PTD 2012 Judgments

2012 P T D (Trib.) 47

[Customs, Appellate Tribunal, Bench-II, Lahore]

Before Shahid Mahmood Bhatti, Member (Judicial) and Muhammad Arshad, Member (Technical)

IRSHAD AHMAD and another

Versus

FIAZ AHMAD CHAUDHARY, DEPUTY SUPERINTENDENT CUSTOMS (AIB), LAHORE and 6 others

C.A. No.327/LB of 2010, decided on 5th August, 2011.

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

----S.179(3)---Adjudication---Limitation---Show-cause notice was issued on 30-9-2008 and the order in original was issued on 5-5-2010---Order in original was time-barred by 112 days---Even if the adjournments sought by the appellants was approximately (30) days and the stay given by the court which was of approximately (260) days were excluded even then the order in original was time-barred by 112 days---Provisions relating to limitation were mandatory in nature for implementation by all subordinate judicial and quasi-judicial forums in view of doctrines of binding precedents and stare decisis.

1993 SCMR 311 distinguished.

Super Asia Muhammad Din and Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala and others 2008 PTD 60; Nagina Silk Mills Lyalpur v. The Income Tax Officer and the Appellate Tribunal, Pakistan PLD 1963 SC 322; Pace International Rawalpindi v. Secretary, Revenue Division, Islamabad, the Federal Tax Ombudsman (FTO) 2006 PTD 340; SS Oil Mills Ltd. v. Secretary Revenue Division, Lahore GST 2005 CL 592; TCL 2005 CL 841; 1992 SCMR 1898; 2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107 and (2010) 109 Taxation 221 rel.

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

----S.187---Burden of proof as to lawful authority, etc.---Affidavit---Initial or persuasive burden of proof---Department failed to controvert affidavits of appellant through submissions of counter affidavits---No counter affidavit having been filed by the Department, depositions made by and on behalf of the appellants in the affidavits were deemed to be true and correct and no controversy in that behalf could be allowed to be generated---Department failed to discharge their legal burden or ultimate burden in terms of S.187 of the Customs Act, 1969.

Messrs Kamran Industries v. The Collector of Customs, Exports and 4 others PLD 1996 Kar. 68 and 2003 PTD 2118 rel.

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

----S.187---Affidavit---Affidavit is a piece of evidence which carries full legal weight as per relevant provisions of Civil Procedure Code, 1908 as well as principles of justice, equity and good conscience---Affidavit was based on information received from any source and such information should be disclosed in the affidavit---Affidavit was sworn on either on Islamic principles or on solemn affirmation.

AIR 1992 SC 317 and 1986 CLC 1119 rel.

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

----S.187---Affidavit---Where no evidence had been produced by the Revenue to show that the depositions made by the taxpayer in the affidavit were incorrect or disproved by documentary evidence the Appellate Tribunal would be justified in relying upon the veracity of the facts sworn by the deponent in the affidavit submitted---If the other party files a counter affidavit he could request the court for permission to cross examine the deponent and lead other evidence to rebut the contents of the affidavit---Non submission of the counter affidavit whether by will or default forfeits the adversary's right to deny the assertions made in the affidavit.

1979 PLJ 71 and 72; 1986 CLC 745; 1986 CLC 1408; 1993 SCMR 662; 1991 MLD 1243; (1974) 94 ITR 1; (1984) 146 ITR 140; (1985) 53 (sic) Taxation 1 (Trib.) and (1978) 114 ITR 19 rel.

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

----Ss.162, 163 & 168---Power to issue search warrant---Search and seizure of godown---Search and seizure in terms of Ss.162, 163 & 168 of the Customs Act, 1969 were in conformity with the requirements stated therein---Question "as to whether search and seizure effected in terms of Ss.162, 163 & 168 of the Customs Act, 1969 were in conformity with the requirements stated therein" was answered in affirmative by the Tribunal.

Writ Petition No.13293 of 2008 dated 24-6-2009 rel.

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

----S.168(2)---Seizure of things liable to confiscation---Show-cause notice---Limitation---Show-cause notice issued well within the statutory time and was not time-barred----Question as to "whether show-cause notice was issued within the statutory time limit as prescribed in S.168(2) of the Customs Act, 1969" was answered in the affirmative by the Appellate Tribunal.

Writ Petition No.13293 of 2008 dated 24-6-2009 rel.

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

----Ss.2(s), 16, 32 & 156(1), (14), (90)---Smuggling---Charge of smuggling in terms of S.2(s) of the Customs Act, 1969 had not been levelled against the appellant neither in the show-cause notice nor in the order-in-original---Appellants during hearing while discussing legal repercussions of simultaneous incorporation of Cls.(14) and (90) of subsection (1) of S.156 of the Customs Act, 1969 had alleged that show-cause notice contained the charge of smuggling whereas the order-in-original was issued for mis-declaration and import of prohibited/ restricted items in terms of Ss.32 and 16 of the Customs Act, 1969---Incorporation of allegation of act of smuggling had nowhere been stated in the show-cause notice or the order-in-original in question was answered in the negative.

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

----Ss.156(1)(14)(90), 16 & 32---Punishment for offences---Simultaneous invocation of Cls.(14) and (90) of subsection (1) of S.156 of the Customs Act, 1969---Validity---Clause (14) of subsection (1) of S.156 of the Customs Act, 1969 was a penal clause and deals with punishment of an offence committed under S.32 of the Customs Act, 1969 for untrue statement, error in connection with any matter of customs through various modes stated therein---Clause (90) of subsection (1) of S.156 of the Customs Act, 1969 was a penal clause dealing with carrying, removing, deposing, harboring, keeping or concealing or in any manner dealing with any goods not being goods referred to in Cl.(89) of subsection (1) of S.156 of the Customs Act, 1969 (smuggled goods) by any person without any lawful excuse---No anomaly was committed by the adjudicating officer while stating both the penal clauses in the show-cause notice---Charge of smuggling had been levelled against the appellant---Objection was not based on sound footings substantiated by any evidence on record---Question as to "whether invoking of Cls.(14) and (90) of subsection (1) of S.156 of the Customs Act, 1969 simultaneously constitute an illegality detrimental/fatal to the outcome of the merits of adjudicating order" was answered in the negative.

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

----S. 179(2)---Power of adjudication---Assigning of jurisdiction by an office order---Validity---Federal Board of Revenue may through a notification in the official Gazette either fix or vary jurisdiction of power of any officer of Customs or class of officers and may also assign or transfer any case to any Collector of Customs irrespective of its territorial jurisdiction in terms of S.179(2) of the Customs Act, 1969---Federal Board of Revenue had assigned jurisdiction to Collector of Customs for adjudication of the subject case in terms of S.179(2) and (4) through an office order signed by a Member (Legal) addressed to Chief Collector---Such order was issued in contradiction to the provisions of S.179(2) of the Customs Act, 1969 which prescribed the issuance of such order through a notification in the official Gazette---Such was a mandatory condition, which had not been fulfilled while issuing the subject order and hit at the very root of the legality of the order and order became coram non judice and unenforceable at law---If law required something to be done in a particular manner that thing was to be done in the manner as prescribed under the law, otherwise it should not be done at all---Department had committed various types of violations of mandatory provisions of law which had vitiated the proceedings and the order could not sustain in the eyes of law---Question as to "whether jurisdiction in terms of provision of S.179 regarding power of adjudication can be assigned to a Collector of Customs without issuance of a notification in the official gazette by the Member Legal Federal Board of Revenue in terms of subsection (2) of S.179 of the Customs Act, 1969" was answered in the negative.

Messrs Al-Faiz Industries (Pvt.) Ltd.'s case 2006 SCMR 129 and Khalid Saeed v. Shamim Rizwan and others 2003 SCMR 1505 rel.

Mian Abdul Ghaffar for Appellants.

Ahmad Kamal, D.R. for Respondents.

Zaheer Ahmad, for D.S.

Date of hearing: 23rd May, 2011.

2012 P T D (Trib.) 1211

[Customs, Appellate Tribunal, Bench-III, Karachi]

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

COLLECTOR OF CUSTOMS, KARACHI

versus

Messrs AAZMIR ENTERPRISES, KARACHI and another

Custom Appeal No.K-409 of2011, decided on 14th April, 2012.

Customs Act (IV of 1969)---

----Ss. 25, 79(1), 80(3), 181, 193 & 156(1) Cls.1, 14 & 14A---Customs Rules, 2001---Customs General Order No.7 of 2006 dated 26-6-2006---S. R. 0.499(1)/2009 dated 13-6-2009---Determination of customs value of goods---Punishment for offences---Goods declaration was selected for scrutiny---Importer allegedly had mis-declared weight and origin of the imported goods---Origin mentioned on goods was "England" whereas importer had declared the goods as "China" origin---Importer was charged for mis-declaration of description, origin, weight and value of goods and to defraud the government from its legitimate revenue; and assessed accordingly---First Appellate Authority observed that shipment of goods from "China" and issuance of certificate of origin by the authorized Chinese authorities, created a strong impression that goods may actually have been manufactured in "China" with the words of "England" origin inscribed thereon, as reportedly happened with many goods manufactured in "China "; and due to availability of the words "Made in England" on the goods, the goods were treated to be "England", instead of "China" origin; and value of goods had been revised upwards by nearly thirty percent (30%) due to general impression that goods manufactured in "China" were inferior in quality vis-a-vis the goods manufactured in West European countries like England; and goods were treated/assessed as England origin and penal action taken was waived; and ordered to remit the redemption fine and penalty imposed on the goods and the importer; and order was modified to that extent only---Revenue contended that First Appellate Authority had no jurisdiction to allow release of goods without payment of fine and penalty after accepting the goods were of England origin and for penal action the discretion of officers of Adjudication and Appellate authorities had been withdrawn and order of First Appellate Authority for remittance of fine and penalty was against the provisions of law---Validity---Goods, no doubt, had been imported from China and certificate of origin to that effect had been produced before the First Appellate Authority during hearing proceedings which had been relied upon---As per practice in vogue in trade and industrial manufacturing, goods are manufactured in other countries by international brands through franchise licenses and their value was taken at par with the brand owning countries and are considered to be the same---Similarly in the present case, goods had been produced in "China" but had been subjected to be assessed on values at par with English Textiles product---Nowhere the element of mens rea had been established---No fresh substantive argument had been made in support of the claim---Order of First Appellate Authority was correct in law and did not warrant any interference---Appeal of the department was disallowed by the Appellate Tribunal.

Messrs Shamoon Traders Quetta v. Customs Excise and Sales Tax Appellate Tribunal, Karachi 2006 PTD 2177; Messrs P&G International, Lahore v. Assistant Collector of Customs, Appraisement, GR-II, Karachi and 3 others 2010 PTD 870; Atta-ur-Rahman v. Sardar Umar Farooq .and others PLD 2008 SC 663 and Yousuf Ali v. Muhammad As.lam Zia and others PLD 1958 SC 104 ref.

Jawad Zafar, Assistant Collector, and Ghulafn Yaseen, A.O. for Appellants.

M.H. Awan for Respondents.

Date of hearing: 1st February, 2012.

2012 P T D (Trib.) 1913

[Customs Appellate Tribunal, Karachi]

Before Ch. Imran Masood, Member Judicial-I and Shahid Mehmood Bhatti, Member Judicial-II

MUHAMMAD IQBAL

Versus

COLLECTOR OF CUSTOMS (APPEALS), KARACHI and another

Customs Appeal No.K-148 of 2011, decided on 13th August, 2012.

Customs Act (IV of 1969)---

----Ss. 193, 194-A & 195-B---Deposit of duty or penalty levied pending appeal---Adjudicating Officer passed the order-in-original and ordered for the recovery of amount being penalty---Being aggrieved by said order, appellant/exporter filed appeal before the Collector of Customs (Appeals), who dismissed the same on account of non-compliance of provisions of 5.195-B of Customs Act, 1969---Validity---Section 195-B of Customs Act, 1969 had provided that pending appeal ,the appellant would deposit with the proper officer the duty demanded or the penalty levied; said section was directory and not mandatory in nature---Non­compliance of S.195-B of the Customs Act, 1969 by the exporter, would not frustrate his right of appeal exercised under Ss.193 & 194-A of the Act---Even otherwise, in the present case neither the Customs Authorities attempted to recover duty/penalty during the pendency of appeal nor the Collector (Appeals) directed the exporter for disposing the same before dismissing the appeal on account of non-compliance of 5.195-B of the Customs Act, 1969---Right of appeal could not be taken away, in circumstances---Impugned order was set aside and appeal would be deemed to be pending before the Collector (Appeals) for decision within one month after receipt of order in accordance with law.

PLD 1972 SC 326 ref.

Muhammad Usman Vawala for Appellant.

Iqbal Jamil Abbasi for Respondents.

Date of hearing: 1st August, 2012.

2012 P T D (Trib.) 1917

[Customs Appellate Tribunal, Karachi]

Before Shahid Mehmood Bhatti, Member (Judicial-II) and Ghulam Ahmed, Member (Technical-II)

Messrs ALIYAAN TRADERS, KARACHI and 3 others

Versus

DEPUTY COLLECTOR OF CUSTOMS, KARACHI and another

Customs Appeals Nos.K-883 to 885 and 905 to 912 of 2010, decided on 9th July, 2012.

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

---S. 25---Customs Rules, 2001, Rr.107 & 109---Determination of customs value of goods---Provisions of S.25 of the Customs Act, 1969, were to be followed in sequential manner barring certain exceptional cases where massive group under-invoices were rampant---Resort to subsequent method was not permissible without exhausting the sequence indicated in S.25 of the Customs Act, 1969 as same 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, thereby making them ineffective and redundant---Discretion had to be exercised within limits based on reason, rationale and fairplay---Section 25(1) of the Customs Act, 1969 specifically provided that the customs value of the imported goods, subject to the provisions of S.25 and Rules would be the transaction value i.e. the price actually paid or payable for the goods, when sold for export to Pakistan---Provisions of S.25(4) of Customs Act, 1969 contained primary method of valuation; and in the first instance the primary method of valuation was required to be adopted in each case of the valuation of the imported consignment which was mandatory---Such was a very important requirement of law that before resorting to the method provided in subsection (5) of S.25 of the Customs Act, 1969, the Customs Officials would make an exercise in accordance with the provisions contained in subsections (I) to (4) of S.25---If thereafter officials would find that the customs value of the imported goods could not be determined under the provisions of sub-section (1) they would resort to the method provided in subsection (5) and not otherwise---Department had failed to discharge the onus of establishing that the price calculated by the importers of the imported goods were not the transaction value within the meaning of S.25(1) of the Customs Act, 1969---Impugned assessment orders being infested with patent illegalities were declared to be null and void and were set aside.

Kamran Industry v. Collector of Customs, Exports PLD 1986 Kar. 68; Punjab Baverages (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, Karachi and 2 others 2006 PTD 909; Najam Impex Lahore v. Assistant Collector of Customs, Karachi and 4 others 2008 PTD 1250; Toyo Int'1 Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494; Messrs Sadia Traders and others v. Federation of Pakistan C.P. No.2673 of 2009; 2009 PTD (Trib.) 1926; 2010 PTD (Trib.) 2432; 2010 PTD (Trib.) 2472; 2011 PTD (Trib.) 987; 2011 PTD (Trib.) 2624; 1975 SCMR 352; 1990 SCMR 1059; PLD 1995 SC 396; PLD 1997 SC 334; PLD 1997 SC 582; 1997 SCMR 874; 1998 SCMR 1404; 2002 PTD 976; 2002 SCMR 312; PTCL 2005 CL 135(sic); 2005 PTD 2417; PTCL 2010 CL 602; Khalid Mehrnood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881; 1998 MLD 650; 2004 PTD 369; 2004 PTD (Trib.) 2898; 2005 PTD 23; 2003 PTD 2821; 2007 PTD 2092; 2011 PTD. 235; 2011 PTD 1185; 2012 PTD 980; 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 Bahi 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; Innovative Impex, v. Collector of Customs, Sales Tax and Federal Excise (Appeal) 2010 PTD (Trib.) 1010; Fazal Ellahi v. Additional Collector of Customs MCC of PaCCS 2011 PTD (Trib.) 79; Unique Wire Industries v. Additional Collector of Customs, MCC of PaCCS 2011 PTD (Trib.) 987; Kaka Traders v. Additional Collector of Post Clearance Audit 2011 PTD (Trib.) 1146; Pak Electron Ltd. v. Collector of Customs, Lahore and others 2012 PTD (Trib.) 1650 and Messrs Super Industries (Pvt.) Ltd., v. Central Board of Revenue and others 2002 PTD 955 ref.

Customs Appeal No.K-249/2000/13372; Customs Appeal No.K-35/2002; Customs Appeal No.K-1670/2001; 2005 PTD (Trib.) 617; Customs Appeal No.K-1281 of 2005; 1986 MLD 790; PLD 1996 Kar. 68; 2006 PTD 909; 2002 PTD 2957; 2007 SCMR 1357 = 2007 PTD 1858; 2008 SCMR 438; 1992 SCMR 1083; 2008 PTD 1250; Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494; Sadia Traders v. F.O.P. C.P. No.2673 of 2009; 2009 PTD (Trib.) 1926; 2010 PTD (Trib.) 2432; 2011 PTD (Trib.) 2472;. 2011 PTD (Trib.) 22; 2011 PTD (Trib.) 987; 2011 PTD (Trib.) 2624; 2007 PTD 117; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala 2008 PTD 60; 2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107; 2010 PTD 465; 2011 PTD (Trib.) 79; 2011 PTD 987; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1146; PTCL 2012 CL 347; 2005 SCMR 492; 2010 SCMR 431; 1990 SCMR 1059; 2002 SCMR 312; 2002 PTD 976; 2007 PTD 361 and 2009 PTD 1507 rel.

(b) Interpretation of statutes---

----Tax law---Plain language of the law was to be applied.

Nadeem Ahmed Mirza for Appellants. Zafar Iqbal A.O. for Respondents.

Date of hearing: 20th June, 2012.

2012 P T D (Trib.) 1026

[Customs Appellate Tribunal Peshawar Bench]

Before Gulab Shah Afridi, Member (Judicial)

Messrs SALLM SERUJ LTD., AFGHANISTAN and another

versus

DEPUTY COLLECTOR CUSTOMS, TFS, NLC,NOWSHERA and 2 others

Appeal No. Cus. 101/PB of 2011, decided on 27th December, 2011:

Customs Act (IV of 1969)---

----Ss. 32, 129, 156(1)(9)(43)(69)(90), 181, 193-A & 194-A---Misdeclaration---Confiscation of non-declared excess quantity of imported goods---Customs staff our examination of imported goods found 25200 yards of imported polyester fabrics in excess of the quantity as declared by the importer in violation of S.129 of the Customs Act, 1969 attracting the provisions of S.32 of the Act---Deputy Collector Customs vide order-in-original ordered outright confiscation of the non-declared excess quantity of polyester fabric---Collector Customs (Appeals) modified order-in-original to the extent that the importer was given an option under 5.181 of Customs Act, 1969 to redeem the confiscated goods against payment of redemption fine---Validity---Goods were loaded on the basis of weightage, which was mentioned in the Bill of Lading as well as in the invoice and not on the basis of measurement---Only thing on the basis of which cage had been based was that there was a difference in the yardage as per physical examination---Once the Customs staff demanded assessment to be made on the basis of weight, then the measurement was not required as was done---No case of misdeclaration, was established in circumstances---No illegality or impropriety had been pointed out---Description of goods was the same as per ATTI, number of packages were the same, weight was the same and the only difference was of yardage---No discrepancy was found in the description of the goods, marks and numbers of package---No ban, restriction on the transit of seized cloth under any notification as required under S.129 of Customs Act, 1969 was imposed---Importer had fulfilled all the requirements and filed the due documents for clearance of the goods wherein no discrepancy with regard to description, quantity and weight was reported---Provisions of Ss.128 & 129 of Customs Act, 1969 were not invokable---Impugned orders were set aside and penalty imposed on the importer as well as redemption fine imposed on goods, was remitted in circumstances.

Danish Ali Qazi for Appellants.

Naseer Khan, Deputy Superintendent Customs for Respondents.

Date of hearing: 27th September, 2011.

2012 P T D (Trib.) 1406

[Customs Appellate Tribunal, Peshawar Bench]

Before Gulab Shah Afridi, Member (Judicial)

RASOOL KHAN through Waris Khan

versus

COLLECTOR APPEAL CUSTOMS, PESHAWAR and 3 others

Appeal No. Cus. 53/PB of 2011, decided on 16th May, 2012.

Customs Act (IV of 1969)---

----Ss.2(s), 9, 10, 16, 168, 201, 171, 156(1) & Cls.(8), (89)---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---S.R.O. 330(I)/2008 dated 31-3-2008---Smuggling---Troops conducted Anti Smuggling activity and stopped smugglers escorting livestock from Pakistan towards Afghanistan---Owner/occupant of live stock identified himself, who on demand failed to produce any documentary evidence showing legal export/import---Troops seized 39 animals under S.168 of the Customs Act, 1969 for violation of Ss.2(s) & 16 of the Customs Act, 1969 read with S.3(1) of the Imports and Exports (Control) Act, 1950---After completion of requisite formalities, matter was placed before Additional Collector (Adjudication) who ordered outright confiscation of livestock---Appellant contended that according to facts narrated in seizure report, 39 number of animals had been seized which was by no means correct because neither means of transportation had been shown nor name of any other person except the appellant had been mentioned in the said seizure report; that allegation of escorting/transportation of livestock was not tenable in the absence of any cogent evidence; that on the date of occurrence, no seizure powers were entrusted with the said troops; that said seizure was also in violation of S.168 of the Customs Act, 1969 besides the show-cause notice was also illegal as prior to issuance of said notice, the goods/animals had already been auctioned without issuing notice under S.201 of the Customs Act, 1969 to the appellant; that at the time of issuance of show-cause notice no such goods/animals were available, the charge of smuggling and liable to confiscation of goods was not possible at all in the absence of goods but the same had altogether been ignored by the adjudicating authority as well as by the First Appellate Authority; that as the goods had been seized inside Pakistan without having any evidence of attempt to smuggle the same were not covered under the definition of S.2(s) of the Customs Act, 1969; and that department was liable to be released/refund the sale proceed of the same---Validity---According to recovery memo 39 number of livestock (animals) were caught and the smugglers fled away leaving behind the animals and on the same page, while serving notice under S.171 of the Customs Act, 1969, the name of appellant was mentioned with remarks (placed on notice board, refused for signature), which showed that the appellant all alone was present on the spot with his animals in the circumstances mentioned in the Recovery Memo.---Was not possible for one person to smuggle the buffaloes in large number without mode of transportation---Mention in recovery memo that smuggler fled away leaving behind the animals was also a mis-statement by the seizing officer because as alleged in Recovery Memo that the smuggler fled away then from which sources the name of the appellant was shown in the Recovery Memo. and how it was mentioned that "refused to sign" in the column of Notice under S.171 of the Customs Act, 1969---Further seizing agency having power to check to the extent of rice, pulses of all sorts wheat and wheat products into all neighboring countries on any route other than a route declared under Ss.9 & 10 of the Customs Act, 1969---Seizure had been made by the authorities being incompetent in terms of provisions of Customs Act, 1969 read with S.R.O. 330(I)/2008 dated 31-03-2008, no such authorization for seizure of subject livestock had been entrusted to the seizing agency---Seizing agency had no power of such seizure and otherwise too, no evidence regarding allegation of smuggling had been established---Appeal was accepted and orders of the authorities below were set aside---As livestock had been auctioned by the seizing agency, the sale proceed shall be returned to the appellant.

PLD 1977 Lah. 300 ref.

Irshad Ahmad Durrani for Appellants.

Naseer Khan, Deputy Superintendent Customs for Respondent.

2012 P T D (Trib.) 111

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Musarrat Jabeen, Member Technical

Messrs SHAZADA WAQAR ULLAH KHAN and others

Versus

COLLECTOR CUSTOMS APPEALS, ISLAMABAD

Appeal No.28/CU of 2010, decided on 10th May, 2011.

Customs Act (IV of 1969)---

----Ss. 2(s), 168 & 194-A---Smuggling---Seizure of smuggled goods---Seizing Agency made two seizure reports pertaining to alleged smuggled tyres claimed by different owners, but issued one show-cause notice---Goods in question were loaded on two different trucks carrying local made tyres---Record revealed that out of confiscated tyres, 38 were claimed by three persons to whom one show-cause notice was served---Phenomenon had been observed that transportation of smuggled goods from one part of the country to another parts in small shipments to hoodwink the authorities and to defeat the law enunciated under S.2(s) of the Customs Act, 1969 and that one financier was controlling the smuggling or transportation of smuggled goods in small shipment by putting up different claimants thereof, in case the goods were intercepted by anti-smuggling outfits---Such practice should be curbed in public interest, rather than taking/deciding the issue compass-sionately keeping in view the value of the goods---Time and place of the occurrence being the same in the present case, there was no reason to differ with the order in appeal which was upheld.

Shoukat Zaman for Appellants.

Jan Bahadur DC/DR with Aga Sabbir SIO and Qazi Ghulam Dastgir for Respondent.

Date of hearing: 13th October, 2010.

2012 P T D (Trib.) 649

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ziaullah Kayani, Chairman, Muhammad Arshad, Member (Technical) and

Muhammad Arif Moton, Member (Judicial-II)

Messrs HONDA ATLAS CARS (PAKISTAN) LTD. LAHORE and others

Versus

COLLECTOR (APPEALS) CUSTOMS, FEDERAL EXCISE AND SALES TAX, LAHORE and others

Customs Appeals Nos.K-306 and K-330 of 2009, decided on 2nd February, 2011.

Customs Act (IV of 1969)---

----Ss. 25(2)(d)(e) & 32---Customs Rules, 2001, R.113---Failure to include amounts of licence fees and running royalty in the customs value of imports---Contravention case was registered against companies on allegation that the companies had not included the amount of licence fees and running royalty in the customs value of imports---Alleged short paid amounts were adjudged as payable besides penalties were imposed on the companies---Validity---Provisions of S.25(2)(d) & (e) of Customs Act, 1969, read with R. 113(3)(4) of the Customs Rules, 2001, were unequivocal and unambiguous in so far as they necessitated inclusion of royalty in the transaction value of the imported goods, either directly or indirectly; and also inter alia included value of any part of the proceeds of any subsequent resale disposal; or use of imported goods that accrued directly or indirectly to the foreign seller---Other assemblers, were including the royalty and technical fee amounts in declared customs value and were paying customs duty and other taxes accordingly---Plea raised by the companies that their cases were not covered within the ambit of mischief of misdeclaration as incorporated in S.32(2) of the Customs Act, 1969, and were hit by provisions of subsection (3) of S.32, was legally untenable and not justified---Companies had from the very outset acted with mala fides through concealment and exclusion of fees and royalty in customs declaration by resorting to insertion of tailor-made clauses into their agreement---Such was undoubtedly a deliberate, advertent, intentional and wilful act on the part of the companies---Charge of mis-declaration under relevant clauses of Customs Act, 1969 by the Customs Authorities, was appropriate and within four corners of law---Customs Officers recovered amount in question under a legislature mandate---Royalty and technical fee as included for customs value, were fully covered under S.25(2)(d)(e) of the Customs Act, 1969---Duty and taxes as correctly payable were to be ascertained---Consistency and uniformity were the touchstone of revenue laws and were to be strictly followed by the Tax Authorities---Royalty was merely an adjustment for the purposes of determining transaction value in unambiguous terms---Findings of fact had already been given by Federal Board of Revenue as well, where royalty had been made a part of assessable value in conformity with International Customs Conventions---Companies could not be allowed to put tailor-made clauses of their convenience into their mutual licence; and Technical Assistant Agreements to give a different colour and interpretation to Customs Statutes; and Valuation Conventions to evade Government's legitimate revenue which was otherwise payable; and also being regularly paid by their contemporaries---No reason existed to interfere in orders already passed by the authorities below---Same were upheld, in circumstances.

2006 PTD 2237 at 2251-53; 1992 SCMR 19 at 27; (2007) 213 ELT 4 and 2004 PTD (Trib.) 2712 distinguished.

(2007) 213 ELT 4 ref.

Khalid Ishaq and Hussain Bukhari for Appellants (in Appeal No.330 of 2009).

Sultan Mehmood and Arshad Majeed for Respondents.

2012 PTD (Trib.) 1195

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

Messrs SUBHANULLAH TRADERS, KARACHI

versus

COLLECTOR, CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), KARACHI and another

Custom Appeal No.742 of 2007, decided on 2nd February, 2010.

Customs Act (IV of 1969)---

----Ss. 32(1)(2), 156(1)(14); 81, 181 & 194-A---Misdeclaration---Imposition of penalty---It was alleged that declaration of the importer was not in accordance with goods recovered from the consignment having different PCT heading and higher rate of customs duty---

Adjudicating Authority after issuing show-cause notice vide order-in­original confiscated the imported goods with option of redemption subject to payment of fine and order-in-original was upheld by Appellate Authority---Validity---Authorities had failed to prove the ingredients of the offence as mentioned under S.32 of Customs Act, 1969---Neither any penalty nor fine could be imposed under clause (14) of S.156(1) and 81, Customs Act, 1969---Prima facie importer had made correct declaration in accordance with information in the form of invoice and agreement---Discrepancy in mentioning the goods in the goods declaration by the importer, could not be termed as misdeclaration within the contemplation of S.32 of the Customs Act, 1969, for want of any tangible evidence that such declaration was made knowingly; or having reasons to believe that same was false in any material particulars, which was sine qua non for such offence---Importer could not be held guilty of S.32 of Customs Act, 1969---Impugned order was set aside, in circumstances. -

Afzal Awan and Imran Jawaid, Consultant for Appellant.

Muhammad Raza, Deputy Collector for Respondents.

Date of hearing: 2nd February, 2012.

2012 P T D (Trib.) 1346

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ziaullah Kayani, Member (Judicial)/Chairman, Muhammad Arif Moton, Member (Judicial) and Muhammad Arshad, Member (Technical)

Messrs HONDA ATLAS CARS (PAKISTAN) LTD., LAHORE

versus

COLLECTOR CUSTOMS, SALES TAX AND CENTRAL EXCISE, LAHORE and others.

Customs Appeal No.422 of 2008, decided on 2nd February, 2011.

Customs Act (IV of 1969)---

----Ss. 32, 19, & 156(1) Cls.10-A, 14---S.R.O. 502(I)/1994 dated 9-6-1994---Customs General Order No.07/98---Customs General Order No.9/92---FBR Circular C. No.(88) Mech/84/ACI/25-5-1994---FBR letter C.No.1(26)SNR-284 dated 10-6-2002---EDB's Classification No.EDB/TPS-I/07 dated 15-6-2007---EDB's Letter No.EDB-005/03/04 dated 11-10-2004---False statement, error, etc.---Importer availed benefit of concessionary notification for import of certain components for manufacturing cars over a specific span of time---Notification provided benefits of exemption of customs duty for only those components as were not manufactured locally---Importer had availed the benefit of exemption of customs duty on those components which were duly manufactured locally without caring for that those parts had been included in the list of locally manufactured items---Benefit of exemption of customs duty on import of such components was absolutely in negation of provisions and the very scheme of notification as these components had been indentified in the list of locally manufactured items and by this way the importer had deprived the national exchequer of its legitimate part of revenue; and got the illegal and unwarranted benefits causing loss to national exchequer---Such action of importer constituted a violation of provisions of notification as well as Customs Act, 1969 which was punishable besides liable to make payment of evaded amount of duty and taxes---Matter was adjudicated and importer was directed to deposit the evaded short levied amount of duty and taxes---Validity---Appellant/importers were assemblers of automobiles and were working under a deletion program issued by Ministry of Industry duly approved by Federal Board of Revenue---Concessionary S.R.O. 502(I)/94 dated 9-6-1994 governed the import of various parts components and subcomponents imported---Said items could only be imported under concessionary regime if they were not locally manufactured in terms of Customs General Order No.7 of 1998---Importer had stated that as per policy of Federal Board of Revenue dictated from time to time Customs General Orders were not applicable regarding locally manufactured items where foreign parts were imported under Deletion Program duly approved by Engineering Development Board (EDB); and it was necessary for an item to be included in the list of locally manufactured goods that the item was being manufactured in Pakistan during the relevant period when the subject import was made; and three lists (A, B & C) issued under Industry Specific Deletion Program (ISDP) was a reference document indicating the particular state of industry and targets under deletion to be achieved by the manufacturer; and Department did not take into consideration the items in respect of which allegation of evasion of customs duty had been levelled in terms of S.R.O. and CGO 7/98 were mentioned in the list (C) of Industry Specific Deletion Program (ISDP) in the relevant period since the items listed therein were undeletable due to non availability of the manufacturer in Pakistan---Engineering Development Board (EDB) stated that CGO No.7/98 will not apply to imports made by the importers unders their respective Unit Specific Deletion Program (USDP) approved by the Engineering Development Board and validated by Federal Board of Revenue---Federal Board of Revenue in its Circular C. No.(88) Mech/84/ACI/25-5-1994 ordered that CGO 9/92 will not apply to imports made in case where deletion programs and imports of specific items were allowed and the same principle was reiterated by Federal Board of Revenue in its letter C.No.1(26)SNR-284 dated 10-6-2002---Factual and legal factors raised by the appellant indicated that both the forums below had not taken into consideration the documents produced by the appellants with particular reference to Approved Deletion Program ISDP's and clarifications made by Engineering Development Board and Federal Board of Revenue---Clarification regarding C.G.O. 9/92 (the predecessor of C.G.O. 07/98) by the department for determining default allegedly committed by the appellant which, was refuted by the appellant in wake of EDB's and Federal Board of Revenue's clarifications on record and which were contradictory to the departmental stance---Department was directed by the Tribunal to get the position reconciled from Federal Board of Revenue; such points need serious consideration for a judicial decision of the present case---Orders passed by the forums below were set aside by the Appellate Tribunal and case was remanded to the officer of original jurisdiction to consider the matter de novo on merits in the light of documents on record after award of a personal hearing to the appellants; and matter may be preferably decided through issuance of a well reasoned speaking order within three months of the date of issuance of present order.

