ordinance, 2001, are disjunctive and not conjunctive-Case can always be selected for audit on the basis of criteria as laid down by Federal Board of Revenue, besides which and in addition thereto, persons can also be selected for audit by Commissioner under S.17(4) of Income Tax Ordinance, 2001--Commissioner Income Tax is empowered under S.177(4) of Income Tax Ordinance, 2001, to issue notice on the basis of criteria spelt out in S.177(4)(a)(b)(c) & (d) of Income Tax Ordinance, 2001.

(b) Interpretation of statutes---

----Discriminatory law---Scope---Any law though not ex facie discriminatory but capable of being used or applied in discriminatory manner cannot be termed as good law.

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

----S.177(4)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Income Tax assessment---Selection of case for audit---Procedure---Petitioners were assessees of income tax and were aggrieved of notice issued by Commissioner Income Tax for selection of their cases for audit---Validity---Conditions and parameters set forth in S.177(4)(a)(b)(c) & (d) of Income Tax Ordinance, 2001, were jurisdictional basis, existence whereof was a sine qua non for selection of a person for audit---Existence of such jurisdictional basis must necessarily be determined before such power could be exercised---Such discrimination could only be effected after hearing petitioner and granting them opportunity to produce material to displace the case, which exercise could only be undertaken on individual case to case basis---Any objections raised by petitioner would be required to be adjudicated upon through speaking order---If jurisdiction to issue such notice was challenged then question of jurisdiction would require to be dealt with and decided first, before the Commissioner could proceed further in the matter by commencing intrusive process of audit---High Court declined to strike down notices under S.177(4) of Income Tax Ordinance, 2001, however, petitioners would be at liberty to respond thereto and raise any and all objections including but not limited to absence of jurisdiction by filing their replies---High Court directed that such objections would require to be adjudicated upon through speaking order after providing fair opportunity of hearing to petitioners and such adjudication must precede audit---Petition was disposed of accordingly.

Commissioner of Income Tax and others v. Messrs Media Network and others 2006 PTD 2502; Ch. Muhammad Hussain and others v. Commissioner of Income Tax 2005 PTD 152; Commissioner of Income Tax and others v. Fatima Sharif Textile Kasur and others 2009 SCMR 344 = 2009 PTD 37; Syed Bhais Pvt. Ltd v. CBR Islamabad and another 2007 PTD 239; Sadiq Hussain Majid v. Secretary Government of Pakistan and others 2007 PTD 2188; Messrs NESPAK Pvt. Ltd. v. Federation of Pakistan through Secretary Law and Parliamentary Affairs and 2 others 2007 PTD 2063; Muhammad Umar v. Commissioner Income Tax Karachi' 2009 PTD 284; Messrs Noble Pvt. Ltd., through Manager Finance and Administration v. FBR through Chairman and 4 others 2009 PTD 841; Messrs Honda Fort Pvt. Ltd., through Director v. Commissioner of Income and another 2009 PTD 20; Paras Commercial Company and others v. Commissioner of Income Tax Central Zone A Karachi 1993 SCMR 2071; Munir Bhimjee and others v. Islamic Republic of Pakistan and 2 others 2005 PTD 1974 and Messrs Novitas International v. Income Tax Officer (Films Circle) and others 1991 PTD 968 distinguished.

Messrs Amson Vaccines Pharma (Pvt.) Ltd. v. CIT 2008 PTD 1440; Messrs Rah-e-Manzil Transport v. Muhammad Amin PLD 1963 Karachi 182; Mir Nabi Bakhsh Khan Khoso v. Branch Manager N.B.P. 2000 SCMR 1017; Messrs Kunja Textile Mills v. CIT, I.C.A. No. 125 of 2007; Messrs Ittefaq Sugar v. F.B.R. Writ Petition No. 7146 of 2008 and Messrs DDFC Pvt. Ltd. v. C.I.T. Writ Petition No. 2928 of 2008 ref.

Muhammad Shahbaz Butt, Muhammad Shahid Baig, Ch. Muhammad Saleem, Sayyid Ali, Sirajuddin Khalid, M. Iqbal Hashmi, Rana Munir Hussain, Sajid Ijaz Hotiana, Rana Muhammad Naeem Munawar, Ch. Mumtaz ul Hassan, Mian Masood Ahmad, Muhammad Ijaz Ali Bhatti, Rana Muhammad Afzal, Asghar Ahmad Kharal, Ikram ul Haq, M. Shahid Usman, Ch. Anwar ul Haq, Dr. Ilyas Zafar, Shaista Habib, Muhammad Nadeem, Naveed A. Andrabi, Muhammad Younas Khalid, Syed Abrar Hussain Naqvi, Syed Ali Imran Rizvi, Mian Ashiq Hussain, Muhammad Amjal Khan, Javed Iqbal Qazi, Ch. M. Ishaq Sipra, Sh. Shahid Waheed, Ch. Zahid Ateeq, Zulfiqar Khan, Shahid Pervez Jami, M.M. Akram, Tahir Mehmood Butt, M. Javed Arshad, Tahir Naeem and Muhammad Mansha Sukhera for Petitioners.

M. Ilyas Khan and M. Naseem Kashmiri, Dy. A.-G. for Respondents.

Date of hearing: 22nd October, 2009.

2010 P T D 1024

[Lahore High Court]

Before Mian Saqib Nisar and Iqbal Hameedur Rehman, JJ

DIRECTOR, INTELLIGENCE AND INVESTIGATION (CUSTOMS AND EXCISE), FAISALABAD and another

Versus

BAGH ALI

Custom Appeals Nos.12, 13 of 2005, Custom References Nos. 1, 14, 16, 20. 24, 25, 28, 29, 30, 34, 35 to 40 43, 45, 46, 50, 51 to 53, 60, 61, 64 67 to 69, Excise Tax Reference No.4 and Sales Tax Reference Nos. 28, 30, 35 to 43, 46 to 48, 51, 65, 71, 78, 79 of 2009, decided on 24th December, 2009.

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

----Ss.194-C & 196---Sales Tax Act (VII of 1990), Ss.2(1), 46 & 47(1)--Federal Excise Act (VII of 2005), Ss 2(3) & 34(2)(3)---Federal Excise Rules, 2005, R.51---Customs, Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006, R.2(1)(c)---Constitution of Pakistan (1973), Art. 199---Constitutional Petition---Appeal to Customs, Excise & Sales Tax Appellate Tribunal---Marking of appeal by Registrar directly to a single Member of Tribunal under some administrative arrangement without its initial entrustment by Chairman to a Bench of two Members comprising such single Member---Decision of appeal by single Member of Tribunal challenged through reference application/appeal before High Court---Validity---Where case was initially entrusted by Chairman to a Bench of Two Members, but same after being part-heard could not be decided by such Bench due to certain circumstances, then Chairman keeping in view expediency and exigency of case could entrust same to single Member of same Bench---Such authority of Chairman was not a routine, incidental and ministerial in nature, but was dependant upon due application of mind to question as to which case should be allotted to a single Member Judicial or Technical on account of its nature and question involved therein---Where an authority had been conferred upon a particular person, then same had to be exercised by him alone and could not be further delegated---Such authority of Chairman could not be delegated to Registrar either at the time of institution of case or during its pendency---Question of exercise of such authority and jurisdiction by Chairman could not be equated with mere a procedural or substantial compliance rule---Impugned order passed by such single Member in matter falling either within purview of Customs Act, 1969, Sales Tax Act, 1990 or Federal Excise Act, 2005 could not sustain for error of jurisdiction---Question of lack of jurisdiction had not been raised before such single Member, thus, no question of law arose out of impugned order and High Court could not set aside same in exercise of its jurisdiction under special law---High Court converted reference/Appeal into constitutional petition and set aside impugned order for being without jurisdiction---Principles.

?

Azad Jammu and Kashmir Logging and Saw Mills Corporation through Chairman and Managing Director v. Collector Central Excise and Sales Tax Muzaffarabad and another 2005 PTD 1998; Collector of Customs, E. and Sales Tax v. Pakistan State Oil Company Ltd. 2005 PTD 2446; Dar Okaz Printing and Publishing Limited Liability Company v. Printing Corporation of Pakistan Private Limited PLD 2003 SC 808; The State v. Asif Adil and others 1997 SCMR 209; Messrs Nishat Mills Limited v. Superintendent of Central Excise Circle II and 3 others PLD 1989 SC 222; Collector of Customs, Model Customs Collectorate of PACCS, Karachi v. Muzammil Ahmad 2009 PTD 266; Messrs Rahim Electric Store, Faisalabad v. Secretary, Revenue Division, Islamabad 2003 PTD 187; Abdul Ghaffar Lakhani v. Federal Government of Pakistan and 2 others PLD 1986 Kar. 525 and James Patrik and Co. Proprietary Ltd. v. Decie Ethel Sharpe PLD 1955 PC 82 ref.

Statutory Interpretation by Cross 15, Azad Jammu and Kashmir Logging and Saw Mills Corporation through and Managing Director v. Collector Central Excise and Sales Tax Muzaffarabad and another 2005 PTD 1998; Collector of Customs, E. and Sales Tax v. Pakistan State Oil Company Ltd. 2005 PTD 2446; Collector of Customs, Model Customs Collectorate of PACCS, Karachi v. Muzammil Ahmad 2009 PTD 266; Abdul Ghaffar Lakhani v. Federal Government of Pakistan and 2 others PLD 1986 Kar. 525 and James Patrik and Co. Proprietary Ltd. v. Decie Ethel Sharpe PLD 1955 PC 82 rel.

(b) Jurisdiction---

---Where an authority has been conferred upon a particular person/officer, then same has to be exercised by him alone and cannot be further delegated.?

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

----S.196(1)---Sales Tax Act (VII of 1990), S.47(1)---Federal Excise Act (VII of 2005), S.34(3)---Reference/appeal to High Court against order of Appellate Tribunal---Scope---Only Question of law arising out of impugned order could be raised before High Court---Such legal question, be that of jurisdiction either of forums below in departmental hierarchy or Tribunal itself, must be agitated before such forum and on account of analyzing, same must emerge for determination, but if not, then same could not be termed as question of law arising out of impugned order---In references/appeals under special law, no collateral attack to order of Tribunal could be made even if based upon lack of jurisdiction---Principles.?

Azad Jammu and Kashmir Logging and Saw Mills Corporation through and Managing Director v. Collector Central Excise and Sales Tax Muzaffarabad and another 2005 PTD 1998; Collector of Customs, E. and Sales Tax v. Pakistan State Oil Company Ltd. 2005 PTD 2446; Collector of Customs, Model Customs Collectorate of PACCS., Karachi v. Muzammil Ahmad 2009 PTD 266 rel.

Izharul Haq, Zubair Khalid, Standing Counsel for Pakistan with Zia Ullah Kiani, Chairman, Customs, Excise and Sales Tax Appellate Tribunal for Petitioners.

Anwar-ul-Haq, Umar Arshad Hakeem, Kh. Aamir Farooq, Malik Ahsan Mahmood, Mian Abdul Ghaffar, Umar Ahmad Khan,-Najam ul Hassan, Jabbar Qadir, Malik Muhammad Akram, Arslan Pervaiz Durrani, Muhammad Akram Nizami, Waseem Ahmad Malik and Andaz Jillani Khan Lodhi for Respondents.

Dates of hearing: 10th and 14th December, 2009.

2010 P T D 1216

[Lahore High Court]

Before Ijaz Ahmad Chaudhry, J

Mirza QAYYUM BAIG and another

Versus

DILSHAD AHMAD KHAN and 3 others

Writ Petition No. 17108 of 2009, decided on 24th February, 2010.

Customs Act (IV of 1969)---

----Ss.157, 168, 195 & 223---Constitution of Pakistan (1973), Art.199--Constitutional petition---Quashing of F.I.R.---Concealing the contents of imported articles and giving false declaration for evading customs duty---Confiscation of goods---Impugned F.I.R. had been registered against the officials of the customs, who had allegedly facilitated in the clearance of the goods on the lowest duty---Practically the petitioner had no concern with the said F.I.R.---Petitioner had already been booked in another F.I.R. for evading the customs duty, wherein after having been arrested he had been sent to the judicial lock-up on completion of the investigation and nothing was to be recovered from his possession---Consignment admittedly was not passed out, but same remained available in the customs area---Allegations levelled in the F.I.R. against the officials of Customs Department could not be declared false in a slipshod manner---Factual controversies were involved, which could not be resolved in constitutional jurisdiction as recording of evidence was not permissible and High Court could not assume the role of the Investigating Officer---No good ground presently was made out for quashing of F.I.R.---Constitutional petition having no merits, was dismissed.

Bridg. Imtiaz Ahmad's case 1994 SCMR 2142 ref.

Muhammad Akram Nizami for the Petitioner.

Khawar Ikram for Respondents Nos.1 and 2.

2010 P T D 1260

[Lahore High Court]

Before Mian Saqib Nisar and Iqbal Hameed-ur-Rahman, JJ

Messrs AL-KHALIL COLD STORAGE

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Islamabad and 3 others

Intra-Court Appeal No.361 in Writ Petition No.3132 of 2009, I.C.As. Nos.321, 323 to 329, 331, 332, 343, 344, 345, 346, 347, 352, 354, 361 to 365, 370 to 377, 381, to 387, 390 to 401, 404 to 409, 412, 413, 414, 417 to 421, 423 to 432, 440 to 450, 454, 456 to 460, 462 to 479, 482 to 492, 497 to 500, 505, 509, 510, 511, 512, 514 to 522, 524, 525 to 530, 531, 533 to 538, 541, 547, 550, 563, 571, 613, 618, 621, 626 to 630, 633 to 638, 640, 646, 647, 648, 651, 652, 653, 658, 667 to 669, 671, 694 to 697, 703, 705, 706, 708, 709, 710, 714, 718, 728, 740, 741, 746, 748, 749, 750, 751, 756, 787 to 793, 797, 847, 859 to 866, 874, 879, 924, 925, 926, 932, 963, 964, 973, 984, 985, 986, Writ Petitions Nos.8561, 8562, 16521, 16663 of 2009 and 10141 of 2008, decided on 24th December, 2009.

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

----Ss. 147, 235 & First Schedule, Part-IV-Constitution of Pakistan (1973), Art.199---Law Reforms Ordinance (XII of 1972), S.3---Electricity bill---Withholding or advance income-tax on electricity bill as a tax on expenditure---Scope---Constitutional petition filed by appellants to declare the imposition of advance income tax or withholding tax on electricity bills harsh and unreasonable was dismissed by Single Bench of High Court---Contention of the appellants in intra-court appeal was that prior to amendment of S.235 of the Income Tax Ordinance through Finance Act, 2008 on 1-7-2008, Rs.2000 were being charged as withholding tax or advance income tax on the electricity bills amounting to Rs.20, 000 or more, however, the bills less than the said amount were chargeable on other percentage, but on account of the change brought in law, the percentage had incredibly been increased---Appellants further contended that withholding tax or advance income tax on electricity bills was a tax on expenditure, rather than the income and the matter did not fall within the Federal/Concurrent Legislative List and, therefore, the competence of the Parliament to impose said tax was confiscatory, harsh, unreasonable and amounted to a double taxation---Validity---Withholding tax or advance income tax was advance nature of the tax on income, which was permissible under the law; it was not a new concept (advance tax) to the income tax regime and was enforced as per the provisions of S.147 of the Income Tax Ordinance, 2001---Advance tax was ultimately founded upon and was embedded in the domain of the income---Advance tax or withholding tax squarely fell in Entry Number 47 of the Federal Legislative List, which had to be given widest possible meaning and amplitude and thus, on account of any misnomer of describing same as an expenditure could not be held to be beyond the legislative competence of the Parliament---Intra-Court appeals were dismissed.

State and another v. Sajjad Hussain and others 1993 SCMR 1523; Pakistan Industrial Development Corporation v. Pakistan through the Secretary, Ministry of Finance 1992 PTD 576; Elahi Cotton Mills' case PLD 1997 SC 582; Pakistan Tobacco Company Ltd. and another v. Federation of Pakistan through Secretary, Ministry of Commerce, Islamabad and 3 others 1999 SCMR 382; Government of Pakistan and others v. Muhammad Ashraf and others PLD 1993 SC 176; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582; Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, AIR 1939 FC 1 equal to PTCL 1986 FC 33; Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 AIR FC 1 = PTCL 1986 FC 33; Lt.-Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty, Government of Pakistan, Karachi and others PLD 1962 SC 335; the Province of Madras v. Messrs Boddu Paidanna and Sons AIR 1942 FC 33; Call Tell (Pvt.) Limited through Authorized Representative and another v. Federation of Pakistan through Secretary, Ministry of Law Justice and Human Rights Division, Islamabad and others 2004 PTD 3032 and Call Tell and another v. Federation of Pakistan and others 2005 PTD 833 ref.

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

----S. 235---Electricity bills---Standard and measure---Final liability---Adjustment of---Scope---Electricity bills inclusive of whatsoever charges were added thereto have been made the yardstick, the standard and the measure for the purposes of collecting the advance which was liable to be adjusted as against the final liability of the taxpayer and if founded to be paid in excess, the refund in this behalf was contemplated to be made within a particular period of time.

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

----S. 235---Withholding tax or advance tax---Imposition of---Discriminatory---Scope---Withholding tax or advance tax on electricity bills was founded upon the rule of parity and equality---It has been imposed upon all those, who fall within the category of S.235 of the Income Tax Ordinance, 2001, but subject to the exemption, which has been granted to certain sectors.

Mian Ashiq Hussain, Ch. Aitzaz Ahsan, Siraj-ud-Din Khalid; Iftikhar-ud-Din Riaz, Shahbaz Butt, Ch. Anwar-ul-Haq, Mian Rasheed Mehmood, Muhammad Jamil-ur-Rehman Chaudhry, Ijaz Ahmad Awan, Miss Komal Malik Awan, Muhammad Amin Goraya, Shahzada Tariq Nawaz Bhatti, Ch. Abdur Razzaq, Sh. Naveed Masud, Muhammad Hussain Chotya, Aamer Iqbal Basharat, Saood Nasrullah Cheema, Omer Alvi, H.M. Majid Siddiqui, Seher Latif Khosa, Javed Iqbal Qazi, Mumtaz-ul-Hassan, Waqar Azeem, M.M. Akram, Tajammal Hussain, Sohail Ibne Siraj, Ahmad Rauf, Malik Naveed Suhail, Rana Zulfiqar Ali, Shahid Mehmood Mehar, Irtiza Ali Naqvi, Shahzad Ahmad Durrani, Sardar Ghulam Abbas Baloch, Sardar Muhammad Hussain Khan, Ch. Liaqat Sindhu, Muhammad Waseem Chaudhry, Fakhar-ul-Zaman Akhtar Tarar, Nawazish Ali Basra and Sajjad Sarwar Saqib for Appellants.

Muhammad Ilyas Khan, Sajjad H. Rizvi and Ch. Aamer Rehman, Deputy Attorney-General for Respondents.

Dates of hearing: 27th October, 3rd, 10th, 11th, 17th, 24th November, 8th and 9th December, 2009.

2010 P T D 1295

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

Messrs RIAZ BOTTLERS PVT. LTD. through Tax Manager

Versus

LAHORE ELECTRIC SUPPLY COMPANY (LESCO) through Chief Executive and 3 others

Writ Petition No. 38 of 2010, decided on 18th March, 2010.

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

----Ss. 4(6), 147, 161(1B), 205, 231A, 233, 233A & 235---Advance tax---Computation formula and payment criteria of such tax stated.

Union Bank Ltd. v. Federation of Pakistan 1998 PTD 2116 and Elahi Cotton Mills v. Federation of Pakistan PLD 1997 SC 582 rel.

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

----Ss. 4(6), 147, 161(1B), 190(3) & 235---Constitution of Pakistan (1973), Preamble, Arts. 2-A, 23, 24 & 199---Constitutional petition--Lahore Electric Supply Company (LESCO)---Charging of advance tax in electricity bills of LESCO---Suspension of payment of advance tax on electricity bills through interim order of High Court passed in earlier constitutional petition filed by petitioner-consumer---Vacation of interim order after dismissal of such petition---Electricity bill of LESCO containing demand of a consolidated amount of advance tax from petitioner for such suspended period falling in Tax Year ending on 30-6-2009 and also spreading into next two quarters of Tax year ending on 30-6-2010---Plea of petitioner that -after payment of income tax by him through other sources for Tax Year ending on 30-6-2009 and next two quarters, impugned demand would amount to double taxation, thus, was unconstitutional---Validity---Advance tax being a computed amount payable through running instalments in current year---Before becoming due last instalment, taxpayer could adjust advance tax against estimated amount of tax due and pay balance amount---Tax due once paid, then liability of advance tax would cease--Petitioner had paid tax due for Tax year before vacation of such interim order---Requiring petitioner to pay advance tax for Tax year ending on 30-6-2009, when tax due for same year already stood paid by him, would amount to double taxation, which was not provided by S.235 of Income Tax Ordinance, 2001 and could not be permitted--Demand of tax, which was no more payable by petitioner for already having been paid, would defeat "economic justice' and offend his fundamental rights---Law did not authorize revenue to charge advance tax as arrears after close of Tax year in order to adjust excess tax against other taxes---If petitioner had paid advance tax for such two quarters through other sources during currency of such interim order, then he could take tax credit thereof under Ss. 147 and 158 of Income Tax Ordinance, 2001---High Court set aside impugned demand for Tax Year ending on 30-6-2009 for being unconstitutional and unlawful, and dismissed petitioner's case to the extent of such two quarters.?

Indus Jute Mills Ltd. v. Federation of Pakistan and others 2009 PTD 1473; CIT v. Marghalla Textile Mills Ltd. 2008 PTD 1982; Prosperity Weaving Mills Ltd. v. Federation of Pakistan 2006 PTD 402; Noon Sugar Mills Ltd. v. Commissioner of Income Tax Rawalpindi PLD 1990 SC 1156 = 1990 PTD 768; C.I.T. v. Kannan Devan Hill Produce Co. Ltd. (1986) 161 ITR 477; Union Bank Ltd. v. Federation of Pakistan 1998 PTD 2116; Indus Jute Mills Ltd. v. Federation of Pakistan through Secretary Finance, Islamabad and 3 others 2009 PTD 1473; Muhammad Saleem Ullah and others v. Additional District Judge, Gujranwala and others PLD 2005 SC 511; Pir Bakhsh v. The Chairman, Allotment Committee and others PLD 1987 SC 145; Abdul Majid and others v. Abdul Ghafoor Khan and others PLD 1982 SC 146; Kanga, Palkhivala and Vyas's, The Law and Practice of Income Tax (Ninth Edition Volume-II Page 2135); Call Tell and another v. Federation of Pakistan and others 2005 PTD 833; Call Tell (Pvt. )Ltd. v. Federation of Pakistan 2004 PTD 3032 and Elahi Cotton Mills v. Federation of Pakistan PLD 1997 SC 582 ref.

Introduction to Interpretation of Statutes by Dr. Avtar Singh, Reprint Edition 2007 Page 236; Municipal Council, Kota v. Delhi Cloth and General Mills Co. Ltd. AIR 2001 SC 1060; CIT v. J.H Gotta (1985) 156 ITR 323(SC); Saroj. Aggarwal v CIT (1985) 156 ITR 497 (SC); (Late) Nawab Sir Mir Osman Ali Khan v. CWT (1986) 162 ITR 888(SC); CIT v. S. Teja Singh (1959) 35 ITR 408(SC); Nowroji Jehangir Ganadia v. Dy Collector AIR 1986 Bom 373; Lord Denning in his book, The `Discipline of Law' and Seaford Court Estates Ltd. v. Ashar (1949) 2 All ER 155 rel.

Ch. Anwar-ul-Haq, Mian Ashiq Hussain, Shahbaz Butt, Siraj?-ud-Din Khalid, Rana Muhammad Afzal, Mian Mahmood Rasheed, Saud Nasrullah Cheema, Muhammad Hussain Chotia, Mian Tabassum Bashir, Ch. Mumtaz-ul-Hassan, Javaid Iqbal Qazi, M.M. Akram, Faiz Ahmad Khan Baloch, Umar Alvi, Muhammad Waseem Chaudhry, M.H. Majid Siddiqui, Shahzad Ahmad Durrani and Fakhar-uz-Zaman Akhtar Tarar for Petitioners.

Aamar Rehman, Deputy Attorney-General for Pakistan, Muhammad Ilyas Khan, Muhammad Asif Hashmi, Umar Sharif; and Asim Zulifqar Ali, Chartered .Accountants/Amicus Curiae for Respondents.

Dates or hearing: 1st, 3rd and 4th, February, 2010.

2010 P T D 1311

[Lahore High Court]

Before Ijaz Ahmad Chaudhry, J

Messrs A.A. BROTHERS through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance (Revenue Division), Islamabad and 3 others

Writ Petition No. 12818 of 2004, heard on 1st April, 2010.

Customs Act (IV of 1969)---

----S. 32(3)---S.R.O. 333(I)/2002, dated 15-6-2002---S.R.O. 477(I)/2003, dated 7-6-2003---Constitution of Pakistan (1973), Art. 199-Constitutional petition---Federal Government vide S.R.O. 477(I)/2003 dated 7-6-2003 reduced the rate of Central Excise Duty on mineral greases imported, produced or manufactured in Pakistan from 50% to 25%---Petitioners imported mineral greases under amended S.R.O. of 2003 paying duty at the rate of 25%---Customs Authorities issued notice to petitioners under S.32(3), Customs Act, 1969 maintaining that reduction in the rate of duty from 50% to 25% in amended S.R.O. (2003) was result of misprinting, therefore, petitioners were liable to pay short-levied of 25%-Petitioners contended that they filed bills of entries on the basis of amended S.R.O. (2003) wherein rate of duty was 25%; Customs Authorities itself made assessment in terms of said amended S.R.O., therefore, Department, and not the petitioner, was responsible for any fault relating to misprinting---Petitioner further contended that the clarification letter issued by the authorities as to correction could not be applied with retrospective effect---Validity---Customs authorities accepted bills of entries filed by the petitioners according to the amended S.R.O. (2003)---Perusal of relevant columns of both the S. R. Os. showed that the word twenty five' had replaced the wordfifty' in amended S.R.O. (2003) establishing without any ambiguity that Central Excise Duty was chargeable at the rate of 25%---Subsequent clarification by Customs Department through a letter, to the effect that the duty was reduced to 25% only for goods produced or manufactured locally and not on imported goods whereon it remained unaltered at 50%---Said clarification was of no help to the authorities for they had failed to explain as to how they escaped to mention 50% against goods imported into Pakistan in the official tariff---Lot of difference existed between short-levied or not levied and misprinting---Petitioners having sold out their material, duty could not be charged from those who had purchased consignments on reduced rates---Clarification issued by the Federal Board of Revenue could only be applied with prospective effect and petitioners could not be denied discretionary relief under Art.199 of the Constitution---Constitutional petition was accepted and recovery notices issued to the petitioners were set aside.