PLD 1987 Pesh. 68 and S.T.A. No.1999/LB of 2001, dated 28-11-2001 ref.

Waleed Khalid for Appellant.

2012 P T D (Trib.) 1459

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Gulab Shah Afridi, Member (Judicial)

Messrs VENUS PAKISTAN (PVT.) LTD., ISLAMABAD

Versus

ADDITIONAL COLLECTOR CUSTOMS, DTRE, AFU, BBI, ISLAMABAD and 2 others

Appeal No.2-CU/IB of 2011, decided on 31st January, 2012.

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

----Ss. 18, 32, 79, 80, 104, 209 & 194-A---Customs Rules, 2001, R.566---Accrual of liability of duty and taxes---Liability of duties on goods damaged or destroyed---Agent, liability of---Liability of duty and taxes would accrue as soon as the goods were imported into Pakistan; it would remain dormant as long as the goods, subject to period of limitation envisaged under various provisions of Customs Act, 1969, remained in the customs area, port and bond---Liability of duty and taxes was discharged at the time of clearance for home consumption as provided under Ss.79 and 80 of the Customs Act, 1969, or under S.104 of the Act at the time of exbonding of warehoused goods---Liability of duty and taxes, would become obviated, if the goods imported were exported out of Pakistan---If the goods were removed clandestinely from the bond without payment of duty and taxes, the same could be recovered on the premises that those escaped goods would have been put to human consumption---Where duty and taxes were short levied or non levied due to inadvertence, error or misconstructions; or due to some deliberate act; S.32 of Customs Act, 1969 had empowered the Customs Officer to recover the same---Liability of duties on goods damaged or destroyed in customs area or port or station or customs bond, was liable to be remitted---Under the provisions of the Customs Act, 1969, without mense rea, the agent should not be exposed to the liability or duty for any wrong, which he had not wilfully committed, though could cause losses in terms of duty and taxes to the exchequer.

Messrs Crescent Sugar Mills v. CIT Lahore 1981 PTD 43; Messrs Kashmir Pottry Work's case 1973 PTD 453; 2002 PTD 804; 2002 PTD 2169 and PLD 1979 Kar. 591 ref.

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

----Ss. 18, 21, 27, 108, 110, 115, 121, 122 & 123---Abatement of duties and taxes in case of goods destroyed---Duties and taxes were liable to be abated or remitted in case of goods destroyed because of natural decay, unavoidable incident, accident occurred beyond the control of possessor, protector of the goods.

(c) Customs Rules, 2001---

----R. 566---Break down or accident en-route---Duty and responsibility of carrier---Rule 566 of Customs Rules, 2001 had created liability upon the carrier in case of tampering; pilferage; theft; or damage caused en-route---Prima facie, present case was neither of tampering, nor of pilferage or theft, nor any damage which was caused with criminal intent---Carrier, could not be held for any act which caused damage, but not committed with criminal intent---Word "damage" had been used in a row with offences to be committed with criminal intent---Word "damage" used in R.566, of Customs Rules, 2001 in circumstances, would include any damage which was committed with criminal intent or criminal negligence---Any damage which was caused because of unavoidable cause or accident, could not be brought within the mischief of R.566 of Customs Rules, 2001---Recovery of duties and taxes could not be allowed from the carrier, in circumstances.

PLD 1957 SC 219; PLD 1993 Kar. 656; C.B.R. v. Messrs Tripple Em (Pvt.) Ltd. 2005 PTD 1806; Messrs Crescent Sugar Mills v. CIT Lahore 1981 PTD 43; Messrs Kashmir Pottery Work's case 1973 PTD 453, 2002 PTD 804; 2002 PTD 2169 and PLD 1979 Kar. 591 rel.

(d) Words and phrases---

----"Unavoidable accident", defined and explained.

Black's Law Dictionary rel.

(e) Words and phrases---

----'Unavoidable cause', defined and explained.

Black's Law Dictionary rel.

Isaac Ali Qazi for Appellants.

Ms. Naghma-e-Tehniat, Deputy Collector Departmental Representative for Respondent.

Date of hearing: 17th November, 2011.

2012 P T D (Trib.) 1491

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

COLLECTOR OF CUSTOMS, KARACHI

Versus

Messrs AL-FAJER ASSOCIATES, KARACHI

Customs Appeal No.K-1180 of 2011, decided on 14th May, 2012.

Customs Act (IV of 1969)---

----Ss.32, 32-A, 80, 81, 83 & 194-A---Short payment of duty and taxes, and fiscal fraud---Imposition of penalty---Importer had imported old and used Double Cabin Pick up and got cleared the same under PCT Heading 8704.2190 through clearing agent---Post clearance audit revealed that importer had short paid duty and taxes in respect of said vehicle---Penalty of Rs.200,000 was imposed on the importer---Basic charge against the importer was that he had evaded duty and taxes in clearance of vehicle in question by way of mis-declaring the actual customs value of the vehicle---Importer had been found guilty of suppressing the fact while making declaration of the imported vehicle as to its description, brand, capacity and make---Assessing Officer after due consideration, had allowed clearance of vehicle on the basis of another identical vehicle---Assessing Officer after due consideration and application of mind, therefore, had allowed the clearance of vehicle under S.80 of Customs Act, 1969---In case of uncertainty and doubt, clearance could have been allowed under S.81 of Customs Act, 1969 which was not done in the case---Element of mala fide and mens rea of fact of the importer did not surface---Merits of the case had been deliberated exhaustively in the orders of the Collector (Appeals)---Collector Customs, who was aggrieved of the decision of Collector (Appeals), had not pleaded the matter in appeal before the Appellate Tribunal---No reason was available to interfere in the orders passed by Collector (Appeals), which was correct in law.

PLD 1971 SC 184; 1992 ALD 449(1); 2004 PTD 624; PLD 1976, PLD 2001 SC 514; 2006 PTD 2237; 2009 PTD (Trib.) 1996; 2010 PTD (Trib.) 823; 2001 SCMR 103; PLD 1963 SC 663; 1984 CLC 1517; PLD 1992 SC 485; 1993 SCMR 1232; PLD 1975 SC 331, S.T. Appeal 72/04; S.T. Appeal 54/09; S.T. Appeal No.2352/99, S.T. Appeal No.106/03; 2002 CLD 705; 2004 PTD 624; 2004 PTD 3020; 2009 PTD (Trib.) 1925; 2005 PTD (Trib.) 135; 2007 PTD 1895; 2010 PTD (Trib.) 759; 2010 PTD (Trib.) 1283; 2004 PTD 1449; 1987 SCMR 1840; 2010 PTD (Trib.) 1759; PLD 1996 Kar. 68; PLD 1976 Kar. 1154; 2002 MLD 1980; 2002 MLD 180; 2011 PTD 2220; S.T. 255/01; 1998 MLD 650; 2004 PTD 369; 2005 PTD 23; PTCL 2005 CL 481; 2005 PTD 340; 2007 PTD 2092; 2007 PTD 117; 2008 PTD 60; 2008 PTD 578; 2009 PTD 762; 2010 PTD (Trib.) 1631 and 2010 PTD (Trib.) 2117 ref.

Hafiz Muhammad Jokhio, A.O. for Appellant.

Nadeem Mirza for Respondent.

Date of hearing; 1st February, 2012.

2012 P T D (Trib.) 1542

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Dr. Zafar Ahmed Khan Sherwani, Member (Judicial-I) and Javed Kazi, Member (Technical-1)

COLLECTOR, COLLECTORATE OF CUSTOMS (EXPORTS), KARACHI

Versus

Messrs ABDULLAH GARMENTS (PVT.) LIMITED, KARACHI and another

Custom Appeal No. K-251 of 2007, decided on 13th January, 2010.

Customs Act (IV of 1969)---

----S.194-A---Appeal to Appellate Tribunal---Natural justice, Principle of---Applicability---Before taking any punitive action against any person, he was required in the first instance to be served with a show-cause notice confronting the material available on record in support of the charge; any action which was in violation of such principle of natural justice, 'audi alteram partem', the same would be void ab initio.

Haider Pirwani, Appraising Officer for Appellant.

Nadeem Ahmed Mirza, Consultant, for Respondent No.1.

Date of hearing: 13th January, 2012.

2012 P T D (Trib.) 1589

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Ghulam Ahmed, Member (Technical-II)

Messrs ARABIAN TEXTILE MILLS, KARACHI

Versus

COLLECTOR OF CUSTOMS (APPEALS), KARACHI and 2 others

Customs Appeal No.K-233 of 2012, decided on 26th May, 2012.

Customs Act (IV of 1969)---

----Ss. 194-A & 195-B---Appeal to Appellate Tribunal---Principle of mutates mutandis---Applicability---Appellant had filed applications for urgent hearing and grand of stay with appeal---Contention of counsel for appellant was that hierarchy of the customs, the Additional Collector of Customs and the Collector (Appeals), had not taken up the subject matters which pertained to legal and factual controversy, in accordance with the law, and on the contrary the case was decided arbitrarily without applying judicious mind, but on the principle of mutatis mutandis; and disposed of the matter without discussing the factual as well as the legal controversies as placed by the counsel for appellant orally or in writing---Customs authorities were required to pass separate orders in each case and the litigants had a right to contest their case, which should be disposed of on its legal and factual positions separately---Action taken by the Authority against the appellant was violative to S.194-B(1) of Customs Act, 1969---Appellant had established the prima facie case, balance of convenience, was also in favour of the appellant, which would also cause irrecoverable loss to the appellant---Authorities were directed by the Appellate Tribunal that no coercive action should be taken against the appellant till the next date of hearing.

2011 PTD 2849 rel.

Muhammad Afzal Awan and Imran Iqbal for Appellants.

Ghulam Yasin for Respondent No.2.

Nemo for Respondents No.3.

Date of hearing: 26th May, 2012.

2012 P T D (Trib.) 1618

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

Messrs SHAKIRULLAH SHINWARI TRADING COMPANY, PESHAWAR

versus

COLLECTOR OF CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), PESHAWAR and 2 others

Appeal No. Cus.551/PB of 2007, decided on 4th January, 2010.

Customs Act (IV of 1969)---

----Ss.25, 79, 81, 179 & 194-A---Provisional customs value of imported goods---Determination---Imported goods were provisionally assessed and the differential amount of duty/taxes was secured through post-dated cheques---Assessment was finalized accordingly upon receipt of the valuation of criteria determined by the Controller of Valuation---Post-dated cheques were presented to the concerned Bank for encashment, upon failure of the importer to pay the demanded differential amount but same were not honoured due to insufficient amount in the relevant account---Case was referred to the Recovery Office for initiating recovery proceedings and a warrant of attachment was issued---Clearing agent had reported that the actual stakeholder/importer was dead---Counsel for the appellant, during the course of hearing, had also stated that actual beneficiary/importer had since expired---Appellant had stated that he was ready to state on oath that he never met Customs Staff and clearing agent; that he never operated the said Bank accounts, which were alleged to be in his name that such accounts might have been opened and operated by his late uncle and he must have introduced the original beneficiary to the customs and the concerned clearing agent---Appellant had further stated that he engaged the counsel for appearance before the Tribunal on insistence of a person of Khyber Agency who dealt in transit goods---Matter requiring further probe by the department to safeguard the Government Revenue and unearthing the actual beneficiary in the case, case was remanded to original Adjudicating Authority to decide the same afresh by providing an ample opportunity of hearing to all concerned; and by deciding admissible evidence, if any to be provided by either side; and then pass a speaking and judicious order.

Isaac Ali Qazi, Danish Ali Qazi and Arooj Ahmad Ansari of Messrs Rehbar Customs Agency for Appellants.

Abdul Razaq, Additional Collector, Muhammad Zahid, Superintendent, Muhammad Azam, Superintendent, Gul Said, Deputy Superintendent and Ziaullah, Appraiser for Respondents.

Dates of hearing: 27th January, 3rd March, 30th March, 13th April, 6th May, 1st June, 16th June, 22nd June, 29th June, 18th August, 29th September and 20th October, 2009.

2012 P T D (Trib.) 1650

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Shahid Mehmood Bhatti, Member (Judicial) and Muhammad Arshad, Member (Technical)

Messrs PAK ELEKTRON LIMITED, LAHORE

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, LAHORE and others

Customs Appeal No. 322 of 2010, decided on 2nd August, 2011.

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

----Ss. 25, 26, 32 & 36---Assessment of imported goods---Submission of forged and untrue documents---Issues for consideration were as to whether the importer had submitted all the commercial/customs documents in respect of the subject importation of the consignment; that whether the goods declared by the importer in the commercial documents and goods declaration submitted before the Customs Authorities, matched with the description of goods as mentioned in the invoice retrieved from the container---Admitted position was that the importer had submitted before the Customs Authorities all the required commercial documents, viz. commercial invoice, packing list, letter of credit and bill of lading; transaction had been conducted in a transparent manner through normal Banking Channel; said documents sufficed the legal requirements of submission of prescribed documents by the importer to the customs at the time of importation; particulars mentioned in the invoice retrieved from the container, and the invoice submitted by the importer before customs were poles apart; number of major discrepancies existed between the particulars of both the invoices; comparison between the invoices retrieved from the container and the one submitted by the importer indicated a huge differential between the material particulars, viz. invoice numbers, dates of invoices, description of goods, selling dates, names of shippers---Invoice retrieved from the container was completely silent about the name of vessel, L/C No. and the issuing bank, which were considered very essential particulars to call the subject piece of paper on commercial invoice as understood in the general and commercial parlance---Issue with regard to submission of all commercial/Customs documents in respect of the import in question was answered in the affirmative while concerning the remaining matters was answered in the negative, in circumstances.

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

----Ss. 25, 26, 32 & 36---Assessment of imported goods---Description of goods---Issue for consideration was, whether the examination reports tendered by the Customs Authorities, supported the description of goods as given in the commercial documents presented by the importer before the Customs Authorities---Commercial documents, viz, commercial invoice, packing list, letter of credit, bill of lading, presented by the importer before the Customs Authorities, contained the same description of the imported goods as determined by the Customs Authorities in the examination report submitted by them or the back of the goods declaration---Same aspect was further substantiated by the Comparative Chart submitted by the Collectorate to the Tribunal---Only difference between both i.e. the invoice submitted to the Customs Authorities by the importer and the examination report tendered by the Customs staff, pertained to the number of units---Total quantity declared in the invoice presented before customs was 25,00 whereas the examination report had shown the quantity as 2525---Examination report tendered by the Customs Authorities, constituted in itself an independent piece of evidence which negated the departmental stance, and on the contrary fortified the view point of the importer---Issue in question was answered in the affirmative.

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

----S. 32---Allegation of misdeclaration---Application of S.32, Customs Act, 1969---Mandatory prerequisites---Issue for consideration was, whether allegation of misdeclaration levelled at against the importer, was factually and legally sustainable---Allegation of misdeclaration in terms of S.32 of Customs Act, 1969 had been levelled against the importer on the basis of an irrelevant, vague and incomplete invoice purported to be issued by another shipper---Retrieved invoices had neither been prepared by the importer nor those had been delivered by the importer to the Customs Authorities---Authorities had not been able to produce any evidence against the importer in respect of opening of letter of credit or remittance of foreign exchange for the purpose of importation of the subject goods at enhanced price against the "so called" invoice---Onus of proof lay on the customs---Case seemed to have been built up by the authorities on the basis of retrieved documents assumed to be commercial invoices, which were not to be relied upon for institution of a case of misdeclaration against the importer in terms of S.32 of the Customs Act, 1969---In order to attract the mischief of punitive provision of S.32 of the Customs Act, 1969, the mandatory prerequisite was that accused should have made or signed or declared or caused the same before Customs Authorities on the form of any declaration notices, certificate or any documents, or should have made any statement while replying the queries put to him by an officer of Customs, with knowledge and belief that such documents or statements were false in any material particular---In absence of any document, declaration notice made, signed or delivered to the Customs Authorities, the charge of misdeclaration, could not be framed against the importer---Said issue was answered in the negative.

PLD 1996 Kar. 68; Special Customs Appeal No.65 of 2001 dated 22-4-2008; 2006 PTD 1207; 2003 PTD 552 and Messrs A.R. Hosiery Works Karachi v. Collector of Export, Karachi and another 2004 PTD 2977; 2002 PTD 2215 = 2007 SCMR 1881 rel.

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

----S. 25---Customs Rules, 2001, R.107---Determination of customs value of goods---Scope and application of S.25 of the Customs Act, 1969---Issue to be determined was, whether the customs value of the subject goods had been determined in conformity with the provisions of S.25(1) of the Customs Act, 1969 and Customs Rules, 2001---Customs Authorities had disputed the value of the subject goods on the value of the goods jotted down on an invoice retrieved from the container; in doing so, authorities were saddled with the responsibility to produce cogent and admissible material to establish the genuineness, authenticity and credibility of the retrieved invoice and also to substantiate that the value of the goods had been misdeclared---Provisions enumerated in the relevant S.25 of the Customs Act, 1969 pertaining to the transaction value had to be followed in a sequential order as per the requirements of the statute and the judgments of superior courts---Authorities were also to bring on record the evidential invoices of the goods in question of the country of export and pertaining to the period of import into Pakistan as stipulated in R.107(a) of the Customs Rules, 2001---On the contrary, the authorities solely relied upon the retrieved invoice from the container which was neither relevant, nor complete, but was vague and poles apart when compared with the invoice presented to Customs Authorities with all other required documents as required under the Rules---Department in the present case, had 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---Authorities had ignored their own Valuation Rulings which supported the declared prices of the imports of the importer beyond any shadow of doubt---Department had failed to discharge the onus of establishing that the prices declared by the importer of the imported goods, were not correct---Issue was answered in the negative, in circumstances.

1986 MLD 1990; PLD 1996 Kar. 68; 2002 PTD 2957; 2004 PTD 38; 2005 PTD (Trib) 617; 2006 PTD 909; 2008 PTD 1250 and 2008 SCMR 438 rel.

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

----S. 25---Customs Rules, 2001, R.113---Determination of customs value of goods---Admissible and conclusive evidence for enhancement of declared price---Issue to be considered was, whether the retrieval of disputed invoices from the container, would constitute an admissible and conclusive evidence for enhancement of the declared price---Invoice retrieved from a container, could not be treated as conclusive evidence of the transaction value agreed between the parties in terms of S.25(1)(b) of the Customs Act, 1969, read with Rule 113 of the Customs Rules, 2001---On the contrary the invoice retrieved from the container was completely different in material particulars and details---Invoice retrieved from the container was an incomplete, vague document and the particulars jotted therein had no nexus with the description of goods, quality, invoice dates etc., except the partial similarly of the model---All the particulars jotted down in the invoice presented to the customs were favourably compatible with the packing list, letter of credit and bill of lading submitted along with the commercial invoice presented to the customs by the importer---Main criteria for acceptance of those documents lay in the fact that those were bank retired documents and the transaction had been conducted in a very transparent manner---Invoice presented to the customs was a normal, regular admissible invoice in terms of S.2(kka) of the Customs Act, 1969 and was complementing the accompanying documents viz, letter of credit, packing list and bill of landing---Issue was answered in the negative, in circumstances.

Special Reference Applications Nos.191 and 192 of 2009 and Customs Appeal No.K-457 of 2009 dated 13-10-2009 rel.

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

----Ss. 25 & 180(a)---Summary adjudication---Issuance of show-cause notice---Issue to be determined was, whether mandatory requirement of issuance of show-cause notice prescribed in S.180(a) of the Customs Act, 1969 for the purpose of adjudication was dispensed with where the incumbent filed a request for summary adjudication---Order-in-original, had been passed by Additional Collector, without issuance of any show-cause notice to the importer on account of the plea that importer had requested for summary adjudication---Importer never requested the adjudicating Officer to summarily adjudicate the case without issuance of the show-cause notice---Request for summary adjudication implied in legal and common parlance for expeditious disposal of the matter by the adjudicating authority in face of entailing circumstances---Issuance of show-cause notice was a mandatory requirement for the adjudicating officers while adjudicating issues before them---Importers were not afforded any opportunity to put any meaningful defence at the time of hearing---Order-in-original issued by the Additional Collector of Customs, was ab initio null and void and the structure built upon that order had no legal value---Said issue was answered in the negative.

2004 PTD (Trib.) 1324; PLD 1964 SC 536; 2003 SCMR 1505; 2006 SCMR 129; Pakistan v. Public at large PLD 1987 SC 304; University of Dhaka v. Zakir Ahmed PLD 1965 SC 90; 1994 SCMR 2232; M.D. The Bank of Punjab v. Syed Shahzad Hussain 2006 SCMR 1023; Sir Edward Snelson's case PLD 1961 SC 237; Fazal-ur-Rehman's case PLD 1964 SC 410 and Pakistan Crome Mines' case 1983 SCMR 1208 rel.

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

----Ss. 193 & 193-A---Appeal to Collector (appeal)---Limitation---Issue to be determined was, whether order-in-appeal passed by the Collector (Appeals) was barred by limitation---Appeal was filed on 21-6-2010 and order-in-appeal was issued by Collector after the initial period of 120 days beyond the limitation period prescribed in terms of S.193(A)(3) of the Customs Act, 1969---No extension was granted by the Appellate Authority as per contents of the order-in-appeal---Order-in-appeal had been passed beyond the period of limitation by 6 days, thereby rendering it ab initio null and void---Time extension given in such cases was akin to giving a new lease of life into dead entity and tantamount to flogging a dead horse, if an event or document had become dead on account of non timely extension of time period prior to expiry of entire stipulated period---Such was legally considered dead and new spirit could not be infused into it by any means, or on account of any reason whatsoever---Since the initial period of 120 days stood expired without any extension, order-in-appeal became barred by limitation period by 6 days rendering the appeal and preceding order as without power/jurisdiction, hence ab initio null and void and not enforceable under the law---Issue in question was answered in the affirmative.

2007 PTD 117; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala and another 2008 PTD 60; 1999 SCMR 1881; Nagina Silk Mills Lyallpur v. The Income Tax Officer and the Income Tax Appellate Tribunal, Pakistan PLD 1963 SC 322; Pace International Rawalpindi v. Secretary, Revenue Division, Islamabad, the Federal Tax Ombudsman (FTO) 2006 PTD 340; SS Oil Mills Ltd. v. Secretary Revenue Division Lahore GST 2005 CL 592; PTCL 2005 CL 841; 1992 SCMR 1898; 2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD Trib. 107 and (2010) 109 Taxation 221(sic) rel.

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

----Ss. 193 & 193-A---Appeal to Collector---Issue to be determined was whether order-in-appeal passed by the Collector was "definite" and "conclusive"---Collector in the operational part of impugned order, had remanded the matter to the Customs Department/Valuation Department for determination of customs value of the subject goods---Order of the Collector, in circumstances was not in conformity with the provisions enunciated in S.193(3) of the Customs Act, 1969---Directions for referring the matter to the Valuation Department was uncalled for in as much as it was discriminatory as well confiscatory as identical/similar goods had been released by the Collectorate at favourably compatible prices---Action of the Collector was appropriately and patently in derogation of the principles enunciated by relevant statute, case-law by superior courts as well as general principles and canons of natural justice, equity and fairplay---Impugned order was adverse to the vested rights as well as fundamental rights of the appellant and needed redressal/rectification---Issue, in question, was answered in the negative, in circumstances.

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

----Ss. 25, 193 & 193-A---Constitution of Pakistan, Arts.4 & 25---Determination of customs value of goods---Discrimination---Issue to be determined was, whether discriminatory treatment had been shown to the appellant---Counsel for appellant placed on record many copies of Goods Declaration for the confirmation that the price indicated in the retrieved invoice, did not reflect the prevailing prices of the goods imported by the appellant in the International market, instead those reflected the prices declared by the appellant---While ignoring the evidence of identical and similar imports of the goods in question, the customs had discriminated by way of preparation of contravention report and subsequently passing of order-in-original, despite the fact that appellant stood on the same pedestal---Treatment given to the appellant against the principles enshrined in Arts.4 & 25 of the Constitution violated the settled law, laid down by the Superior Courts in their judgments---Issue, in question was answered in affirmative, in circumstances.

2002 PTD 976; 1990 SCMR 1072; 1990 SCMR 1059; 1975 SCMR 352; PLD 1995 SC 396; 1998 SCMR 1404; PLD 1997 SC 582; PLD 1997 SC 334 and 1997 SCMR 1874 rel.

(j) Administration of justice---

----If the law required something to be done in a particular manner that thing was to be done in the manner as prescribed under the law, otherwise should not be done at all.

Messrs Al-Faiz Industries (Pvt.) Ltd.'s case 2006 SCMR 129 rel.

(k) Interpretation of statutes---

----Statutes, which enabled person to take legal proceedings under certain specified circumstances, demanded that those circumstances must be accurately obeyed, notwithstanding the fact that the provision thereof were expressed in merely affirmative language---No universal rule could be laid down as to whether a mandatory enactment would be construed directory only or obligatory with an implied nullification for disobedience---Statutes which enabled person to take legal proceedings under certain specified circumstances, as a general rule, demanded that those circumstances must be accurately obeyed notwithstanding the fact that the provision thereof were expressed in affirmative language---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 spirit; 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.

Liverpool Borrough Bank v. Turner (1848) 13 OS 30 rel.

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

----S. 196---Reference to High Court---Scope---Section 196 of Customs Act, 1969, specified a particular office to initiate legal proceeding on behalf of the Customs Department---Demands of Section 196 were to be accurately and strictly obeyed---High Court was not to question the propriety, motive, prudence of object of the Legislature in conferring the power or right to file an appeal under S.196 of the Customs Act, 1969 on a particular or specified officer.

Punjab Province v. Malik Khizar Hayat Khan Tiwana PLD 1958 Federal Court 200 and Khalid Saeed v. Shamim Rivan and others 2003 SCMR 1505 rel.

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

----Ss. 179, 193 & 193-A---Order-in-original and order-in-appeal---Impugned order-in-original and order-in-appeal issued by the Adjudicating and Appellate Authorities were not speaking orders wherein all the issues raised by appellant had not been discussed and dealt with properly---Such orders were to be deemed to be without jurisdiction in which the Competent Authorities had not discussed question of fact and question of law---Operational portion of the subject order-in-original contained inherent legal infirmities, deficiencies and substantive illegalities discussed therein other issues dealt in by that forum in the judgment---Judicial order must be a speaking order manifesting by itself that the court had applied its judicial mind to the issues and the points of controversy invoked in the case---When the reasons would not be forthcoming, the Appellate Court would be deprived of the views of the subordinate court---Impugned orders which were not speaking orders and devoid of reasons, were not sustainable in law being contravention of settled law.

1994 CLC 2181; 2005 YLR 1019; 2007 PTD 2500; 2004 PTD 1973; 2005 YLR 1719; 2003 PTD 777; 2003 PTD (Trib.) 2369; 2002 MLD 357; 1983 CLC 2882; 2005 PTD 2519; 2005 PTD 1189; PLD 1995 SC (Pak.) 272; PLD 1970 SC 158; PLD 1970 SC 173 and 1984 SCMR 1014 rel.

Tariq Najib Choudhary for Appellant.

Ahmed Kamal D.R., and Masud Javed for Respondents.

2012 P T D (Trib.) 1697

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

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

Messrs SHAHZAD GHEE MILLS LTD., GADOON AMAZI

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), PESHAWAR and another

Appeal No. Cus.537/PB of 2007, decided on 5th January, 2010.

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

----Ss. 156, 168, 179, 193 & 194-A---Criminal proceedings and confiscation/recovery proceedings---Scope---Criminal proceedings before the Special Judge, Customs and the confiscation/recovery proceedings before the adjudication/Appellate Authority, were concurrent independent and mutually exclusive---Adjudication/Appellate proceedings for the confiscation of the goods or recovery of short-levied/non-levied duty/taxes under Customs Act, 1969, neither would involve a criminal prosecution nor a punishment for an offence---No trial of the offence would take place for any offence, nor was any punishment awarded to the offender---Two proceedings, in circumstances, were not inter-dependent and neither could remain suspended for the sake of the other.

Adam v. Collector of Customs PLD 1969 SC 446 rel.

(b) Administration of justice---

----Adjudicating officer would pass a speaking order, which was one of the exhilarating principles of the whole concept, around which the principles of natural justice revolved---Order by the adjudicating officer, must be based upon sound, cogent and plausible reasons; and he should reflect his true inner process of thought, through introspection---Recorded reasons were the essence of a speaking order.

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

----S. 24-A---Statutory obligation of judicial/quasi-judicial authorities---All judicial/quasi-judicial authorities were obliged to pass judicial/ adjudication by a speaking order manifesting by itself that the judicial/ adjudicating Authority had applied its judicial mind to the issues and the points of controversy involved in the case---When the reasons would not be forthcoming, Appellate Authority/court would be deprived of the valuable views of the subordinate fora---Order which was not a speaking order and devoid of reasons, was not sustainable being in contravention of the law---In the absence of properly framing issues, adjudicating authority or the first Appellate Authority could follow any trajectory and even sail into uncharted territories, which was not appreciable in the eyes of law---Adjudicating Authority and the first Appellate Authority must pass speaking orders, duly supported by reasoning and showing due application of mind to the points of facts and law applicable while disposing of the cause before it.

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

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

----Ss. 97 & 98---Period for which goods may remain in warehouse---Taking out goods out of warehouse---Under provisions of S.98 of the Customs Act, 1969, the maximum period for which the goods could be stored in the warehouse was one year, and for perishable goods, the permissible period was three months---Collector as well as the Federal Board of Revenue had been empowered to extend that period further---Under S.97 of the Customs Act, 1969, no warehoused goods could be taken out of the warehouse, except on clearance for home consumption or export or for removal to another warehouse or as otherwise provided in the Customs Act, 1969.

Duty Free Shop Ltd. v. Central Board of Revenue 2002 PTD 1167 rel.

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

----Ss. 32 & 180---Untrue statement---Issuance of show-cause notice before confiscation of goods or imposition of penalty---Scope---Show-cause notice must cite the relevant provisions of law, under which it was issued---Show-cause notice in terms of S.32 of the Customs Act, 1969 must disclose all the material fact, on the basis of which the charges of misdeclaration, connivance, suppressive or fraud were intended to be raised---Adjudicating Authority had erred by invoking all the provisions of S.32 of the Customs Act, 1969 and not the relevant provisions thereof for the purpose of the statutory notice; and it could not be ascertained whether the notice had been issued under S.32(2) or S.32(3) and S.32(3-A) of the Act---Such failure on the part of the Authority had rendered the impugned show-cause notice not to be in consonance with the requirements of S.32 of the Customs Act, 1969---Foundation of show-cause notice would be bona fides, if the same conveyed an impression that the officer issuing the statutory notice had applied his mind to the facts of the case; and had not issued the notice in a mechanical manner---Only those sections of the Customs Act, 1969 should be cited in the notice which were material and relevant and had been fixed with proper application of judicial mind---Indiscriminate citation of multiple sections resulted in the show-cause notices being declared as illegal---Person against whom proceedings were held could not be punished for the charge different from the one, for which notice had been given---Show-cause notice should be based on accurate and factual position---Where a show-cause notice did not specifically allege collusion, mis-declaration, suppression of facts or fraud, as a basis for issuance for the recovery of the non-levied/short levied amount, the importer could not adequately reply to it where any charge was levelled against any person, he should be intimated for such charge in clear terms where the initial order or statutory notice was void, all subsequent proceedings, or superstructures built on it were also void.

D.G. Khan Cement Company Ltd. v. Collector of Customs, Sales Tax and Central Excise, Multan 2003 PTD 1797; Osman Abdul Karim Bawaney v. Collector of Customs PLD 1962 Dacca 162; Iram Ghee Mills Ltd. v. Appellate Tribunal 2004 PTD 559; Quetta Textile Mills Ltd. v. Government of Pakistan and others 1990 ALD 582; Messrs Central Cotton Mills, Ltd. v. Collector and others 1992 CLC 841; Khawja Tanneries Ltd. v. Controller of Valuation NLR 1987 TD 202; Government of Pakistan v. Shah Sons 1991 CLC Note 338 Page 259; Anisa Rehman v. P.I.A. 1994 SCMR 2234; Motilal Lalchand Shah v. L.H. Kau 1984 (17) E.L.T. 294 (Guj); Raphael Pharmaceuticals v. Superintendent 1988 (38) E.L.T. 11 and Koruta Rubber Co. v. Collector 1987 (32) E.L.T. 216 and Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 rel.

(f) Words and phrases---

----"Mistake", meaning and connotation.

Black's Law Dictionary rel.

(g) Words and phrases---

----"Corrigendum", meaning explained.