?

PLD 1997 SC 503; 1992 SCMR 1652; PLD 1997 SC 582 and 1999 SCMR 139 ref.

Mian Abdul Ghaffar for Petitioners.

Ch. Muhammad Zafar Iqbal for Respondents.

Date of hearing: 1st April, 2010.

2010 P T D 1366

[Lahore High Court]

Before Nasir Saeed Sheikh and Kh. Imtiaz Ahmad, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX, RAWALPINDI ZONE and another

Versus

BOARD OF INTERMEDIATE AND SECONDARY EDUCATION, RAWALPINDI through Secretary and another

Intra-Court Appeal No. 104 of 2004 in W.P. No.1974 of 2010, decided on 16th December, 2009.

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

----Ss. 14. 50(2A) & Second Sched. Part-I, Cl. 86---Income Tax Ordinance (XLIX of 2001), S.53 & Second Sched. Part-I, Cl. (92)---Punjab Boards of Intermediate and Secondary Education Act (XIII of 1976), Ss. 3 and 10---Educational Institution---Punjab Board of Intermediate and Secondary Education---Income of Board and its deposits lying in Bank---Levy of withholding tax---Plea of Revenue that Board was not an educational institution, University or falling within meaning of Provincial Government Department, thus, its income and deposits were liable to tax deduction; and that in order to avail exemption from tax, Board had to obtain an exemption certificate--Validity---Primary function of Board being to organize, regulate, develop, control intermediate and secondary education and hold examinations in prescribed manner---Process of education on its completion would necessarily include granting of educational certificates or degrees to successful candidates by a University or an educational board established for such purpose---Income of a University or an educational institution established solely for educational purposes and not for purposes of profits was exempt---Board would fall within definition of `educational institution' as envisaged in Cl. (86) of Part-I of Second Sched. of Income Tax Ordinance, 1979, thus, was not liable to tax deduction and obtain exemption certificate as claimed by Revenue---Principles.

AIR 1968 SC 662 rel.

(b) Words and phrases---

----"Education institution "---Definition.

AIR 1968 SC 662; Concise Oxford English Dictionary and Black Law Dictionary fifth Edition p.461 ref.

Mrs. Shahina Akbar for Appellant.

Hafiz Muhammad Idrees for Respondents.

2010 P T D 1376

[Lahore High Court]

Before Ijaz Ahmad Chaudhry, J

Messrs GLACIER INTERNATIONAL through Authorized representative

Versus

COLLECTOR OF CUSTOMS, LAHORE and 3 others

Writ Petition No. 16279 of 2009, decided on 18th December, 2009.

Customs Act (IV of 1969)---

----Ss. 25 & 81---Constitution of Pakistan (1973), Art.199---Constitutional petition---Customs value of goods---Determination---Provisional assessment---Petitioner had sought that the letter issued by the Authorities be declared unlawful; and consignment be ordered to be released provisionally under S.81 of the Customs Act, 1969---Record had revealed that goods were assessed on the basis of valuation advice/letter issued by the Directorate-General of Customs Valuation, following the procedure laid down under S.25 of the Customs Act, 1969 and as per the powers conferred upon them under the relevant' provisions of law---Request of the provisional assessment of the subject goods under S.81 of the Customs Act, 1969 was not feasible as a valuation advice/letter was already present on the subject-matter, which was issued lawfully; and except valuation no other issue was involved in respect of the impugned consignment---Factual controversy between the parties being involved, which could not be resolved while entertaining the constitutional petition, petition was dismissed.

Muhammad Akram Nizami for Petitioner.

Ghulam Ali Raza for Respondents.

2010 P T D 1394(1)

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs PAK STAR INTERNATIONAL through Proprietor

Versus

COLLECTOR CUSTOMS, LAHORE and 3 others

Writ Petition No. 7242 of 2010, decided on 13th April, 2010.

Customs Act (IV of 1969)---

----Ss. 202 & 215---Issuance of warrant of attachment for recovery of taxes, duties or penalties---Cause or ground of such demand neither mentioned in warrant nor first confronted to assessee---Validity---No recovery could be effected on basis of such warrant for not being a valid demand---Illustration.

Ch. Ishtiaq Ahmad Khan for Petitioner.

2010 P T D 1797

[Lahore High Court]

Before Mian Saqib Nisar and Iqbal Hameed-ur-Rehman, JJ

Syed MUHAMMAD MURTAZA ZAIDI

Versus

MOTOR REGISTRATION AUTHORITY and others

Writ Petitions Nos.8886, 13426, 14698, 14699, 13723, 16048, 16049, 15685, 15743, 15723, 15737, 15588, 15586, 15974, 15535, 15563, 15564, 15491, 15173, 15170, 15780, 15534, 15174, 15175, 15350, 15180, 15349, 15347, 15346, 15348, 15351, 15172, 15171, 16028, 16027, 15019, 16023, 16034, 16050, 16039, 16040, 16070, 16071, 16079, 16075, 16077, 16186, 16339, 16494, 16493, 16480, 16427, 16490, 16691, 16224, 16202, 17450, 17459, 17509, 17140, 17614, 17615, 17611, 16872, 16875, 16876, 16905, 16906, 16907, 16873, 16946, 16952, 16957, 16958, 16959, 16960, 16987, 17044, 17704, 17692, 17698, 17533, 17095, 17155, 17112, 17559, 17076, 17075, 17073, 17103, 17089, 17157, 17079, 17083, 17085, 17084, 17367, 17366, 17365, 17364, 17368, 17381, 17380, 17141, 17411, 17412, 17395, 17394 17393, 17392, 17410, 17214, 17389, 17413, 17204, 17205, 17206, 17207, 17296, 17297, 17305, 17215, 17243, 17241, 17277, 17300, 17270, 17257, 17295, 17301, 18540, 18539, 18541, 18428, 18246, 18255, 18257, 18258, 18187, 16530, 16531 16532, 16549, 16551 16566, 16581, 16580, 16582, 17784, 17785, 17786, 17787, 17797, 17801, 17829, 17840, 17854, 17855 of 2008, 192, 193, 194, 195, 196, 199 of 2009, 16642, 16683, 16684, 16685, 16697, 16707, 16713, 16724, 16812, 16813, 16829, 17782, 17783 of 2008, 60, 41, 910, 2672, 3314, 4059, 5769, 5771, 5775, 6346, 7076, 7077, 5700, 7235, 8701, 11363, 11248, 11981, 11980, 12074, 12004, 12504, 13684, 13999, 13959, 14658, 14660, 15734, 15733, 17953, 12689, 6513, 18941, 18960, 19290 of 2009, 17363 of 2008, 17449, 22153, 1051, 6871, 6872, 6873, 6874, 22986, 23007, 23009, 22692, 23008 and 20787 of 2009, decided on 24th December, 2009.

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

----Arts. 189 & 201---Judgment of equal Bench---Scope---Earlier judgment of equal Bench in High Court on the same point is binding upon second Bench---If a contrary view has to be taken, then request for constitution of larger Bench should be made---Points which have been settled are binding.

Multiline Associates v. Ardeshir Cowasjee and 2 others PLD 1995 SC 423 and The Province of East Pakistan v. Dr. Azizul Islam PLD 1963 SC 296 rel.

(b) Punjab Finance Act (I of 2008)---

----S. 6---Tax on imported luxury vehicles---Applicability---Retrospective effect---Legislative intent---On account of lucid, express, unambiguous language, which has categorically provided a cut-off date, the intention of legislature is very much clear; that the imposition is vividly, consciously, lambently retrospective in nature and also affects past and closed transaction and even any alleged vested right--All those vehicles, which have been imported into Pakistan by given date, notwithstanding registration or otherwise, are liable to tax.

Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan and others 1993 SCMR 1905 rel.

(c) Punjab Finance Act (I of 2008)---

----S. 6---Constitution of Pakistan (1973), Arts.25, 70 (4), 77, 141, 142(a), 199 & Fourth Schedule, Sr. No.52---Constitutional petition---Tax on imported luxury vehicles---Legislative power of Province---Scope---Provincial Government imposed tax on vehicles on the basis of capacity---Plea raised by petitioners was that such tax could not be imposed in the garb of "luxury" and imposition of such tax was covered by Federal Legislative list---Validity---It was the use and enjoyment of a vehicle having engine of a particular power, which was subject to tax and such tax could on the production capacity of any plant, machinery etc. so as to attract entry No. 52 of Federal Legislative list---High Court declined to hold that engine produced energy to run a vehicle and the same had brought the matter within the connotation of "production" appearing in entry No.52 of Federal Legislative list of the Constitution---Petitioners failed to make out a case of discrimination at all of any nature as all vehicles of given engine power, from a particular date were subjected to tax and the same as across the board---Capacity criterion in such behalf constituted a class itself which was not shown to be based on any irrational criteria rather the use and enjoyment of vehicles having bigger engine force were subject/ object of tax, which was rationally founded notwithstanding model and brand of vehicle---Petition was dismissed in circumstances.

WAPDA and others v. Mian Muhammad Riaz and others PLD 1995 Lah. 56; Sayphire (Pvt.) Ltd. and others v. Government of Sindh, PLD 1990 Kar. 402; Rahimullah Khan and others v. Government of N.-W.F.P 1990 CLC 550; Federation of Pakistan and others v. Shaukat Ali Mian and others PLD 1999 SC 1026, Charanjit Lal Chowdhury v. The Union of India and others AIR 1951 SC 41; Hirjina and Coi. v. Islamic Republic of Pakistan and another 1993 SCMR 1342; Amanat Khan v. Motor Registration Authority, Chakwal and 2 others 1999 CLC 1597; Messrs Syed Bhais (Pvt.) Ltd. through Company Secretary v. Government of the Punjab, Excise and Taxation Department through Secretary and another PLD 2000 Lah. 20; Messrs Raja Industries Ltd. v. Government of Punjab and others 1999 MLD 3141 and Elahi Cotton Mills Limited. v. Federation of Pakistan PLD 1997 SC 582 ref.

(d) Constitution of Pakistan (1973)---

----S. 25---Discrimination, principle of---Applicability---Wisdom of legislature as to why a particular item has been taxed and not the other cannot be gone into by court, until a case of discrimination has been made out.

Fauji Foundation and others v. Shamimur Rehman PLD 1983 SC 457 rel.

Taffazul H. Rizvi, Imtiaz Rashid Siddiqui, Muhammad Azhar Siddique, Zia Haider Rizvi, Ms. Najma Rasheed, Shahid Mahmood Sheikh, Shahbaz Butt, Salman Akram Raja, Ras Tariq Ch., Fozi Zafar, Shahid Azeem, Ch. Anwar-ul-Haq, Muhammad Kashif Chaudhry, Arshad Malik, Nasar Ahmad, Asjad Saeed, Hafeez-ur-Rehman, Labeeb Zafar Bajwa, Muhammad Ashraf Joya, Rana Muhammad Zahid, Atif Amin, Malik Ahsan Mehmood, Kamran Masood Mirza, Malik Asad Rasool Khan, Jawad Hassan, Sh. Muhammad Umar, Khurram Hussain, Muhammad Anwar Khokhari, Mirza Abbas Baig, Pir. S.A. Rashid, Ijaz Ahmad Awan, Nouman Mushtaq Awan, Komal Malik Awan, Mian Waheed Nazir, Muhammad Arif Mehdi, Ata-ul-Mustafa Rizvi, Moazim Ali Shah, M. Iqbal, Zulfiqar Ali Khan, Barrister Ahmad Pervaiz, Muhammad Javed Arshad and Sher Zaman Khan for Petitioners.

Muhammad Shan Gul, A.A.-G., Malik Zubair Khalid, Standing Counsel, Zaka-ur-Rehman, Addl. A.-G. along with Farrukh Sher Gondal, Excise and Taxation Officer Motor Registering Authority for Respondents.

Dates of hearing: 3rd and 9th December, 2009.

2010 P T D 2015

[Lahore High Court]

Before Iqbal Hameed ur Rahman and Ch. Muhammad Tariq, JJ

COLLECTOR OF CUSTOMS---Petitioner

Versus

REHMAT AFRIDI and 5 others---Respondents

Customs Reference No. 24 of 2010, decided on 14th July, 2010.

Customs Act (IV of 1969)---

----Ss.2(s) & 156---S.R.O. 499(I)/2009---Recovery of smuggled tyres from truck---Seizure and confiscation of tyres and truck---Order of Appellate Tribunal releasing confiscated tyres and truck on payment of duty and redemption fine---Validity---Nothing on record to show that truck in question had ever remained involved in smuggling previously---Truck in question was admittedly a public transport hired for transportation of tyres from one place to another---Words "False cavities" as used in Cl. (b) of S.R.O. 499(1)/2009 would mean a cavity made for time being or artificially made---Space behind a truck for loading goods would not fall within definition of "False cavity"---Authority had failed to point out any further false cavity made in truck in question, thus, Cl. (b) of S.R.O. 799(1)/2009 would not attract to the present case---High Court dismissed reference in circumstances.

Sultan Mahmood for Petitioner.

Mian Abdul Ghaffar for Respondents.

Date of hearing: 14th July, 2010.

2010 P T D 2035

[Lahore High Court]

Before Irfan Qadir, J

Messrs MUHAMMAD HANIF CHAUHAN---Petitioner

Versus

FEDERATION OF PAKISTAN, through Secretary, Revenue Division, Islamabad and 4 others---Respondents

Writ Petition No. 14408 of 2009, decided on 20th July, 2009.

Customs Act (IV of 1969)---

----S.25-A(1)---Imported goods, valuation of---Powers of Deputy Director, Customs Valuation---Scope---Deputy Director could not determine such valuation.

Mian Abdul Ghaffar for Petitioner.

Sultan Mehmood on behalf of Izhar-ul-Haq for Department.

2010 PTD2101

[Lahore High Court]

Before Ijaz Ahmad Chaudhry, J

Messrs A.A. BROTHERS through Proprietor---Petitioner

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance (Revenue Division), Islamabad and 3 others---Respondents

Writ Petition No. 12818 of 2004, heard on 1st April, 2010.

Customs Act (IV of 1969)---

----S. 32 (3)---S. R. O., 333(I)/2002, dated 15-6-2002---S. R. O. 477(I)/2003, dated 7-6-2003--Constitution of Pakistan (1973), Art.199--Constitutional petition---Customs tariff, misprinted rates---Correction---Retrospective effect---Scope---Discretion, exercise of---Grievance of petitioners was that Customs authorities could not demand short levied Central Excise Duty on the ground that rates were misprinted in tariff---Validity---There was lot of difference between short levied or not levied and misprinting, while misprinting could be a mistake clerical or otherwise---Customs authorities at their own did not have inquired into the matter as to how misprinting had occurred in relevant notifications at the relevant place nor it intended to do so in future, therefore, petitioners were not solely responsible for the omission---Petitioners were not alleged to have managed to get their material released stealthily---Petitioners had sold out their material and then it was impossible to charge such duty from those who had earlier purchased the consignments---Clarification issued by Federal Board of Revenue could be made effective prospectively and not with retrospective effect, therefore, High Court granted discretionary relief to petitioners who chose one of the two or more alternatives, all of which were lawful---High Court observed it would not be a proper exercise of discretion to refuse relief to a party to which it was entitled under the law---High Court in exercise of Constitutional jurisdiction, declared that recovery notices were issued to petitioners were without any basis and the same were set aside---Petition was allowed in circumstances.

1997 SC 503; 1992 SCMR 1652; PLD 1997 SC 582 and 1999 SCMR 139 ref.

Mian Abdul Ghaffar for Petitioners.

Ch. Muhammad Zafar Iqbal for Respondents.

Date of hearing: 1st April, 2010.

2010 P T D 2349

[Lahore High Court]

Before Tariq Javaid and Shaukat Umar Pirzada, JJ

COMMISSIONER INCOME TAX, LEGAL DIVISION, MULTAN

Versus

Messrs CRESS GAS CARRIERS, SAHIWAL

T.R. Nos. 98, 99, 100, 101, 102 and 103 of 2008, heard on 12th May, 2010.

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

----S.131---Reference/appeal to High Court must be supported with certified copy of impugned order.

Naseer Mughis Ltd. v. CIT Lahore 1991 PTD 871 rel.

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

----S.131---Income Tax Rules, 2002, R.78---Reference/appeal to High Court---Objection that reference/appeal not filed in prescribed firm along with a statement of case was liable to be dismissed on merits---High Court repelled such objection to be of hypertechnical nature.

Khalid Saeed v. Shamim Rizwan 2003 SCMR 1505 and Director, Directorate-General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) and Ltd. others 2006 SCMR 129 ref.

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

----Ss. 115(4) & 153(1)---Transport/carriage services, rendering or providing of---Presumptive tax regime, applicability of---Such services were covered under S.153(1)(b) of Income Tax Ordinance, 2001, thus; tax deducted at source would be adjustable and filing of statement under S.115(4) thereof would not be required---Principles.

Premiers Mercantile Services (Pvt.) Ltd. v. Commissioner of Income Tax Karachi (2008) 97 Tax 89 and 1991 PTD 871 ref.

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

----S.131---Revenue/appeal to High Court---Interpretation of a statutory provision by revenue authorities would not be binding on High Court.

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

----S.234---Provision of S.234 of Income Tax Ordinance, 2001---Scope---Such provision not a charging provision, but simply provides machinery for recovery/deduction of advance income tax.

Ch. Muhammad Asghar Saroha for Appellant.

Malik Mumtaz Hussain Khokhar for Respondent.

Date of hearing: 12th May, 2010.

2010 P T D 2403

[Lahore High Court]

'Before Umar Ata Bandial, J

Messrs CHINAS LTD.

Versus

FEDERATION OF PAKISTAN and others

Writ Petitions Nos. 4048, 4757 of 2006, 5234 of 2007 and 1814 of 2008, decided on 20th May, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8 & 10---S.R.O. No. 538(I)/05, dated 6-6-2005---S.R.O. 992(I)/2005, dated 21-9-2005---S. R. O. 487(I)/2006, dated 26-5-2006---Constitution of Pakistan (1973), Art.199---Constitutional petition---Refund of Sales Tax---Claim for---Petitioners, who were manufacturers of export goods, were aggrieved by refusal of Collectorate to grant refund of sales tax, paid on inputs of manufactured goods exported---Right to recover refund of input sales tax conferred by Ss. 7, 10 of Sales Tax Act, 1990 was subject to conditions that could be imposed by the Federal Government in exercise of its powers contained in Ss.8 & 10 of the Sales Tax Act, 1990---Federal Government, with effect from 6-6-2005 (S. R. O.538(I)/2005) had decided to make all inputs of export goods manufactured by the petitioners to be sales tax free---No occasion, in circumstances, arose for refund of sales tax on inputs of export goods purchased after the said date---Petitioners though were able to export all their finished goods made from inputs purchased before 6-6-2005, but not within the final deadlines fixed by impugned notification---Petitioners had a right of refund of input tax only in respect of those raw materials that were purchased before target date i.e. 6-6-2005; and were consumed in finished goods that were duly exported from the country---Said vested right was liable to be enforced, if the petitioners would satisfy authorities on both counts namely, date of acquisition of raw materials as well as the factum of export of finished goods resulting from such raw material.

Lt. Muquddus Haider v. Federal Public Service Commission 2008 SCMR 773 and Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 ref.

Mian Sultan Tanvir for Petitioner.

Ms. Yasmin Saigol, D.A.G.

Sarfaraz Ahmed Cheema for Respondent No.2.

Miss Kausar Perveen for Respondent No.1.

Ehsan Yousaf, Advocate.

2010 P T D 2502

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

LONE COLD STORAGE, LAHORE

Versus

REVENUE OFFICERS, LAHORE ELECTRIC POWER CO. and others

Writ Petition No. 7754 of 2010, decided on 15th July, 2010.

(a) Precedent---

----Order of court---Main legal question neither raised nor did court discuss same not was court properly assisted---Effect---Such order would not constitute a binding precedent.

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

---Ss. 147, 159, 168 & 235---Income Tax Rules, 2001, R. 40---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Demand of transitional advance tax under S. 235 of Income Tax Ordinance, 2001 during currency of same Tax Year after payment of advance tax under S. 147 thereof---Validity--Transitional advance tax not an independent tax, but a separate collection point for receiving advance tax estimated by taxpayer for same Tax year under S. 147 of the Ordinance---Payment made under S. 235 of the Ordinance would be adjusted under S. 147 read with S. 168 thereof, thus, total collection of advance tax could not be more than estimated amount of advance tax under S. 147 for same Tax Year---Word "transitional" used in S.235 of the Ordinance, would mean process of change from one condition to another signifying fluctuating chargeability thereunder---Once liability of advance tax as estimated by taxpayer discharged during currency of tax year, then transitional advance tax would come to an end---Commissioner under S. 159(1) of the ,Ordinance, upon application in writing, by taxpayer could issue a lower rate certificate (i.e. 0% rate or nil rate certificate) in case of full payment of advance tax---After issuance of such certificate, chargeability of S. 235 of the Ordinance, would remain intact, but rate of tax would be reduced making same ineffective---High Court directed petitioner to approach Commissioner, who after verifying full payment of advance tax under S. 147 of the Ordinance, would issue him nil rate certificate, otherwise not---Principles.

Messrs Riaz Bottlers (Pvt.) Ltd. case (Writ Petition No. 38 of 2010); Indus Jute Mills Ltd. v. Federation of Pakistan 2009 PTD 1473; Messrs Al-Khalil Cold Storage v. Federation of Pakistan through Secretary Finance, Islamabad and 3 others 2010 PTD 1260; Elahi Cotton Mills Ltd. case PLD 1997 SC 582 and Flying Paper Industries v. Lesco Writ Petition No. 1583 of 2010 distinguished.

(c) Interpretation of statutes----

----"Literal approach" and "purposive approach"---Preference--Where literal construction or plain meaning causes hardship, futility, absurdity or uncertainty, then purposive or contextual construction would be preferred to arrive at a more just, reasonable and sensible result.

Introduction of Interpretation of Statues by Dr. Avtar Singh (Reprint Edition 2007); Lord Denning in his book Discipline of law; Kammins v. Zenith Investment Ltd. (1971) AC 850; Maxwell on the Interpretation of Statutes; Delhi Transport Corporation v. D.T.0 Mazdoor Congress AIR 1991 SC 101; Mittal in Interpretation of Statutes; Introduction to interpretation of Statutes (Reprint Edition 2007); by Dr. Artar Singh Calcutta Guj Education Society and another v. Calcutta Municipal Corporation and others AIR 2003 SC 4278 and BR Enterprises v. State of UP (1999 (9) SCC 700 rel.

(d) Interpretation of statutes---

----Function of court to expound law and not to legislate, but in case of difficulty must interpret same liberally to advance its cause---Principles.

Every law is designed to further the ends of justice and not to frustrate it on mere technicalities. Though the function of the courts is only to expound the law and not to legislate, nonetheless the legislature cannot be asked to sit to resolve the difficulties in the implementation of its intention and the spirit of the law. In such circumstances, it is the duty of the court to mould or creatively interpret the legislation by liberally interpreting the statute. The statutes must be interpreted to advance the cause of statute and. not to defeat it.

Introduction to Interpretation of Statutes by Dr. Avtar Singh (Reprint Edition 2007) fol.

(e) Interpretation of statutes---

----Conflict between two provisions of a statute---Effect--Where purpose of statute was clear, then interpretative tool of "reading down" such provisions would be resorted to.

Indus Jute Mills Ltd. v. Federation of Pakistan 2009 PTD 1473; Mittal in Interpretation of Taxing Statutes; Introduction to interpretation of Statutes (Reprint Edition 2007) by Dr. Artar Singh; Delhi Transport Corporation v. D.T.C. Manzdoor Congress AIR 1991 SC 101; Calcutta Guj Education Society and another v. Calcutta Municipal Corporation and others AIR 2003 SC 4278 and BR. Enterprises v. State of UP (1999 (9) SCC 700 rel.

Sirajuddin Khalid, Ch. Anwar-ul-Haq and Shahzad Ahmad Durrani for Petitioners.

Muhammad Ilyas Khan, Muhammad Asif Hashmi, Sajjad Hussain Jafferi and Mansoor Usman Awan for Respondents.

Dr. Ikram-ul-Haq and Asim Zulifqar, amici curiae.

Dates of hearing: 19th April, 7th, 24th May and 4th June, 2010.

2010 P T D 2552

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

DEFENCE HOUSING AUTHORITY through Secretary

Versus

DEPUTY COMMISSIONER INCOME TAX and 3 others

Writ Petition No. 6512 of 2008, decided on 8th September, 2010.

Income Tax Ordinance (XLIV of 2001)---

----Ss. 49 & 122(1)(5)(5-A)---Defence Housing Authority Lahore Order (C.E. Order 26 of 2002), Arts.4, 6, 7(2)(e)(g), 13, 14 & 16---General Clauses Act (X of 1897), S.3(28)---Local Authorities Loan Act (IX of 1914), S. 3---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Defence Housing Authority---DHA on ground to be a local authority claimed exemption from income tax for years 2003-2005---Refusal of Income Tax Authority to accept such claim and issuance of notices to DHA under S. 122(1)(5)(5-A) of Income Tax Ordinance, 2001---Validity---Determination of status of an Authority to be a local authority would depend on its power to manage and administer "local fund"-DHA had a statutory status and through its Executive Board had powers to impose fees and charges and develop and regulate housing facilities within its area---Management of DHA vested in Governing Body with Chairman being Secretary Ministry of Defence and Vice-Chairman being Corps Commander---Executive Board of DHA had to submit to Governing Board at end of every financial year general report on its affairs including audit and balance sheet---DHA in its name was maintaining a fund for crediting therein all money received by DHA---Governing Body had powers to approve budget prepared by DHA---According to Art. 16 of Defence Housing Authority Lahore Order, 2002, any sum payable to DHA would be recoverable as arrears of land revenue---DHA for being a local authority, was exempt from income tax for tax year, 2003-2005---High Court set aside impugned notices for being illegal and without lawful authority.