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

----S. 180---Issue of show-cause notice before confiscation of goods or imposition of penalty---Provisions of S.180 of Customs Act, 1969 were quite exhaustive---Once the adjudicating authority would arrive at a conclusion that some important relevant sections of the law had not been invoked, an independent show-cause notice was required to be issued---By issuing a corrigendum so as to bring an infringement within the ambit of existing proceedings, would violate the principles of natural justice---Such improprieties being apparent on the face of the records, could not be upheld---Proper care was required to include all the points of facts and law in the show-cause notice---No law existed whereby a second show-cause notice was precluded in order to incorporate additional points of facts and law, but, if the second or revised show-cause notice would enlarge the scope of the earlier one, by taking advantage of the defence already disclosed by the party, in his reply thereto and also in the personal hearing, it would be illegal and barred by the principles analogous to res judicata---Corrigendum could be issued for rectifying any mistake in the show-cause notice, but where the rectification would affect the basis of the show-cause notice, then the limitation period, if any, had to be computed with effect from the date of the issue of the corrigenda or the revised show-cause notice and not from the first show-cause notice originally served---Where any corrections were made other than clerical errors to compensate for any provisions of law which had been incorrectly invoked or not invoked same would render the original show-cause notice as time barred, if such corrections were not made within the original validity of the show-cause notice.

Hassan Associates v. Additional Collector of Customs Adjudication 2003 PTD (Trib.) 1489; Jasoda Jasoda Jiban Shah v. S.K. Chatterjee AIR 1961 Cal. 195; Lalwani Earthmowers Ltd.'s case 1999 (113) ELT 641; Halsbury's Laws of England-4th Edition Volume 23, Para 29 and Associated Cement v. C.T.O. 48 S.T.C. 466 SC rel.

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

----Ss. 18, 30(b), 32 & 104---Levy of customs duty---Scope---Section 18 of the Customs Act, 1969, which was a charging section would create the charge, at the time of "import" or "export", but the payability was regulated by other provisions of the Customs Act, 1969---Appropriate Customs Officer possessed the power to recover any non/short levied tax, which he was required to collect, but had not been collected---Word 'charge' was vide enough, to include regulatory duty, sales tax, federal excise duty, advance income tax, which were found to be non/short-recovered by the appropriate customs officer---Customs Officer though merely would collect some of the said taxes on behalf of the relevant department, but as Collecting Agent, his power to collect those taxes, should naturally include the ancillary power to recover any non-short collected amount as well---Word "charge" would include any kind of encumbrance, not satisfied by the importer, at the time of clearance of his goods from the warehouse, either for home consumption or export.

Halsbury's Laws of England-4th Edition Voluem 23, Para 29; Associated Cement Co. v. C.T.O. 48 S.T.C. 466 SC and Crescent Pak. Industries Ltd. v. Government of Pakistan 1990 PTD 29 ref.

Duty Free Shop Ltd. v. Central Board of Revenue 2002 PTD 1167 rel.

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

----Ss. 32, 32-A, 97 & 156---Untrue statements or mis-declaration---Imposition of penalty---Scope---Monetary penalty could not be imposed, where alleged mis-declaration did not involve loss of revenue---Penalty could only be levied in case of wilful evasion of duty and taxes---Penalty could be declared as illegal, if no wilful breach was dis-covered---Customs Officials could not escape their responsibilities to ensure that the goods were not removed illegally from the bonded warehouse---Where the goods were removed from the warehouse unlawfully, the Customs Department could not escape its responsibilities to see that the goods were not removed unlawfully and without the payment of the duties and taxes---Heavy penalty was not justifiable in such cases---Customs Act, 1969 did not provide to impose in all circumstances the penalty, as double or thrice the Customs value of the goods, but to secure the payment of the duty and taxes in case of violation---Provisions of penalty were criminal in nature and that "mens rea" or intention of the party was relevant---Heavy penalties even in cases of absolute liability were deprecated---Order imposing penalty for failure to carry out a statutory obligation, was the result of a quasi criminal proceeding and penalty would not ordinarily be imposed, unless the party either acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct, or acted in conscious disregard of its obligation---Penalty would not also be imposed merely because it was lawful to do so---Whether penalty should be imposed for failure to perform a statutory obligation was a matter of discretion of the Authority to be exercised judicially and on consideration of all the relevant circumstances---Even if a minimum penalty was prescribed, the Authority competent to impose the penalty would be justified in refusing to impose the penalty, when there was technical or venial breach of the provisions of the Customs Act, 1969 or where the breach flows from a bona fide belief, that the offender was not liable to act in the manner prescribed in the statute---Wrong citation of the section, could not deprive the Customs Authorities of their jurisdiction, to impose the penalty and to recover the same as they possessed the plenary powers in that behalf---Importer would have no cause of action for seeking the intervention of the higher forums, in cases, where no prejudice was shown to have been caused on account of the citation of a wrong section---Case of illegal removal of impugned goods by the importer from the bona fide warehouse, having been established, it was directed by the Tribunal that the leviable duty and taxes on the assessed customs value be recovered from the importer---Imposition of heavy penalty was not justifiable which was reduced to 30% of the assessed customs value of the impugned goods---Impugned orders were modified to that extent, accordingly.

Kamran Industries v. Collector of Customs (Exports) PLD 1996 Kar. 68; Sardar Chemical Gadoon v. Collector of Customs and Central Excise, Peshawar PTCL 1999 CL 813; Scanmatic Systems (Pvt.) Ltd. v. The Collector of Customs, Customs, Excise and Sales Tax Appellate Tribunal, Lahore PTCL 1999 CL 114; Eastern Rice Syndicate v. Government of Pakistan PLD 1959 SC 364; Pakistan v. Hardcastle Waud PLD 1967 SC 1; Bijhama Traders v. Collector of Customs, 1989 MLD 4592; National Construction Co. v. Government of Pakistan PLD 1989 Kar. 174; National Construction Co. (Pakistan) Ltd. v. Government of Pakistan 1990 CL 217; Mst. Baigan v. Abdul Hakeem 1982 SCMR 673 and Sindh Engineering (Pvt.) Ltd. v. C.E.S.T.A.T. Karachi Bench 2002 PTD 2556 rel.

Ishtiaq Ahmad for Appellant.

Muhammad Azam, Superintendent, Taj Malook, Superintendent and Naseer Khan, D.S. for Respondents.

Dates of hearing: 11th February, 30th March, 21st April, 20th May, 22nd June, 6th July, 17th August, 28th September, 30th September and 13th October, 2009.

2012 P T D (Trib.) 1754

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ch. Imran Masood, Member Judicial and Umar Farooq, Member Technical

Messrs NAVEED ENTERPRISES, FAISALABAD

versus

COLLECTOR of CUSTOMS (APPEALS), LAHORE and 2 others

Customs Appeal No.323/LB of 2011, decided on 26th April, 2011.

Customs Act (IV of 1969)---

----Ss.32(3A), 26(A) & 25A---Valuation Ruling No.Misc/08/2009-1/ 2476 25-A 191 dated 31-10-2009---Fiscal fraud---Powers to determine customs value---Recovery order was passed on the ground that GD was filed without proper application Valuation Ruling and non-application of Valuation Ruling had resulted in short payment of Government Revenue---First Appellate Authority observed that evidential data showed that the identical goods were being assessed at the relevant time @ US $ 2.71 per Kg, @ US $ 2.78 per Kg and @ US $ 2.9 per Kg; and goods were liable to be assessed not less than @ US $ 2.40 per Kg---Importer contended that observations of First Appellate Authority was neither based on the Valuation Ruling not evidential data and GD was filed on 26-10-2009 and the Valuation Ruling was issued on 31-10-2009; that the said Valuation Ruling could not be applied retrospectively ; that Valuation Rulings were estimates, if the same were not followed at the time of earlier appraisement, and that could not be used against an importer which had already appraised and had been made out of charge by the authorities---Validity---Record showed that GD was filed on 26-10-2009 and the Valuation Ruling under S.25A of the Customs Act, 1969 was issued on 31-10-2009---Valuation Ruling could not be applied retrospectively---Valuation Rulings were estimates, if the same were not followed at the time of earlier appraisement, same could not be used against an importer which had already appraised and had been made out of charge by the authorities---Valuation Ruling dated 31-10-2009 was not applicable as after proper assessment, the goods were made out of charge---First Appellate Authority erred in law by observing that goods were required to be assessed @ US $ 2.40 per Kg as such observation was neither based on valuation ruling nor on any evidential data--Evidential data discussed by the First Appellate Authority showed the assessed values of the identical goods as @ US $ 2.71 per Kg, @ US $ 2.78 per Kg and @ US $ 2.9 per Kg---Record had nothing to show that the identical goods were being assessed @ US $ 2.40 per Kg---Even otherwise show cause notice issued was based on the Valuation Ruling and not on evidential data and First Appellate Authority had travelled beyond the scope of show-cause notice---Orders of the authorities below were set aside and show cause notice was vacated by the Appellate Tribunal.

Messrs S.T. Enterprises v. Federation of Pakistan and 4 others (in Writ Petitions Nos. 15767 to 15776 of 2008) rel.

Khubaib Ahmad for Appellant.

Dr. Aitzaz Ahsan, D.R. for Respondents.

Date of hearing: 17th April, 2012.

2012 P T D (Trib.) 1788

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Shahid Mahmood Bhatti and Ch. Imran Masood, Members (Judicial)

Messrs YASIR ENTERPRISES, MULTAN and 2 others

versus

DEPUTY/ADDITIONAL COLLECTOR, MULTAN and 2 others

Customs Appeal No.312/LB of 2011, decided on 19th May, 2012.

Customs Act (IV of 1969)---

----Ss. 156, 168 & 179(3)---Decision of cases involving confiscation of goods or imposition of penalty---Limitation---Adjudicating Officer under S.179(3) of Customs Act, 1969 was required to finalize adjudication proceedings and pass the order within 120 days to be reckoned from the date on which the show-cause notice was issued---If the time for which an extension of 60 days could have been granted by the Collector; and the time of 30 days on account of adjournments sought by the parties were also included in the initial period, the order was to be passed in the case within 210 days---In the present case the earlier order was passed after lapse of 561 days and second order was passed by the Adjudicating Officer after expiry of 691 days from the date of issuance of show-cause notice---Contention of Departmental Representative was that on re-opening the case by the Collector of Customs, limitation would be reckoned from the date on which the re-opening order was passed, was not tenable; because on re-opening the case, show-cause notice stood re-activated and the limitation prescribed under S.179(3) of Customs Act, 1969 would be counted from the date of issuance of show-cause notice---Adjudicating proceedings as well as the superstructure built thereon was infested with legal infirmities; and patent violation of mandatory provision contained in S.179(3) of Customs Act, 1969 which made the subsequent proceedings ab initio null and void---Order-in-original was not issued within prescribed time limit as specified in the statute; and the appeals were being disposed of purely on legal grounds---Impugned order in appeal as well as order-in-original, were set aside, in circumstances.

Messrs Super Asia Muhammad Din and Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala and another 2008 PTD 60; Irshad Ahmad and another v. Faiz Muhammad Chaudhry, Deputy Superintendent, Customs (AIB), Lahore and 6 others 2012 PTD (Trib.) 47 and Messrs Ibrahim Spinning Mills case's 1992 SCMR 1898 rel.

Mian Abdul Ghaffar along with Malik Muhammad Arshad for Appellants.

Dr. Aetizaz Ahsan, D.R. along with Ali Rizvi, D.S. for Respondents.

Date of hearing: 6th March, 2012.

2012 P. T D (Trib.) 1962

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ch. Imran Masood, Member Judicial and Umar Farooq, Member Technical

COLLECTOR OF CUSTOMS, MCC, MULTAN

Versus

SHAH FAISAL and another

Customs Appeal No.289/LB of 2011, decided on 28th April, 2012.

Customs Act (IV of 1969)---

----Ss. 2(b), (s), 156(1)(89), 157, 168, 181 & 194-A---S. R.O. 499(1)/ 2009, dated 13-6-2009---Smuggling---Confiscation of smuggled goods---Option to pay fine in lieu of confiscation---Reduction in fine---Alleged smuggled goods along with carrier/vehicle were seized under Ss.168 and 157 of Customs Act, 1969---Adjudicating Officer, on option of importer vide order-in-original released goods along with vehicle against payment of 20% redemption fine of its assessed value---Collector (Appeals) reduced said fine---Order of reduction of fine had been challenged by the department in appeal before the Appellate Tribunal contending that impugned order was against the law as Collector (Appeals) had exceeded the powers conferred on him by Customs Act, 1969---Validity---Under provisions of 5.181 of the Customs Act, 1969, Federal Board of Revenue was competent to issues order to specify the goods where option of fine in lieu of confiscation would not be given as per first Proviso of S.181---Second Proviso of S.181 of Customs Act, 1969 empowered the Board to fix the amount of fine which in lieu of confiscation would be imposed on any goods---Order issued by the Board under S.181 of Customs Act, 1969 was binding on the appropriate officers directing confiscation of goods---Goods were rightly released vide order-in­original against payment of 20% redemption fine of customs value of the impugned vehicle---Collector (Appeals), in circumstances, was not justified in modifying order-in-original---Impugned order was set aside.

2002 MLD 296 rel.

Aitzaz Ahsan D.R. and Muhammad Ali D.S. for Appellant.

Hafeez-ur-Rehman, A.R. for Respondents.

Date of hearing: 26th April, 2012.

2012 P T D (Trib.) 1966

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Ms. Kausar Sultana Hussain, Member (Judicial-III)

Messrs ABDUL MAJEED

Versus

COLLECTOR OF CUSTOMS (ADJUDICATION-II), COLLECTORATE OF CUSTOMS, SALES TAX AND CENTRAL EXCISE, KARACHI

Custom Appeal No.K-414 of 2005, decided on 22nd May, 2012.

Customs Act (IV of 1969)---

---Ss. 32, 32-A, 156(1)(14), 168, 171, 180 & 194-A---Mis-declaration and fiscal tax fraud---Issuance of show-cause notice---Seizure and confiscation of goods---Exporter company had been allegedly found involved in fiscal tax fraud in the export consignments through mis­declaration of description, value, quantity, quality and weight of exported goods---Neither the name of clearing Agent/appellant was mentioned in the notice among the names of the other persons, nor his role had been specifically stated outlining abetment and collusion---Only a copy of the said notice had been endorsed in the name of appellant---Collector of Customs had issued impugned orders ex parte without granting the appellant/Clearing Agent the opportunity of being heard--Show-cause notice must contain specific charge along with specific relevant provisions of the law violated---Orders of adjudication, being ultimately based on a ground which was not mentioned in the show-cause notice, was palpably illegal---In view of the legal infirmities in the show-cause notice, subsequent order of the Collector Customs failed the test of being in order---Courts were required to do justice between the parties in accordance with the provisions of law---If . a particular thing was required to be done in a particular manner, that must be done in that manner, otherwise it should not be done at all---Show-cause notice was declared to be void and orders emanating from it also stood annulled upto the extent of appellant/Clearing Agent only, in circumstances.

Muhammad Sadquain v. Collector of Customs (Appraisement), Karachi 2006 PTD 2742; 2005 PTD (Trib.) 10; 2005 PTD (Trib.) 196; Messrs Exide Pakistan Limited, Karachi v. Deputy Collector (Adjudication-III), Karachi and others 2004 PTD 1449; Adam v. Collector of Customs, Karachi PLD 1969 SC 446 and The Collector Central Excise and Land Customs and others v. Rahm Din 1987 SCMR 1840 ref.

Collector Central Excise and Land Customs v. Rahm Din 1987 SCMR 1840; Messrs Exide Pakistan Ltd., Karachi v. Deputy Collector (Adjudication-III), Collectorate of Customs, Sales Tax and Central Excise (Adjudication), 2004 PTD 1449 and PLD 2005 SC 842 rel.

Mian Abdul Ghaffar for Appellants.

M. Naeemullah, V.O. for Respondents.

Date of hearing: 6th April, 2012.

2012 P T D (Trib.) 1974

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ch. Imran Masood, Member Judicial

Messrs ROSHAN TRADERS, LAHORE

Versus

COLLECTOR MODEL CUSTOMS COLLECTORATE, LAHORE

Customs Appeal No.58 of 2011, decided on 27th September, 2011.

Customs Act (IV of 1969)---

---Ss. 32, 156(1)(14) & 194-A---Mis-declaration---Physical examination of goods revealed that weight of consignment was excess---Matter in issue was in the knowledge of the exporter and no bias had been noted against him---Generally, in case of summary adjudication the show-cause notice was given verbally---Difference between ascertained and declared weight being more than 05%, exporter had mis-declared the weight in terms of S.32 of the Customs Act, 1969, punishable under S.156(1)(14) of the Customs Act, 1969.

Tariq Najib for Appellant.

Ahmad Kamal D.R. and Habib-ur-Rehman for Respondent.

Date of hearing: 10th August, 2011.

2012 P T D 102

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs STARPAK MARTIAL ARTS (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.507/Lhr/Cus(29)/1028 of 2011, decided on 10th November, 2011.

Customs Act (IV of 1969)---

----Ss. 35, 194-A, 195-C & 224---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i) & 10(4)---Customs duty drawback claim---Maladministration---Complaint---Complainant filed 23 customs duty drawbacks claims for the years 2004 and 2005 and during scrutiny of documents, department observed that claims were filed after expiry of limitation period---Deputy Collector Customs rejected the claims of the complainant and appeal against rejection order having been rejected, the complainant had filed appeal before Appellate Tribunal---Pending said appeal, Federal Board of Revenue appointed Alternate Dispute Resolution Committee, which examined the case and observed that late filing of claims was of no advantage to the exporter and it could not be deliberate---Said Committee unanimously recommended for condonation of delay under S.224 of Customs Act, 1969, but Federal Board of Revenue rejected the recommendations of the Committee---Complainant filed complaint alleging maladministration for passing an arbitrary and unreasonable order almost three years after submission of recommendations of the Committee, whereas the Board was required to take decision on the recommendation of the Committee within 45 days of receipt of recommendations---Counsel for the complainant had submitted that Deputy Collector Customs in identical cases had condoned delay and decided the duty drawbacks claim---Government had no right to withdraw citizen's money on ground of limitation or technical reasons---Federal Board of Revenue also had been allowing condonation of delay in submission of documents in many cases---Federal Board of Revenue's rejection of unanimous recommendation of the committee, was both arbitrary and unreasonable---Ombudsman recommended that Federal Board of Revenue should direct the concerned officials to condone delay in filing of duty drawback claims and decide the pending cases in accordance with law within 21 days.

Messrs Pfizer Laboratories Ltd. v. The Federation of Pakistan PLD 1998 SC 64 ref.

Saeed Akhtar, Advisor for Dealing Officer.

Zulfiqar Ahmad, FCA for Authorization Representative.

Dr. Muhammad Mumtaz Ali, D.R. for Departmental Representative.

2012 P T D 150

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs B.F.J. ENTERPRISES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.260/Khi/Customs(107)647 of 2011, decided on 6th September, 2011.

Federal Excise Act (VII of 2005)---

----S. 5---Zero rate of duty and drawback of duty etc.---Duty draw back claim---Non implementation of order of Appellate Tribunal despite repeated reminders---Department contended that due to change in system the supplementary duty-drawback claim could not be processed and PRAL had been approached for amendment in Rebate Processing Software, the matter was still pending resolution and submitted copies of correspondence made between the Department and PRAL and undertook to process the pending claims manually within 30 days---Validity---Withholding of duty drawback / rebate since 2002 and non implementation of the order of Appellate Tribunal without any stay order from High Court would tantamount to maladministration---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Collector to sanction the complainant's claims, as per law, within 21 days; to direct the Collectors (Customs) to submit details of all rebate / duty drawback claims pending up to 31st August, 2011, to the Registrar, Federal Tax Ombudsman Secretariat, within 21 days; to ensure processing and payment of all pending rebate/duty drawback/refunds, as per law, within 60 days and to direct PRAL to fix the software problem within 21 days.

Justice (R) M. Nadir Khan for Dealing Officer.

Ammar Yasir for Authorized Representative.

Dr. Amna Naeem, Assistant Collector Departmental Representative.

2012 P T D 158

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Sh. IFTIKHAR AHMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.282/LHR/ST(35)572 of 2011, decided on 20th August, 2011.

Sales Tax Act (VII of 1990)---

----Sixth Sched., Item No.52-A & S.2(12)---Customs Act (IV of 1969), First Sched., Heading 27.16---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2(3)---Exemption---Charitable hospital---Request for grant of exemption on supply of electricity---Request was regretted by the Federal Board of Revenue on the ground that no such exemption was available to any of the charitable hospitals as the exemption under Sr. No.52-A of the Sixth Schedule of the Sales Tax Act, 1990 was available to equipment / materials used solely for the purpose of hospital activities, the said exemption was not available on utilities such as electricity and gas---Validity---Goods exempt from levy of sales tax were covered under the Sixth Schedule of the Sales Tax Act, 1990, read with reference to First Schedule to the Customs Act, 1969 (Pakistan Customs Tariff: Heading 27.16)---Electricity fell under the definition of goods, and supply of electricity to charitable hospital of 50 beds or more was exempt from levy of sales tax---Rejection of application for grant of exemption of sales tax on supply of goods, including electricity, being based on unreasonable grounds would tantamount to maladministration---Federal Tax Ombudsman recommended the Federal Board of Revenue to allow exemption of Sales Tax on supply of goods including electricity, to charitable hospitals of 50 beds or more, as provided in entry at Sr. No.52-A of the Sixth Schedule to the Sales Tax Act, 1990.

Saeed Akhtar, Advisor Dealing Officer.

Syed Saeed Ahmad Shah for Authorized Representative.

Tehseen Sadiq, ACIR for Departmental Representative.

2012 P T D 168

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs CHICAGO METAL WORKS, MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.338/LHR/ST(52)/668 of 2011, decided on 20th September, 2011.

Sales Tax Act (VII of 1990)---

----S.47A(4)---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(ii)---Alternative dispute resolution---Recommendations of Alternative Dispute Resolution Committee were sent to the Federal Board of Revenue for approval but no action was taken by the Board---Taxpayer deposited the amount recommended by the Committee, however, feeling aggrieved due to inaction of the Federal Board of Revenue on the report of the Committee, maladministration was alleged for the delay---Validity---Complaint was sent to Revenue Division for comments---Chief Commissioner confirmed the facts stated in the complaint and submitted that decision of Federal Board of Revenue on the recommendations of the Committee was awaited and further action would be taken on receipt of decision of the Federal Board of Revenue---Federal Board of Revenue was required to pass an order in terms of S.47A(4) of the Sales Tax Act, 1990 within 45 days of receipt of report of Alternative Dispute Resolution Committee---Delay in passing of order on the recommendations of the Committee was established which would tantamount to maladministration in terms of S.2(3)(ii) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended the Federal Board of Revenue to take decision on the recommendations of Alternative Dispute Resolution Committee within 14 days.

Saeed Akhtar, Advisor for Dealing Officer.

Riaz Ahmad Raja, ITP for Authorized Representative.

Saleem Akhtar Khan, DCIR for Departmental Representative.

2012 P T D 180

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs NAVARTIS PHARMA (PAKISTAN) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.31 of 2011 in Complaint No.26/Khi/Cust(06)/51 of 2011, decided on 23rd August, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 10 & 13---S.R.O. No.565(I)/2008 dated 11-6-2008---S.R.O. No.391(I)/2010 dated 5-6-2010---Refund of input tax---Exemption---Cancer medicines---Import of medicine 'Tasgina 200mg tab'---Withholding of refund of duty and taxes charged on import of such medicine which was claimed as exempt from duty and taxes---Importer contended that said medicine was exempt from duty and tax vide S.R.O. No.565(I)/2008 dated 11-6-2008 which covered all cancer medicines and the list was illustrative and earlier imports were cleared without payment of duty and taxes---Validity---Under S.R.O. No.565(I)/2008 dated 11-6-2008 cancer medicines were exempt from duty and taxes, and an illustrative list was issued---Such list did not specifically mention the subject medicine---Department reported that out of eight consignments imported during the period of enforcement of S.R.O. No.565(I)/2008 dated 11-6-2008, seven were granted exemption---Refund was rejected on the ground that subject medicine was not included in the illustrative list issued under S.R.O. No.565(I)/2008 dated 11-6-2008---Department could not advance any reason for grant of exemption in seven imports of the same medicine, while S.R.O. No.565(I)/2008 dated 11-6-2008 was in the field---Contention of the Department that benefit extended was irregular amply showed that the Departmental interpretation of S.R.O. No.565(I)/2008 dated 11-6-2008 widely varied from Karachi to Lahore to Islamabad, and there was no uniformity across Pakistan---Allowing benefit in seven cases and denial in one case being patently discriminatory would tantamount to maladministration---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Collector of Customs, MCC, Islamabad to reopen the order-in-original and allow due refund of duty and taxes, as per law and to take steps to ensure that all S.R.Os. were uniformly applied across the country.

Justice (R) M. Nadir Khan, Advisor Dealing Officer.

Aziz A. Sheikh for Applicant.

Musthaq Shahni, Deputy Collector for Respondent.

2012 P T D 244

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD TAHIR NASIM

Vversus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.409/LHR/IT(331)830 of 2011, decided on 5th October, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170, 171, 153, 239(10) & 1st Sched: Part-III, Div-III, Cl.(1a) & (b)---S.R.O.600(I)/91 dated 2-7-1991---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9(2)(a)---Refund---Excess deduction of tax at source on cotton lint @ 3.5%---Non-issuance of refund---Validity---Departmental appeal was filed in the Appellate Tribunal on 7-7-2011, the complaint came to the Federal Tax Ombudsman office on 20-7-2011 i.e. two weeks after the matter had become sub judice---Complaint though appeared to be hit by S.9(2)(a) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, the facts were so obvious and peculiar that any further delay in issuance of refund as allowed by the First Appellate Authority would be an irrefutable act of maladministration---Overriding purpose of Federal Tax Ombudsman Ordinance, 2000 was to redress and rectify and injustice done to a taxpayer, the apparent jurisdictional bar placed in S.9(2)(a) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, being of a technical nature, could not be allowed to defeat the very purpose of the law---Delay also created right to receive compensation under S.171 of the Income Tax Ordinance, 2001---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Chief Commissioner to issue refund/compensation due, as per law and without prejudice to the decision of the Appellate Tribunal, within 21 days.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Khwaja Riaz Hussein, Advocate for Authorized Representative.

Muhammad Ali, DCIR for Departmental Representative.

2012 P T D 298

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

ZAFAR ULLAH KHAN CHATTHA, OIL TRADERS, BHAKKAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No.347/LHR/IT(282) 686 of 2011, decided on 1st November, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A), 170(4) & 171---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---C.B.R. letter C.No.1(9)S(Legal-DT)/09 dated 25-11-2009---Amendment of assessment---Refund---Carriage receipts---Refund claimed was rejected on the ground that income was covered under Presumptive Tax Regime---Appellate Tribunal found that carriage contracts were in the nature of services rendered and were assessable under normal tax regime---Department initiated proceedings for amendment of assessment on the same ground relied upon earlier by the Taxation Officer and carriage receipts were assessed under Presumptive Tax Regime without bringing any fresh evidence on record---Validity---Assessment of income and determination of tax thereon fell within the jurisdiction of Audit Division and not within the competence of the Enforcement Division---Appellate Tribunal settled the issue that assessment of income of the complainant was to be done under normal tax regime---Amendment of assessment by the Audit Division on the same ground was unjustified---Refund had been issued during the processing of complaint---Although grievance of complainant to the extent of issuance of refund had been resolved after the intervention of the Office of the Federal Tax Ombudsman, the issue of compensation due was yet to be settled---Arbitrary and unreasonable treatment and the delay in disposal of refund claim within the time limit prescribed under S.170(4) of the Income Tax Ordinance, 2001 was tantamount to maladministration which also created right to compensation---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Chief Commissioner to issue compensation due, as per law and to warn the officials to stop behaving unfairly and unreasonably, failing which they will be dealt with under S.22 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, in addition to any other action deemed fit against them.

Haji Ahmad, Advisor Dealing Officer.

Najam-ul-Hassan, Authorized Representative.

Shakeel Ahmad Shakeel, DCIR for Departmental Representative.

2012 P T D 309

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Dr. R.A. SIYAL, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.121/Isd/IT(63)1121 of 2011, decided on 1st November, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Second Sched., Part-III, Cl. (2)---Constitution of Pakistan, Art.24(1)---Taxpayer was posted as Deputy Director General (Science), National Institute of Sciences and Technical Education---Working as Teacher Trainer, he received instructional allowance @ 20% of basic pay on which he was entitled to 75% rebate in tax as admissible as whole time teacher and researcher---Department refused to refund excess deduction of tax on the ground that the complainant was posted as Deputy Director General (Science) which was an administrative post; that he was holding supervisory job; that he was not entitled to 75% tax rebate; that he did not provide any evidence of tax deduction and that claim was otherwise barred by time as the refund application was not filed within prescribed time limit---Validity---Claim of being a full time teacher had not been rejected through any written order---Claim of refund validly existed on record---Sufficient evidence of tax deduction in the shape of salary slips had been filed; and refund claim could not be declined on the ground of limitation---No person shall be deprived of his property save in accordance with law---Department's refusal to entertain complainant's claim of refund was not found plausible---Action of the Department in refusing the complainant's claim of refund based on 75% tax rebate admissible was unfair, unjust and arbitrary and was tantamount to maladministration---Federal Tax Ombudsman recommended that the Federal Board of Revenue to direct the Chief Commissioner, concerned to issue refund, as per law, within 15 days.

Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others (sic) rel.

Istataat Ali, Advisor Dealing Officer.

Complainant in person for Authorized Representative.

Faisal Irshad, Inland Revenue Officer and Ghulam Hussain, Audit Officer Departmental Representatives.

2012 P T D 313

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

HASHIM SABIR RAJA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.492/LHR/CUST(26)984 of 2011, decided on 1st November, 2011.

Customs Rules, 2001---

----R.65(ii)---Contract Act (IX of 1872), S.20---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(b) & 10(4)---Auction---Auctioneer, at the time of auction, presented the vehicle as Mercedes Benz of 1998 model and delivery order issued by the auctioneer in favour of buyer on behalf of Department also indicated the vehicle to be of 1998 model---Inspection of the vehicle revealed that vehicle was of 1992 model---Complainant contended that auction be cancelled as he was led to buy the vehicle on wrong information made available to him by the Department and auctioneer---Validity---Goods were auctioned on, "as is where is" basis, Department was nevertheless required to provide the correct "details of goods" to the prospective purchaser in terms of R.65(i) of the Customs Rules, 2001---Section 20 of the Contract Act, 1872 provided that where both the parties were under a mistake as to a matter of fact, the agreement was void---Delivery alone was not of the essence---Irrespective of the fides of the Department, the complainant, a bona fide purchaser had suffered a loss because of the wrong information provided by the Department---Where there was a wrong, there was a remedy, grievance had to be redressed---Department's resistance to reverse a process which was so patently unfair and unjust was tantamount to maladministration---Federal Tax Ombudsman recommended the Federal Board of Revenue to cancel the auction and refund the full auction amount after retrieval of the vehicle.

Saeed Akhtar, Advisor Dealing Officer.

Kamran Naseer Abbasi for Authorized Representative.

Ahmad Kamal, DC for Departmental Representative.

2012 P T D 325

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs INNOVATIVE IMPEX, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.279/KHI/ST(95)704 of 2011, decided on 2nd December, 2011.

Sales Tax Act (VII of 1990)---

----Ss.10 & 73---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 16(a) & 32---Refund of input tax---Delay in giving effect to the appeal---Appellate Tribunal had found that not only the show cause notice issued after inordinate delay of about five years was illegal, but Collector (Appeals) had also failed to decide the appeal within the period stipulated under the law; and directed the Department to pay refund claim, as permissible under the law; and department did not discard the invoices through evidence as per requirements of S.73 of the Sales Tax Act, 1990 and there existed no provision to levy tax twice; firstly at the time of purchase and secondly at the time of sales---Department failed to give effect to the finding of Tribunal---Revenue contended that suppliers of the complainant were registered with the Department as commercial importers/wholesalers and not manufacturers, as was claimed and suppliers were found black listed on account of their involvement in the issue of fake and flying invoices and physical verification of Units of suppliers was conducted and were found non-existent on the addresses given on the invoices and owners in whose names such Units were shown were either found not traceable or were engaged in petty business and after affording opportunity of being heard to explain his position about fake and flying invoices, his refund claims were rejected through speaking order-in-original which was upheld by the First Appellate Authority and in order to allow appeal effect to Tribunal's order and issue refund permissible under the law, claims were processed through the STARR system launched by the Federal Board of Revenue; and copies of objection memos. generated through STARR were served on the complainant to clarify his position with regard to sales tax invoices, bills of exports and shipping bills in respect of the claims and as soon as the reply was filed by the complainant, the claims would be settled, as per law---Validity---In order to allow appeal effect to the Tribunal's decision the Department had already initiated processed through STARR and the objection memos. generated by the system had been served on the complainant---Case spoke volumes about how the Department dealt with the taxpayers affairs, and at times how stubborn and insular its organizational climate was---Any further dilly-dallying would entail serious consequences---No tax functionary could be allowed to make a mockery of the law---Appellate Tribunal had allowed the refund, delay in giving appeal effect to the order of Appellate Tribunal was tantamount to maladministration---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Chief Commissioner to allow the refund, as per law, within 15 days.

Manzoor Hussain Kureshi, Advisor for Dealing Officer.

Ammar Yasser for Authorized Representative.

Tariq Hussain Shaikh, DCIR and Akhtar Hussain Qureshi, Deputy Superintendent for Departmental Representatives.

2012 P T D 330

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Mrs. SHAMA RAUF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.430/KHI/ST(129)/1112 of 2011, decided on 20th December, 2011.