The Deputy Managing Director, National Bank of Pakistan, Principal Office, Jinnah Avenue, Dacca and others v. Ataul Huq PLD 1965 SC 201; Chief Secretary, Government of the Punjab Lahore v. Commissioner of Income Tax, Lahore Zone, Lahore 1976 PTD 56; Karachi Development Authority v. Province of Sindh through the Secretary, Excise and Taxation Department, Karachi and 4 others PLD 1977 Kar. 152; Commissioner of Income Tax v. U.P. Forest Corporation (1999) 80 Tax 173 (S.C. India); Chief Secretary, Government of the Punjab, Lahore v. Commissioner of Income Tax, Lahore Zone, Lahore PLD 1976 Lah. 258; Union of India and others v. R. C. Jain and others AIR 1981 SC 951; Commissioner of Income Tax, Lahore v. Chief Secretary, Government of the Punjab, Lahore 1980 PTD 329 and Messrs Qadri Brothers v. Assessing Authority PLD 1969 Kar. 47 ref.

Naveed A. Andrabi for Petitioner.

Mansoor Usman Awan for Respondent.

Dates of hearing: 24th June, and 1st July, 2010.

2010 PTD311

[Peshawar]

Before Talaat Qayyum Qureshi, J

Messrs G.B. PLAZA

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX

F.A.O. No.71 of 2005, heard on 4th April, 2007.

Wealth Tax Act (XV of 1963)---

----S.16---Ex parte assessment order for non-appearance of assessee---Validity---Assessing Officer had not made any effort to know as to whether assessee was sole proprietorship concern or was owned by many shareholders---Assessee had not been made party through any person to come forward and defend case---Such ex parte order was violative of the rules of natural justice---High Court set aside impugned order and remanded case to Assessing Officer with directions to assess assessee through some person and after recording versions of its various owners-shareholders and pass order strictly on merits and in accordance with law.

Abdul Rauf Rohaila for Appellant.

Shahid Raza Malik for Respondent.

Date of hearing: 4th April, 2007.

2010 P T D 438

[Peshawar High Court]

Before Ejaz Afzal Khan, C.J. and Abdul Aziz Kundi, J

Messrs LAL GHEE OIL MILLS (PVT.) LTD. through Chief Executive

Versus

PAKISTAN through Secretary, Finance and Economic Affairs, Islamabad and 9 others

Writ Petitions Nos. 1134, 1191, 1208, 1239, 1246, 1617 of 2004, 5, 6, 157, 158 of 2005, 50, 51, 223, 844, 854 of 2006 and 1049 of 2007, decided on 18th December, 2009.

Customs Act (IV of 1969)---

----S.19---Sales Tax Act (VII of 1990), S.13---Central Excise Act (I of 1944), S.12-B---Constitution of Pakistan (1973), Arts.199 & 247(3)---Constitutional petition---Levy and collection of federal excise and regulatory duty---Exemption of Tribal Areas---Counsel for the petitioner had contended that where the manufacturing units of the' petitioners were located in the tribal areas, anything imported from abroad for their consumption, could not be subjected to the levy of regulatory or excise duty, so long as, the laws imposing such levy, were not extended to such areas---Contention of counsel for department was that since the taxable event for the purposes of Excise Act, 1944, Customs Act, 1969 or Sales Tax, 1990 was import of goods into Pakistan, it was immaterial, whether any of those enactments had been extended to the Tribal Areas or not---Validity---Whether it was regulatory duty, excise duty or sales tax, the taxable event for the purposes of Excise Act, 1944, Customs Act, 1969 or Sales Tax Act, 1990 or S. R. Os. issued thereunder, was import of goods into Pakistan--Once the goods were imported into Pakistan, they were liable to be (axed under said Acts or the S. R. Os. issued thereunder regardless altogether of the fact that those had been imported for being transported to or consumed in an area where neither of the said enactments or S.R.Os. issued thereunder were applicable---Neither Central Excise Act, 1944 nor the amendments made in the Customs Act, 1969 nor the Sales Tax Act, 1990 including the S.R.Os. issued under those Acts had been extended to the Tribal Areas; but it would be absolutely insignificant when the legislature in its wisdom, had made the levy contingent only upon the import of goods, which had nothing to do with their onward transmission to an area whether settled or tribal---Argument that where none of the said Acts or the S.R.Os. issued thereunder had been extended to the Provincially Administered Tribal Areas or Federally Administered Tribal Area in the terms of Article 247(3) of the Constitution, the department had no authority to levy the duty, was not tenable; it was all the more untenable, when the incidence of levy was independent of all the subsequent events---Import of goods being within the regime of said Acts, could not be exempted from the levy---Levy and collection 'being two different events, levy would become a fait accompli on the arrival of the goods at the seaport notwithstanding the collection was done at a different stage or place.?

Messrs Gul Cooking Oil v. Government of Pakistan and others 2002 PTD 2079; Messrs Master Foam (Pvt.) Ltd. and 7 others v. Government of Pakistan and others PLD 2005 SC 373; Messrs Shroof and Co. v. Municipal Corporation of Greater Bombay 1989 Supp (1) SCC 347 and N.B. Sanjana v. Eliphinstone Spinning and Waving Mills AIR 1971 SC 2039 ref.

Isacc Ali Qazi for Petitioners.

Iqbal Mohmand, Dy. A.-G. for Respondents Nos.1, 2.

Raja Muhammad Irshad, S. Muhammad Ghazi, Ozair Kirmat Bandari, Shamshad Ali Cheema, Muhammad Hamayun Khan along with Muhammad Jamil, Law Officer for Respondents Nos. 3 to 5, 7 to 10.

Eid Muhammad Wahallah for Respondent No.6.

Date of hearing: 18th December, 2009.

2010 P T D 515

[Peshawar High Court]

Before Nasir-ul-Mulk, C. J. and Ejaz Afzal, J

Messrs COLLECTOR OF CUSTOMS

Versus

DHAN FIBRES LTD.

S.A.Os. Nos. 25 to 27 of 1999, decided on 6th January, 2005.

(a) Interpretation of statutes---

----Word "shall"; interpretation of---Principles stated.

Ordinarily, the word "Shall is mandatory and is in the nature of an order. However, the Courts have at times given this word a directory or permissive meaning depending upon the circumstances to which it is used and the object to be achieved by the Legislation. However, while construing the nature of the word "shall", the Courts search for the legislative intent.

(b) Sales Tax Act (VII of 1991)---

----S.34 [as amended by Finance Act (IX of 1996)]---Imposition of additional tax mandatory for delay in payment of sales tax---Principles.

Ordinarily, the word "shall" is mandatory and is in the nature of an order. However, the Courts have at times given this word a directory or permissive meanings depending upon the circumstances in which it is used and the object to be achieved by the Legislation. However, while construing the nature of the word "shall", the Courts search for the legislative intent.

The legislative intendment has been manifested by the amendment made in section 34 of the Sales Tax Act---Prior to the Finance Act of 1996, the word used for the imposition of additional tax in section 34 was that the defaulter "shall be liable" to pay additional tax. This was an enabling provision empowering the authority concerned to impose additional tax. This power was, therefore, permissive and not mandatory.

The Legislature has amended section 34 of the Sales Tax Act and replaced the words "shall be liable" by the word "shall". By this substitution, the legislative intent is clear. The discretionary power of imposing additional tax has been substituted by the mandatory direction to the authorities to impose the tax.

When by the substitution made by the Finance Act of 1996 in section 34 of Sales Tax Act, the Legislative intent is clear; there is no need to take into consideration other factors.

Mamy Beverages v. Naseem 1995 PTD 91 rel.

Abdul Rauf Rohaila for Appellant.

Qasim Ali Chauhan for Respondent.

Date of hearing: 27th October, 2005.

2010 PTD 534

[Peshawar High Court]

Before Shah Jahan Khan and Talaat Qayyum Qureshi, JJ

Messrs MASOODURREHMAN, KOHAT

Versus

COMMISSIONER OF INCOME TAX (APPEALS) PESHAWAR

T.R. No. 47 of 1997, heard on 3rd May 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.111---Imposition of penalty on concealment of purchases made during business activities of assessment year---Scope---Assessee while filing return was obliged to furnish particulars of income earned by him during assessing year, but not details of all business activities of assessment year---Where assessee declared his accurate income during assessment year, when penalty could not be imposed on him for failing to give details of purchase made by him---Penalty proceedings could be initiated against assessee for an attempt to conceal or completed act of concealment of income or its particulars, but not concealment of purchases---Onus in penalty proceedings would lie on department to prove guilty intent by showing deliberate commission or omission by assessee resulting in concealment of income or furnishing of inaccurate particulars of income, which might result in avoiding of tax---Assessee must be given reasonable opportunity of hearing in penalty proceedings---Penalty proceedings being of quasi-criminal nature, thus, standard of proof in a criminal ease would be required in such proceedings to sustain an order of imposing penalty---Department could impose penalty after proving that such concealments were deliberate and contumacious---Principles.

(1982) 45 Tax 52; 1992 PTD (Trib.) 155; 1998 PTD (Trib.) 1103 and 2005 PTD 1 rel.

Abdul Rauf Rohaila for Appellant.

Eid Muhammad Khattak for Respondent.

Date of hearing: 3rd May, 2005.

2010 P T D 1269

[Peshawar High Court]

Before Ejaz Afzal Khan, C.J. and Liaqat Ali Shah, J

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, PESHAWAR

Versus

Messrs SOLV-TECH. (PVT.) LIMITED, HATTAR INDUSTRIAL ESTATE, HATTAR-HARIPUR

S.A.O. No.3 of 2004, decided on 16th February, 2010.

Sales Tax Act (VII of 1990)---

----Ss.2(16), 2(33)(a) & Sixth Schedule---Levy of sales tax---"Supply"--Assessee was an industrial unit engaged in processing and packing of oil on behalf of another company---Grievance of authorities was when on receipt of oil and packing material from another company, assessee processed and packed the same then it was liable to be taxed on account of conversion charges---Validity---Not only that the assessee also received consideration for value addition but such activity was supply par excellence---As such the same was covered by expression `supply' as defined in S.2 (33) of Sales Tax Act, 1990---End product in question was exempted from Sales Tax under Sixth Schedule to Sales Tax Act, 1990, what was supplied by assessee was not an end product but value added to the raw material through exercise of processing and packing---Assessee thus could not claim exemption under any canons of interpretation---If exemption could be extended on such assumptions, then even import of raw material could not be taxed, as it also constituted an activity preceding manufacture and supply of an end product---High Court declined to accept such interpretation of assessee which prima facie led to absurdity and tend to defeat purpose of charging provision---Legislature had not exempted such an activity from tax, when it constituted manufacture as well as supply carried for pecuniary consideration---Activity of assessee processing and packing of oil on behalf of another company was liable to be taxed---Reference was answered accordingly.

Abdur Rauf Rohaila for Appellant.

Ishaq Ali Qazi for Respondent.

Date of hearing: 20th January, 2010.

2010 P T D 1286

[Peshawar High Court]

Before Ejaz Afzal Khan, C.J. and Liaqat Ali Shah, J

Messrs BALANA RESTAURANT, PESHAWAR

Versus

COLLECTOR SALES TAX, PESHAWAR

Tax Reference No.4 of 2009 with C. M. 2 of 2009, decided on 21st January, 2010.

Sales Tax Act (VII of 1990)---

----Ss.3 (1), 13 & Sixth Sched., Item No. 3 (vii)---Sales tax, levy of---Supply of cooked food---Assessee was a contractor, supplying cooked food stuff to be served in an industrial canteen---Grievance of assessee was when food stuff cooked or prepared in messes run on the basis of mutuality and industrial canteens for workers was exempted under S.3(1) read with Sixth Schedule of Sales Tax Act, 1990, then food stuff supplied by it could not be taxed---Validity---Food cooked, prepared and served in messes was exempted because messes were run on the basis of mutuality---Food stuff cooked, prepared and served in canteens was exempted because it provided to workers of a particular class by such concerns, gratis or without any pecuniary consideration---Assessee, in the present case, was embarking on such activity purely for profit or pecuniary consideration, therefore, it could not push itself into the ambit of relevant provision so as to justify its claim for exemption---Industrial concern in question could have claimed such exemption, if it would have cooked, prepared and served food in canteen itself, because such activity by the company would not be construed as the one in furtherance of taxable activity because of its being on losing end---Element of mutuality, especially when it was not disputed either in the fora below or High Court that the activity so embarked upon by assessee was for pecuniary consideration---Person supplying cooked and prepared food to an industrial canteen for business activity was not exempted from Sales Tax, 1990---Reference was answered accordingly.

Farrukh Jawad Pani for Appellant.

Abdul Latif Yousafzai for Respondent.

Date of hearing: 20th January, 2010.

2010 P T D 1333

[Peshawar High Court]

Before Mazhar Alam Khan and Imtiaz Ali, JJ

SUDEER

Versus

COLLECTOR CUSTOMS, PESHAWAR and 2 others

S.A.O. (Customs) No. 4 of 2006, decided on 21st April, 2010.

Customs Act (IV of 1969)---

----Ss. 156(1)(8)(89)(90) & 196---Order of outright confiscation of seized vehicle---Customs Officers detained accused's vehicle for allegedly bearing tampered (welded and refitted) chassis plate/number and having been smuggled into the country without payment of customs duty---Customs Tribunal ordered outright confiscation of vehicle---Validity---Mere fact that chassis number was refitted, without any evidence showing that some other vehicle was plying with the same chassis number was not sufficient to justify seizure or confiscation of vehicle by customs authorities---Order of the Appellate Tribunal was set aside and vehicle was ordered to be released unconditionally.

Malik Haroon Iqbal for Appellant.

Ghulam Shoaib Jalkay for Respondents.

Date of hearing: 21st April, 2010.

2010 P T D 1355

[Peshawar High Court]

Before Zia-ud-Din Khattak, J

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, PESHAWAR

Versus

Messrs MAKK BEVERAGES (PVT.) LTD., PESHAWAR

Tax Reference No.24 of 2008, decided on 18th September, 2008.

Sales Tax Act (VII of 1990)---

----Ss. 30, 36, 46 & 47---Central Excise Act (I of 1944), Ss.2(28) & 36-c---Central Excise Rules, 1944, R.10---Recovery of short levied Tax---Reference to High Court---Additional Collector ordered the registered unit to pay amount as Central Excise Duty under R.10 of Central Excise Rules, 1944 and as Sales Tax, Additional Sales Tax under S.36 of Sales Tax Act, 1990---Appeal against said order having been dismissed by Collector (Appeals), the registered unit filed appeal to Sales Tax Appellate Tribunal---Said appeal having been accepted by the Tribunal, department had filed reference to the High Court---Case of petitioner/department solely rested on the audit that was conduced by the Directorate General of Revenue Receipts Audit, a branch of Auditor General of Pakistan, and its officers were neither Sales Tax Officers nor they were authorized under Sales Tax Rules, 2005 to have access to premises and accounts of any registered unit---Said Officials did not even fall in the category of officers mentioned in S.2(28) of Central Excise Act, 1944---Charter of function of said Directorate as given in notification dated 17-12-1990, had revealed that President of Pakistan had required the Auditor General of Pakistan to audit the receipt of Federal Government and not the record of private enterprises/Industrial Units licensed/registered under the Sales Tax/Central Excise Laws---Whole exercise conducted by the Directorate; that particular case was coram non judice and reference being devoid of force, was dismissed, in circumstances.

Sharifullah, Law Officer for Petitioner.

Nemo for Respondent.

2010 P T D 1781

[Peshawar High Court]

Before Sardar Shaukat Hayat and Imtiaz Ali, JJ

COLLECTOR OF CUSTOMS, CUSTOMS HOUSE, PESHAWAR

Versus

WAHEED GUL

Custom Reference No. 24 of 2009, decided on 7th June, 2010.

Customs Act (IV of 1969)---

----Ss. 168, 179, 194-A & 196---Confiscation of vehicle---Reference/appeal to High Court---Scope extent---Vehicle in question was confiscated by the appellant/Customs Authority and Appellate Tribunal accepting appeal filed by the respondent, ordered release of vehicle in question, unconditionally and department had filed reference application before the High Court against judgment of the Appellate Tribunal---Maintainability of said reference application had been objected to by the respondent on the ground that no question of law was involved in the case and question involved in the case was purely a question of fact---Under S.193 of Customs Act, 1969 appeal was provided to Collector (Appeals) against any decision/order passed under S. 179 of said Act by an officer of Customs and any order passed thereon was subject to a further appeal to the Appellate Tribunal under S.194-A of the Act---Finality was attached to the order passed by the Appellate Tribunal---Scheme of said provisions of law had unambiguously laid down that Appellate Tribunal was final arbiter for determining question of facts as well as mixed questions of facts and law and finality was attached to such orders, so far as hierarchy provided by Customs Act, 1969 was concerned---Reference could only be made to the High Court under S.196 of the Customs Act, 1969 where a pure question of law would arise out of the order of Appellate Tribunal---High Court could not even enter upon the controversy, brought before it and proceed to hear the case, unless it was satisfied that a question of law would arise out of such order---Question of law would be a question which either required interpretation of a provision of law or applicability or otherwise of any such provisions to a particular set of facts---Question of law did not require investigation of facts---Intention of Legislature as expressed in S.196 of Customs Act, 1969 was clear in that High Court had been given a limited advisory jurisdiction to that extent and was neither empowered nor required to determine propriety, legality or merit of each and every decision rendered by the Appellate Tribunal---Appellate Tribunal in the present case had only found that the findings of fact of two forums below with regard to chassis of the confiscated vehicle, were not maintainable---No possible question of law would arise out of said order---Pure questions of fact involved in case could only be raised before appellate/revisional forum and not before the High Court exercising advisory jurisdiction under S.196 of Customs Act, 1969---Decision of Appellate Tribunal, neither suffered from any illegality or infirmity nor was contrary to or in violation of any provision of Customs Act, 1969---No question of law having been referred to the High Court which was necessary pre-condition for maintainability of application under S.196 of Customs Act, 1969, application was dismissed.

2006 SCMR 129 and 2006 PTD 985 ref.

Muhammad Ali for Petitioner.

Zahid Idrees for Respondent.

Date of hearing: 7th June, 2010.

2010 P T D 1850

[Peshawar High Court]

Before Liaqat Ali Shah and Yahya Afridi, JJ

Messrs A.G.E. INDUSTRIES (PVT.) LTD.

Versus

IAC OF INCOME TAX

F.A.O. No. 84 converted in SAO Nos. 17 and 18 of 2000, decided on 2nd July, 2010.

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

----S.136---Questions of law not taken by appellant as grounds of appeal, argued or discussed by Appellate Tribunal---Reference to High Court containing such questions---Maintainability---High Court in its advisory jurisdiction could not consider such questions, thus, declined to render, opinion thereon.

Commissioner of Income Tax v. Maqbool Ahmad Gill 2007 PTD 1757; Mountain States Mineral Enterprises v. Commissioner of Income Tax 2008 PTD 1087; Hirgina and Co. v. Commissioner Sales Tax 1970 SCMR 128; The Lunglatea Co. v. Commissioner of Income Tax 1970 SCMR 872; Amin Spinning Mills v. Deputy Collector Central Excise 2004 PTD 2479 and Commissioner of Income Tax v. National Refinery Ltd. 2003 PTD 2020 ref.

Ahmad Karachi Halwa Marchant v. The Commissioner of Income Tax 1982 SCMR 489; M/s. Madar-I-Millat Pakistan Ltd. v. Commissioner of Income Tax 2006 SCMR 526 and Mst. Nisar bibi v. Muhammad Shafique Ahmad 2007 SCMR 977 fol.

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

----S.80-C & Second Sched. Part-IV, Cl.9 [as amended by Finance Act (IX of 1996)]---Words "opts out of" as used in Second Sched. Part-IV, Cl. (9) of Income Tax Ordinance, 1979 replaced with words "opts for" by Finance Act, 1996---Effect---Before such amendment, assessee was required to file written declaration to opt out of presumptive tax regime of S.80-C of Income Tax Ordinance, 1979, whereas after such amendment, assessee would be assessed under such regime on giving a written option to such effect---Such amendment had neither affected any substantive right of assessee nor imposed new tax, rather had simply changed mode of assessment---Procedural law, if amended and that too for benefit of assessee, would be retrospective and applicable to pending cases---Such amendment was declaratory and not remedial in nature as no evidence existed to show that there was a corrective measure to be taken, which resulted in such amendment.

(c) Interpretation of statutes---

----Procedural law, amendment in---Effect stated.

The procedural fiscal law, if altered and that too for the benefit of the assessee, then in such case, the amendment would be retrospective and applicable to cases, which are pending before a forum prescribed by law.

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

----Ss.62 & 66-A---Re-opening of assessment order passed under S.62 of Income Tax Ordinance, 1979---Powers of Inspecting Additional Commissioner (IAC)---Scope---Decision by Deputy Commissioner, if erroneous and prejudicial to interest of revenue, could be reconsidered by IAC after providing opportunity of hearing to assessee---Inspecting Additional Commissioner must exercise such discretion reasonably and on valid grounds.

Issar Ali Qazi for Appellant.

Eid Muhammad Khattak for Respondent.

Date of hearing: 27th May, 2010.

2010 P T D 1913

[Peshawar High Court]

Before Ejaz Afzal Khan, C.J. and Mazhar Alam Khan, J

Messrs BANK ALFALAH LIMITED, KARACHI---Petitioner

Versus

EXCISE AND TAXATION OFFICER-IV, PESHAWAR and 2 others---Respondents

Writ Petitions Nos. 1982 of 2006, 742, 1107 of 2007 and 950 of 2008, decided on 17th June, 2010.

Banking Companies Ordinance (LVII of 1962)---

----S.5(c)---Cantonments Act (II of 1924), S.60---Constitution of Pakistan (1973), Arts 163, 199 & Fourth Sched. Part-1, Entry 48---Constitutional petition---Levy of professional tax by Provincial Government on Banking Company housed in Cantonment area---Plea of Bank that its Head Offices located in other Provinces had paid such tax according to their paid-up capital, thus, its Branch could not be subjected to such levy; that such levy was illegal as its Branch Office located in Cantonment area would not fall within domain of Provincial Government; and that such levy covered by Entry 48 of Fourth Sched. of the Constitution would not fall within competence of Provincial Government---Validity---Such tax could be levied on limited company, Mudariba, Mutual Fund and other corporate bodies having prescribed paid-up capital or reserves in preceding years---Payment of such tax in one Province could not diminish or dilute its liability once Bank decided to expand its activity by entering into another Province---Powers of Cantonment Board to impose tax within scope of S.60 of Cantonments Act, 1924 would not take any such business, trade, calling or employment carried in Cantonment area outside scope of Province or its Assembly-Such tax was not imposed on Cantonment, but on business carried therein by petitioner---In absence of any provision whether express or implied in any law for the time being in force, powers of Provincial Government to levy such tax on business carried in Cantonment area could not be restricted---Petitioner being a limited company, could not escape liability of such levy irrespective of fact whether its Head Offices were within or outside Province---Bank/Banking Companies could not be termed as "corporation" used in Entry 48 of Fourth Sched. of the Constitution---Impugned levy was legal---High Court dismissed constitutional petition in circumstances.

Province of Punjab and others v. Sargodha Textile Mills Ltd. and others PLD 2005 SC 988 and Fist Leasing Corporation Ltd. v. Government of N.-W.F.P. and others rendered in Writ Petition No. 1965 of 1998, decided on 28-1-2009 rel.

Sharif Ahmad Butt for Petitioners.

Farman Ullah Khattak for Respondent Nos. 1 and 2.

Wazar Ali A.A.-G. for Respondent No.3.

Date of hearing: 10th June, 2010.

2010 P T D 2003

[Peshawar High Court]

Before Ejaz Afzal Khan, C.J. and Mazhar Alam Khan, J

COMMISSIONER OF INCOME TAX

Versus

ASSOCIATED INDUSTRIES

T.R. No.15 of 2007, decided on 23rd June, 2010.

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

----Ss. 88 & 104---Additional tax, addition of---Deletion of such addition by appellate Tribunal on basis of refund relating to year preceding the assessment year---Validity---Assessee would become liable to pay additional tax in case of non-payment of tax or payment of tax less than tax payable---Creation or adjustment of refund did not fall within ambit of S.54 of Income Tax Ordinance, 1979---Tax would become payable under S.54 of Income Tax Ordinance, 1979 on furnishing return of income and become payable under S.59, 59-A, 62,63 or 65 thereof on completion of assessment---Assessment would not mean mere determination of what was payable, but would include determination of what was refundable---Determination of tax payable must coincide with what was refundable, even though both such matters being dealt with by different provisions of the Ordinance---Tribunal was justified to delete additional tax---High Court answered the reference in affirmative.

Pakistan Machine Tool Factory (Pvt.) Ltd., Karachi v. Commissioner of Sales, Central, Zone-B, Karachi 2006 SCMR 1577 and Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs Circle Sheikhupura and another PLD 1988 SC 370 rel.

(b) Interpretation of statutes---

----Fiscal statute---Statute imposing pecuniary burdens would be construed strictly (rather than liberally), but not to an extent to deny due benefit to person taxed.

Pakistan Machine Tool Factory (Pvt.) Ltd., Karachi v. Commissioner of Sales, Central, Zone-B, Karachi 2006 SCMR 1577 and Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs Circle Sheikhupura and another PLD 1988 SC 370 rel.

Eid Muhammad Khattak for Appellant.

Fazal-ur-Rehman, A.-A.G. and Ghulam Shoaib Tolly for Respondent.

Date of hearing: 23rd June, 2010.

2010 P T D 2136

[Peshawar High Court]

Before Syed Sajjad Hussain Shah and Sardar Shaukat Hayat, JJ

COLLECTOR CUSTOMS, PESHAWAR---Appellant

Versus

IFTIKHAR ALI KHAN---Respondent

Customs Reference No. 5 of 2007, decided on 24th May, 2010.

Customs Act (IV of 1969)---

---Ss. 168 & 196---Seizure of vehicle---Appeal/reference to High Court---Appeal though was filed by the appellant/department in ,the name of Collector, but same was not signed by the Collector---Even there existed no affidavit or verification with the reference/appeal---Reference/appeal was only signed by the counsel for the department---Under S.196 of the Customs Act, 1969, the reference could be filed, signed or verified only by the Collector---None else was authorized to sign or verify the reference on behalf of the Collector---Reference having not been filed in accordance with law, was not maintainable in its present form---Reference/appeal was dismissed, in circumstances.

2009 PTD 1799; 2006 SCMR 129 and 2008 PTD 356 ref.

Moinuddin Humayun for Appellant.

Issaq Ali Qazi for Respondent.

Date of hearing: 24th May, 2010.

2010 P T D 287

[Supreme Court of Pakistan]

Present: Javed Iqbal, Sayed Zahid Hussain and Muhammad Sair Ali, JJ

Messrs HUFFAZ SEAMLESS PIPE IND. LTD.