Sales Tax Act (VII of 1990)---

----Ss.48 & 45B---Sales Tax Rules, 2006, R.71(2)(b)---Sales Tax General Order No.1 of 1998---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), 9(2)(b)---Recovery of arrears of tax---Recovery of outstanding liability from one of the directors of the company, who ceased to hold ownership, pertaining to the period before the company was assessed---Validity---Notices issued by the Department to the Directors, including the complainant, for recovery of outstanding arrears were after the process of liquidation and auction of the company by the order of the High Court---Plea about non-service of recovery notices till complainant got information from her bank and approached the Department for certified copy of the order-in-original appeared to be well founded as the Department had failed to rebut her claim---No evidence regarding service of order-in-original was produced by the Department on the plea that old record was not traceable---Copy of Form-29 was also not certified by the Security and Exchange Commission of Pakistan on the ground that it was not available on the record maintained by them---Security and Exchange Commission of Pakistan had neither accepted nor rejected the complainant's claim, but had shown inability to certify Form-29 on the ground that it was not available in the record maintained by them---Revenue, after perusing copies of wealth tax returns and subsequent assessment orders framed by the Department conceded that the shares of Company gifted by the complainant were assessed for the assessment year 2000-2001 in the hands of her son---Change of ownership and subsequent assessment of Wealth Tax coupled with a copy of Form-29 dated 30-10-1999 stated to be submitted by the Complainant showed that during the period of order-in-original i.e. June 2000 to July 2001, the complainant was no more director of the company---Department could not recover the outstanding sales tax arrears of the company from the complainant, in circumstances---Action of Department to recover sales tax liabilities outstanding against the company from the complainant under S.58 of the Sales Tax Act, 1990 was tantamount to maladministration in terms of S.2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Chief Commissioner to (i) withdraw notice issued to the banks for recovery of sales tax liability outstanding against the company from the accounts of the complainant (one of the directors of the company); (ii) issue refund of the amount already recovered from her bank accounts after necessary verification and (iii) provide the complainant a certified copy of the impugned order-in-original.

Manzoor Hussain Kureshi, Advisor Dealing Officer.

Khushnood A. Khan and Shiraz A. Khan, Advocate Authorized Representatives.

Abdul Rehman Khilji Additional Commissioner, IR Mushtaq Ali Tunio, ACIR Departmental Representatives.

2012 P T D 347

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs NIZAMI WIRE INDUSTRIES (PVT) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.339/LHR/CUS(11)678 of 2011, decided on 21st December, 2011.

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

----S.2(3)(ii)---Demurage---Customs Department issued delay and detention certificate for claiming refund of demurrage charges as delay was on account of dispute about quality of goods but Port Trust did not accept the refund application---Complainant contended that consignment of wire rods was not allowed clearance due to dispute in which he was not at fault and requested for directions to the Port Trust to refund the demurrage charges or Customs Department should compensate the loss as delay in clearance was on the part of department---Validity---Customs Department was responsible for delay in clearance and the department was to bear the burden of demurrage charges---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the concerned officials to refund the demurrage charges the complainant paid to the Port Trust within 15 days.

Saeed Akhtar, Advisor Dealing Officer.

Mian Ahmad Sethi-Authorized Representative.

M. Qasim Khokhar, D.C. Departmental Representative.

2012 P T D 374

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ALL PAKISTAN TEXTILE PROCESSING MILLS ASSOCIATION

Versus

SECRETARY, REVENUE DIVISION, GOVERNMENT OF PAKISTAN

Complaint No.19/ISD/SUO MOTU (1)/159 of 2011, decided on 12th January, 2012.

Sales Tax Rules, 2006---

----R.28---Settlement of a large number of pending Sales Tax refunds---Exercise of suo motu powers---Complaint had been lodged by Complainant Association seeking indulgence of Federal Tax Ombudsman for settlement of a large number of pending Sales Tax refunds filed by its members---Complaint had been entertained exercising suo motu powers under S.9(1) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Complainant Association stated that as the refund claims of its members would be processed by the department individually, they would like to request that the complaint filed by it be treated as withdrawn---Complaint having been taken up for investigation under suo motu jurisdiction of Federal Tax Ombudsman, same would be decided on its merits---Huge difference in the number of claims having been noticed, both the department and Association were directed to reconcile the figures---Though the major contentious issue of pending sales tax refund claims had been reconciled with the intervention of Federal Tax Ombudsman Office, the need of addressing the systemic issue of maladministration in the sales tax refunds remained intact---Federal Board of Revenue was recommended to direct the Chief Commissioners across Pakistan to clear all more than two months old pending sales tax refund claims, as per law, within four weeks; that being a systemic issue, Federal Board of Revenue to put in place an efficient and fool-proof mechanism of expeditious disposal of bona fide refund claims; complainant Association to file a monthly statement with the Registrar Federal Tax Ombudsman on more than two months old pending claims, with a copy to the concerned Chief Commissioner, to enable the Federal Tax Ombudsman Office to monitor that issue on a regular basis; and Federal Board of Revenue to report compliance of said matters by specified date.

Manzoor Hussain Kureshi, Advisor Dealing Officer.

Zulfiqar Ali Chaudhary, Chairman Authorized Representative.

Abdul Hameed Anjum, DCIR Departmental Representative.

2012 P T D 392

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD TUFAIL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.581/LHR/ST(94)1177 of 2011, decided on 30th December, 2011.

Sales Tax Act (VII of 1990)---

----S.45-A(4)---Complaint against order passed beyond jurisdiction---Show-cause notice was issued to the complainant to the effect that input tax claimed by him was not admissible as it was based on invoices issued by black-listed persons and that refund issued for the period February 2004 to July 2005 was recoverable---Order-in-original was accordingly passed---Collector (Appeals) allowed appeal of the complainant and input tax for the period February 2004 to June 2005 was allowed, while the claim for July 2005 was rejected---Appellate Tribunal decided appeal of the complainant and remanded the case to the department to the extent of the month of July 2005---Appellate Tribunal in its judgment had unequivocally held that retrospective black-listing of the suppliers units was not tenable in law---In the complainant's case the period involved was from February 2004 to July, 2005, whereas the supplier's units were black-listed in 2007 after more than two or three years' span---Order could not be made applicable retrospectively---Appellate Tribunal in its judgment did not approve the treatment accorded by the department and only the period July 2005 was remanded for de novo appraisal---Judgment of Appellate Tribunal disposing of the complainant's appeal against decision of the Collector (Appeals) had been deliberately distorted/perversed, which tantamount to maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue was recommended to direct the Commissioner to set aside the order-in-original by invoking provisions of S.45-A(4) of the Sales Tax Act, 1990; to implement the order of Appellate Tribunal, in letter and spirit; to ask C.I.R. to explain why appropriate corrective/disciplinary action as provided under S.13 of Establishment of office of Federal Tax Ombudsman Ordinance, 2000, may not be taken against him and to report compliance within 15 days.

PLD 1997 SC 582 ref.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Mian Abdul Basit Authorized Representative.

Qasswar Hussain, ACIR Departmental Representative.

2012 P T D 401

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD SALEEM SARWAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.572/LHR/IT(449)/1157 of 2011, decided on 30th December, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.120 & 177---Complaint against conduct of 'composite audit'---Complainant was informed by the Commissioner Internal Revenue that his case had been selected by the Federal Board of Revenue through random Computer ballot for conduct of "Composite audit" for tax year 2008, (composite audit referred to the simultaneous conduct of audit both in income tax and Sales Tax cases)---Complainant had protested that "composite audit" was not an acceptable method of 'conducting audit'---Phrase "Composite audit" did not appear anywhere in the statutes governing income tax and sales tax assessments---Assessment of income per se, was not the moot point in the complaint, but the method adopted to determine the income of the complainant for purposes of levy of Income Tax and Sales Tax simultaneously through conduct of a 'composite audit', had been complained against---'Composite audit' exposed the complainant to double jeopardy---'Composite audit' was far removed from audit as ordinarily envisaged in the Income Tax and Sales Tax statutes---Said audit subjected a taxpayer to multiple audit proceedings, simultaneously under two different statutes, and created a climate of uncertainty and raised the prospect of unforeseen risks for the complainant---Departmental failure to follow the judgment of High Court on the subject would constitute maladministration as defined under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue was recommended to withdraw notices issued for conduct of "composite audit" in the complainant's case with 15 days and report compliance within 5 days thereafter.

2011 PTD 1558 rel

(2011) 103 Tax 131 (SC Pak.) distinguished.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Muhammad Humayun Authorized Representative.

Safdar Bhatti, ACIR Departmental Representative.

2012 P T D 416

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

AFSAR KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.26/Isd/Cus(03)/206 of 2011, decided on 19th January, 2012.

Customs Act (IV of 1969)---

----S.30---S.R.O. 574(I)/2005 dated 6-6-2005---Complaint against inordinate delay in verification of customs "no objection certificate"---Complainant had alleged maladministration on the part of Customs Officials for inordinate delay in verification of customs N.O.C. for registration of his vehicle; and for consequent cancellation of the deal to sell the vehicle causing the complainant a loss---Complainant furnished an undertaking to pay any short-levied amount of duty and other taxes---Customs department instead of finalizing the demand in accordance with the fourth proviso to S.30 of the Customs Act, 1969, erroneously applied the Federal Board of Revenue's Guidelines for the implementation of amendments made in S.R.O. 574(I)/2005 dated 6-6-2005---Departmental Representative had contended that the duty, taxes and redemption fine paid by the complainant were erroneously calculated by the Customs on the basis of Federal Board of Revenue's Guidelines, which were actually not in conformity with the fourth proviso to S.30 of the Customs Act, 1969---Resultant corrective action, in circumstances, would need to be taken uniformly in all cases where the benefit of the Guidelines was availed in the past---Those in the Federal Board of Revenue, who issued the unlawful Guidelines, also needed to be effectively disciplined---Arbitrary withholding of verification of N.O.C., already issued to the complainant by the Customs and non-response to the complainant's letters, had constituted maladministration---Coercing recovery in any manner other than provided under the law involved maladministration---Federal Board of Revenue was recommended to direct the Collector of Customs to confirm the genuineness of N.O.C.; to direct all Collectors in Pakistan to recover the short levied amount of duty and taxes etc., where the benefit of Federal Board of Revenue's unlawful Guidelines was unduly granted in the past; to submit vehicle-wise and year-wise details of recoveries made as per law; to proceed against those found responsible for issuing the Guidelines which were contrary to law and to report compliance within 30 days.

Yasin Tahir, Senior, Advisor Dealing Officer

Irshad Ahmad Durrani Authorized Representative.

Dr. Nauman Khan, Deputy Collector Departmental Representative.

2012 P T D 424

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

EJAZ SPINNING MILLS LTD. through Company Secretary

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.512/LHR/ST(79)/1034 of 2011, decided on 30th December, 2011.

Sales Tax Act (VII of 1990)---

----Ss.10 & 45-A(4)---Sales Tax Rules, 2006, R.28---Complaint against non-issuance of refund---Complainant filed various refund claims for tax periods under S.10 of Sales Tax Act, 1990 and also provided the necessary supporting documents as per R.28 of the Sales Tax Rules, 2006 including input and output invoices as well as diskettes along with proof of payment to the respective suppliers in accordance with law, but the department did not take up the refund claims for disposal, despite lapse of significant time---Complainant had contended that though comprehensive documentation was provided to the department, the refund claim remained blocked largely due to objections by the STARR system, which according to the complainant had no legal backing under the statute and was not applicable to his refund claims---In the case of the complainant inordinate delay in disposal of pending refund claims, was the predominant feature and same fell squarely in the definition of maladministration in S.2(3)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Department was supposed to devise effective ways and means to ensure that administrative bottlenecks did not become endemic---Department must ensure that the system put in place to process refund claims, actually had delivered the desired results, but in the case of the complainant it was evident that the system had failed badly---Delay in issuance of refund was tantamount to maladministration under S.2(3)(ii) of Establishment of Federal Tax Ombudsman Ordinance, 2000---Delay also created the right to receive compensation admissible under Sales Tax Act, 1990---Federal Board of Revenue was recommended to direct the Chief Commissioner to issue refund claim, along with compensation as per law within 21 days and to report compliance within 7 days thereafter.

2010 PTD (Trib.) 1636 and 2011 PTD (Trib.) 483 ref

Muhammad Munir Qureshi, Advisor Dealing Officer.

Ahsan Mehmood Authorized Representative.

Taimoor Kamal Malik, DCIR Department Representative

2012 P T D 437

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

BILAL SAEED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.576/LHR/ST(93)/1172 of 2011, decided on 30th December, 2011.

Sales Tax Rules, 2006---

----R.28(1)---Complaint against non-issuance of refund---Complainant's claim of refund of amount for the tax periods March and June, 2010, which refund arose on account of wrong deduction of input tax on purchase of stationery incorrectly described as "advertisement services" by the buyer---Application of the complainant was rejected by the department informing him that refund claim could not be admitted unless application for refund was submitted as per R.28(1) Sales Tax Rules, 2006 (S.R.O. 555(I)/2006 dated 5-6-2006)---Supplies of stationery from the complainant, having been wrongly described as 'advertisement services' by the purchaser and input tax was wrongly deducted at an excessive rate, excess amount so deducted and deposited in government treasury, needed to be refunded---Relevant document filed by the complainant had not been specifically commented upon by the department---Tax profile of the complainant also reflected the excess amount refundable to the complainant---Incomplete compliance with the requirements of Sales Tax Rules, 2006 alone could not be made the basis for rejection of a refund claim which otherwise was in order---Summary rejection of the complainant's refund claim without passing a formal order was not legally tenable---Claim had not been evaluated on merits and had been rejected on technicalities, which was tantamount to maladministration under S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue was recommended to direct the Commissioner to reappraise the claim strictly on merit and pass a speaking order in accordance with law, after hearing the complainant within 21 days and to report compliance within 7 days thereafter.

Muhammad Munir Qureshi, Advisor Dealing Officer.

M. Bashir Malik, Authorized Representative.

Sultan M. N. Nasir, ACIR Departmental Representative.

2012 P T D 439

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ALANDICK AND COMPANY LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.123/ISD/IT(65)/1138 of 2011, decided on 30th December, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.113, 122-A, 153(1)(b) & 170(4)---Complaint against non-issuance of refund---Complainant had contended that tax deducted on contract receipts constituted minimum tax liability under Ss.153(1)(b) read with S.113 of the Income Tax Ordinance, 2001---Taxation Officer passed a back-dated order under S.170(4) of Income Tax Ordinance, 2001 rejecting the claim of refund on the ground that proof of tax deduction/ payment was not furnished---On complaint, Federal Tax Ombudsman, recommended that Federal Board of Revenue should ensure that refund/compensation due, as per law, was issued within 21 days after vacating/rectifying the order passed under S.170(4) of Income Tax Ordinance, 2001, but no compliance was made by the authorities and refund was not issued in spite of directions of Federal Tax Ombudsman---Complainant's claim of refund was not disputed by the department---Verification of tax deduction had already been made---No element of presumptive income was involved---No issue was pending in appeal---Case had not been selected for audit---Recommendation of Federal Tax Ombudsman given in complaint had not been implemented, which attracted action under S.16 of Establishment of Federal Tax Ombudsman Ordinance, 2001---Whole range of acts of omission and commission by the department tantamount to maladministration in the light of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2001---Federal Board of Revenue was recommended to direct the Chief Commissioner to issue refund/compensation due as per law, within 21 days, failing which, proceedings under S.16 of the Establishment of Tax Ombudsman Ordinance, 2001, would be initiated against all concerned and report compliance within 7 days thereafter.

Istataat Ali, Advisor Dealing Officer.

Muhammad Zaheer, FCA Authorized Representative.

Muhammad Kashif Ahmad, OIR Departmental Respondent.

2012 P T D 445

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs UROOJ TEXTILES

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.380/LHR/ST(57)/736/2011, decided on 30th December, 2011.

Sales Tax Act (VII of 1990)---

---S.45-A---Blacklisting of the company---Complaint against maladministration---Assistant Collector Sales Tax reported to the Collector Sales Tax that complainant had failed to produce Sales Tax record for audit, despite several reminders---Assuming that complainant was involved in issuing fake and flying invoices without physical transfer of goods to facilitate fraudulent refunds, a show-cause notice was issued directing the complainant to attend hearing---Complainant having failed to appear on fixed date and also on subsequent hearings fixed on various dates, he was blacklisted for his failure to attend hearing and produce record for audit---Representative of the complainant stated that manufacturing unit, was shifted to another premises by filing application for such change in the "particulars of registration" on prescribed format and said change of premises was duly allowed by Central Board of Revenue---According to the complainant he being physically available at the new address allowed by the Federal Board of Revenue his blacklisting was unfair and unjust---Show-cause notice and hearing notice were sent to the wrong address---Complainant had no knowledge of the notices issued by the department and he could not avail the right to explain his position---Action taken for blacklisting of the complainant could not be sustained---Complainant had been condemned unheard, and that too because of the fault of the department---Said action was tantamount to maladministration in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue was recommended to re-examine the blacklisting order under S.45-A of the Sales Tax Act, 1990 and decide the case afresh in accordance with law; to pass appropriate orders to enable the complainant to start normal business activities; to take adequate remedial measures to ensure that approved changes in addresses of the complainant were duly reflected in their record and the complainant was not unnecessarily harassed due to the inefficiency of the functionaries of Revenue Division and to report complainant within 30 days.

Haji Ahmad and Saeed Akhtar, Advisor Dealing Officers.

Hafeez Ahmad, Authorized Representative.

Muhammad Arshad, DCIR Departmental Representative.

2012 P T D 449

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs LAL GHEE AND OIL MILLS MALAKAND AGENCY

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.126/Isd/IT(66)1159 of 2011, decided on 30th December, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(1), 124(1) & 148---Constitution of Pakistan, Art.247(3)---Complaint against illegal issuance of notice for audit---Exemption from income tax---Complainant, a private limited company, was engaged in manufacturing and sale of ghee and cooking oil---Unit of complainant was located in Malakand (PATA) which was exempt from tax under Art.247(3) of the Constitution---Claim of total exemption was rejected and 20% of turnover was assessed by the Authority to tax and assessment order under S.124(1) of Income Tax Ordinance, 2001 was accordingly passed---Said assessment order was annulled by C.I.T. (Appeals) observing that the Assessing Officer had failed to bring any concrete evidence on record to support his action of treating 20%, sales having been made in taxable territory---Second appeal by the department against annulment of assessment was rejected by Income Tax Appellate Tribunal said rejection order attained finality as department had not filed appeal/reference against Tribunal's order before High Court---Department, instead of implementing the Tribunal's order started audit proceedings---Complainant contended that audit proceedings were illegal as verification of sale had already been done by the department and it was established that the business was done wholly and exclusively in the tax free Tribal areas and that another exercise of verification of sale was legally not tenable---Business of the complainant was situated in the tax exempt area and all the business operations were carried out in the Tribal areas---No fresh evidence was brought on record to rebut the claim of the complainant---Issue under consideration with the Federal Tax Ombudsman was not assessment of income and determination of tax liability of the complainant but was that correct procedure was not followed while making the assessment which could not stand the test of appeal---Due to inefficiency of the department, the complainant was subjected to rigors of lengthy proceedings---Non-implementation of decision of the Tribunal, was tantamount to maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue was recommended to direct the Chief Commissioner to ensure that the decision of the Tribunal was implemented in letter and spirit without prejudice to a just and fair income of the audit proceedings and to report compliance within 30 days.

Istaat Ali, Advisor Dealing Officer.

Abdul Rehman and Sikandar Nawaz, General Manager Authorized Representative.

Faheem Sikandar, DCIR Departmental Representative.

2012 P T D 457

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs M.YAHYA M. YOUSAF BARI

Versus

SECRETARY, REVENUE DIVISION, GOVERNMENT OF PAKISTAN ISLAMABAD

Complaint No.465/KHI/FE (04) 1199 of 2011, decided on 30th December, 2011.

Federal Excise Act (VII of 2005)---

----S.3-A---Complaint had been filed against the department for its failure to devise any procedure to claim the refund of Special Excise Duty (S.E.D.) paid under S.3-A of the Federal Excise Act, 2005, thereby causing excessive delay in settlement of refund claim for the period from July, 2007 to December, 2009---Complainant stated that no procedure was devised by the Federal Board of Revenue enabling him to submit claim of refund---Inordinate delay in devising the system to receive the Special Excise Duty refund claim was established which tantamount to maladministration in terms of S.2(3)(ii) of Establishment of Office of Federal Ombudsman Ordinance, 2000---Ombudsman recommended that Federal Board of Revenue would direct the Chief Commissioner to condone the delay in the filing of time-barred Special Excise Duty claims of the complainant; to issue refund as per law, along with compensation due within 21 day and to report compliance within next 7 days.

Manzoor Hussain Kureshi, Advisor Dealing Officer.

Jameel Ahmed Karimi, Manager Authorized Representative.

Junaid Ahmed Memon, DCIR Departmental Representative.

2012 P T D 463

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

UMER SHAHID Proprietor U.S. Motors, Lahore

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.534/LHR/IT(420)1068 of 2011, decided on 1st December, 2011.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Assessment of income was not the moot point in the complaint---Arbitrary, whimsical and capricious exercise of discretion by the Assessing Officer had been assailed, which was tantamount to maladministration.

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

----Ss.121 & 122---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000)---Best judgment assessment---Taxpayer contended that amended order passed under S.122(1) of the Income Tax Ordinance, 2001 was, in reality, an ex parte order as it was passed unilaterally on a date other than that cited in the notice---Validity---Amendment of assessment was actually finalized ex parte as envisaged under S.121 of the Income Tax Ordinance, 2001 but was wrongly cited by the Assessing Officer as a regular amendment under S.122 of the Income Tax Ordinance, 2001.

1975 PTD 58 (LHC); 1981 PTD 210 and 1995 PTD (Trib.) 1159 ref.

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

----S.122---Amendment of assessment---Adjournment---Refusal to allow adjournment for the first time on the ground that it was sought without assigning any reason was patently unreasonable and an improper exercise of discretion by the Assessing Officer.

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

----Ss. 122(9) & 121---Amendment of assessment---Refusal of adjournment---Proceedings unilaterally on a single default---Validity---Refusal of adjournment sought was not conveyed to the taxpayer in time---Courier Service record confirmed that Assessing Officer's letter intimating refusal of adjournment was received by the complainant on 8-9-2011 when the due date for compliance of notice issued under S.122(9) of the Income Tax Ordinance, 2001 was 27-8-2011---Assessing Officer stated that he issued the refusal letter on 29-8-2011 but even that was two days after the due date---Assessing Officer had no plausible explanation for the delayed receipt of his refusal letter by the complainant---Decision to proceed unilaterally on a single default and on a date later than that specified in the notice was both arbitrary and legally untenable---Assessing Officer failed to take cognizance of alleged default by the complainant on the due date; and there was no order sheet entry for that date---Acts of omission and commission were tantamount to gross maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Commissioner to vacate the order dated 30-8-2011 passed under S.122(1) of the Income Tax Ordinance, 2001 (Tax Year 2010) by invoking his reversionary jurisdiction under S.122A of the Income Tax Ordinance, 2001 and issue a fresh order, as per law, after giving opportunity of hearing to the complainant.

Muhammad Munir Qureshi, Advisor for Dealing Officer.

Rana Munir Hussain for Authorized Representative.

Usman Ahmad Khan, ACIR Departmental Representative.

2012 P T D 469

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD EHSAN MEHBOOB

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.523/LHR/ST(81)1054 of 2011, decided on 11th January, 2011.

Sales Tax---

----Complaint against arbitrary curtailment of quantitative entitlement certificate and delay in its issuance---Complainant i.e. manufacturer of Welded Pipes was issued quantitative certificate for 10,000 Metric Tons of 'input goods'/Hot Rolled Steel Coils---Certificate was issued after intervention by Federal Tax Ombudsman---Subsequently, on fresh application, after eleven reminders, a provisional quantitative entitlement certificate for import of only 5,800 tons of input goods in next year was issued---Department had not come up with any cogent reason as to why the complainant's 10 reminders in rapid succession failed to get a response; and why in the eleventh reminder, the entitlement certificate was issued for 5,800 Metric Tons as against 10,000 Metric Tons for the previous year---Manufacturers, could not plan their production cycle properly when they were not assured a guaranteed supply of input goods; if they had to face bottlenecks in the supply of essential inputs, it was bound to have adverse effect on their efficiency and profitability---Delay in issuance of entitlement certificate and curtailment of sanctioned limit, was tantamount to maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue, was recommended to direct the Chief Commissioner to give the complainant, personal hearing with a view to arriving at a just and fair resolution of the issues involved; to streamline the procedure for the issuance of entitlement certificates and to notify parameters for objective appraisal of a registered person's requirements for input goods; and report compliance with 30 days.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Imran Iqbal, Authorized Representative.

Ashfaq Ahmad, DCIR Departmental Representative.

2012 P T D 475

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUMTAZ HUSSAIN MIAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.496/LHR/IT(394)/994 of 2011, decided on 19th December, 2011.

Income Tax Ordinance (XLIX of 2001)---

----S. 151(1)(a), Second Sched: Part-IV, Cl. (59)---Profit on debt---Defence Saving Certificates---Deduction of tax at source---Taxpayer contended that tax withholding was unjustified as the Defence Saving Certificates held in each account were within the exemption threshold---Department contended that tax withholding rate on profit on debt was 10%; and deposits below Rs.1,50,000 were exempt from withholding tax and as the complaint was against officials of Directorate of National Savings, the Department was not concerned in the improper deduction of withholding tax at the time of encashment of Defence Saving Certificates held by the complainant and his family members---Validity---Tax was required to be withheld @10% under S.151(1)(a) of the Income Tax Ordinance, 2001 since tax year 2003, and the same constituted final discharge of tax liability---Defence Saving Certificates were purchased by the complainant in his own name and the names of his family members in tax year 2003 and 2004---Exemption threshold for profit on debt specified in the Income Tax Ordinance, 2001 had since been Rs.1,50,000 as per Cl.(59) Part-IV of the Second Schedule to the Income Tax Ordinance, 2001---Prior to tax year, 2003, exemption threshold was Rs.3,00,000---Tax was required to be deducted at source at the time of encashment, except for the joint account being less than Rs.15,00,000---Tax had been correctly withheld by the Directorate of National Savings---Department's contention that it had no concern with the matter was not correct---Department was responsible to monitor the tax withheld by the Directorate of National Savings, or for that matter any withholding agent, on a regular basis---Department was also responsible to provide the required guidance to the withholding agents with regard to correct application of the relevant provisions of the Income Tax Ordinance, 2001---Federal Tax Ombudsman recommended the Federal Board of Revenue to issue instructions to concerned officials to monitor tax deductions by withholding agents and provide necessary guidance to the withholding agents.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Mumtaz Hussain Mian Authorized Representative.

Ashfaq Hussain, DCIR Departmental Representative.

2012 P T D 491

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD YASIN BUTT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.501/LHR/ST(76)999 of 2011, decided on 10th January, 2012.

Sales Tax---

---Allegation of arbitrary demand for payment of Sales Tax---Complainant had claimed illegal input tax credit on the strength of fake Sales Tax invoices---Department, though retained complainant's last five years Sales Tax documentation for more than a year and subjected the same to rigorous scrutiny, but was unable to detect any discrepancy therein---Complainant, as soon as came to know that false invoices had been used by him, he immediately deposited the amount involved therein---Complainant wrote on the CPR that payment was being made under protest and wanted same to be returned to him as soon as recovery was made from the persons who had masterminded the racket---Held, person depositing the amount out of fear could not reasonably be expected to demand its return back to him in the event of recovery of amount from the real perpetrators of the criminal scheme---No meaningful investigation had been carried out to unmask the PRAL's role, if any, in that nefarious scheme to defraud the revenue---Department was unable to establish mens rea and wilful involvement of the complainant in the scheme, which was a condition precedent to levy of 100% penalty---Federal Board of Revenue was recommended to direct the Chief Commissioner to refund the amount deposited by the complainant under protest to cancel the order-in-original; to conduct an enquiry to identify, if any PRAL Officials were involved in the scheme and to proceed against the defaulters, as per law; to launch an investigation into the circumstances, as to why the officials of Directorate of Investigation and Intelligence, did not file an appeal against the apparently light sentences awarded to those who seemingly masterminded the scam and to report compliance within 30 days.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Waheed Shahzad Butt, Authorized Representative.

Malik Fazal ur Rahman, ACIR Departmental Representative.

2012 P T D 495

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

AAMIR RIAZ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.125/ISD/CUS(21)1158 of 2011, decided on 30th December, 2011.

Customs Rules, 2001---

----R.67---Complaint against non-refund of earnest money---Claim of the complainant was that at the auction of vehicle in question he offered bid for Rs.2,400,000 and being the highest bidder he deposited Rs.600,000 as earnest money equal to 25% of the bid amount according to Rules---Complainant had alleged that auction authority despite receiving the amount, not only did not deliver the vehicle in question to him, but also had forfeited amount deposited by him---Contention of Departmental Representative was that highest bid offered by the complainant was for Rs.42,50,000 as per bid recording sheet and the complainant who was required amount of Rs.1,062,500 equal to 25% of bid amount but he had deposited Rs.600,000---As the highest bid was for Rs.4,250,000 as per the documentary evidence produced by the Departmental Representative, the authorities should not have accepted the earnest money less than Rs.1,062,500 i.e. 25% of the bid amount---Accepting partial payment of earnest money, was not in keeping with the requirement of R.67 of Customs Rules, 2001---If the bidder had failed to deposit the full amount of earnest money soon after the fall of the hammer, the bid should have been cancelled as per the provisions of R.67 of Customs Rules 2001---Approval of the highest bid without immediate deposit of full amount of the earnest money was done in violation of R. 67 of the Rules---Non-issuance of receipt and forfeiture of partial amount was unfair---Dispatch of the forfeiture intimation letter on wrong address of the complainant too involved inefficiency and irresponsibility---Said acts of omission and commission of authorities were tantamount to maladministration in terms of S.2(3) of the Establishment of Office of Federal Ombudsman Ordinance, 2000---Federal Board of Revenue was recommended to direct Director General (Intelligence and Investigation) to refund the unfairly forfeited amount of Rs.600,000 to the complaint; to take necessary steps to ensure compliance of the Auction Rules in letter and spirit by all concerned and report compliance within 15 days.

Yasin Tahir, Senior Advisor Dealing Officer.

Aamir Riaz for the Complainant (in person).

Ghulam Ali Malik Deputy Director, DGI&I, F.B.R. Departmental Representative.

2012 P T D 524

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

POLY PACK (PVT.) LTD. through C.E.O.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.614/LHR/ST(107)/1284 of 2011, decided on 30th December, 2011.

Sales Tax Act (VIII of 1990)---

----Ss.11, 36 & 45-A(4)---Complaint against illegal adjudication of sales tax demand---Complainant company was subjected to Sales Tax audit for 2001-2006 that carried on for over four years from 2007 to 2011---Show-cause notice was issued to the company under Ss.11 & 36 of Sales Tax Act, 1990 informing that the company was liable to pay sales tax on account of detection of taxable sales made in that period, including sales of excess stock of raw material---Documentation pertaining to stocks of raw material having not been produced by the company, adverse inference was drawn against the company and order-in-original was passed raising sales tax demand---Department had acknowledged that the calculation of sales tax liability was wrongly communicated to the complainant due to clerical error---No comment was made by the department on the protracted audit proceedings---Under first proviso to S.36(3) of the Sales Tax Act, 1990 order-in-original was required to be passed within 120 days of the issuance of the show-cause notice, but same was passed after more than four months---Time limitation specified in the statute invariably required that the cut off date should be adhered to strictly---Complainant had acquired a vested right to benefit from expiry of limitation period and avoid incidence of taxation, should the department fail to finalize proceedings on the due date within the limitation period---Department was duty bound to finalize proceedings in time---Apart from the expiry of limitation deadlines and adjudication made in excess of the pecuniary limit laid down in the notification, the sales tax demand raised in the order-in-original attributed to alleged sales and excess stocks of raw material to unregistered person was without any corroborative evidence---Besides said lapse, the format of the order-in-original was almost replication of the earlier format of order-in-original---Departmental actions in year 2005-2006 were tantamount to maladministration under the Establishment of Office of the Federal Ombudsman Ordinance, 2000 for the reasons of issuance of time-barred show-cause notice; issuance of time-barred order-in-original; violation of ratio of tribunals judgment in Sales Tax Appeal; adjudicating sales tax liability in excess of the limit laid down in notification; protracted audit proceedings spread over four years and incorrect calculation of sales tax liability---Federal Board of Revenue was recommended to direct the Commissioner to cancel the order-in-original which was coram non judice; to warn ACIR, not to exceed the powers conferred under the law in future and to report compliance within 30 days thereafter.

2008 PTD 609; 2006 PTD 219 (Trib.) and 2011 PTD (Trib.) 1943 rel.

Muhammad Munir Qureshi Adviser Dealing Officer.

Waseem Ahmad Malik Authorized Representative.

Shabana Aziz, DCIR and Munir Ahmad Chaudhry, ACIR Departmental Representatives.

2012 P T D 538

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ATM ENTERPRISES PAKISTAN (PVT.) LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.130/ISD/ST(34)/1179 of 2011, decided on 28th December, 2011.

Sales Tax Act (VII of 1990)---

----Ss.7, 36 & 73---Determination of tax liability---Audit by DGRRA---Disallowance of admissible input tax adjustment---Taxpayer contended that he was not provided the basis of DGRRA's audit objection to enable him to explain his position before issuance of show-cause notice and order-in-original; and mechanical issuance of show-cause notice and order-in-original, without ascertaining the basis of DGRRA's objection, was not fair, just or lawful and amount of input tax stated as Rs.5.936 million in the show-cause notice was incorrect while the actual amount of input tax adjustment, during the period, was Rs.4.636 million---Break up of Rs.5.936 million along with details of audit objection was asked but to no avail---Revenue stated that basis of the objection and required break-up could not be supplied as it was not furnished by the DGRRA; and DGRRA's objection was not evaluated by the sales tax authorities before issuance of show-cause notice and stated that the matter could have been settled through reconciliation---Validity---Revenue agreed to sit with the complainant to reconcile the facts for which reasonable time was allowed---Revenue, after doing reconciliation exercise, was satisfied with the legality and propriety of input adjustment on the basis of valid invoices issued by the registered suppliers, valid copies of GDs showing payment of sales tax at import stage and transfer of payment of amounts to the suppliers through normal banking channels in accordance with the provision of S.73 of the Sales Tax Act, 1990---Amount of input tax adjustment was also wrongly indicated by the DGRRA---Mechanical issuance of show-cause notice without first evaluating the DGRRA's observation and failing to provide the information required by the complainant, to enable him to prove the genuineness of input adjustment, was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Commissioner to set aside order-in-original in exercise of his powers under S.45A of the Sales Tax Act, 1990 and finalize the matter as per law.

Yasin Tahir, Senior Advisor Dealing Officer.

M. Mansoor Saeed Authorized Representative.

Zahid Hussain, Audit Officer, RTO, Islamabad Departmental Representative.

2012 P T D 544

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs FROOTO INDUSTRIES (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.452/KHI/ST (138)/1167 of 2011, decided on 19th December, 2011.

Sales Tax Act (VII of 1990)---

----S. 66---Refund to be claimed within one year---Excessive delay in allowing appeal effect---Taxpayer contended that till filing of complaint, department, despite repeated efforts, did not allow appeal effect and issue the refund due---Revenue conceded that claims arising out of appellate orders had to be refunded but claims could not be processed unless submitted through RCPS of STARR system and manual processing of refund claims was no more permissible; and when officer concerned approached the Director General (SP&R), Federal Board of Revenue, for permission to generate electronic Refund Processing Order, it was informed that claims under S.66 of the Sales Tax Act, 1990 could be lodged at Refund Claim Counter---Validity---Revenue despite admitting the claim of refund, showed inability to process the subject refund through the RCC as no procedure for handling refund claims arising out of court orders, where verification of bills and invoices was not involved, was provided in the STARR software---Delay in allowing appeal effect and settling refund claims being established was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to revisit the instructions regarding refund processing through STARR dated 12-4-2003 so that payment of refund and maintenance of record were both clearly provided for; direct the concerned officials to allow appeal effect to appellate orders dated 24-1-2011 and 16-3-2011 and issue refund due, as per law.

Manzoor Hussain Kureshi, Advisor Dealing Officer.

Arshad Shehzad Authorized Representative.

Nasir Khan, ACIR Departmental Representative

2012 P T D 554

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

WAHEED SHAHZAD BUTT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.286/LHR/IT/(240)/577 of 2011, decided on 16th December, 2011.

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

----S.153(1)(b)---F.B.R. letter C.No.1(6)WHT/2009 dated 4-7-2009---F.B.R. Circular No.3 of 2009 dated 17-7-2009---F.B.R. Circular No.6 of 2009 dated 18-8-2009---F.B.R. Letter C.No.1(10)WHT/2006-Part-III dated 1-11-2010---F.B.R. letter No.1(25)WHT/2009 dated 26-4-2011---Payments for goods, services and contracts---Services---Despite imposition of minimum withholding tax @ 6%, the Commissioner issued exemption certificate to taxpayer providing services and falling under the ambit of S.153(1)(b) of the Income Tax Ordinance, 2001 being corporate taxpayer---Validity---Clarifications circulated by the Federal Board of Revenue to its field formations were sufficient proof that the amendment made in S.153 of the Income Tax Ordinance, 2001 through Finance Act, 2009 had ousted all the National Tax Number holders whether individuals, Association of Persons or Companies providing services from Normal Tax Regime/Final Tax Regime and brought them under the Minimum Tax Regime---Exemption certificate issued by the Commissioner on the request of some corporate taxpayer prior to issuance of Circular No.6 of 2009 dated 18-8-2009 were withdrawn when the legal position was explained to the Commissioner---Prima facie, it seemed that the corporate sector providing services thereafter approached the Federal Board of Revenue and Circular No.6 of 2009 dated 18-8-2009 was issued, ousting the corporate sector from Minimum Tax Regime of S.153 of the Income Tax Ordinance, 2001 (as amended) without withdrawing the Federal Board of Revenue's earlier clarifications issued through its letter dated 4-7-2009 and Circular No.3 of 2009 dated 17-7-2009---Exemption Certificate was wrongly issued in the month of July 2009, when changed position of applicability of S.153(1)(b) of the Income Tax Ordinance, 2001 was clear---Clarification issued vide F.B.R. letter C.No.1(6)WHT/2009 dated 4-7-2009 and F.B.R. Circular No.3 of 2009 dated 17-7-2009 were not followed while issuing exemption certificate---Ambiguous clarification was issued through Circular No.6 of 2009 dated 18-8-2009 which was withdrawn on 26-4-2011---Revenue admitted that public exchequer suffered losses because of issuance of Circular No.6 of 2009 dated 18-8-2009 and the exemption certificate issued by the Commissioner all over Pakistan---No measures were taken by Federal Board of Revenue to recoup the losses because corporate taxpayers were still issuing bills to their customers with a printed note that they were exempt from deduction of withholding tax and the same was not being deducted by many service recipients---Circular No.6 of 2009 dated 18-9-2009 was wrongly issued and the Commissioner issued exemption certificate contrary to law and in departure from Federal Board of Revenue's earlier clarifications, which was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to initiate appropriate action against officials who approved/issued Circular No.6 of 2009 dated 18-9-2009; initiate appropriate action against officials who issued exemption certificate to unduly benefit the corporate entities; ascertain the particulars and the amount of tax not withheld @ 6% from each service provider; take immediate measures to recover the loss of revenue, as per law and direct the concerned officials to take suitable action to ensure that the taxpayers, including the cellular companies, issue bills/invoices without reference to exemption from withholding tax.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Complaint in public interest---Investigation by Ombudsman on its own motion---Jurisdiction---Scope---Objection raised by the Revenue regarding matter being sub-judice in High Court or regarding jurisdiction of Federal Tax Ombudsman to investigate the complaint in public interest were not legally tenable---No evidence had been submitted to prove that the issue was sub judice before the High Court prior to filing of application---Section 9(1) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, empowers the Federal Tax Ombudsman to investigate, on his own motion, any allegation of maladministration on the part of Revenue Division or any tax employee.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Ramzan Bhatti Adviser

Waheed Shahzad Butt for Applicant.

Dr. Muhammad Iqbal, Chief, F.B.R., Asif Rasool, Secretary, F.B.R. and Ashfaq Ahmad, DCIR Departmental Representatives.

2012 P T D 565

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUSSADAQ FARHAN CHUGHTAI through Muhammad Ibrahim Chughtai

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.483/LHR/IT(389)/970 of 2011, decided on 16th December, 2011.

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

----S.9(2)(b)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Disregard of evidence and explanation---Assessment of income---Allegation against the Department by the complainant was not the quantum of income assessed per se, but the Department had arbitrarily and in a discriminatory manner disregarded the complainant's documentary evidence and explanation regarding his sources of investment---Procedural injustice being well within jurisdiction of Federal Tax Ombudsman and did not fall within the purview of S.9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000.

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

----Ss.111(1)(b), 120(1) & 122(5)---Unexplained income or assets---Source of investment was rejected by the Department on the basis that the actual withdrawal of Pak Rupees from the Rupee account was not established; that the receipt of sale proceeds, in instalments, from sale of 57 kanals plot in village, was not proved; that sale proceeds were received in their entirety when the third and final Iqrar Nama was executed and that amount received in its entirety could not have been used to finance the purchases of properties in the prior period---Validity---Department had no clear idea of what it intended to do during Audit---Audit proceedings were started on the premise that the complainant was a dealer in real estate in Pakistan and the differential between purchase price and sale price in the case of properties sold out by him was liable to be taxed as the complainant's business income---Department rejected all three Iqrar Namas filed by the complainant to substantiate sale of his property at village---In assessments made earlier in the case of buyers of these properties, the Department had raised no objection with regard to the authenticity of any of the three Iqrar Namas submitted, which was evidently arbitrary---Any contrary view taken in complainant's case, when the property, the buyers of the property and the seller were the same, was indeed discriminatory---Department could not approbate and reprobate in the same breath---Department failed to ascertain what other sources of income the complainant had invoked to be able to purchase property---After the Department had arbitrarily rejected the declared sources of investment of the complainant that were fully documented, such a failure showed gross professional incompetence---Department violated the instructions of Central Board of Revenue contained in C.No.1(14)E&02/95-P dated 12-4-2011, directing that foreign remittances encashed in Pak Rupees and utilized to finance expenditures were not to be subjected to unnecessary probe---Multiple instances of maladministration were established---Federal Tax Ombudsman directed that Federal Board of Revenue to direct the Commissioner to invoke his revisionary jurisdiction under S.122(1) of the Income Tax Ordinance, 2001 to set aside the order passed under S.122(1) of the Income Tax Ordinance, 2001, and proceed as per law.

???????????

Mohsin Raza v. Chairman F.B.R.; (in Writ Petition 4630 of 2009;? 2010 PTD (Trib.) 1709;? 2006? PTD? 2828? and? 2010? PTD? 1489 ref.

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

----Ss.111 (1) (b), 120(1) & 122(5)---Unexplained income or assets---Addition on the ground that source of investment was not proved through banking channel---Validity---Foreign remittances were sent by the complainant (from the U.S.A. where he was resident since 1981 and derived income from business) to his Foreign Currency Account---Itemized details of deposits and withdrawals relevant to the Foreign Currency Account were reflected in a bank statement---Foreign remittances were later encashed and converted into Pak Rupees between 23-10-2001 to 22-9-2005 for utilization in purchase of immoveable property---Once the U.S Dollars were converted into Pak Rupees it was up to the taxpayer how he used them---Taxpayer could keep the amount with himself in as cash in hand or he could deposit the proceeds in a Pak Rupee account either totally, or partially and keep the balance amount with him as cash---Taxpayer could invest the converted U.S. Dollars in any manner that he deemed fit, including purchase of immoveable property and there was no requirement in law that he should first deposit the proceeds in a Rupee Account and then withdraw the amount there from and produce a Bank statement of the Rupee Account in order that the source of his investment be accepted by the income tax authorities.

???????????

2006 PTD 2828 rel.

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

----Ss.111(1)(b), 120(1) & 122(5)---Unexplained income or assets---Agreement to sell---Cash payments---Iqrar Nama or agreement to sell was an established legal way of entering into a transaction involving immoveable property and the Department had not established that the requirements of law and procedure that needed to be fulfilled in this regard were not fulfilled by the taxpayer in any of the three Iqrar Namas executed between the taxpayer and the buyers of his property in village---Record, including the Bank Statement, confirmed that the cheque payments were received for sale of land at village and were duly credited in the account---Iqrar Namas showed that? some amounts were received in cash---Total amount received in cash and through cheques, for sale of village land, were sufficient to prove investment in purchase of property.

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

----S.177---Audit---Change of stance during the audit---Department, during the audit, shifted its stance and held that the taxpayer had no legitimate resources to finance the purchase of properties---Validity---When Department decided to conduct audit on different lines than? what was conveyed to the taxpayer initially, the earlier proceedings should? have? been? first? concluded? and ?then? a? fresh? notice? issued? for the conduct of audit to investigate the taxpayer's sources of investment only---Failure to do so betrayed professional incompetence.

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

----S.111---Unexplained income or assets---Evidence---Suppression of---Letters received from the Bank were suppressed---Such selective treatment of relevant evidence showed a predetermined intention to make out a case of unexplained investment against the taxpayer.

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

----Ss.111(1)(b), 120(1) & 122(5)---Unexplained income or assets---Opportunity for rebuttal---Department did not confront the taxpayer with their 'finding' that no encashed US Dollar receipts from the foreign currency account were credited to the Pak Rupee account---Proper opportunity, as envisaged in law, was not accorded to the taxpayer to rebut the departmental 'finding'.

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

----S.177---C.B.R.? Circular Instructions? C.No.7(2)Dt-14/94? dated? 24-1-1994---Audit---Completion of proceedings---Limitation---Reason-able? time---Protracted? audit? proceedings? commenced? on 29-6-2007 and concluded on 14-6-2011---Assessment proceedings were required by law to be completed within a "reasonable time'---Federal Board of Revenue had directed that assessment proceedings be finalized within a reasonable time, preferably within three hearings and not more than three notices be issued---Proceedings could not be allowed to be spread out over years with a gap of almost a full year during which time only a single notice was issued by the Department---To keep the taxpayer guessing as to his fate in the audit with no closure in sight was tantamount to maladministration---Protracted delay in bringing judicial proceedings to a close within a reasonable time would render them null and void in the eye of law.

???????????

2010 PTD 1489 rel.

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

----S.2(3)(iii)---Maladministration---Repetitive issuance of notices---Repetitive issuance of as many as 20 statutory notices was tantamount to maladministration.

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

----Ss.122(1) & 121---Amendment of assessment---Non-compliance of terms of statutory notices---Assessment of---Finalization of audit, after repeatedly observing in the assessment order that the taxpayer had not complied with the terms of statutory notices issued and served properly on the taxpayer's agent, required assessment under S.121 of the Income Tax Ordinance, 2001, not under S.122(1) of the Income Tax Ordinance, 2001---Such contradicted the Assessing Officer's assertion that the taxpayer did not comply with statutory notices issued and properly served on the taxpayer's agent in Pakistan.

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

----Ss.122(5), 120 & 177---Amendment of assessment---Conditions---Deemed assessment had been made under S.120 (1) of the Income Tax Ordinance, 2001 initially---Amendment under S.122(5) of the Income Tax Ordinance, 2001 required that a show-cause notice be served so as to accord opportunity to the taxpayer, as envisaged in law, to properly explain his position---Department's lapse in such regard was tantamount to maladministration---Once audit proceedings were initiated under S.177 of the Income Tax Ordinance, 2001 and amendment was required to be made under S.122(5) of the Income Tax Ordinance, 2001, assumption of jurisdiction under S.122(5) of the Income Tax Ordinance, 2001 was a condition precedent to amendment.

???????????

2010 PTD (Trib.) 1709 rel.

???????????

Muhammad Munir Qureshi, Advisor Dealing Officer.

???????????

M. Akram Raza, ITP Authorized Representative.

???????????

Shehzad Mehmood, DCIR Departmental Representative.

2012 P T D 751

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

COMPLAINANT

Versus

HAQ NAWAZ

Complaint No.7/QTA/IT(01)526 of 2011, decided on 18th August, 2011.

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

----Ss. 2(3), 9 & 10---Misuse of circular of the Board of Revenue---Exemption from withholding tax---Federal Board of Revenue, issued a circular under the Prime Minister's Economic Incentive Package for FATA and PATA, to rehabilitate the economic life in the areas affected from war on terror---Respondent firm, which was dealing in rice export, was got registered with Federal Board of Revenue, only to avail the benefit of said Circular---Rice, being not cultivated in FATA and PATA, export of the same could not originate from said areas---Bank account of the respondent firm had shown that it did not belong to FATA and PATA---Firm availed the benefit of Circular in question and deprived the Government of legitimate revenue---Said firm, in view of clarification of the Board, did not qualify for exemption from withholding tax under the cover of the Circular---Respondent firm evaded payment of withholding tax and department without due application of mind or seeking clarification from the Board, allowed undue benefit of tax amounting to Rs.6,804,567 to the firm---Board on the intervention of the Federal Tax Ombudsman issued clarification according to which benefit of Circular in question, was disallowed to the firm---Federal Board of Revenue, was recommended to direct concerned Chief Commissioner Inland Revenue, to finalize proceedings, as per law and report compliance within 30 days.

M. Nadir Khan, Advisor, Dealing Officer.

Muhammad Arif, Deputy Commissioner, Fida-ul-Haq, Assistant Commissioner, Departmental Representatives

2012 P T D 836

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs E.M. INDUSTRIES (PVT.) LTD., SIALKOT and 4 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint Nos.651-655/LHR/CUST(35-39)1370-1374 of 2011, decided on 7th February, 2012.

Customs Act (IV of 1969)---

----S.37--- Drawback on goods used in the manufacturing of goods which were exported---Withholding of duty draw-back claims---Complainant prayed that department be advised to pay the amount due immediately and not to delay payments in future---Department informed that the claims which had come to the top of the queue were sanctioned and rest of the claims being in queue would be sanctioned on their turn---Validity---Despite Federal Tax Ombudsman's repeated directions for processing and payment of rebate/duty draw-back claims without delay, a large number, of claims kept piling up without any just cause, which tantamount to maladministration---Federal Tax Ombudsman directed the Department to file monthly progress report about pendency/disposal of rebate/duty draw-back claims and recommended the Federal Board of Revenue to direct Collector Customs to ensure timely processing and payment of all pending rebate/duty draw-back claims; to submit a consolidated monthly report about pendency and disposal of rebate/duty drawback claims on the format already circulated to all the Collectorates across Pakistan and to take adequate steps to liquidate pendency of duty draw-back claims on a sustainable basis.

M. Nadir Khan, Advisor for Dealing Officer.

Shamas-ud-Din Bhatti Authorized Representative.

Ms. Rizwan Bhasir, D.C. Departmental Representative.

2012 P T D 862

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs MUHAMMAD HAFEEZ & SONS KOHAT, PESHAWAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.135/ISD/ST(35)/1195 of 2011, decided on 17th February, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S.114---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 10(4)---Maladministration---Complaint was filed against maladministration on the part of the department for failing to decide application of deregistration due to which the complainant could not get the user ID, Password and Pin Code of E-FBR Portal---Delay of almost six years by the department to decide the complainant's application for deregistration, was tantamount to gross maladministration in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue was recommended to direct the RTO concerned, to decide the complainant's request for waiver of penalty for non e-filing of Income Tax Returns for 2010 and 2011 as per law; and keeping in view the circumstances of that case; to submit year-wise details of all pending cases of deregistration across Pakistan; and report compliance within 30 days.

Yasir Tahir, Senior Advisor Dealing Officer.

Sher Mast Khan, Authorized Representative.

Saleem-ur-Rehman, DCIR, Peshawar Departmental Representative.

2012 PTD 1193

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

ARIF IQBAL

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.68/LHR/IT(55)136 of 2012, decided on 24th April, 2012.

Income Tax Ordinance (XLIX of 2001)-

--Ss.122 & 129(5)(7)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Amendment of assessment---Maladministration---Comp-lainant/assessee's deemed assessment for relevant tax year having been amended, he filed appeal before C.I. R. (Appeals), contesting the turnover adopted in the amended assessment on the information obtained from the complainant's sales tax record---Complainant had further contended that his request to the C.I.R. (Appeals) for a stay order against the demand raised through amended assessment was unjustifiably refused---Appeal having been finalized with considerable delay, complainant had filed complaint against such maladministration---Contention of the complainant regarding improper assessment of turnover in the amended assessment, was not borne out---As far as the time actually taken to decide the appeal, contention of C.I.R. (Appeals) did not appear plausible---Delay in deciding the complainant's appeal, was tantamount to maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000--Recommendations were made to Federal Board of Revenue, to issue instructions to Commissioner (Appeals) to decide appeals in accordance with law contained in S.129(4) of Income Tax Ordinance, 2000 and to report compliance within 30 days.

2008 PTD 609 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Riaz ahmad Raja, ITP Authorized Representative.

Riaz Ahmad, CIR (Appeals) Departmental Representative.

2012 P T D 1265

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

SHAHZAD ANWAR SHEIKH

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.80/LHR/ST(16)/150 of 2012, decided on 7th May, 2012.

Sales Tax Act (VII of 1990)---

----Ss.37 & 38---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 11---Business transaction with blacklisted suppliers who had not deposited output tax---Issuance of notice---Complainant was found to have had business transactions with four blacklisted, suppliers who had not deposited output tax---Notice issued under Ss.37 & 38 of Sales Tax Act, 1990 to the complainant had been challenged by the complainant by filing complaint---Complainant had admitted that sales tax payment made by him to the supplier was entirely in cash---All the transactions were below Rs.50,000 while payment ought to have been routed through Banking Channels which cast suspicion as it seemed unusual that each transaction was for less than Rs.50,000---Cash transactions were resorted to by entities seeking to avoid leaving a paper trail---Complainant's failure to submit the required documents and not to appear before Investigating Authority in person also left many questions regarding his alleged involvement unanswered---When a person had nothing to hide, he should not feel reluctant to produce all the record before the Investigating Authority and to render explanations on all pertinent issues---Issuance of notice to the complainant in the context of the investigation underway in the false invoices scam did not tantamount to maladministration---Federal Board of Revenue was directed to ensure that the false invoices scam was thoroughly investigated expeditiously as per law.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Riaz Ahmad, ITP Authorized Representative.

2012 P T D 1343

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

SHOAIB AHMAD, MUHAMMAD ALI COTTON WASTE FACTORY, FAISALABAD

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 100/LHR/ST(21)192 of 2012, decided on 7th May, 2012.

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

----Ss.21 & 2(17)---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2(3)---De-registration, blacklisting and suspension of registration---Bleaching of cotton rags---Suspension of sales tax registration on the ground that there was no machinery installed in the business premises and claimed outstanding refund arising from excess deduction of tax at the time of import of chemicals were held up pending finalization of Departmental investigation---Taxpayer contended that there was no justification to keep sales tax registration suspended for a protracted period, as, despite lapse of significant time, the Department had not been able to come up with a definitive finding of commission of sales tax fraud; that in other similar cases registration had been restored; and that discrimination against him was tantamount to maladministration---Department contended that as no machinery was installed at the business premises, the complainant not being a manufacturer had wrongly declared his status as such to the Department---Validity---Department had restored the sales tax registration in other cases, even though in those cases the Department had found that no machinery was available at the business premises---Commissioner had accepted in the order that no machinery as such was required in the bleaching of cotton rags; therefore, there was no justification to treat the taxpayer differently and to keep his sales tax registration suspended for a protracted period---Refund arose as a result of excess deduction of tax at import stage and such deduction was fully documented---Non-restoration of sales tax registration, when registration had been restored in other cases in similar circumstances, was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Chief Commissioner to restore sales tax registration within 15 days and process pending refund claims on merit and issue refund due, as per law, within 21 days.

2011 PTD (Trib.) 2090 ref.

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

----S.2(17)---Manufacturer or producer---Presence of machinery---Definition of manufacturer under S.2(17) of the Sales Tax Act, 1990 apparently did not make the presence of machinery at the premises a precondition.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Khubaib Ahmad, Authorized Representative.

2012 P T D 1365

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Sheikh M. SULTAN AHMED MUALLA RULER IN ABU DHABI and another

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and another

Complaint No.33/ISD/CUS(04)/339 of 2012, decided on 30th May, 2012.

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

----Ss. 138, 139, 168, 169, 179, 180 & 181---Customs Rules, 2001, Chap.1, R.2(g)---Punjab Wildlife (Protection, Preservation, Conservation and Management) Act (II of 1974), Preamble---Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 22---Unlawful 'disposal' of falcons belonging to the complainants after they had been declared as 'unclaimed' by the customs---Authority of Customs and the Wildlife Department to dispose of the falcons---Scope---Jurisdiction of Magistrate to order release of the falcons---Complainants who were Commercially Important Persons (CIPs) brought falcons into Pakistan and when their baggage arrived at the airport, their representative approached the customs with their passports, falcons' tags and health certificates issued by the foreign government, for clearance---Customs official informed the said representative that clearance of the falcons also required import authorization by the Ministry of Foreign Affairs and the Ministry of Environment and a "no objection certificate" from the National Council for Conservation of Wildlife---Subsequently customs declared the falcons as 'unclaimed' and handed them over to the Punjab Wildlife Department, which released them in a forest after obtaining orders of the Magistrate---Contentions of the customs officials were that every passenger was under a statutory duty to declare the goods being imported and obtain clearance after satisfying the customs that the import was in accordance with the law; that no one claimed the falcons and therefore they were handed over to the Wildlife Department for safe custody; that the signatures on the affidavit annexed with the complaint were forged and did not tally with the signatures on the photocopies of the passports---Validity---Falcons were present in cages which bore the airline tags showing the names of owners, flight number and date---Customs officials declared the falcons to be 'unclaimed' despite being informed that their owners (complainants) were in the airport lounge waiting for their clearance---Passports of complainants were produced before the Customs officials and representative of the complainants had presented all the documents to the customs at the airport but he was never asked that the owners of falcons should personally appear before the customs officials---Customs officials claimed that they did not have the facilities for keeping the falcons, therefore they handed them over to the Wildlife Department, which also had no such facility; in circumstances there could be no rationale for handing the falcons over to the Wildlife Department, which then approached the Magistrate for the release of the falcons in the forests---Law did not give the Magistrate such a jurisdiction nor were the officials of the Customs and the Wildlife Department empowered under the law to dispose of the falcons in such a manner---Entire procedure adopted by customs was illegal, mala fide, and was apparently adopted to criminally deprive the complainants of their high value possessions---Sections 139, 168, 169 179, 180, 181 of the Customs Act, 1969, were completely ignored and the falcons could not have been justifiably detained rather an opportunity had to be given to the complainants to obtain the required permissions from the Ministries concerned---Complainants had a month to complete said formalities but their representative was not informed of the developments, even though he was diligently approaching both the customs and the Wildlife officials---Maladministration in terms of S. 2(3) of the Federal Tax Ombudsman Ordinance, 2000, in unlawfully treating the falcons as 'unclaimed' was established---Illegal confiscation of the falcons and their disposal in contravention of the law for improper motive, was apparent in the circumstances---Ombudsman made recommendations to the Revenue Division to either return the falcons to the complainant, or to pay them special cost thereof---Ombudsman further observed that wildlife officials had played despicable role in the criminal transaction.

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

---Ss. 2(3), 11 & 22---Customs Act (IV of 1969) Ss. 138, 139, 168, 169, 179, 180 & 181---Punjab Wildlife (Protection, Preservation, Conservation and Management) Act (II of 1974), Preamble---Maladministration by Customs officials---Unlawful 'disposal' of falcons belonging to the complainants after they had been declared as 'unclaimed' by the customs---Procedure for redressal of grievance---Scope---Compensation for the falcons---Contentions of the Customs officials were that compensation proceedings under S. 22 of the Federal Tax Ombudsman Ordinance, 2000, could only be invoked after the determination in terms of S. 11 of the Ordinance, and that the complainants had not prayed for compensation in the complaint---Validity---Complainants had stated an amount of Rs. 35 million in their complaint as costs of the falcons---Contention of Customs officials regarding determination under S. 11 of the Federal Tax Ombudsman Ordinance, 2000, prior to invoking S. 22 of the Ordinance, was misconceived as there was no such requirement in the Ordinance---Notice was given to the concerned officials for the production of falcons but they failed to do so---Subsequently a show-cause notice, under S. 22 of the Federal Tax Ombudsman Ordinance, 2000, was issued, therefore, contention of the Customs officials regarding the stage and time of issuance of said show-cause notice was not sustainable in the eyes of law---Maladministration in terms of S. 2(3) of the Federal Tax Ombudsman Ordinance, 2000, in unlawfully treating the falcons as 'unclaimed' was established---Illegal confiscation of the falcons and their disposal in contravention of the law for improper motive, was apparent in circumstances---Recommendation was made to the effect that Revenue authorities were to direct the Customs officials concerned to either return the falcons to the complainants or pay them Rs.35 million as costs of the falcons, in addition to Rs.1 million as compensation for the mental and emotional anguish and distress caused to the complainant.

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

----S. 217---Customs Rules, 2001, Preamble---Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 22---Actions done or intended to be done in good faith in pursuance of the Customs Act, 1969 or Customs Rules, 2001---Legal proceedings against Federal Government or public servant for such actions---Maintainability---Maladministra-tion by Customs officials---Illegal confiscation of falcons brought from a foreign country by Commercially Important Persons (complainants) and their unlawful disposal by the customs after declaring them to be 'unclaimed'---Contention of the customs officials was that under the Customs Act, 1969, no suit, prosecution or other legal proceedings could lie against the Federal Government or any public servant for anything which was done or intended to be done in good faith in pursuance of Customs Act or Rules---Validity---No immunity existed against patently fraudulent and perverse acts---Actions of the Customs officials in the present case, could not be taken to be acts done in 'good faith' and their acts were clearly mala fide and brought both the Government and the nation into disrepute, locally as well as internationally.

Yasin Tahir Senior Advisor and Hafiz Ahsan Ahmed Khokhar, Advisor Dealing Officers.

Malik Nadeem Aslam Representative of the Complainants.

Imtiaz Ahmed Khan, Collector Customs, Zahid Ali Baig, Additional Collector, Tahir Habib Cheema, AC Airport Customs and Tariq Mahmood Awan, Superintendent Customs Department Representatives for Customs.

2012 P T D 1380

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs UMER TRADING CO. through Mrs. Javeria Sohail Amin and 2 others

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.4-06/LHR/IT(03-05)22-24 of 2012, decided on 15th May, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S.161---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 13---Allegation of illegal demand of tax under S. 161 of Income Tax Ordinance, 2001 and additional tax raised by Inland Revenue Officers (IROs) and Commissioner Inland Revenue (CIR) in order to extort bribe from the complainant---Proof---Complainant produced recordings of mobile phone conversations of IROs and CIR demanding bribe for deleting unfounded charge of non-payment of withholding tax against him and for avoiding selection of his case for audit---Such recordings appeared to be authentic as playback thereof did not reveal any gap or break in flow of conversation or any other sudden change in conversation between such Officers---One IRO had acknowledged his voice in such recordings with complainant, and he was given a copy thereof along with translated transcript to make written reply thereto, but he did not opt to reply same---Such recordings had pointed to corruption in the Department---IROs had passed an illegal order under S. 161 of Income Tax Ordinance, 2001 when there was no default by complainant in payment of withholding tax---Such recordings supported the version of complainant contained in his affidavit that one IRO had received a bribe of Rs.2,00,000 in his office---Such alleged acts of omission and commission committed by such Officials were tantamount to maladministration as defined under S. 2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Ombudsman recommended to Federal Board of Revenue to take necessary disciplinary action as provided under S. 13 of Income Tax Ordinance, 2000 against the relevant Officials and also forwarded copy of such recordings and recommendations to Chairman, National Accountability Bureau for initiating criminal investigations into such matter as per law.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Waheed Shahzad Butt Authorized Representative.

2012 P T D 1402

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs MIA CORPORATION, ISLAMABAD

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.24/ISD/ST(08)/242 of 2012, decided on 22nd February, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S.177---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 10---Selection of case for "Composite Audit" (covering Sales Tax and Federal Excise matters)--Complainant/corporation was aggrieved against the letter of Commissioner whereby it was informed that its case had been selected for "Composite Audit"---Contention of the complainant was that there was no provision of "Composite Audit" in the Income Tax Ordinance, 2001, Sales Tax Act, 1990 or Federal Excise Act, 2005---Submission of Departmental Representative was that the Commissioner was competent under S.177(1) of Income Tax Ordinance, 2001 to select any case for audit falling in his jurisdiction---Commissioner, of course, was competent under S.177(1) of Income Tax Ordinance, 2001 to issue notice for audit, but while exercising that power, he could not invoke the said provision on other laws---Both Sales Tax and Federal Excise laws had independent sections for audit proceedings; their consequences were different and they could not be subjected to the provision of Income Tax Law---Action of Commissioner to issue notice for 'composite audit' covering Sales Tax and Federal Excise matters simultaneously with the complainant's Income Tax affairs being without jurisdiction was tantamount to maladministration as defined under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000--Federal Board of Revenue was recommended to withdraw notices issued for conduct of 'composite audit' in the case of the complainant within 15 days; and report compliance within 5 days thereafter.

2011 PTD 1558 rel.

Hafiz Ahsan Ahmed Khokhar, Advisor Dealing Officer.

Atif Mehmood, Authorized Representative.

2012 P T D 1412

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

REHMAT ULLAH TABBASUM

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.281/LHR/IT(209)548 of 2012, decided on 26th April, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5-A) & 122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 9(2)(b)---Revision of assessment---Complainant's income tax assessment for assessment year 1998-99 was revised by Addl. Commissioner on 30-6-2004, under S.122(5-A) of Income Tax Ordinance, 2001 redetermining taxable benefits received under the Golden Handshake Scheme at the time of his premature retirement from service---Commissioner vide his order overruled the same on the ground that original assessment in the case was finalized under S.59(4) of the repealed Income Tax Ordinance, 1979 on 30-6-1999; and said order could not be revised under S.122(5-A) of Income Tax Ordinance, 2001, which provision was inserted in the statute on 1-7-2003---All assessments pertaining to the period falling under the repealed Ordinance could only be made under provisions of the repealed Ordinance---Show-cause notice under S.66-A of the repealed Ordinance for assessment year 1998-99 was issued to the complainant on 4-6-2011---When said show-cause notice was issued, the four years limitation time laid down in S.66-A of the repealed Ordinance to revise an assessment had expired---Assessing Officer, in circumstances, did not have jurisdiction to issue the show-cause notice under S.66-A of the repealed Ordinance for assessment year 1998-99---Said notice was void ab initio and a nullity in the eyes of law---Departmental contention that the complaint involved assessment and interpretation of law, were misconceived---Departmental recourse to the provisions of S.66-A of the repealed Ordinance in assessment year 1998-99 in the case being an act contrary to law, was tantamount to maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000--Federal Board of Revenue was recommended to direct the Commissioner to vacate the show-cause notice dated 4-6-2011 issued under S.66-A of the repealed Ordinance, as per law by recourse to the provisions of S.122-A of Income Tax Ordinance, 2001, within 21 days; and report compliance within 7 days thereafter.