Versus

COLLECTOR OF SALES TAX, HYDERABAD

Civil Appeals Nos. 1576 and 1577 of 2007, decided on 1st October, 2009.

(On appeal against the order, dated 9-5-2007 passed by High Court of Sindh at Karachi in ITR. No. 100 of 2006).

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

----S.13---S.R.O.533(I)/94, dated 9-6-1994---Exemption---Burden of proof would lie on person claiming exemption under the S.R.O.

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

----S.13---S.R.O. 533(I)/94, dated 9-6-1994---Qanun-e-Shahadat (10 of 1984), Art. 86---Exemption from tax---Self-serving certificate issued in favour of assessee by private companies---Evidentiary value---Such certificates would not enjoy any legal presumption or evidentiary veracity to be ipso facto admitted as proof for contents therein.

(c) Constitution of Pakistan (1973)---

----Art. 185(3)---Sales Tax Act (VII of 1990), Ss. 13 & 46---S.R.O. 533(I)/94, dated.9-6-1994---Exemption from tax---Question of fact duly settled by Tribunal of fact--- Re-decision of such question could not be sought in appeal before Supreme Court.

Mansoorul Arfeen, Advocate Supreme Court for Appellant.

Syed Arshad Hussain, Advocate Supreme Court and A.S.K. Ghori, Advocate-on-Record for Respondents.

Date of hearing: 1st October, 2009.

2010 P T D 313

[Supreme Court of Pakistan]

Present: Sardar Muhammad Raza Khan, Ghulam Rabbani and Sarmad Jalal Osmany, JJ

MURREE BREWERY COMPANY LIMITED

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOMS HOUSE, KARACHI

Civil Petition No.906 of 2009, decided on 28th July, 2009.

(On appeal from the order, dated 17-3-2009 passed by High Court of Sindh at Karachi in Special Customs Reference Application No. 190 of 2006).

Customs Act (IV of 1969)---

----S. 196---Constitution of Pakistan (1973), Art.185(3)---Imported goods---Description---Scope---Grievance of importer was that goods imported fell within PTC Heading 8419-5090 chargeable to customs duty at 10% but authorities applied PTC Heading 8419-5010 and charged customs duty at the rate of 35%---Validity---Goods imported were shaped like "Shell" as well as "Tube", therefore, it did not appeal to a prudent mind to like the same out from description "Shell or Tube type" and put under description "other" not akin to relevant description---Adjudicating officer had correctly classified imported goods chargeable under PCT Heading 8419.54010, so also the Customs Appellate Tribunal---High Court rightly dismissed appeal and reference of importer---Concurrent findings recorded by courts below were unexceptionable---Leave to appeal was refused.

Sohail Muzaffar, Advocate Supreme Court for Petitioner.

Nemo for Respondent.

Date of hearing: 28th July, 2009.

2010 PTD331

[Supreme Court of Pakistan]

Present: Sardar Muhammad Raza Khan, Raja Fayyaz Ahmad and Khilji Arif Hussain, JJ

GENERAL TYRE AND RUBBER CO. PAK. LTD

Versus

DEPUTY COLLECTOR and another

Civil Appeal No.1577 of 2006, decided on 30th September, 2009.

(On appeal from the judgment, dated 27-1-2006 of the High Court of Sindh, Karachi passed in Spl. Sales Tax A. No.38 or 2004).

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

----Ss. 3(1)(a), 3(3), 33(2)(cc), 34, 36.& 45---Sales Tax General Order No.1 of 1998, dated 17-6-1998---Constitution of Pakistan (1973), Art. 185(3)---Leave to appeal was granted by Supreme Court to consider whether input tax was paid by manufacturer on supplies not owned by him would be adjustable against output tax paid by him on such supplies going out of his factory; whether adjustment of input tax was permissible only in respect of goods which belonged to vendor and not in respect of goods which belonged to vendee and were received by him only for the purpose of manufacturer; whether provisions of Sales Tax General Order No.1 of 1998, dated 17-6-1998, would prevail over provisions of Ss-3(1)(a) and S.3(3) of Sales Tax Act, 1990; and whether Customs, Excise and Sales Tax Appellate Tribunal and High Court in view of material and evidence available were justified in holding that vendee did not have invoice of payment, of sales tax so as to adjust input tax against output tax.

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

----Ss. 2(12), 3(1)(a), 3(3), 33(2)(cc), 34, 36 & 45 [as substituted by Finance Ordinance (XXI of 2000)]---Sales Tax General Order No.1 of 1998, dated 17-6-1998---Sales Tax---Input tax, adjustment of---Appellant-company got raw material mixed from another factory due to damage to its own mixing machinery by accidental fire---Appellant-Company claimed adjustment of input' tax for payments made to that other factory which adjustment was declined by authorities and notice was, issued, for recovery of sales tax along with additional tax and penalty as well---Appeals before Customs, Excise and Sales Tax Appellate Tribunal and High Court were dismissed and order passed by authorities was maintained---Validity---Before eruption of fire in factory of appellant, mixing process of given raw materials was being carried out through their own unit of machinery and its own staff thus never before the company claimed adjustment of input tax on account of use of such machinery and thus appellant-Company on such factual plane advanced claim for adjustment of input tax not backed by any provision of Sales Tax Act, 1990---Pecuniary jurisdiction of Deputy Collector was enhanced up to Rupees two and half million by virtue of amendment in S.45 of Sales Tax Act, 1990, which was in force at the relevant time---As appellant did not supply any goods as defined in S.2(12) of Sales Tax Act, 1990, therefore, authorities had rightly - refused to adjust input tax claimed by appellant---Supreme Court declined to interfere in the judgment of High Court---Appeal was dismissed.

Executive District Officer (Education), Rawalpindi v. Muhammad Younis 2007 SCMR 1835; Evacuee Trust Property Board and others v. Mst. Sakina Bibi and others 2007 SCMR 262; Messrs Thatta Cement Company, Thatta v. Customs, Central Excise and Sales Tax Appellate Tribunal Karachi and 2 others 2003 PTD 1899 and Collector of Customs, E. & S.T. and Sales Tax v. Pakistan State Oil Company Ltd., 2005 PTD 2446 ref.

Aziz A. Sheikh, Advocate Supreme Court for Petitioner.

Raja M. Iqbal, Advocate Supreme Court for Respondents.

Date of hearing: 30th November, 2009.

2010 P T D 352

[Supreme Court of Pakistan]

Present: M. Javed Buttar, Muhammad Farrukh Mahmud and Sayed Zahid Hussain, JJ

FEDERATION OF PAKISTAN through Secretary Federal Board of Revenue, Islamabad and others

Versus

Messrs NEW AMMUR INDUSTRIES, LAHORE

Civil Petition No.514 of 2007, decided on 11th June, 2009.

(On appeal against the judgment, dated 14-3-2007 passed by the Lahore High Court, Lahore in Writ Petition No.6846 of 2006).

Sales Tax Act (VII of 1990)---

----S.45-A---Constitution of Pakistan (1973), Art. 185(3)---Calling for record---Re-opening of case---Order-in-Original was passed on 20-5-2005, determining sales tax amount which was deposited by respondent---In exercise of powers under S.45-A of Sales Tax Act, 1990, Collector vide his order, dated 10-6-2006, directed Deputy Collector to re-open Order-in-Original and pass fresh order, which order of Collector was set aside by High Court---Validity---Order-in-Original was passed by Deputy Collector (Adjudication), who was not. subordinate to Collector and the same was not challenged in appeal by any officer of Sales Tax Department---Power of Board (Collector or Collector Adjudication) under S.45-A of Sales Tax Act, 1990, to call for record remained in force till 29-6-2005, whereafter the same was amended by Finance Act, 2005---It was after the amendment under S.45(4) of Sales Tax Act, 1990, that powers were given to Collector to call for and examine record of any proceedings under Sales Tax Act, 1990, suo motu---Amendments incorporated through Finance Act, 2005, were prospective in nature and were not applicable---Supreme Court did not find any irregularity or any infirmity in judgment passed by High Court---Leave to appeal was refused.

Malik Itaat Hussain Awan, Advocate Supreme Court and M.S. Khattak, Advocate on Record for Petitioners.

Mian Abdul Ghaffar, Advocate Supreme Court of Respondent.

2010 P T D 1177

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J., Ch. Ijaz Ahmad and Mahmood Akhtar Shahid Siddiqui, JJ

POULTRY FEEDS CONTAINING PIG MEAT: In re.

Civil Miscellaneous Nos. 2482 of 2007 and Suo Motu Case No. 15 of 2007, decided on 7th July, 2009.

Customs Act (IV of 1969)---

----Ss.32 & 156(4)---Constitution of Pakistan (1973), Art.184(3)---Constitutional jurisdiction of Supreme court---Import of poultry feed containing trances of pork meat/bones---Supreme Court, in exercise of suo motu powers issued notices to the importers and authorities regarding import of poultry feed containing traces of pork meat/bone and disposed of the matter in the terms that importers against whom penalty was imposed under S.156(4) read with S.32 of Customs Act, 1969 as well as for violation of import policy, would make payment of the same to Customs department; that customs department or importers would not further agitate the matter either within the hierarchy of Customs Act, 1969, or before High Court or any forum and orders of adjudication would be treated final for all intents and purposes; that importers who could manage re-export of consignment would do the same on their own responsibility, after taking into permission from concerned quarters, within the period of three weeks, failing which all consignment which was dumped in different places would be destroyed under the supervision of responsible officers of customs department as well as importers, subject to payment of damages etc. by importers individually and undertaking had to be given from importers against whom penalty was imposed that they would be careful in future and if there was any violation, strict action would be taken against them according to law, which entailed punishment---Supreme Court directed that such exercise should be completed within four weeks under the supervision of Member Customs Federal Board of Revenue.

Sardar Muhammad Latif Khan Khosa, Attorney-General for Pakistan and Dr. Riffat Ayesha Chief Nutritionist, NIH on Court notice.

Raja Abdul Ghafoor, Advocate Supreme Court/Advocate-on Record, Munir Qureshi, Member (Customs), Mumtaz Ahmed, Member (Legal).

Najmul Hassan Kazmi, Senior Advocate Supreme Court for Punjnad Feed.

Tariq Mehmood, Advocate Supreme Court for National Feed.

Zulfiqar Khalid Maluka, Advocate Supreme Court for Olympia Feed, Shahzor Feeds, Shabbir Edible Feeds, Ghazi Brothers and A One Feeds.

Taufiq Asif, Advocate Supreme Court for Sadiq Brothers and Chakwal Feeds.

M. Bilal, Senior Advocate Supreme Court for Syed Fish.

Nemo for others

2010 P T D 1809

[Supreme Court of Pakistan]

Present: Sardar Muhammad Raza Khan, Anwar Zaheer Jamali and Khilji Arif Hussain, JJ

UCH POWER (PVT.) LTD. and others

Versus

INCOME TAX APPELLATE TRIBUNAL and others

Civil Appeals Nos.2652-2654 of 2006, 1328-1336 of 2009, Civil Petitions Nos.1462, 1482, 1718-1724 and 1772-1774 of 2009, decided on 29th January, 2010.

(On appeal from the judgment dated 19-5-2005 passed by the Islamabad High Court, Islamabad in T.R. Nos.26, 27 and 51 of 2005, 1 and 2 of 2006, 58, 59, 60 and 61 of 2007 and 1, 2, 3, 63, 161, 162, 163 and 164 of 2008 and 17, 19, 21 and 22 of 2009 and judgment dated 27-7-2009 passed in T.R. No.3 of 2009 and judgment, dated 13-3-2006 passed by the Lahore High Court, Lahore in T.R. Nos.87 and 88 of 2002 and 457 of 2003).

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

----Ss. 23(1)(vii), 34 & Second Sched. Part-I, Cl.176 [as inserted through S.R.O. No.1046(I)/88, dated 21-11-1988]---Income Tax Ordinance (XLIX of 2001), Second Sched. Part-I, Cl.132---Assessee company engaged in Private Sector Power Generation Project---Profit/interest earned by company on Bank account maintained solely for such project---Set off of business losses of company against their such interest income or any other income---Scope---Set off of losses covered by S. 34 of Income Tax Ordinance, 1979 were not restricted to any particular head of income, rather same were adjustable against income of company under any other head.

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

---Ss. 23(1)(vii), 30(2)(b), 31(1)(b), 34 & Second Sched., Part-I, Cl.176 [as inserted through S. R. O. No.1046(I)/88, dated 21-11-1988]--Income Tax Ordinance (XLIX of 2001), Second Sched. Part-I, Cl.132---Assessee-Company engaged in Private Sector Power Generation Project---Profit/interest earned by company on Bank account maintained solely for such project---Interest paid in respect of capital borrowed by company---Exemption from tax on such interest income of the company---Deduction of such paid interest while computing such interest income of company under S.31(1)(b) of Income Tax Ordinance, 1979---Scope---Use of words "profits and gains" under Cl.176 of Part-I of Second Schedule of Income Tax Ordinance, 1979 was only with reference to income generated by company covered by S.22 thereof---Such interest income of company for being a separate income covered by S.30 of Income Tax Ordinance, 1979 was not entitled to exemption under Cl.176 of Part-1 of Second Schedule thereof.