Eli Lily's case 2009 SCMR 1279 = 2009 PTD 1392 ref.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Mian Zafar Iqbal, Authorized Representative.

2012 P T D 1439

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD ASHIQ

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 181/LHR/IT(128)/355 of 2012, decided on 19th March, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.148, 162 & 205---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 9---Illegal levy of tax---Complainant was served with a show-cause notice under Ss.162(1)/205 of Income Tax Ordinance, 2001 without specifying any tax year asking him to explain as to why tax allegedly short deducted under S.148 of Income Tax Ordinance, 2001 at the time of import of his goods could not be charged afresh---Complainant explained that tax deducted at the time of import in the case of the imported goods was consistent with the notification and Rulings of Federal Board of Revenue---Complainant had also contended that the order passed under S.162(1) of Income Tax Ordinance, 2001, was illegal because sufficient time was not allowed to make a suitable response to the final show-cause notice---Validity---Denial of reasonable opportunity to the complainant to respond to show-cause notice; and refusal of adjustment when sought by the complainant for the first time, had constituted maladministration under S.2(3) of the Establishment of Federal Tax Ombudsman Ordinance, 2001---Failure to mention any tax year in show-cause notice, had shown ineptitude, inefficiency and carelessness of the department tantamount to maladministration under S.2(3) of Establishment of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Commissioner, to invoke revisionary jurisdiction under S.122-A of the Income Tax Ordinance, 2001 and annul impugned orders passed under S.162 of Income Tax Ordinance, 2001 for relevant year as per law, within 21 days; and report compliance within 7 days thereafter.

2011 PTD (Trib.) 2005; 1988 PTD 1014; 2003 PTD (Trib.) 242 and PLD 1997 SC 582 = 1997 PTD 1555 ref.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Sajjad Ahmad Butt, ITP Authorized Representative.

2012 P T D 1488

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

WAHEED SHAHZAD BUTT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.627/LHR/IT(483)1310 of 2011, decided on 28th May, 2012.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 153(1) (b) & 153(6)--- Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)(ii)--- Public interest complaint---Corporate tax payers--- Web portal of the Federal Board of Revenue (FBR) ---Tax computation defects in the electronic Income Tax Return--- Complainant contended that for corporate tax payers deriving income by providing/rendering services chargeable under Ss. 153(1)(b) & 153(6) of the Income Tax Ordinance, 2001, the electronic Income Tax Return (IT-1) for Tax year 2010 placed on the Federal Board of Revenue (FBR) web portal gave misleading information to taxpayers and tax payable by them was not being correctly computed; that the electronic Income Tax Return understated a taxpayer's due income tax liability for the tax year 2010 and was not designed to take into account receipts/income liable to tax under normal tax regime, besides the income taxable under the minimum tax regime--- Validity--- Defectively designed electronic return for corporate taxpayers (service sector) showed incompetence, inefficiency and inaptitude on the part of the concerned officials and was tantamount to systematic mal-administration under S. 2(3)(ii) of the Federal Tax Ombudsman Ordinance, 2001--- Federal Tax Ombudsman recommended that the Federal Board of Revenue to ensure that in the future a fool-proof electronic Return was placed on the Federal Board Revenue's official web portal; to direct field formations to determine revenue losses that occurred due to defective e-Return, and to take steps to retrieve the loss, without charging any penalty or default surcharge to the concerned taxpayers.

Muhammad Munir Qureshi and Hafiz Ahsan Ahmad Khokhar, Advisors Dealing Officer.

Waheed Shahzad Butt for the Complainant.

Mirza Nadeem Munawar Baig Chief IR Operations, Basit Saleem Shah Secretary IR (General), Mujahid Naeem Manager Automation PRAL Departmental Representatives.

2012 P T D 1513

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

SHAHID MUHAMMAD SWABI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.149/ISD/Cus(27)1318 of 2011, decided on 13th December, 2012.

Pakistan Customs Tariff, 2011-12---

---Heading 87.02 & 87.03---Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10(4) & 9(2)(b)---Complaint against non-refund of additional amount of duties and taxes collected by the Customs due to alleged arbitrary classification of a limousine-car under Pakistan Customs Tariff, heading 87.03 instead of 87.02---Jurisdiction of the Federal Tax Ombudsman to investigate said complaint---Scope---Contentions of the complainant were that he imported the limousine car in question and filed Goods Declaration at the dry port, where the Customs instead of accepting the declared classification under Pakistan Customs Tariff, heading 87.02 (chargeable to 20% duty), arbitrarily determined classification under heading 87.03, chargeable to 100% customs duty and 50% regulatory duty, and that the Customs disregarded an earlier ruling of the Classification Committee and the recommendation of the Federal Tax Ombudsman Secretariat in a previous complaint---Validity---Reading of Pakistan Customs Tariff heading 87.02 and 87.03 was indicative of lack of clarity in the two headings---Office of the Federal Tax Ombudsman had already directed the Federal Board of Revenue to remove the said confusion through addition of an appropriate amendment/explanation in the Pakistan Customs Tariff Code---Although the matter of classification fell under S.9(2)(b) of the Federal Tax Ombudsman Ordinance, 2000, but the issue with which the office of the Federal Tax Ombudsman was seized of was lack of clarity under classification headings 87.02 and 87.03, leading to avoidable confusion/litigation---Federal Tax Ombudsman recommended the Federal Board of Revenue to decide the matter of classification of the limousine car in question as per law, and to consider setting up a separate Classification Directorate, on the pattern of Valuation Directorate, to make the classification rulings more authoritative and binding for all Customs stations across the country or to alternatively entrust classification disputes to the Valuation Directorate.

Yasin Tahir, Senior Advisor Dealing Officer.

Rana Munir Hussain and Ijaz Baig, Special Attorney Authorized Representatives.

Ms. Kanwal Ali, AC Customs, Peshawar and Javaid Iqbal, Appraiser Customs Departmental Representatives.

2012 P T D 1586

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs NADIA TEXTILES INTERNATIONAL LIMITED, LAHORE and 4 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 92/Khi/Customs(35)270, 126/Khi/Customs(43)347, 127/Khi/Customs(44)348, 168/Khi/Customs(49)510, 178/Khi/Customs-(51)540 of 2012, decided on 12th April, 2012.

Customs Act (IV of 1969)---

----S.35---Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Duty-drawback claims---Alleged delay, negligence and inaction on part of the department to process said claims of the complainants---Complainants had submitted their duty-drawback claims for processing by "Micro Clear" software which was closed on 28-2-2012 and replaced by a new system "Standalone", however the data from "Micro Clear" software was yet to be retrieved and transferred to the new system, which became operational on 1-3-2012, causing delay in processing of duty-drawback claims fed in the "Micro Clear" software---Federal Tax Ombudsman, in circumstances, found that installation of new software without taking steps for retrieving and transferring of data from the old system reflected inefficiency and ineptitude in the administration and discharge of official responsibility, which was tantamount to maladministration---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Chief Collector Customs to expedite development of software to retrieve and transfer data of duty-drawback claims fed into "Micro Clear" software, and to process claims pending clearance in the old "Micro Clear" software after transfer of data to new system on priority basis.

Justice (R) M. Nadir Khan, Advisor Dealing Officer.

M. Afzal Awan, Naeemuddin Pervaiz Rais Khan and Muhammad Rashid Authorized Representatives.

Dr. Aamir Nawaz Hamid, Assistant Collector Departmental Representative.

2012 P T D 1632

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD ANWAR KHAN, NATIONAL SCREEN ART ADVISOR, LAHORE

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.67/LHR/IT(54)126 of 2012, decided on 16th May, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.170 & 171---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(ii)---Refund---Advertisement media---Manufacturing and supply of advertisement media like sign boards, billboards and hoardings---Refund arose on account of excess deduction of income tax at source on payments made for the manufacture and supply of said advertisement media like sign boards etc.---Department contended that refund application was liable to be rejected as the electricity tariff(A2) was for domestic use and did not bear out that the taxpayer was a manufacturer/ supplier of goods---Taxpayer explained that the process of preparing signboards, billboards and hoardings involved cutting, welding and shaping iron angles and preparing flex skin sheets for which an industrial electricity connection was not required; and expert workers were employed to cut, shape and frame the iron and flex sheets by hand; and where necessary, gas welding plant was used for which no electricity was required---Validity---Record indicated that the taxpayer was a manufacturer/supplier and tax deducted at source was required to be adjusted against tax liability due---Chief Commissioner reached a decision that the taxpayer was a manufacturer/supplier of advertisement media---Refund had been held up without any justification for more than three years---Delay in issuance of refund was tantamount to maladministration---Delay also created the right to receive compensation---Federal Tax Ombudsman recommen-ded that Federal Board of Revenue to direct the Chief Commis-sioner to issue refund/compensation due, as per law, within 15 days.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Chaudhry M. Saleem Jehangir, Authorized Representative.

Ashfaq Ahmad, DCIR for Departmental Representative.

2012 P T D 1940

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SALLM SERUJ LTD. AFGHANISTAN, PESHAWAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.24/KPK/CUS(05)523 of 2012, decided on 7th July, 2012.

Customs Act (IV of 1969)---

----S.156(1)(64)---Punishment for offences---Personal penalty and redemption fine was remitted by the Appellate Tribunal---Department was approached for release of goods, but of no avail---Department contended that Reference had been filed against judgment of Appellate Tribunal which was pending before the High Court---Validity---Admittedly, Appellate Tribunal remitted personal penalty and redemption fine and Department filed a Reference before the High Court • against judgment of Appellate Tribunal but it had not been suspended---Mere filing of appeal in higher forum did not automatically suspend the judgment of lower forum---Non-releasing of seized goods after judgment of Appellate Tribunal being unlawful and arbitrary was tantamount to maladministration under S.2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Collector of Customs, concerned to ensure implementation of the judgment of the Customs Appellate Tribunal and release the seized goods, as per law, without prejudice to the final outcome of the reference filed in the High Court.

Hafiz Ahsan Ahmad Khokhar, Advisor Dealing Officer.

Danish Ali Qazi for Authorized Representative.

Zubair Shah, DC Customs and Fazal-ur-Rehman, Dy. Superintendent Departmental Representatives.

2012 P T D (Trib.) 5

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mrs. Tabbana Sajjad Naseer, Accountant Member

Messrs HONDA ATLAS CAR (PAKISTAN), LTD., LAHORE

Versus

C.I.T., LEGAL DIVISION, R.T.O., LAHORE

I.T.As. Nos.627/LB, 628/LB, 678/LB and 646/LB of 2010, decided on 9th June, 2011.

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

----S.21(e)---Income Tax Rules, 2002, R.117---Deductions not allowed--Gratuity fund---Amount paid to fund and claimed as deduction to be classifiable as 'initial contribution' to fund was disallowed on the grounds that it required a special approval from Commissioner Inland Revenue under provisions of R.117 of the Income Tax Rules, 2002 which was not obtained and that a further amount representing 'transitional liability' computed by actuary was separately disallowed---Taxpayer contended that amount paid was within the limits prescribed i.e. such amount was not in excess of participating employees, aggregate salaries for last months of relevant financial year in respect of which benefit of 'staff gratuity' had vested and a similar issue was raised by the Commissioner Inland Revenue at the time of issuance of 'exemption certificate' to the fund established by taxpayer and after examining the record, concerned Authority had agreed that such amount was not in excess of the prescribed limit and no statutory approval under R.117 of the Income Tax Rules, 2002 was required---Validity---Authority to enforce the limits prescribed in R.117(2) of the Income Tax Rules, 2002 rested with the Commissioner Inland Revenue which did satisfy himself on this account---Such position, prima facie, verifiable from the documents furnished before the Appellate Tribunal and had been conceded to by the Departmental Representative---Taxation Officer had formed a view that was in conflict with another departmental official and that too senior in hierarchy to him---Contents of reply submitted by the taxpayer showed that the amount was not in excess of limit prescribed in R.117(2) of the Income Tax Rules, 2002 and subsequent issuance of exemption certificate substantiated that after due verification, such contention of taxpayer was found to be correct---Disallowance had been made on an assumption that was unfounded and was not supported by facts and circumstances---Disallowance had been made on the basis of an imaginary position, which did not exist---Section 21(e) of the Income Tax Ordinance, 2001 conferred a right upon the taxpayers to claim as deduction the 'payments' made to an 'approved fund' was very well founded and was corroborated by the plain text of such legal provisions---Such right could not be taken away by placing reliance on the provisions of Rules that were subordinate to the provisions of Ordinance, a creation of legislature---If a fund failed to comply with any of the conditions prescribed in the Rules, the legitimate way was to revoke the approval accorded to such fund in consequence to which provisions of S.21(e) of the Income Tax Ordinance, 2001 would come into play and the amount in question would stand disallowed---Taxation Officer had mis-understood the situation and had not only erred in understanding facts of the matter but had misinterpreted the relevant scheme of law---Appellate Tribunal directed that an amount paid to an approved fund by the taxpayer company be allowed as a deduction.

I.T.As. Nos.4776 to 4780/LB of 2004 and I.T.As. Nos.5121 to 5124/LB of 2004 not relevant

(b) Interpretation of Statutes---

----Fiscal law---Right conferred upon a taxpayer under primary legislation cannot be taken away through a subordinate legislation i.e. Rules, notification etc.

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

----Ss.21 (c) & 152(1)---Deductions not allowed---License fee paid to parent company by the taxpayer was subjected to withholding tax @ 15% under S.152(1) of the Income Tax Ordinance, 2001 considering same to be in the nature of 'royalty'---Taxation Officer disputed such position and found that license fee was not classifiable as 'royalty' and attracted the withholding tax rate of 30% prescribed under S.152(2) of the Income Tax Ordinance, 2001 and provisions of S.21(c) of the Income Tax Ordinance, 2001 were applicable in the case of subject expense and expense on account of license fee was disallowed---Validity---Appellate Tribunal directed that expense of 'license fee' be allowed to the taxpayer as per claim, as there was no justification for such disallowance.

I.T.A. No.767/LB of 2009 rel.

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

----S.221---Rectification of mistake---Adjustment against determined refunds---First Appellate Authority found that matter of adjustment of refunds of other tax years against the liability for the subject tax year fell within the domain of 'rectification' and taxpayer should seek remedy through filing of an application with the Taxation Officer under S.221 of the Income Tax Ordinance, 2001---Taxpayer contended that since adjustment was refused in the order without assigning any reason, matter was appealable and finding given by the First Appellate Authority was not proper---Validity---Matter was appealable and the First Appellate Authority should have recorded his finding on the matter---Appellate Tribunal directed that while giving effect to the order of Appellate Tribunal, adjustment be allowed against available determined refunds so as due right of taxpayer was not infringed.

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

----S.21(k)---Federal Board of Revenue Circular No.16 of 1990 dated 4-12-1990---Deductions not allowed---Perquisite---Provision of food and cost living allowance---Taxpayer contended that expenses incurred on provision of food etc, to employees during their stay at factory was not classifiable as a perquisite; and cost of living allowance' being a 'statutory allowance' was also not classifiable as a 'perquisite, for which relief was accorded by the First Appellate Authority---Validity---Under the provision of Federal Board of Revenue Circular No.16 of 1990 dated 4-12-1990 canteen subsidy could not be classified as a 'perquisite'---Cost of living allowance being a statutory allowance payable to employees under legislative compulsion also could not be considered to be includable in 'perquisites'---Relief granted by the First Appellate Authority was maintained by the Appellate Tribunal and Departmental appeal failed.

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

----Ss. 22 & 122(5A)---Depreciation---Loss on scrapped assets---Admissibility---Fixed assets having a tax book value were scrapped---Assets were in the nature of jigs, moulds, dyes etc, used to manufacture proprietary items and were required to be scrapped due to change in model of cars---While such assets were no longer required in the manufacturing activity, being items of 'proprietary' nature, these had to be defaced and scrapped so as no unauthorized manufacturing could be undertaken by the buyers of these items; and were sold as 'scrap'---Taxpayer was confronted that since these were assets on which 'depreciation' was earlier allowed, gain/loss on disposal thereof should be commuted by reference to tax written down value and sale proceeds fetched by taxpayer on disposal and claim of entire written down value of assets as an expense under the head 'fixed assets scrapped' could not be allowed---Taxpayer explained that amounts fetched on disposal of such assets had been duly offered for tax as 'scrap revenue' and treatment required to be followed had been meted out---Claim was accepted to the extent of 1/3rd on the grounds that it could not be ascertained that all these items were sold during the period relevant to assessment year and some of these items may have been sold as part of scrap in period subsequent to that relevant assessment year; and balance 2/3rd claim was considered for allowance in next two years in equal proportions---Relief was accorded by the First Appellate Authority on the ground that requisite evidence was duly produced before the taxation officer during the amendment proceedings, which showed that entire defaced items were sold during the period relevant to tax year under consideration; and claim was accepted on merit---Validity---Claim of the taxpayer was proper and legitimate---Sale proceeds of each individual item scrapped was not identifiable as the items were scrapped and sold in bulk---Departmental stance clearly caused an undue hardship to the taxpayer---Entire scraped assets were disposed off in period relevant to tax year under consideration as scrap could not have been carried by taxpayer for the entire year---Taxation officer directed to divide the claim in three tax periods while such a mechanism was detrimental to the interest of taxpayer in terms of tax cash outflows---Position adopted by the taxation officer was unlawful particularly when it was verifiable from the record that the taxpayer had provided the evidence regarding sale of scrap during the year under consideration---Taxation officer was conducting the amendment proceedings under S.122(5A) of the Income Tax Ordinance, 2001, he was not justified in requisitioning the evidence and disallowing the amounts under consideration for want of evidence---Such action was taken outside the legal jurisdiction available to taxation officer---Finding of First Appellate Authority was upheld by the Appellate Tribunal and directed that such claim be allowed to the taxpayer.

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

----S.60A---Workers' Welfare Fund Ordinance (XXXVI of 1971), S.4---Workers' Welfare Fund---Computation of liability---Procedure---Levy of 'Workers Welfare Fund' being allowable as a deduction from taxable income, taxpayer computed such levy by applying a ratio of 2/102 to the income before deduction on this account---Taxation officer computed workers welfare fund @ 2% of the income before charging workers' welfare fund---Validity---Departmental stance was at variance with the provisions of S.60A of the Income Tax Ordinance, 2001---Workers' Welfare Fund was deductible against income and 'taxable income' was a sum arrived at after deducting such statutory levy---Under the provisions of S.60A of the Income Tax Ordinance, 2001 workers' welfare fund was computable by applying a ratio of 2/102 to income before charging workers' welfare fund; in this manner, both the statutory provisions i.e. S.4 of Workers' Welfare Fund Ordinance, 1971 and S.60A of the Income Tax Ordinance, 2001 would be complied with---Departmental appeal was dismissed by the Appellate Tribunal on this account.

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

----S.75(3A)---Disposal and acquisition of assets---Write-off of 'idle assets'---Admissibility of loss---Assets having a tax written down value not being usable in manufacturing activity were declared as 'idle' and deduction was claimed under S.75(3A) of the Income Tax Ordinance, 2001---Such claim was not allowed by the Taxation Officer while First Appellate Authority accorded the relief---Validity---Since the matter had already been decided in taxpayer's favour, Appellate Tribunal upheld the order of First Appellate Authority and departmental appeal was dismissed.

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

----S.21 (g)---Deductions not allowed---Provisions for customs duty---Admissibility of---Reduced rate of customs duty was applicable to import of vehicles in 'completely knocked down' form subject to condition that taxpayer would follow an indigenization of imported parts---Subsequently it was found by the relevant governmental authority that such condition was not fully complied with by the taxpayer and remission of customs duty earlier accorded was required to be recouped to a certain extent---Department disputed such claim on the grounds that such amount being penal in nature was hit by mischief of S.21(g) of the Income Tax Ordinance, 2001 and any such payment of duty was admissible only when it was actually paid---Taxpayer contended that under accrual basis of accounting, provisions of Ss.32 & 34 of the Income Tax Ordinance, 2001 was required to be followed mandatorily---Such amount was admissible as the events giving rise to the expense / liability had already occurred---Such amount being in the nature of general customs duty was not penal in the nature---Validity---Issue had already been decided in favour of the taxpayer---Following the ratio laid down earlier, Appellate Tribunal endorsed the findings of First Appellate Authority---Departmental grounds were not entertained and appeal was dismissed.

Asim Zulfiqar, FCA for Appellant (in I.T.As. Nos.627/LB and 628/LB of 2010).

Muhammad Tahir, D.R. for Respondent (in I.T.As. No.627/LB and 628/LB of 2010).

Muhammad Tahir, D.R. for Appellant (I.T.As. Nos.678/LB and 646/LB of 2010)

Asim Zulfiqar, FCA for Respondent (I.T.As. Nos.678/LB and 646/LB of 2010).

Date of hearing: 13th April, 2011.

2012 P T D (Trib.) 25

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and M.B. Tahir, Accountant Member

C.I.R., ZONE-II, R.T.O., MULTAN

Versus

ALI RAZA INDUSTRIES (PVT.) LTD., MULTAN

I.T.A. No.1052/LB of 2011, decided on 14th October, 2011.

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

----Ss.161 & 205---Failure to pay tax collected or deducted---Limitation for calling record---Tax year 2005---Order passed under Ss.161/205 of the Act was annulled by the First Appellate Authority on the ground that taxpayer was not obliged to keep records beyond 30-6-2010 when the details / documents were filed on 30-2-2011---Validity---First Appellate Authority had annulled the order on the legal grounds that the tax year involved was 2005 which ended on 30-6-2005---Vested interest was created in favour of the taxpayer on the very day that it would maintain records as prescribed under S.74 of the Income Tax Ordinance, 2001 for the next five years i.e. up to 30-6-2010 which had to operate prospectively and not retrospectively---First Appellate Authority had rightly annulled the order as the Taxation Officer had called for the record regarding tax year 2005 through the show-cause notice dated 29-12-2010 and subsequently passed the order under Ss.161/205 of the Income Tax Ordinance, 2001 for the tax year 2005 on 22-3-2011 had rightly, been annulled by the First Appellate Authority---Appeal of the department was dismissed by the Appellate Tribunal.

Fazal Din and Sons's case 2009 SCMR 973 = 2009 PTD 1016; Army Welfare Sugar Mills 1992 SCMR 1652; Al-Samrez Enterprises 1986 SCMR 1917; PLD 1969 Lah. 24; Messrs Kohi Noor Textile's case PLD 1974 SC 284 = 1974 PTD 239; Elahi Cotton Mills Ltd.'s case PLD 1997 SC 82 = 1997 PTD 1555; Zakaryia H.A. Sattar Bilwani's case 2003 PTD 52; Messrs Essential Industries's case PLD 1977 Lah. 1168 and Mian Hameed Ahmad's case PLD 1979 Lah. 703 ref.

(b) Vested right---

----Vested right---If an exemption from payment on excise duty or any other tax has been granted for a specified period on certain conditions, person who fulfils those conditions acquires a vested right.

Fazal Din and Sons's case 2009 SCMR 973 = 2009 PTD 1016 and Army Welfare Sugar Mills rel.

(c) Interpretation of statutes---

----Retrospective operation---Scope---Enactment which prejudicially affected vested right or a legality of past transactions or impaired contract cannot be given retrospective operation.

Al-Samrez Enterprises 1986 SCMR 1917 rel.

(d) Income Tax---

----Exemption---Principles---Person who acts on assurance of the right to exemption is exposed to unforeseen loss in business transactions by the sudden withdrawl of the exemption after he had made legal commitments and the same would be an inequitable and unjust action for him.

Al-Samrez Enterprises 1986 SCMR 1917 rel.

(e) Income Tax---

----Right created in favour of person and a subsequent amendment in the original scheme cannot be given retrospective effect by a subsequent act of the department to destroy the said right.

(f) Interpretation of statutes---

----Creation of vested right---Scope---Right of appeal existing on the day on which proceedings on lis commenced is a vested right and such right is to be governed by law prevailing on that day and not by law prevailing on the day of its decision---Such vested right can be taken away only by the subsequent enactment if it so provided expressively.

PLD 1969 Lah. 24 rel.

Bashir Ahmad Kalwar, D.R. for Appellant.

Waqas Khalid for Respondent.

Date of hearing: 14th October, 2011.

2012 P T D (Trib.) 31

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

Messrs NAVEED ENTERPRISES, FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.960/LB of 2009, decided on 6th April, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 3, 7, 11 & 46---Determination of tax liability---Disallowance of input tax---Assistant Collector, through a show-cause notice, confronted the registered person/assessee with disallowance of input tax---Proposed disallowance included input tax on purchases made from various supplies apart from an amount on packing material being in excess of 20% value of the exported goods/confectionery items---Contention of Representative of assessee was that disallowance of input tax on the packing material in excess of 20% value of the exports on the basis of an agreement between the department and Confectioners' Association was not justified because said agreement did not have the force of law---Validity---Mere minutes of meetings between the Association and the Revenue were not enough to charge the existing tax regime fully supported by provisions of S.3(1) of the Sales Tax Act, 1990---Minutes of the meeting between the revenue and the Association of a class of taxpayers was neither a superior nor a subordinate legislation---Agreement between the department and Confectioners' Association, did not have binding force, because it had not been enacted as a piece of legislation, and did not have the force of law---Appeal of the registered person was accepted with direction that the claim of input tax on packing material used in the manufacturing and export of products of the registered person, be allowed.

2005 PTD 72; 2011 PTD (Trib.) 20 and 2010 PTD (Trib.) 2126 rel.

Khubaib Ahmed for Appellant.

None for Respondent.

Date of hearing: 6th April, 2011.

2012 P T D (Trib.) 34

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs MEHR DASTGIR LEATHER AND FOOTWEAR INDUSTRIES, MULTAN

Versus

COLLECTOR OF SALES TAX, MULTAN

S.T.A. No.239/LB of 2009, decided on 5th August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10(4), 3, 7 & 73---Sales Tax Refund Rules, 2002, Rr. 4, 8(1) & 9---Refund of input tax objections---Limitation---Taxpayer contended that adjudicating authority had issued show-cause notice after two years but as per R.8 (1) of Refund Rules, 2002, he was required to raise objection in respect of claim within 14 days; and show-cause notice was time-barred as the department had failed to follow the prescribed rules as the principles of law are that if the law provides certain things to be done in a particular way, it is to be done in the same way or not at all and if anything done contrary to the commandment of law, that would have no legal effect---Validity---Department had failed to confront the discrepancies within prescribed time limit as provided by the Rules under which there would be no escape---Return had been filed within time and the input tax claimed on the invoices was fully claimed under the law after which no show-cause notice was issued as required by the law and rules on the subject---Department had issued show-cause notice after lapse of two years which itself was contradictory to the Audit Report---Department's act for such a belated notice was coram non judice and could find no legal support---Show-cause notice was invalid and consequently all the proceedings taken thereof had no legal effect as against the rights of the taxpayer---Orders of the Officers below were set aside and the appeal filed by the taxpayer was allowed by the Appellate Tribunal.

2004 SCMR 838 rel.

Shoaib Ahmad Sh. for Appellant.

Adnan Ahmad Khan, D.R. for Respondent.

Date of hearing: 5th August, 2010.

2012 P T D (Trib.) 38

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson and Sohail Afzal, Accountant Member

COLLECTOR OF SALES TAX AND FEDERAL EXCISE, FAISALABAD

Versus

Messrs AMTEX (PVT.) LIMITED, FAISALABAD

S.T.A. No.1232/LB of 2009, decided on 19th October, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 10, 66, 67 & 46---Refund claim---Rejection of refund claim---Refund claim filed by the registered person for relevant period was rejected by Assistant Collector on account of export of goods in less weight---Appeal filed by registered person against order passed by Assistant Collector having been accepted by the Commissioner (Appeals), Department had filed appeal before Appellate Tribunal---Departmental Representative could not rebut the findings of Collector (Appeals), with any tangible material evidence---Contentions of Departmental Representative had no force---Findings of the Collector (Appeals) were maintained and departmental appeal was dismissed, in circumstances.

2005 SCMR 492 and 2011 PTD 155 ref.

Atif Bashir, D.R. for Appellant.

Khubaib Ahmed for Respondent.

Date of hearing: 18th June, 2011.

2012 P T D (Trib.) 40

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

Messrs INTERLOOP (PVT.) LTD. KHURRIANWALA, FAISALABAD

Versus

COLLECTOR, F.S.T., R.T.O., FAISALABAD

S.T.A. No.411/LB of 2009, decided on 9th August, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 11(2), 33, 45 & 46---Sales Tax Rules, 2006, R.37---Refund claim---Registered person filed claim of refund for the amount of Rs.35,83,056 against zero-rated supply---Adjudicating Officer/Assistant Collector rejected claim of refund to the extent of Rs.13,79,046---Collector (Appeals), on appeal, vide impugned order further reduced the amount on inadmissible refund to Rs.9,13,058---Validity---Under provisions of S.45 of Sales Tax Act, 1990, Assistant Collector who passed the order-in-original, did not have the jurisdiction to adjudicate cases involving refund of more than one million rupees---Order-in-original having been passed in violation of provisions of S.45 of Sales Tax Act, 1990 being without lawful authority, was not sustainable and stood vacated.

2011 PTD (Trib.) 923 and 2011 PTD (Trib.) 467 ref.

Khubaib Ahmad for Appellant.

Sajid Taslim, D.R. for Respondent.

Date of hearing: 9th June, 2011.

2012 P T D (Trib.) 73

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Judicial Member and Shahnaz Raffique, Accountant Member

Messrs MULTAN ENTERPRISES (PVT.) LTD., MULTAN

Versus

SUPERINTENDENT, DIRECTORATE OF INTELLIGENCE AND INVESTIGATION, F.B.R., MULTAN and others

S.T.A. No.145/LB of 2010, decided on 6th January, 2011.

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

----S. 3---Qanun-e-Shahadat (10 of 1984) Art.1(2)---Scope of tax---Third party record---Levy of sales tax by alleging evasion of sales tax by concealment of taxable supplies on the basis of third party record---Taxpayer contended that case of Revenue was based on alleged record retrieved/seized from third party, who was allegedly one of the distributors of the taxpayer, which was never produced before either the adjudicating officer or the First Appellate forum and the taxpayer could not be taxed on the basis of record of the third party specially in circumstances when no one had appeared to prove such record and its relationship with the taxpayer---Validity---Admittedly, raid was conducted on the third party without a warrant---Revenue failed to point out any provision in law under which circumstances such raid could be equated to that of another party---Such documents could not be used even against third party itself then it would not be logical and would be devoid of any common sense as to how such documents could be used against a third party which was neither executants nor author of those documents---None of the documents seized from the third party could be used against the taxpayer.

2005 SCMR 1166; 2007 PTD 1351; 2004 PTD 1731 and 2007 PTD 2356 rel.

(b) Sales Tax---

----Documents procured through illegal searches and seizures could not be used for burdening the taxpayers with any liabilities.

2005 SCMR 1166 and 2007 PTD 1351 rel.

(c) Sales Tax---

----Record and documents which have been seized through an illegal raid and search cannot be used in any manner whatsoever.

2004 PTD 1731 and 2007 PTD 2356 rel.

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

----S. 3---Qanun-e-Shahadat (10 of 1984) Art.59---Scope of tax---Search and seizure---Proof of documents---Documents which have been procured during the raid, search and seizure have to be proved in accordance with law i.e. Qanun-e-Shahadat, 1984---Either the author of the document or the person who is well aware of the documents and has been associated with execution or preparation of these documents has to appear before the Court or adjudicating forum to prove the same.

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

----S. 3---Qanun-e-Shahadat (10 of 1984), Art.1(2)---Scope of tax---Raid, search and seizure---Proof of documents procured from third party---Adjudicating officer had taken the allegations levelled in the audit report and the show cause as gospel truth without any manner asking the department to prove the allegation levelled in the same---Adjudicating Officer had not even asked the department to present the documents seized from third party and to prove the same in accordance with law---Department had not even proved as to how the documents seized from the third party were linked to the taxpayer which was a different and distinct limited company---First Appellate Authority also without calling the Revenue to produce the documents or prove the same believed that whatever had been stated in the documents was true---Revenue had even failed to produce the figures which were calculated from the said documents---Revenue had built up the case on presumption, conjectures, surmises and was on the basis of documents which were not proved and had no link whatsoever with the taxpayer and were part of internal record of the third party---Even no one appeared from the third party to state the connection between these documents and the taxpayer---Revenue miserably failed to prove charge against the taxpayer which had no legs to stand upon.

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

----S.7---Determination of tax liability---Minor errors in invoices---Charge of inadmissible adjustment of input tax---Validity---Despite specific query, whether there was any particular case or invoices which was not in accordance with and against the law whereby the adjustment of input tax had been denied to the taxpayer, revenue failed to provide any instance of input tax which had been claimed in violation of the provisions of law---Input adjustment could not be denied after lapse of almost three years on the basis of some minor errors in the invoices which could be cured at any stage---No substance had been found in the allegation levelled by the revenue and revenue had failed to prove this charge.

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

----S. 3---Income Tax Ordinance (XLIX of 2001), S.114---Scope of tax---Non-payment of sales tax on other supplies (wastage)---Gross receipts shown in the Income Tax Returns as "other revenue" was treated as revenue on account of sale of wastage and was taxed accordingly---Taxpayer contended that receipts which related to other than for supply of goods or wastage and were not received in lieu of any taxable supplies, were beyond the scope of Sales Tax Act, 1990; that revenue failed to provide as to what quantity of wastage had been sold and what was its value and how much tax was payable thereon and that the amount taken from the Income Tax Return had been taxed by applying 15% tax without mentioning as to what kind of supplies covered said amount and no documentary evidence in that regard had been provided---Validity---Appellate Tribunal repelled the allegations raised by the revenue---Nothing was available on record or in the order wherefrom it could be shown that such amount had been received as consideration for disposal of wastage or any other assets of the taxpayer---Revenue had imposed such allegation only to drag the assessee into another chain of litigation---Allegation of the revenue was without any solid proof and had no legs to stand upon which was cancelled by the Appellate Tribunal.

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

----S. 3---Scope of tax---Procedural errors---Non production of record, late filing/non filing of sales tax returns and non submission of invoice summary statement---Such allegations were of minor nature and only relate to procedural errors and imposition of penalties---Revenue had levelled such allegations as a matter of routine work and without any basis or any application of mind---Revenue could not prove main allegations raised in the such show cause, so such objection had no sanctity in the eye of law and were cancelled.

Shoaib Ahmad Sheikh for Appellant

Tahir Tanveer, D.R. for Respondent.

Date of hearing: 23th December, 2010.

2012 P T D (Trib.) 82

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shahin, Judicial Member and Sohail Afzal, Accountant Member

Messrs CHEEMA COTTON FACTORY, BUREWALA

Versus

C.I.R. (LEGAL DIVISION) R.T.O., MULTAN

S.T.A. No.1635/LB of 2009, decided on 27th August, 2011.

Sales Tax Act (VII of 1990)---

----Ss.21, 2(46), 3, 6, 23, 26, 33 & 34---Special Procedure for Ginning Industry Rules, 1996, Rr.5(5) & 6(5)---De-registration, blacklisting and suspension of registration---Recovery of sales tax along with additional tax on the ground that registered person had supplied bales of cotton lint to different defaulting units---Registered person contended that supply of cotton lint was made in the years 2002/2003 whereas said units were blacklisted in 2004 and principal amount of tax on supplies had already been paid by the buyers---First Appellate Authority found that ginners were required not to deliver the cotton lint to blacklisted spinners unless they had paid the sales tax outstanding against them; however, directed to exclude the amount of principal tax and additional tax, if any, already paid by the spinners or registered person from the adjudged and recoverable amounts of tax along with additional tax and penalty---Registered person further contended that 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 that order passed by the Collector directing ginners not to deliver or supply ginned goods to defaulter spinning units; that ginner was liable only if supply was made after the date of receipt of such order of Collector; that if a ginning unit after receipt of such order made delivery or supply of ginned cotton to such spinning units or exporters without prior payment of the amount of sales tax, such ginner shall be liable to pay sales tax, additional tax, and penalty that department had not supplied such order to the registered person and the registered person was not aware of blacklisting at the time of making supplies; that service must be made through personal service and registered person was not personally served and their service through substituted means was defective---Validity---Registered person was charged without adherence to the procedure laid down by law and First Appellate Authority had confirmed the action of Adjudication Officer without appreciating the facts of the case as well as the contentions raised before him---Proviso to S.21(4) of the Sales Tax Act, 1990 which authorized the Collector to blacklist the units or suspend their registration was added w.e.f. 1-7-2003, it could not be applied retrospectively---Order regarding blacklisting of the alleged parties was also not in the knowledge of the registered person/appellant before making supplies---Alleged units, on the basis of which the registered person was charged, had paid the principal amount of sales tax---No justification existed for imposition of additional tax or penalties as the Department had failed to prove wilful default on the part of registered person/ appellant---Action of adjudication Officer was not sustainable and First Appellate Authority had erred in law to maintain the same---Show cause as well as the order-in-original was set aside by the Appellate Tribunal and order was annulled meaning thereby that the tax demand created was deleted.

2008 PTD 416; 2010 PTD 1112; 2005 PTD 2442; 2006 PLD 84(sic); 2006 CLD 836; 2000 CLC 530; 2006 YLR 526; 1993 MLD 657; 2009 PTD 330; 2008 PTD 1864; 2006 SCMR 626 (SC); 2008 PTD 2025; 2009 PTD (Trib.) 2074 and 2009 PTD (Trib.) 876 ref.

Asad Ahmed Ghani for Applicant.

Mrs. Fouzia Adil D.R. for Respondent.

Date of hearing: 27th August, 2011.

2012 P T D (Trib.) 93

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and M.B. Tahir, Accountant Member

ADDITIONAL DIRECTOR INTELLIGENCE AND INVESTIGATION, F.B.R., LAHORE

Versus

Messrs PRIME PVC FACTORY, MULTAN

S.T.A. No.307/LB of 2011, decided on 13th October, 2011.

Sales Tax Act (VII of 1990)---

----Ss.2(37), 3, 21, 36 & 47---Sales Tax General Order No.03 of 2004 dated 12-6-2004, R.39(c)---Tax fraud---Taxable supplies without getting registration---Tax period 17-3-2004 to 10-7-2005---Registered person was de-registered with the direction that they will be liable to get themselves registered under the Sales Tax Act, 1990 when their turnover exceeded Rs.5 million---Later on, Revenue on the basis of ban entries, taking them as sales, charged the taxpayer with non-payment of due sales tax inter alia other defaults under various provisions of Sales Tax Act, 1990 by alleging that the taxpayer was involved in tax fraud as they knowingly, fraudulently and dishonestly did not get them registered and kept on working without sales tax registration even the fact that their actual value of supplies was much higher than the threshold limit---Taxpayer contended that revenue passed the order without conducting audit of the business; that bank entries could not be treated as taxable supplies; that invoking of S.36(1) of the Sales Tax Act, 1990 on the day when such show cause was issued i.e. 8-7-2010 had become barred by time; that department de-registered the taxpayer on 13-12-2004 as the sales were less than five million threshold and was not liable to pay sales tax for the period 17-3-2004 to 30-6-2004; that sales as per the adjudicating authority keeping in view the bank accounts from 1-7-2004 to 30-6-2005 were at Rs.12,579,679 while for the period 02-2004 to 3-6-2005 at Rs.10,929,687; that period was hit by limitation on 30-6-2010; that under R.39(c) of the Sales Tax General Order No.03 of the Sales Tax Act, 1990, the staff of Directorate General of Intelligence and Investigation shall not undertake any audit of any registered person except under specific written authorization from the Central Board of Revenue and that in the present case Revenue had not been authorized by the Board to conduct the audit, thus, the whole exercise was patently illegal and all subsequent proceedings on the basis of illegal audit were also void in the eyes of law, without any authority and were void ab intio---Validity---Neither the department had established with any solid evidence that the taxpayer was carrying on any business, nor any audit had been conducted regarding the business and tax had been imposed only on the basis of 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 withdrawal from the bank account to be a purchase---First Appellate Authority had rightly found that the period involved was hit by limitation, but no explanation in this regard had been given by the adjudicating authority---Appeal filed by the Department was dismissed by the Appellate Tribunal.

2010 PTD 1376 and 2004 PTD 868 ref.

Messrs Maria Enterprises, Multan v. Collector of Customs, Sales Tax and F. Excise (Appeals), Multan S.T.A. No.61/LB/2007 and dated 10-7-2009; Messrs West Pakistan Tank Terminal (Pvt.) Ltd. v. The Collector Appraisement Customs Karachi C.P. No.1098 of 2006 dated 21-2-2007; 2004 PTD 868; 2010 PTD 1376; 2008 PTD 981; 2008 PTD 1973 and S.T.A. No.706/LB of 2009 rel.

Bashir Ahmad Kalwar, D.R. for Appellant.

Muddasar for Respondent.

Date of hearing: 13th October, 2011.

2012 P T D (Trib.) 105

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and M.B. Tahir, Accountant Member

C.I.R., ZONE-II, R.T.O., MULTAN

Versus

Messrs PRIME PVC FACTORY, MULTAN

S.T.A. No.606/LB of 2011, decided on 13th October, 2011.

Federal Excise Act, (VII of 2005)---

----Ss.3A & 33---Sales Tax Act (VII of 1990), S.36---Sales Tax General Order No.03 of 2004 dated 12-6-2004, R.39(c)---Appellate Tribunal Inland Revenue Rules, 2010, Rr.11 & 12---S.R.O. No.555(I)/1996 dated 1-7-1996---Special excise duty---Tax period 17-7-2005 to 17-12-2008---Deletion of special excise duty levied under S.3A of the Federal Excise Duty Act, 2005 @ 1% and penalty by observing that excise duty should be levied under S.3 only then, in addition to that special excise duty could be levied that there was no justification to levy Special Excise Duty @ 1 in the absence of Duty leviable under S.3 of the Federal Excise Duty Act, 2005; that S.3A of the Federal Excise Duty Act, 2005 was made operative w.e.f. 1-7-2007 but special duty was levied for the period 17-7-2005 to 17-12-2008 which was wrong; that power prescribed in R.39(c) of the STGO of the Sales Tax Act, 1990 for conducting the audit of any taxpayer by the Directorate of intelligence and investigation provided that the staff of Directorate General of Intelligence and Investigation shall not undertake any audit of any registered person except under specific written authorization from the Central Board of Revenue in each individual case and that in the present case Revenue Officer had not been authorized by the Board to conduct the audit thus, whole exercise was patently illegal and all subsequent proceedings on the basis of illegal audit were also void in the eyes of law, without any authority and void ab intio---Contention of Revenue was that in the case of tax fraud the law did not impose any time constraint or the past period for which the record of an accused may be scrutinized---Registered person contended that department was not authorized by the Board to conduct the audit thus the whole exercise was patently illegal and subsequent proceeding on the basis of illegal audit were also void in the eyes of law without any authority; that Deputy Commissioner of Inland Revenue had been authorized to adjudicate the cases involving assessment of sales tax, charging of additional tax and imposition of penalty provided that the amount of tax involved did not exceed Rs.1,000,000 whereas Deputy Commissioner adjudicated the case involving sales tax Rs.33,222,896 which was without jurisdiction; that department had accepted the findings of First Appellate Authority to the extent that no principal amount of sales tax was recoverable and only special excise duty and penalty was recoverable; and that department had admitted that there was no taxable supply hence not liable to be registered under the Sales Tax Act, 1990 thus, demand of Special Excise duty and penalty for non maintenance of record was not justified---Validity---No interference was warranted by the Appellate Tribunal in the order of First Appellate Authority as the special excise duty and penalty both had been deleted placing reliance on the earlier decision of the Appellate Tribunal---First Appellate Authority had discussed all the factual as well as legal issues in detail and had rightly allowed the relief---Appeal of the department was dismissed.

S.T.A. No.706/LB/2009 dated 4-11-2010; 2004 PTD 868; 2010 PTD 1376; 2004 PTD 868; (IITC 26 (Sindh); 1996 PTD (Trib.) 388 and 2011 PTD (Trib.) 1943 rel.

Bashir Ahmad Kalwar, D.R. for Appellant.

Muddassar for Respondent.

Date of hearing: 13th October, 2011.

2012 P T D (Trib.) 113

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairman and Tabana Sajjad Naseer, Accountant Member

Messrs COTTON ARTS (PVT.) LIMITED, FAISALABAD

Versus

COLLECTOR OF SALES TAX AND FEDERAL EXCISE (R.T.O.), FAISALABAD

S.T.A. No.2259/LB of 2009, decided on 29th March, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 2(14), 4, 7, 8, 10, 11 & 46---Sales Tax Rules, 2006, R.37---Refund claim---Rejection of refund claim---Assessee filed refund claim of input tax against Zero-rated supply pertaining to March, 2005---Said refund claim having been rejected, both by Adjudicating Officer and Collector (Appeals) under "STARR" system, assessee had filed appeal before Appellate Tribunal---No concept of "STARR" existed in the Sales Tax Refund Rules, 2002, but term "STARR" was introduced for the first time in the Rules, 2004 which came into force on first July, 2004---Date of application of provision regarding refund in Rules, 2004 and 2005, was not notified by Federal Board of Revenue till the Sales Tax Refund Rules, 2002 were rescinded through notification dated 5-6-2006 applicable w.e.f. 1-7-2005---Since, the provisions of Chapter-V, regarding refund in Sales Tax Refund Rules, 2004 and the Rules, 2005, had not been enforced, and Sales Tax Refund Rules, 2002 remained applicable upto 30-6-2006, rejection of refund claim filed against invoices issued prior to 1-7-2006 on the objections raised by the "STARR" was found to be illegal and without any lawful jurisdiction---Term "STARR" had no legal backing in the Sales Tax Act, 1990, nor it was supported by any legislative enactment---While exercise carried out by the Sales Tax Department for rejection of bona fide refund claim merely relying upon the objections raised by "STARR", without obtaining independent evidence against the charges whatsoever raised on invoices of their registered suppliers, was illegal---Impugned show-cause notice and impugned orders were set aside, in circumstances.

S.T.A. No.191/LB of 2008, dated 9-6-2006; 2010 PTD (Trib.) 1636; 2010 PTD (Trib.) 2128 and Messrs Niagara Mills (Pvt.) Ltd. v. Collector of Sales Tax, Faisalabad 2011 PTD (Trib.) 483 ref.

Khubaib Ahmed for Appellant.

Syed Jawad Ali Shah, D.R. for Respondent.

Date of hearing: 29th March, 2011.

2012 P T D (Trib.) 119

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member

MUHAMMAD ASHFAQ

Versus

C.I.R., R.T.O., LAHORE

I.T.A. No.442/LB of 2011, decided on 21st October, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111, 114, 121, 122, 127 & 131---Unexplained income or assets---Best judgment assessment---Ex parte order---Department received information that the taxpayer had purchased property having value of Rs.10,00,000---Since the taxpayer allegedly had not filed return of income, notices were issued to the taxpayer for furnishing of return of income tax---Notices issued by department having remained uncomplied with, Taxation Officer proceeded ex parte against the person and passed best judgment assessment under S.121 of Income Tax Ordinance, 2001---Investment made on purchase of property in question was treated as made through unexplained sources and additions were made under S.111(1)(b) of Income Tax Ordinance, 2001---Commissioner (Appeals) on appeal vide impugned order remanded the assessment to the Taxation Officer---Validity---Commissioner (Appeals) had failed to apply his judicious and conscious mind while remanding the case of taxpayer---Taxation Officer passed ex parte order under Ss.121/111 of Income Tax Ordinance, 2001, whereas Commissioner (Appeals) treated the same as passed under Ss.122C/111, when provisions of S.122C were not even on the Statute Book at that time---Ex parte assessment was passed by Taxation Officer before the close of financial year 2008 for which return of income was required to be filed on or before 30-10-2008 it seemed that Taxation Officer passed the order in haste and hurry---No notice under S.116 of Income Tax Ordinance, 2001 was ever issued by the Taxation Officer requiring the taxpayer to file wealth statement or wealth reconciliation to ascertain as to whether the taxpayer had sources to invest in the purchase of property---Taxation Officer had failed to point out in the assessment order as to when the investment was made by the taxpayer---Order passed by the Taxation Officer under Ss.121/111 of Income Tax Ordinance, 2001, was cancelled and order passed by Commissioner (Appeals) was vacated, in circumstances.

Aurangzeb for Appellant.

Dr. Shazia Gul, D.R. for Respondent.

Date of hearing: 21st October, 2011.

2012 P T D (Trib.) 122

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member

COMMISSIONER OF INLAND REVENUE, R.T.O.-I, LAHORE

Versus

Messrs NAM INTERNATIONAL (PVT.) LTD., LAHORE

I.T.As. Nos.1151/LB and 1152/LB of 2011, decided on 19th October, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161 & 131---Failure to pay tax collected or deducted---Taxation Officer repeatedly asked the taxpayer to furnish party-wise details---On not furnishing said details, the Taxation Officer proceeded to hold the taxpayer as personally liable under S.161 of Income Tax Ordinance, 2001---Without identifying names and addresses of the parties or persons from whom and how much tax was to be deducted, provisions of S.161 of Income Tax Ordinance, 2001 could not be invoked---Taxation Officer could not appreciate that the tax referred to be deducted under S.161 of the Income Tax Ordinance, 2001 had to be of some identified taxpayer/person and a taxpayer could be declared personally liable only after establishing that he was a withholding agent, who failed to withhold the tax from transaction, liable to such tax---Taxation Officer had misunderstood the spirit of S.161 of the Income Tax Ordinance, 2001, as he himself had observed in his order under S.161 that proceedings were initiated to ascertain the compliance level; he could only see whether withholdings, as per return and statutory statement, was made or not and that any transaction, liable to withholding, had not escaped taxation---No transaction could be held to have escaped deduction under S.161 of Income Tax Ordinance, 2001, unless the taxpayer was a withholding agent that a particular transaction was liable to deduction/withholding and that a specified tax of a specific person was to be withheld, who could take credit of the tax recoverable under S.161 of Income Tax Ordinance, 2001---Commissioner (Appeals) had rightly held that action of the Taxation Officer, was not sustainable in the eyes of law, in circumstances.

Naeem Hassan D.R. for Appellant.

None for Respondent.

Date of hearing: 19th October, 2011.

2012 P T D (Trib.) 126

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Shahnaz Rafique, Accountant Member

Messrs MEHAR DASTGIR LEATHER AND FOOTWEAR INDUSTRIES, MULTAN

Versus

COLLECTOR OF CUSTOMS SALES TAX AND FEDERAL EXCISE and 3 others

S.T.A. No.1025/LB of 2009, decided on 2nd November, 2010.

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

----Rr.8(1), 4 & 9---Sales Tax Act (VII of 1990), Ss.10, 11(2), 3, 7, 8(1), 73 & 33(1)(c)---Action on inadmissible refunds---Limitation---Taxpayer contended that show-cause notice issued was ab initio void and illegal as that was issued after the stipulated period in the statute; that sales tax return was furnished within time and input tax was claimed under the law and to that extent, show-cause notice should have been issued within 14 days whereas it was issued after lapse of three years which was patently barred by time and that issuance of such belated notice was coram non judice which did not have any legal sanctity in the eye of law and certainly lost its existence---Validity---If the show-cause notice was void, ab initio, illegal and time barred then all the proceedings initiated by the authorities against the registered person were futile exercise and have no legal consequences in the eye of law---Contentions of the taxpayer certainly carried much weight---Appellate Tribunal accepted the appeal, orders of authorities were vacated and the Deputy Collector (Refund) was directed to sanction refund in accordance with law.

S.T.A. No.1530/LB of 2009 dated 11-6-2010; S.T.A. No.704/LB of 2009 dated 30-6-2010 and S.T.A. No.239/LB/2009 dated 5-8-2010 rel.

(b) Administration of justice---

----If the law requires to do certain things as per the statute book that should be followed in its letter and spirit because that has been prepared for awareness of the court proceedings for the rival parties---Action of the officer which is contradictory or has been done out of the way to cross the rules and regulation does not have any legal support.

Shoaib Ahmed Sheikh for Appellant.

Dr. Sheryar, D.R. for Respondents.

Date of hearing: 28th October, 2010.

2012 P T D (Trib.) 144

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs HABIB QATAR INTERNATIONAL EXCHANGE PAK (PVT.) LTD., KARACHI

Versus

COLLECTOR OF CUSTOMS SALES TAX AND FEDERAL EXCISE (APPEAL), KARACHI

F.E. No.5/K of 2010, decided on 31st March, 2011.

Federal Excise Act (VII of 2005)---

----Ss.3(1)(d), 3(5)(c), 2(23), 2(17), 4, 14, 16, 19 & First Sched, S.No.9---Federal Excise Rules, 2005, R.40B---S.R.O.656(I)/2007 dated 29-6-2007---Excise duties specified in the First Schedule to be levied---Period 1st July 2006 to 30th June 2007---Services abroad---Excise duty had been charged for the reason that the services rendered came under the provisions of Federal Excise Duty which had not been paid---Taxpayer contended that during the said period there was no Federal Excise Duty and such services had not been generated in Pakistan as the remittances or the commission was received in USA or Canada and no transaction took place in Pakistan and subsections (1)(d) of S.3 of the Federal Excise Act was applicable at that time, according to which the duties specified in First Schedule to be levied were "regarding the services, provided or rendered in Pakistan"; and subsequently through Finance Act, 2008, S.3(1)(d) of the Sales Tax Act, 1990 had been substituted including the services originated outside but rendered in Pakistan---Validity---Held, there was no justification for levy of Federal Excise Duty---First Appellate Authority had rejected the version of taxpayer with the reason that the law provided that the kind of services provided by the taxpayer were subject to Federal Excise Duty and similarly placed persons were paying Federal Excise Duty on the same type of services provided by them---Such contention of First Appellate Authority had been controverted by the taxpayer with contention that none of such company was paying Federal Excise Duty---Observation by First Appellate Authority in respect of retrospective applicability of the remedial/curative legislation was not justified as substitution in clause (d) taking the "services provided in Pakistan including the services originated outside but rendered in Pakistan" had been made through Finance Act, 2008 which could in no way be made applicable to the case of the taxpayer which related to period of 1st July, 2006 to 30-7-2007---Order of First Appellate Authority was vacated and order-in-original was cancelled by the Appellate Tribunal and appeal filed by the taxpayer was accepted.

Muhammad Aleem for Appellant.

None for Respondent.

Date of hearing: 31st March, 2011.

2012 P T D (Trib.) 153

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

C.I.R., ZONE-I, R.T.O., KARACHI

Versus

Messrs CENTURY -- 21 SPORTSWEAR, KARACHI

S.T.As. Nos.57/KB and 58/KB of 2011, decided on 12th July, 2011.

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

----Ss.24, 36(1), 25, 33 & 73---Retention of record and documents for six years---Tax period July 2004, December 2005 & February 2006---Refund amount already sanctioned was held to be recoverable along with additional tax and default surcharge on the ground that no response was given to the notice issued and requisite record was not submitted---Taxpayer contended that time limit for retaining Sales Tax record had been mentioned in the law at the time of proceedings under S.24 of the Sales Tax Act, 1990 was five years, whereas the adjudicating authority had served notice for requisition of record which pertained to beyond the prescribed time limit and whole of the proceedings were against the law and adjudicating authority without any justification had found that under S.24 of the Sales Tax Act, 1990 registered person was required to retain the record till the finalization of the proceedings but this provision of law was inserted vide Finance Act, 2010 and it could not be applied from the period 2002 to 2005---Order passed by the adjudicating authority was set aside by the First Appellate Authority---Department contended that First Appellate Authority without any justification had found that the obligation of taxpayer to retain the record was for the period of five years only whereas under S.24 of the Sales Tax Act, 1990 the period prescribed was six years or till such period the assessment proceedings were finalized---Validity---Adjudicating authority passed orders for recovery of whole amount of tax along with penalty just on the mere assumption that refund was erroneously paid since no record was produced---Adjudicating authority had not considered the fact that the refund claims pertained to the period of more than last five years and was hit by time limitation as well as the show-cause notice under S.36(1) of the Sales Tax Act, 1990 had been issued after five years i.e. prior to June 2005 and three years in two cases for the period in between July 2005 and June 2007---Registered person could not be legally bound to retain the record in a situation where they were legally not obliged/bound---Provision for completion of proceedings relied by the adjudicating authority was also not relevant due to the fact that amendment in law did not relate to the said period---Refunds were made after computer verification and question of its non verification did not arise as all the record should be available in computer data base which was verifiable as and when required---Section 73 of the Sales Tax Act, 1990 related to the compliance of procedure for payment of more than Rs.50,000 through specified procedure, therefore upon mere assumption that compliance of S.73 of the Sales Tax Act, 1990 was not made, recovery demand of entire amount of tax would tantamount to double taxation---Orders of First Appellate Authority were upheld and appeals filed by the department were dismissed by the Appellate Tribunal.

2008 PTD 60 and 2009 PTD (Trib.) 1263 rel.

(b) Sales Tax---

----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 was to be deemed to be directory---Where a public functionary was empowered to create a liability against a citizen only within prescribed time, it was mandatory.

2008 PTD 60 and 2009 PTD (Trib.) 1263 rel.

Zaffar Akhtar, D.R. for Appellant.

Arshad Shahzad for Respondent.

Date of hearing: 10th June, 2011.

2012 P T D (Trib.) 162

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs KRUDDSON (PVT.) LTD., KARACHI

Versus

COLLECTOR SALES TAX (ENFORCEMENT), KARACHI

S.T.A. No.890/KB of 2009, decided on 9th March, 2011.

Sales Tax Act (VII of 1990)---

----Ss.45-A, 2(46), 2(37), 3, 6, 11, 22, 23, 26, 33, 36(1), 37-A(4), 37-B & 37-C (1) (a) (c), 45(3), 45-A, 40 & 40A---S.R.O. 1349(I)/1999, dated 17-12-1999---Power of the Board and Commissioner to call for records----Re-opening of First Appellate Authority's order by the Federal Board of Revenue---Payment under Amnesty Scheme---Claim of refund of such payments in terms of observation of First Appellate Authority---Instead of issuing refund, order-in-original already passed was reopened under S.45-A of the Sales Tax Act, 1990 at the back of taxpayer without affording him reasonable opportunity of being heard and without issuing any notice---Validity---Federal Board of Revenue re-opened the order-in-appeal in exercise of powers conferred under S.45-A of the Sales Tax Act, 1990 without considering the fact that under S.45-A of the Sales Tax Act, 1990, the Federal Board of Revenue may of its own motion, call for and examine the record of any 'departmental proceedings' for the purpose of satisfying itself as to the legality or propriety of any decision or order passed therein by an officer of Sales Tax, it may pass such order as it may think fit---In the present case, it had not been considered that in subsection (2) of S.45-A of the Sales Tax Act, 1990, it had specifically been mentioned that no proceedings under said section shall be initiated in a case where an appeal under S.45-B or S.46 of the Sales Tax Act, 1990 was pending---Appeal had already been decided by the First Appellate Authority---Federal Board of Revenue under S.45-A of the Sales Tax Act, 1990 could only call for and examine the record and pass an order regarding the departmental proceedings pending before the officer of sales tax which in no way include the appellate proceedings---Order-in-original was passed on 3-10-2005, which was set aside by the High Court with certain directions and subsequently the second order-in-original was passed on 6-10-2006---No concept of recalling of an order by the Federal Board of Revenue of a subordinate authority existed specifically in the circumstances where the record was never called for and the affected party was issued a notice regarding reopening---Order issued by the Federal Board of Revenue, was not justified and was totally illegal and void and was cancelled by the Appellate Tribunal---Appeal of the taxpayer was accepted.

2004 PTD 714 rel.

Mushtaq Kazmi for Appellant.

Zafar Akhtar, D.R. for Respondent.

Date of hearing: 9th March, 2011.

2012 P T D (Trib.) 170

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

RASHID MEHMOOD

Versus

C.I.R. (LEGAL DIVISION) R.T.O., RAWALPINDI

I.T.A. No.383/IB of 2011, decided on 10th August, 2011.

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

----Ss.116(3), 111(1)(b), 114(6) & 122---Wrong wealth statement---Filing of revised wealth statement---Refusal to accept such statement---First Appellate Authority found that revision of wealth statement could not be accepted merely for the reason that the taxpayer had revised the said statement; that the tax payer had to justify and explain the revision of statement with proper documentary evidence and observed that taxpayer had revised the wealth statement without any proper evidence, just to escape the treatment under S.122(1) read with S.122(5) of the Income Tax Ordinance, 2001---Taxpayer had contended that Assessing Officer had to accept the revised statement as it was provided in S.116(3) of the Income Tax Ordinance, 2001 that any omission or discrepancy could be removed through revision of wealth statement but his contention was rejected and addition was made under S.111(1)(b) of the Income Tax Ordinance, 2001---Department pleaded that taxpayer's version by all means was an afterthought and he had failed to offer any explanation for the amount of addition and scope of revision was very limited; revision could only be made for correction of any omission or error; and it could not be revised after pointation of any discrepancy from the department---Validity---Scope of "omission" or "wrong statement" was very wide and all encompassing---If a taxpayer after filing his return discovers that it was not correct and any part of taxable income had been omitted and not included in taxable income or a "wrong statement" including "wrong statement of accounts" had been filed, he was legally entitled to correct such "omission" or "wrong statement"---Contrary to the provisions of Income Tax Ordinance, 1979 the right of revision of return did not abate (during statutory limitation) even after the completion of deemed assessment or amended assessment---Such right continued to remain legally due, even after pointation of any "omission" or "wrong statement" from the department---Law did not stop any taxpayer from revising his return---No bar could be put on the rights of a taxpayer granted to him by the statute---Power of assessment of income conferred upon the tax authorities by law could nevertheless be exercised, in relation to the return so revised by a taxpayer and they were also empowered to declare a return as invalid, if it did not fulfil all legal requirements, but tax authorities could not refuse to accept a revised return, under any circumstances---Action of refusal to accept the revised return was legally not correct---Revised wealth statement filed was taxpayer's entitlement and should have been considered as having been properly filed and addition made under S.111(1)(b) of the Income Tax Ordinance, 2001 was deleted by the Appellate Tribunal.

(2010) 102 Tax 509 (Trib.); 2009 PTD (Trib.) 749; 1998 PTD (Trib.) 13; ITA No.1636 (IB) 1995-96 dated 15-5-1998 and Oxford Dictionary 9th Edition ref.

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

----S.116 (3)---Wealth statement---Wrong statement---Scope----Scope of "omission" or "wrong statement" was very wide and all encompassing---Revised wealth statement was filed by the assessee before the completion of the assessment, it covered the discrepancy appeared to have cropped up on account of inadvertence, there remained no justification for the addition---Taxpayer could legally revise the wealth statement and if any omission was made in the original wealth statement, he had a right to rectify that omission.

Zahid Masood Chatha for Appellant.

Ziaullah Khan, D.R. for Respondent.

Date of hearing: 10th August, 2011.

2012 P T D (Trib.) 176

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member

C.I.R., ZONE-I, R.T.O., KARACHI and others

Versus

Messrs NATASHA L. JATOI, KARACHI and others

M.As. (Cond.) Nos.219/KB to 221/KB of 2011, I.T.As. Nos.718/KB to 720/KB of 2011, decided on 4th August, 2011.

Income Tax Ordinance (XLIX of 2001)---

----S.131(1)(d)---Limitation Act (IX of 1908), S.5---Appeal to Appellate Tribunal---Limitation---Delay of 170 days---Application for condonation of delay on the sole ground agitated by the department, regarding reorganization of Inland Revenue Department whereby structural changes were introduced by the Federal Board of Revenue and an affidavit of Commissioner Inland Revenue was annexed , but he did not state any reason or ground for condonation of delay---Validity---When a party moves the court for condonation of delay, the cause of the delay must be properly explained and the delay also must have been beyond the control of the party---Contents of the affidavit annexed with the application did not show any reason or cause whatsoever, beyond the control of the department in filing the appeal after inordinate delay of 170 days---Was incumbent on the applicant, in order to have benefit of S.5 of Limitation Act, 1908, to explain the delay of every day that lapses beyond the period allowed for filing of appeal---No sufficient cause or plausible reason was given in the application for condoning the delay---Appeals filed at the belated stage stood dismissed, being time barred, by the Appellate Tribunal.

2010 SCMR 1899; 1970 SCMR 558; 1957 SMCR 959; 1981 SCMR 37; 1979 SCMR 45 and 1979 SCMR 191 rel.

Qazi Afzal D.R. for Appellants.

Mazharul Hassan for Respondents.

Date of hearing: 4th August, 2011.

2012 P T D (Trib.) 184

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

C.I.R. (LEGAL), R.T.O., RAWALPINDI

Versus

Messrs EMPIRE HOTEL, MURREE

I.T.A. No.316/IB of 2011, decided on 10th August, 2011.

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

----S. 177(10)---Audit---Provisions of S.177(10) of the Income Tax Ordinance, 2001---Nature---Procedural or substantive legislation---Last line of S.177(10) of the Income Tax Ordinance, 2001 provided that assessment treated to have been made on the basis of return or revised return filed by the taxpayer shall be of no legal effect, provision had charging impact---Said section attacked on the sanctity of the deemed assessment, rather cut roots of deemed assessment---Right accrued to the taxpayer that of deemed assessment and the section snatched its accrued right and affected taxpayer adversely which was the only test to determine fact as to whether any piece of legislation was procedural or substantive---Appellate Tribunal disagreed with the Department that it was a machinery or a procedural legislation.

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

----Ss.121(1)(d),177(10), 114, 120 & 122(9)---Finance (Amendment) Ordinance (XXII of 2009)---Best judgment assessment---Tax year 2006---Audit---Best judgment assessment in the presence of deemed assessment---Validity---Return had been filed---Provisions of S.121(1)(d) of the Income Tax Ordinance, 2001 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 sub-section (4) read with subsections (3) & (6) of S. 120 of the Income Tax Ordinance, 2001 or there was no return 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---Section 177(10) of the Income Tax Ordinance, 2001 was applicable for the tax year 2010 onward and no assessment under S.121 of the Income Tax Ordinance, 2001 could be made where a return was filed under S.114 of the Income Tax Ordinance, 2001, in a case selected for audit, for the tax years prior to tax year 2010---Upholding the application of S.121 of the Income Tax Ordinance, 2001 in the presence of a valid return would amount to two assessments in field simultaneously, one i.e. deemed assessment and Second as ex parte assessment under S.121 of the Income Tax Ordinance, 2001 which was not warranted under the law---Assessment under S.121 of the Income Tax Ordinance, 2001 where return had been filed was legally not sustainable---Proceedings conducted were legally defective and departmental appeal was dismissed.