Genertech Pakistan Ltd. and others v. Income Tax Appellate Tribunal of Pakistan, Lahore and others 2004 SCMR 1319; AES Pak. Gen (Pvt.) Ltd. v. Commissioner Income Tax C.Ps. Nos.2211 and 2212-L of 2005; Black's Law Dictionary; Genertech Pakistan Ltd. and others v. Income. Tax Appellate Tribunal of Pakistan, Lahore and others 2004 SCMR 1319; AES Pak. Gen (Pvt.) Ltd. v. Commissioner Income Tax C.Ps No.2211 and 2212-L of 2005; Pakistan v. Messrs Lucky Cement 2007 PTD 1656; C.I.T./W.T. v. Surraya Zafar 2008 PTD 202; Federation of Pakistan v. Muhammad Sadiq 2007 PTD 67; Facto Belarus Tractors Ltd. v. Pakistan 2001 PTD 1829; Packages Ltd. v. Commissioner of Income Tax 1993 SCMR 1224; Sanam Progetti S.P.A. v. Addl. C.I.T. (Delhi) (1981 (132) ITR 70; (1995 (216) ITR 535; A&B Food Industries Ltd. v. Commissioner of Income Tax/Sales 1992 SCMR 663; State v. Qaim Ali Shah 1992 SCMR 2192; B.P. Biscuit Factory Ltd. v. Wealth Tax Officer 1996 SCMR 1470; Muhammad Rafique Goreja v. Islamic Republic of Pakistan 2006 SCMR 1317 Messrs AES PAK GEN (Pvt.) Company. Lahore v. Income Tax Appellate Tribunal, Lahore and another 2006 PTD 1; Commissioner of Income Tax, East Pakistan v. Liquidator, Khulna Bogerhat, Railway Company Ltd. PLD 1962 SC 128; Genertech Pakistan Ltd. v. Income Tax Appellate Tribunal of Pakistan 2004 SCMR 1319; AES Pak. Gen. (Pvt.) Ltd. v. Commissioner of Income Tax (in Civil Petitions No.2211 and 2212-L of 2005 and Tuticorin Alkali Chemical and Fertilizer Ltd., v. Commissioner of Income Tax 1993 PTD 900 ref.

Genertech Pakistan Ltd. v. Income Tax Appellate Tribunal of Pakistan 2004 SCMR 1319 and the judgment dated 16-6-2006 (AES Pak. Gen. (Pvt.) Ltd. v. Commissioner of Income Tax) rel.

(c) Words and phrases---

--- "Profit "---Definition.

Black's Law Dictionary ref.

(d) Words and phrases---

----"Gain "---Definition.

Black's Law Dictionary ref.

Wasim Sajjad, Senior Advocate Supreme Court and M.S. Khattak, Advocate-on-Record assisted by Mustafa Ramday for Appellants (in C.As. Nos. 1328-1336) and for Respondent No 1 (in C.P.S. Nos. 1465, 1466, 1477, 1482 of 2009).

Shahid Hamid, Senior Advocate Supreme Court and Ikram-ul-Haq, Advocate Supreme Court for Appellants (in C.As. Nos.2652-2654 of 2006).

Hafiz Muhammad Idris, Advocate Supreme Court for Petitioners (in C.Ps. Nos.1718-1724, 1772-1774 of 2009) and for Respondents (in C.Ps. Nos.1462-1464, 1467-1470 of 2009).

M. Iqbal Vehniwal, Advocate Supreme Court for Respondents (in C.As. Nos.2652-2654 of 2006).

Shahid Raza, Advocate Supreme Court and Mehmood A. Sheikh, Advocate-on-Record for F.B.R: (in C.As. No.1328-1336, 1718-1724.

Raja Abdul Ghafoor, Advocate Supreme Court for F.B.R. (in C.Ps. Nos. 1462-1468 of 2009 only).

Dates of hearing: 28th 29th January, 2010.

2010 P T D 2006

[Supreme Court of Pakistan]

Present: Javed Iqbal, Muhammad Sair Ali and Tariq Pervaiz, JJ

DIRECTOR-GENERAL, INTELLIGENCE AND INVESTIGATION-FBR, through Director, Intelligence and Investigation, FBR, Islamabad---Appellants

Versus

SHER ANDAZ and 20 others---Respondents

Civil Appeals Nos. 768 to 788 of 2009, decided on 15th July, 2010.

(On appeal from the judgment, dated 19-3-2009 passed by the Lahore High Court, Rawalpindi Bench in T.R. Nos. 10 to 30 of 2007).

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

----S.196---Finance Act (IV of 2007), S.8(25)---Constitution of Pakistan (1973), Art.185(3)---Leave to appeal was granted by Supreme Court to consider; whether Director-General, Intelligence and Investigation, Federal Bureau of Revenue was covered by expression "aggrieved person" under S.196 of Customs Act, 1969, prior to its amendment vide S.8(25) of Finance Act, 2007 made applicable from 1-7-2007.

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

----S.196---Finance Act (IV of 2007), S.8(25)---Reference applications before High Court---Scope---Reference applications filed by Director-General Intelligence and Investigation, FBR were dismissed by High Court as incompetently filed---Validity---Reference applications were filed in March/April, 2007, i.e. prior to 1-7-2007, when S.196 of Customs Act, 1969 was amended by Finance Act, 2007 with effect from 1-7-2007, authorizing appellants etc. to file Reference applications before High Court---Prior to the amendment, Director and Directorate-General of Intelligence and Investigation, FBR etc. had no power to institute Reference applications in S.196 of Customs Act, 1969---Supreme Court declined to interfere in the judgment passed by High Court, whereby appeals of appellants were dismissed as incompetent and invalidly filed---Appeal was dismissed.

Director, Directorate-General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Limited and others 2006 SCMR 129 and Director, Directorate-General of Intelligence and Investigation, Customs and Excise, Karachi and Messrs Al-Faiz Industries (Pvt.) Ltd. Karachi and others 2004 PTD 2987 ref.

Hafiz S.A. Rehman, Senior Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record (in all cases) for Appellants.

Muhammad Naeem Qazi, Advocate Supreme Court and Sajjad Hussain, Advocate Supreme Court for Respondents (in all cases).

Date of hearing: 11th March, 2010.

2010 P T D 2018

[Supreme Court of Pakistan]

Present: Javed Iqbal, Raja Fayyaz Ahmed and Muhammad Sair Ali, JJ

PEARL CONTINENTAL HOTEL and another---Appellants

Versus

GOVERNMENT OF N.-W.F.P. and others---Respondents

Civil Appeal No. 240 of 2005 in C.P. No. 2720 of 2004, decided on 20th July, 2010.

(On appeal against the judgment, dated 28-3-2005 passed by Peshawar High Court, Peshawar in Writ Petition No. 650 of 2003).

(a) North West Frontier Province Finance Ordinance (XXIII of 2002)---

----Ss.4 & 5---North-West Frontier Province Finance (Amendment) Ordinance (VII of 2003), S.4--- North West Frontier Province Hotel Tax Rules, 2003, R.4---Constitution of Pakistan (1973), Arts.128 & 185(3)---Leave to appeal was granted by Supreme Court to consider; whether North-West Frontier Province Hotel Tax Rules, 2003 were framed by Provincial Government with competent authority because S.5 incorporated in North West Frontier Province Finance Ordinance, 2002, was not laid before Provincial Assembly for making the same as Act of Provincial Assembly, within the period of three months from its promulgation as per Art. 128 of the Constitution; whether North West Frontier Province Finance (Amendment) Ordinance, 2003, was protected under Constitution (Seventeenth Amendment) Act, if so, to what effect; whether Rule 4 of North-West Frontier Province Hotel Tax Rules, 2003, was promulgated beyond the scope of section 4 of North West Frontier Province Finance Ordinance, 2002, if so, same being ultra vires the Ordinance, deserved to be struck down; and whether High Court had correctly interpreted expression used in section 4 of North-West Frontier Province Finance (Amendment) Ordinance, 2003, namely "lodging units available at the rate of 5% of room rent per lodging unit per day".

(b) West Pakistan Finance Act (I of 1965)---

---Ss. 12 & 18(3)--- North-West Frontier Province Finance Ordinance (II of 2000), S.6--- North-West Frontier Province Finance Ordinance (XXIII of 2002), Ss.4 & 5--- North-West Frontier Province Finance (Amendment) Ordinance (VII of 2003), S.4--- North West Frontier Province Hotel Tax Rules, 2003, R.4---Hotel tax---Vires of maximum charges for lodging unit in a Hotel---Absence of machinery provisions--Rebated room rents---Effect--- "Room rent per lodging unit per day "---Connotation---Authorities sought recovery of Hotel Tax under S.4 of North-West Frontier Province Finance Act, 2002, from appellant/ hotel---Plea raised by appellant/hotel was that charging section did not permit tax on room rent calculated for the year on the basis of the highest charges received for a lodging unit for a day---Appellant/hotel further contended that charging section limited imposition of tax to 50% of available lodging units and not on the maximum number of lodging units---Validity---Where assessment and recovery of tax was made in good faith and strictly in accordance with law and re-exercise thereto would have been futile, courts refused to interfere because of inadequacy or error in or absence of machinery provisions or procedure---Connotation of "room rent per lodging unit per day" in the statute could therefore, only be the standard and declared "room rent" printed in hotel literature and afforded at the counter to lodgers and customers to the contract for---No other meaning could be ascribed for the purposes of hotel tax---Behind the counter, management or owner of a hotel, using commercial or personal discretion, might charge a customer rebated or negotiated room rent at 3/4th, 1/2th, 1/4th, 1/8th, 1/10th or nil of the standard declared room rent---On the same logic a hotel in good season and good days, might charge room rent higher than the declared rent---Such discretion or accommodation might be normal or abnormal, ordinary or extraordinary and commercial or non-commercial practice but it could neither be standardized as a rule nor could it be effectively/evenly regulated by taxing authorities---Such practice patently non-transparent, uneven and optional could not provide the requisite equal, just, balanced, fair and reasonable parametrical basis for levy and collection of tax---Concept of maximum count of lodging units or maximum charges for room rent of a lodging units was illogical, in-apt and in conflict with the provisions of S.4 of North-West Frontier Province Finance Ordinance, 2002---If there was 100 lodging units in a hotel, tax could only be charged on room rent of 50% of lodging units and not on fifty one lodging units or more---Framers of rules in their over-anxiety to extract maximum tax, superfluously added the term "maximum" with the number of lodging units as well as the charges thereon---Defined and fixed basis of tax under S.4 (1) of North-West Frontier Province Finance Ordinance, 2002, was changed by rule 4 of North-West Frontier Province Hotel Tax Rules, 2003, to a variable basis, which over-stretched and over-bloated itself beyond the scope of parent statute---Supreme Court declared Rule 4 (1) North-West Frontier Province Hotel Tax Rules, 2003, as ultra vires the provisions of S.4 of North-West Frontier Province Finance Ordinance, 2002 and Rules 4 (2) and (3) of North West Frontier Province Hotel Tax Rules, 2003, as ultra vires the law along with any other provisions in the Rules which were inconsistent or conflicting with or repugnant to and deviative of the law---Assessment made by the authorities was set aside by Supreme Court and authorities could initiate fresh proceedings for assessment and collection of tax on hotels for the period of 1-7-2002 to 13-9-2003---Appeal was allowed.

West Punjab Province v. K.B. Amir-ud-Din and others PLD 1953 Lah. 433 and Muhammad Younas v. Chairman Municipal Committees, Sahiwal and others PLD 1984 Lah. 345 rel.

Pakistan through Secretary Finance, Islamabad and 5 others v. Aryan Petro Chemical Industries (Pvt.) Ltd. Peshawar and others 2003 SCMR 370 and The Chairman, Railway Board, Lahore and others v. Messrs M. Wahabuddin and Sons PLD 1990 SC 1034 ref.

(c) Interpretation of statutes---

----Taxing statute---Machinery provisions---Applicability---Machinery provisions where provided, have to be construed liberally and in the manner aiding realization of proper tax and to prevent avoidance of tax---Where such provisions not provided for but tax recovery is made as per law, the omission of machinery may not be considered as fatal to tax recovery but where law is disregarded or breached or violated in assessing or recovering tax, non-existence of recovery provisions cannot be ignored.

(d) Interpretation of statutes---

----Taxation statute---Ambiguity---Principle---In case of ambiguity or uncertainty, taxing statutes should be interpreted to obtain, certainity, coherence and even applicability of provisions demanding interpretation---Unambiguous and express provisions of taxing statutes be enforced literally without demur, stretch or restriction.

Messrs Yousuf Re-Rolling Mills v. The Collector of Customs and another PLD 1989 SC 232 and Messrs Al-Hamza Ship Breaking Company and others v. Government of Pakistan through Secretary, Finance and Economic Affairs (Revenue Division), Islamabad and others 1996 PLD 347 ref.

(e) Interpretation of statutes---

----Taxing statute---Scope---It cannot be read into a taxing statute, what has not been provided therein?

(f) North-West Frontier Province Finance Ordinance (XXIII of 2002)---

----S.4---Words "available" and "room rent"---Connotation---Word "available" in a hotel does not demand a given or fixed number of lodging units always in a hotel---Hotel management may on a future date discard, reduce or increase lodging units during a year as a policy---Similarly "room rent" may on commercial considerations be changed but its increase or decrease and be so adopted, declared and displayed as the standard room rent for a particular period.

Syed Naeem Bukhari, Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Appellants.

Masood Kausar, Advocate Supreme Court, Syed Arshad Hussain, Advocate Supreme Court along with Zia-ur-Rehman, A.G. N.-W.F.P. for Respondents Nos. 1 to 4.

Date of hearing: 29th January, 2010.