2010 PTD (Trib.) 2602; 2010 PTD (Trib.) 819; 2010 PTD (Trib.) 1552 and 2010 PTD (Trib.) 2140 rel.

Ziaullah Khan, D.R. for Applicant.

Zahid Masood Chatta for Respondent.

Date of hearing: 10th August, 2011.

2012 P T D (Trib.) 188

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

Messrs PUNJAB COLLEGE OF INFORMATION TECHNOLOGY (PVT.) LTD., LAHORE

Versus

C.I.R., L.T.U., LAHORE

I.T.A. No.430/LB of 2009, decided on 10th October, 2011.

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

----Ss.2(19)(e) & 161---Dividend---Failure to pay tax collected or deducted---Loan---Certain amount was advanced to shareholder by the company---Taxation Officer observed that amount of advance being in the nature of dividend was liable to withholding tax but no evidence regarding deduction of tax was available on record---Taxpayer company was treated as a taxpayer in default---Validity---Amount advanced by the company to its shareholder was disclosed as loan in the statement of accounts and there was no provision in the income tax law which provides for deduction of tax on the amount of loan; it was only by fiction of law that the amount of loan was treated as dividend in the hands of beneficiary if it fulfils the conditions laid down in S.2(19)(e) of the Income Tax Ordinance, 2001---Best course open to Revenue was to treat and assess the amount of loan as "dividend income" in the hands of shareholder and charge tax thereon.

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

----Ss.161 & 205---Failure to pay tax collected or deducted---Assessee in default---Taxpayer contended that proceedings under S.161 of the Income Tax Ordinance, 2001 were initiated and finalized on 30-6-2005 by the predecessor of the officer who passed the order on 31-12-2008 and during course of earlier round of proceedings the entire record of the company had been examined and a conscious finding was recorded by the Taxation Officer regarding compliance of the company with the withholding provisions in his order dated 30-6-2005 and in presence of earlier order dated 30-6-2005 the Taxation Officer had no jurisdiction to initiate proceeding again on the basis of same data/accounts which had already been examined and adjudicated upon in the earlier round of proceedings---Validity---Consolidated order under Ss.161/205 for the assessment year 2002-2003, tax year 2003 and 2004 was passed on 30-6-2005 by the Taxation Officer after conscious application of mind to the accounts of the company---All transactions recorded in the accounts had taken place before the Taxation Officer when he finalized the proceedings under Ss.161/205 of the Income Tax Ordinance, 2001 and passed the order---In presence of such order succeeding incumbent became functus officio as far as proceedings under S.161 of the Income Tax Ordinance, 2001 were concerned---Succeeding incumbent was not competent to assume jurisdiction under S.161 of the Income Tax Ordinance, 2001 and for such reason alone the order dated 31-12-2008 could not be treated as having been passed with lawful authority---In presence of order dated 30-6-2005 Taxation Officer was not competent to initiate proceedings again under Ss.161/205 of the Income Tax Ordinance, 2001---Assumption of jurisdiction by the succeeding incumbent and the order passed under Ss.161/205 of the Income Tax Ordinance, 2001 on 31-12-2008 were held to be illegal and void ab initio.

2010 PTD (Trib.) 150 rel.

Ch. Anwar-ul-Haq (Adv.) for Appellant.

Muhammad Tahir (DR) for Respondent.

Date of hearing: 28th June, 2011.

2012 P T D (Trib.) 193

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs CENTRAL POWER GENERATION COMPANY LTD., GUDDU

Versus

C.I.R. (APPEALS-III), KARACHI

I.T.As. Nos.187/KB and 188/KB of 2011, decided on 24th March, 2011.

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

----Ss. 49(4), 113, 221, 122(5), 120(1), 2(64), 9 & Second Sched., Part-IV, Cl.11A (XV)---Income of Federal Government, Provincial Government, and Local Government---Tax year 2006---Turnover tax---Taxpayer was a company owned and controlled by the Federal Government deriving income from sale of electricity---Return was filed declaring nil income---Proceedings for rectification of order were initiated on the basis that turnover tax under S.113 of the Income Tax Ordinance, 2001 was not paid along with the return---Order under Ss.221 of the Income Tax Ordinance, 2001 was cancelled by the First Appellate Authority---Fresh proceedings were initiated under S.122(1)/122(5) of the Income Tax Ordinance, 2001 and order creating the demand of turnover tax was passed which was upheld by the First Appellate Authority---Validity---Taxpayer company was owned and controlled by the Federal Government and the income was not liable to tax up to tax year 2007 as S.49(4) of the Income Tax Ordinance, 2001 had been inserted through Finance Act, 2007 making the government owned entities as taxable---No justification existed for charging tax under S.113 of the Income Tax Ordinance, 2001 for the tax year 2006---Income of the taxpayer company had become taxable w.e.f. tax year 2008 and not for the tax year 2006---Invoking the provision of S.122(1) read with S.122(5) of the Income Tax Ordinance, 2001 was not justified---Order of First Appellate Authority was vacated and the order passed by the Taxation Officer under S.122(1) read with S.122(5) of the Income Tax Ordinance, 2001 was cancelled by Appellate Tribunal.

Writ Petition No.6512 of 2008 rel.

1997 PTD 603; I.T.As. Nos. 778 to 781 and 891/LB of 2010, I.T.As. Nos. 905, 906 and 782 to 784/LB of 2010; 1997 SCMR 503; 2001 SCMR 1012; 2001 PTD 814; PLD 1993 (SC) 473; PLD 2009 (SC) 367; 2010 PTD (Trib.) 12; Messrs Glaxo Laboratories v. IAC PLD 1992 SC 549 = 1992 PTD 932; 2009 PTD (Trib.) 1536; 2008 PTD 1525 and 1997 PTD 47 ref.

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

----Ss. 205, 119(6) & 137---Default surcharge---Extension of time for furnishing returns and other documents---Taxpayer company had failed to discharge his legal obligation to pay due tax under S.137 of the Income Tax Ordinance, 2001 within the prescribed time limit---Extension of 15 days was granted for filing of return---Extension of time granted under subsection (3) of S.119 of the Income Tax Ordinance, 2001 shall not change the due date for payment of income tax under S.137 of the Income Tax Ordinance, 2001---Order passed for levy of additional tax under S.205 of the Income Tax Ordinance, 2001 had rightly been upheld by the First Appellate Authority---Taxpayer's appeal regarding additional tax was dismissed by the Appellate Tribunal.

Muhammad Iqbal Hashmi and Qadeer Ahmed, ITP for Appellants.

Gohar Ali, D.R. for Respondent.

Date of hearing: 24th March, 2011.

2012 P T D (Trib.) 202

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

Miss JAANA MALIK and others

Versus

C.I.R. (LEGAL), R.T.O.-II, LAHORE and others

I.T.As. Nos.1207/LB and 1291/LB of 2010, decided on 29th September, 2011.

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

----S.122(9)---Amendment of assessments---Opportunity of being heard---Sufficient and reasonable time---Issuance of notice under S.122(9) of the Income Tax Ordinance, providing only two days for compliance could not be considered as sufficient and reasonable time for compliance.

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

----S.120---Assessment---Date for finalization of assessment---Finalization of assessment on the date other than the one fixed for compliance was not tenable.

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

----Ss.111(1)(b) & 122(9)---Unexplained income or assets---No definite information---Addition without making an effort to verify the ownership of property as well as the exact investment of car---Validity---No definite information was available with the department while initiating proceedings as was evident from the wealth statement and lease documents as well as ownership documents of the property submitted at the time of hearing---Car was obtained on lease and lease amount paid up to 3-6-2003 to the leasing company was accordingly declared in wealth statement for the tax year 2003---Addition of Rs.4,83,000, which was the total amount of car, showed that the Taxation Officer was in possession of incomplete information---Property which was not even owned by the taxpayer as was evident from the record of Housing Authority was added without making an effort to verify the ownership as well as the exact invested amount clearly established that no definite information was available with the department as envisaged in S.122 of the Income Tax Ordinance, 2001---Such infirmities clearly established that the proceedings for amendment of assessment were altogether illegal and not warranted---Orders of the authorities below were annulled by deleting the addition under S.111 (1) (b) of the Income Tax Ordinance, 2001---Taxpayer's appeal was accepted whereas departmental appeal was rejected by the Appellate Tribunal.

M. Waseem Ch. for Appellants (in I.T.A. No.1207/LB of 2010).

Sajjad Taslim, D.R. for Respondents (in I.T.A. No.1207/LB of 2010).

Sajjad Taslim, D.R. for Appellants (in I.T.A. No.1291/LB of 2010).

M. Waseem Ch. for Respondents (in I.T.A. No.1291/LB of 2010).

Date of hearing: 29th September, 2011.

2012 P T D (Trib.) 206

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

Messrs LAFARGE PAKISTAN CEMENT LTD., ISLAMABAD

Versus

C.I.R., L.T.U., ISLAMABAD

I.T.A. No.352/IB of 2011, decided on 5th October, 2011.

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

----S. 70---Recouped expenditure---Taxation---Scope---Legislative intent was to tax such expenditure only where it had earlier been allowed as tax deductible.

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

----Ss. 70, 69, 25, 18(1)(d), 120, 122(5) & 122(9)---Recouped expenditure---Tax year 2005---Receipt of income---Pre-commencement expenditure---Income Tax Return, Annexure IIB, IIB & IIC---Waiver of interest and penal charges---Taxpayer contended that department had taxed the reversal of interest and penal charges under the head 'income from business ignoring the fact that these financial expenses were 'pre-commencement expenses' in terms of S.25 of the Income Tax Ordinance, 2001 and the company had already accounted such reversal as for claiming amortization of pre-commencement expenses for the first time in tax year 2007---Validity---Expenses incurred during the pre-commencement period were to be amortized in the subsequent years after the commencement of production, but the waiver of interest meant that such expense was not incurred---If an expense was not incurred , it had not to be amortized---Expense was booked in accounts but subsequently subtracted due to waiver---Such expense was to be considered as having not been incurred and income was to be taxed---Waiver of interest fell under the ambit of business income, but when revenue receipts start to pour in and business income started---Business had started in tax year 2007---No income could be computed without awarding the expense---Department had taxed it when the business income had not started---If such income was to be taxed, then expenses of business could not be disallowed on the plea that taxpayer had not claimed the expense---Taxpayer had not claimed the expenses for the reason that business had not commenced and expenses were being accumulated for amortization of business income---Department had to start taxing of business income, when business had commenced and production had been started---If revenue prefers to tax it within pre commencement period, then expenses claimed were embodied in return---Business expense, therefore, could not be disallowed; it was not the choice of pick and choose that benefit / income while treating same as business income was to be taxed as a separate block of income without giving the expense---Such methodology was not warranted under the law---Benefit, although was an income but also claimed as expense---Through waiver neither there was any income in negative nor on the positive side, being liability, it was assumed as negative income---Through waiver such was presumed as positive income---Effect was again zero---To tax the income in question directly without giving an expense on the plea that expenses were not claimed due to filing of 'nil return', in pre-commencement production period, had resulted into double taxation because the expense had also been reversed by the taxpayer and case had become that of double jeopardy---Orders passed by both the officer below on this issue were vacated by the Appellate Tribunal.

(c) Income Tax---

----Accounting gain on disposal of fixed assets---Taxation---Validity---Taxpayer could produce evidence before Officer Inland Revenue to support his contention that said assets did not constitute depreciable assets---Orders were set aside on this issue and case was remanded to Officer Inland Revenue on the issue with the direction to receive evidence and provide opportunity of being heard.

Hafiz Muhammad Idrees and Faisal Banday, FCA for Applicants.

Saeed Ahmed Zaidi, D.R. for Respondent.

Date of hearing: 5th October, 2011.

2012 P T D (Trib.) 219

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

GHIAS-UD-DIN, LAHORE and another

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE (ADJUDICATION), LAHORE and another

M.A. (AG) No.2/LB of 2011 and S.T.A. No.1110/LB of 2009, decided on 28th April, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 11(4), 33, 34, 36(3) & 46---Evasion of Sales Tax---Issuance of show-cause notice---Imposition of penalty---Contention of the applicant was that impugned order-in-original, was passed by Adjudicating Authority after about eight months of issuance of show-cause notice, whereas under Ss.11(4) & 36(3) of Sales Tax Act, 1990, Authority was bound to pass order-in-original within forty five days of the issuance of show-cause notice; that if due to any reason, Authority had failed to pass the order within forty-five days then it was legally bound to obtain extension for further period, which would not in any case exceed ninety days; that such extension must be in writing and the reasons for delay must be incorporated in it that order-in-original in the case was passed beyond the prescribed time limit of forty-five days, but Adjudicating Authority, had neither got fixed any extended period nor recorded any reasons for passing the order after forty-five days and that taxpayer had been penalized by resorting to provisions of S.33 of Sales Tax Act, 1990, but he was never confronted as per contents of show-cause notice---Held, penalty imposed on the taxpayer under S.33 of Sales Tax Act, 1990, being not sustainable under the law, was deleted---Impugned order was set aside by Appellate Tribunal, in circumstances.

2001 PTD (Trib.) 2888; 1999 PTD 1892; 2002 PTD (Trib.) 300; PTCL 2001 CL 197(sic); 2009 PTD 1978; 2009 PTD 2004; 2009 PTD 762; 2008 PTD 578; 2010 PTD 1522; 2010 PTD 2117; 2010 PTD 1469; 2010 PTD 1636; 1987 SCMR 1840; AIR 1962 Madras 366; 2010 PTD (Trib.) 2157; 2011 PTD (Trib.) 738; 2010 PTD (Trib.) 451; Super Asia Muhammad Din and Sons v. Collector of Sales Tax 2008 PTD 60; Messrs Tanvir Viewing Mills v. Deputy Collector Sales Tax 2009 PTD 762 and Messrs Meraj Din v. Collector Customs, Excise and Sales Tax 2009 PTD 2004 rel.

Khuram Shahbaz Butt and Miss Nida Malik, ITP for Appellants (in M.A. (AG) No.2/LB of 2011).

Nemo for Respondents (in M.A. (AG) No.2/LB of 2011).

Khuram Shahbaz Butt and Miss Nida Malik, ITP for Appellant (in S.T.A. No.1110/LB of 2009).

Nemo for Respondents (in S.T.A. No.1110/LB of 2009).

Date of hearing: 28th April, 2011.

2012 P T D (Trib.) 229

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Shahid Jamil Khan, Judicial Members and Muhammad Ashraf, Accountant Member

Messrs SUI NORTHERN GAS PIPELINES LTD., LAHORE

Versus

C.I.R., L.T.U., LAHORE

I.T.As. Nos.244/LB to 446/LB, 449/LB to 451/LB of 2009, decided on 8th December, 2010.

Per Ch. Muhammad Asghar Paswal, Judicial Member

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

----Ss. 221 & 122(5A)---Rectification of mistake---Compensation---Assessee was confronted that compensation determined in the order was in excess of what was legally due to the assessee and assessee was required to retrieve such excess amount through rectifying the compensation order---Assessee contended that order of rectification by the Additional Commissioner was void ab initio as under the law rectification could only be carried out by the authority which passes the original order, sought to be rectified; and since the order was passed by the Deputy Commissioner, only Deputy Commissioner could rectify the order and further, compensation through earlier consolidated order was determined for as many as 17 years; and even if department's contention that compensation was wrongly/excessively allowed, which were considered for the computation of compensation, had already been adjusted against some other years, was accepted, still it did not effect the quantum of overall compensation and that was so because the counter effect in other year would off-set the impact of alleged excess compensation---Validity---Revenue could not demonstrate as to how the counter effect of adjustments, for the purposes of rectification, had been duly considered in the other yeas where the refunds were statedly adjusted---Basis for rectification was that a refund had already been adjusted and its effect was not taken while determining compensation on refund---Rectification order, otherwise available on record or departmental representative could not demonstrate that refund was required to be corrected on account of earlier alleged adjustment---Orders of the authorities below were vacated and matter was remitted back to the taxation officer to examine the same afresh with the direction that Taxation Officer shall scrutinize the record in coordination with the assessee and ensure that the assessee was not deprived of its legitimate right in any manner whatsoever and shall be given reasonable opportunity of being heard in the process of remand proceedings---Action of the Taxation Officer of denying opportunity of being heard to assessee in finalizing proceedings was contrary to the spirit of law and should be avoided under all circumstances---Taxation Officer should bring on record appropriate evidence regarding assumption of lawful jurisdiction.

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

----Ss.52 & 86---Liability of persons failing to deduct or pay tax---Assessee in default---Levy of additional tax---Taxpayer was held to be as assessee in default regarding its withholding tax obligations in respect of payment of dividend to shareholders and additional tax was levied---Assessee contended that orders dated 30-8-2008 were in fact in the nature of rectification of earlier orders dated 30-1-2002 and 17-2-2003 and these were barred by time, illegal, having been passed beyond a period of 4 yeas applicable to rectification proceedings under Income Tax Ordinance, 1979 and proceedings under S.52 of the Income Tax Ordinance, 1979 were governed by time limitation and the consequential additional tax, which was levied in connection with default under S.52 of the Income Tax Ordinance, 1979, would also be legally sustainable if levied within such time frame---Validity---Held, that action of the Taxation Officer for imposing additional tax was rectification of original orders passed under S.52 of the Income Tax Ordinance, 1979 and that admittedly having been done after the lapse of statutory time limit the orders, imposing additional tax, were illegal in the eyes of law---Orders of both the authorities were vacated by the Appellate Tribunal.

2010 PTD 150 rel.

2003 PTD 1571 and PTR No.345 of 2003 ref.

Per Muhammad Ashraf, Accountant Member, contra [Minority view]

2010 PTD 150 and PTR No.345 of 2003 distinguished.

1977 PTD 183 rel.

Per Shahid Jamil Khan, Judicial Member, (agreeing with Ch. Muhammad Asghar Paswal, Judicial Member, [Majority view]--

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

----Ss.86, 52 & 156---Income Tax Ordinance (XLIX of 2001), S.239(3)---Charge of additional tax for failure to deduct and pay tax---Separate order under S.86 of the Income Tax Ordinance, 1979---Separate order under S.86 of the Income Tax Ordinance, 1979 was rectification of original order passed under S.52 of the Income Tax Ordinance, 1979 and was passed beyond the statutory limitation prescribed under S.156 of the Income Tax Ordinance, 1979---Taxpayer contended that invocation of the provision of S.86 of the Income Tax Ordinance, 1979 was never intended, either in show-cause notice or orders under S.52 of the Income Tax Ordinance, 1979, belated action under S.86 of the Income Tax Ordinance, 1979 was an afterthought---Revenue contended that charging of additional tax under S.86 of the Income Tax Ordinance, 1979 was in the nature of recovery for which no limitation was provided by Income Tax Ordinance, 1979---Validity---Section 86(1) of the Income Tax Ordinance, 1979 unequivocally showed that it envisaged a consequential levy of additional tax, as no procedure of taking independent action under said section was available in the Income Tax Ordinance, 1979---Notice under S.52 of the Income Tax Ordinance, 1979 was issued along with S.86 of the Income Tax Ordinance, 1979 and likewise order under S.52 of the Income Tax Ordinance, 1979 was to be recognized as order under Ss.52/86 of the Income Tax Ordinance, 1979---Since additional tax under S.86 of the Income Tax Ordinance, 1979 had to be charged, as a consequence of order under S.52 of the Income Tax Ordinance, 1979 and failure to charge the same could be expounded either that taxation officer had not intended to charge it, or charging of the same was omitted mistakenly---Charging of additional tax independently could not be termed other than an amendment through rectification of order under S.52 of the Income Tax Ordinance, 1979---Order in question under S.86 of the Income Tax Ordinance, 1979 was of recovery in nature, which could be passed at any time as no limitation for that was provided---Demand for recovery could arise from any order, determining liability of a taxpayer---If the determined liability was not paid by the taxpayer voluntarily, a notice of demand could be issued under S.85 of the Income Tax Ordinance, 1979---Liability of additional tax was not determined by any order, recovery of the same could not be demanded under S.85 of the Income Tax Ordinance, 1979---Attempt was made to determine liability of additional tax through separate/independent order under S.86 of the Income Tax Ordinance, 1979---No procedure for passing independent order under S.86 of the Income Tax Ordinance, 1979 was available in the Income Tax Ordinance, 1979, therefore, said order, being consequential in nature, be termed as a rectification of order under S.52 of the Income Tax Ordinance, 1979---Order was also passed after more than five years, which was hit by limitation---Section 52 of the Income Tax Ordinance, 1979 was independently invocable for which proper procedure was available---Issue of additional tax had arisen after the order under S.52 of the Income Tax Ordinance, 1979, as consequence of which only the provision of S.86 of the Income Tax Ordinance, 1979 could be invoked but not independently---Appeal was allowed by the Tribunal.

1977 PTD 183 not relevant.

Asim Zulfiqar, FCA for Appellant.

Karamatullah Ch. D.R. for Respondent.

Date of hearing: 2nd December, 2010.

2012 P T D (Trib.) 246

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs ISLAMABAD ELECTRIC SUPPLY COMPANY LTD.

Versus

COMMISSIONER INLAND REVENUE, (LEGAL), ISLAMABAD and another

S.T.A. No.65/IB of 2011, decided on 7th September, 2011.

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

----Ss.13, 3(1) (a), 3(3)(a), 2(14)(e), 2(41), 2(39), 6, 7, 8, 22, 23, 26(1), 33, 34 & 61A---Customs Act (IV of 1969), S.2(s), 50, 130, 131---Import and Export (Control) Act, (XXXIX of 1950), S.3---Export Policy Order 2008, Para.3---STGO No.18/2010 dated 10-05-2010---Exemption---Supply of electricity to Government of Azad Jammu and Kashmir by Islamabad Electric Supply Company---Charge of sales tax---Taxpayer contended that supplies were made under a valid agreement entered between the Government of Pakistan and Azad Jammu and Kashmir Government for raising Mangla Dam, wherein it had specifically been consented and agreed between both the Governments that no sales tax shall be charged on the (supplies subject matter of the agreement), and Azad Jammu and Kashmir being a foreign territory, the subject supply of electricity was "export" amenable to charge of tax at the rate of zero percent in terms of S.4 of the Sales Tax Act, 1990---Validity---Explicit agreement existed between the two governments whereby, the Ministry of Water and Power of the Government of Pakistan had pledged itself to ensure that the Federal Board of Revenue did not levy General Sales Tax on electricity generated and supplied to Azad Jammu and Kashmir---Revenue questioned the maintainability of the agreement on the ground that said agreement was never given a legal effect as no notification in this regard under S.3 of the Sales Tax Act, 1990 was issued by the Federal Board of Revenue---After execution of the agreement, it was the contractual obligation of the Ministry of Water and Power to secure a notification of exemption of electricity supplied to Azad Jammu and Kashmir, which was not done; whether, agreement was given effect through S.R.O. or not was immaterial---Federal Board of Revenue was as much bound by he agreement as Ministry of Water and Power itself---Both the Ministries were part of Federal Government and agreement entered by the Federal Government was binding on the Federation---Agreement executed by the Government of Pakistan with another Government was sacrosanct and was legally enforceable per se, no matter whether any S.R.O. to give same legal effect was issued or not---Tax treatment of supply of electricity to Azad Jammu and Kashmir shall be governed by the agreement and there was no escape due to technical reasons---Agreement in question came into force as soon as it was executed---Neither, the Azad Jammu and Kashmir Government ever charged General Sales Tax on its supply of electricity to Pakistan nor any power distribution company in Pakistan charged General Sales Tax on its supply of electricity to Azad Jammu and Kashmir from 2003 to 2010---Admittedly, Azad Jammu and Kashmir Government did not charge General Sales Tax on electricity supplied to Pakistan because it owned its contractual commitment---Government of Pakistan or any of its instrumentality could not unilaterally go back on its covenant not to levy General Sales Tax on electricity supplied to Azad Jammu and Kashmir---Contracts were executed to be implemented in letter and spirit and a contract could not be unilaterally revoked or nullified by either party as long as it existed---Treaty between the Government of Pakistan and Azad Jammu and Kashmir was legally enforceable and levy of General Sales Tax on electricity supplied by Islamabad Electric Supply Company to Azad Jammu and Kashmir was without lawful authority---Supply of electricity was exempt by virtue of agreement between the two governments, containing a binding commitment that the parties to the agreement or treaty should not levy General Sales Tax on electricity supply to each other---Appeal succeeded because of the existence of an agreement or treaty between the two governments and such findings did not apply to normal trade or supply transactions between Pakistan and Azad Jammu and Kashmir.

Noor Hussain v. State PLD 1966 SC 88; Commissioner Income Tax AJK Muzaffarabad v. Messrs Haji Ali Khan and Co., Forest Lessee Havellian PLD 1964 SC 456; Federation of Pakistan v. Malik Muhammad Maskeen and 8 others PLD 1995 SC (AJ&K) 1; Noor Hussain's case 1998 PTD (Trib.) 1878; Master Foam (Pvt.) Ltd. and others v. Government of Pakistan PLD 2005 SC 373; Messrs Jabeer Hotel Mirpur v. Kashmir Council of Islamabad 2002 PLC (C.S.) 11; 2001 YLR 2240; PLD 2010 SC 837; 2002 PTD 967; PTCL 2011 CL 235; Lal Ghee Mill's case 2010 PTD 438; 2005 PTD 1537; 2002 PTD (Trib.) 2764 and 1998 PTD 2561 ref.

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

----S. 3---Scope of tax---Contract or treaty to the effect that supply of electricity to Azad Jammu and Kashmir was not a taxable supply---Supply of electricity to Azad Jammu and Kashmir would have been chargeable to General Sales Tax, if there had been no contract or treaty between the Government of Pakistan and the Government of Azad Jammu and Kashmir, providing that General Sales Tax should not be charged inter se.

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

----S.4---Customs Act (IV of 1969), Ss.2(s) & 131---Import and Export (Control) Act, (XXXIX of 1950), S.3---Export Policy Order, 2008, Para.3---Zero rating---Supply of electricity to Government of Azad Jammu and Kashmir by Islamabad Electric Supply Company---Levy of sales tax---Taxpayer contended that Azad Jammu and Kashmir being a foreign territory, supply of electricity was "export" amenable to charge of tax at the rate of zero percent---Revenue contended that export was governed by S.131 of the Customs Act, 1969 read with S.3 of the Import and Export Control Act, 1951 and Para.3 of the Export Policy Order, 2008 and the taxpayer neither complied the prescribed procedure for export nor declared the supply in question as export in sales tax return---Validity---Revenue had made a good case against the taxpayer's claim of export---Supply was clearly outside the ambit of export as the procedure for export was not followed---Taxpayer never claimed the supply as export and in their sales tax return declared their supply of electricity to Azad Jammu and Kashmir as "exempt supply"---Transaction did not become export just because some one claims to have made an export---Export was not a word of mouth but a series of actions done under the legal framework governing export---Supply of electricity to Azad Jammu and Kashmir could not be characterized as "export" and the benefit of zero rating shall be inadmissible.

Shahbaz Butt, Muhammad Faisal Banday, FCA and Muhammad Ahmed for Appellants.

Syed Tauqeer Bokhari and Imran Shah, D.R. for Respondents.

Date of hearing: 7th September, 2011.

2012 P T D (Trib.) 263

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Ashraf, Accountant Member

Messrs LAHORE ELECTRIC SUPPLY COMPANY LTD., LAHORE

Versus

C.I.R., R.T.O., LAHORE

S.T.As. Nos.253/LB, 254/LB and 284/LB of 2011, decided on 14th June, 2011.

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

----Ss.7, 3, 14 & 71---Sales Tax Special Procedures Rules, 2007, Chapter-III, R.3(1) & Chapter-XI, R.58H (2)---Determination of tax liability---Adjustment of input tax---Electric supply companies---Taxpayer, an electric supply company, was paying sales tax (output tax) on distribution/supply of electricity and were adjusting input tax---Revenue created demand on the ground that tax collected from the Steel Melters/Re-rollers, under R.58(H) of the Sales Tax Special Procedure Rules, 2007 through electricity bills, was wrongly adjusted by them against input tax as the tax was final discharge of tax liability of the Steel-Melters/Re-rollers and the taxpayer had just collected the same on behalf of department---Taxpayer contended that they were entitled to adjust input tax under S.7 of the Sales Tax Act, 1990 read with R.15 to Chapter III of Special Procedure Rules, 2007---No corresponding amendment having been made in Chapter III, dealing with Special Procedure for Electric Power Supplies, department's interpretation had no force and no restriction on adjustment of tax collected under R.58H was available in Chapters III or XI and the taxpayer were never declared as withholding agents under Sales Tax Special Procedure (Withholding) Rules, 2007, wherein it was specifically provided that tax withheld would be deposited by withholding agent through his monthly return and such collection should not be treated his output tax and department was estopped by its conduct because return filed electronically were based on pre-defined formula available on webpage of Federal Board of Revenue and formula was devised keeping in view the existing law and rules and that format of sales tax returns also support the contention of the taxpayer, as a payable amount by a registered person, even if there was a brought forward balance, was available for adjustment against such allegedly withheld amount---Validity---Tax envisaged under R.58H to Chapter XI of Sales Tax Special Procedure Rules, 2007 was in lieu of tax under S.3(1) of Sales Tax Act, 1990 and was not an output tax of the taxpayer/appellants---Taxpayers were entitled to adjust input tax under R.15 to Chapter-III i.e., in accordance with S.7, from the tax payable under R.13(1) of the same Chapter---Tax under R.58(H) was printed and separated, on the electricity bill, from the tax paid under R.13(1)---Tax payable was printed @ 17% as required under R.17(2) of Chapter-III---Rules did not stop the taxpayer from adjusting input tax from output tax paid @ 17%---Taxpayer was not justified to adjust tax collected under R.58H of the Sales Tax Special Procedure Rules, 2007---Was not necessary that taxpayer should have been declared withholding agent under S.3(7) of the Sales Tax Act, 1990 read with Special Procedure (Withholding) Rules, 2007---Preamble of withholding Rules of 2007 showed that these were made for government department, autonomous bodies and public sector organizations (withholding agents) to whom goods and services were supplied---Such withholding agents, while advertising for purchases, were required to notify that sales tax intended by these Rules shall be deducted from the payments---Taxpayer's case was not covered by said Rules---Rules under Chapter XI had simply provided a manner of depositing tax, which could not be termed as 'withholding'---Department was not estopped by its conduct due to pre-defined formula on webpage---No estoppel against law, which in the present case was very clear---No two possible interpretations of law existed, particularly of R.58H of the Special Sales Tax Procedure Rules, 2007---Order-in-original passed by the Adjudication Officer was upheld by the Appellate Tribunal.

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

----S.45-B---Appeal---Limitation---No express order of dismissing the appeal as time barred was passed, despite disagreeing with the explanation of taxpayer/appellant for late filing of appeal---Merits of case involved in appeal had wider implications---First Appellate Authority preferred to decide appeal on merits---Appellate Tribunal ignored the objection of limitation and preferred to deal with merits of the case as was done by the First Appellate Authority.

(c) Sales Tax Special Procedures Rules, 2007---

----R. 58H (1) & (6)---Payment of tax---Tax envisaged under R.58H of the Sales Tax Special Procedure Rules, 2007 shall be 'final discharge of tax liability' of Steel Melters/Re-rollers 'who shall not be entitled to any input tax adjustment'---Tax of the Steel Melters/Re-rollers was out put tax and adjustment of input tax could only be made against an output tax.

Shahbaz Butt, Kamran Iqbal Butt, F.C.A. and Abid Latif Lodhi, Finance Manager for Appellants (in S.T.As. Nos.253/LB and 254/LB of 2011).

Asif Iqbal Hashmi, Legal Advisor and Dr. Ishtiaq Ahmad, D.R. (LTU) for Respondents (in S.T.As. Nos.253/LB and 254/LB of 2011).

Shahbaz Butt and Kamran Iqbal Butt, FCA for Appellants (in S.T.A No.284/LB of 2011).

Syed Tauqeer Bokhari, Legal Advisor and Dr. Ishtiaq Ahmad, D.R. (LTU) for Respondents (in S.T.A No.284/LB of 2011).

Date of hearing: 14th June, 2011.

2012 P T D (Trib.) 278

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

Messrs COCA-COLA BEVERAGES PAKISTAN LIMITED, MULTAN

Versus

COLLECTOR OF SALES TAX, MULTAN

F.E.As. Nos.18/LB, 19/LB, 26/LB, 27/LB, 34/LB, 35/LB and 37/LB of 2009, decided on 5th September, 2011.

(a) Federal Excise Act (VII of 2005)---

----S. 12(4)---Central Excise Act (I of 1944), S.4(2)---Sales Tax Act (VII of 1990), S.3---Determination of value for the purposes of duty---Principles---Retail price is to be inclusive of all the charges incurred by the manufacturer and tax payable by him other than sales tax levied and collected under S.3 of the Sales Tax Act, 1990---If more than one retail price is fixed for the same brand or variety the highest of such price shall be made basis for levy of duty---Determination of retail price is the sole prerogative of the manufacturer---For the determination of retail price for the purpose of charging Federal Excise Duty/Central Excise Duty manufacturer had to include all the charges incurred by him in order to make the product marketable.

(b) Federal Excise Act (VII of 2005)---

----S. 12(4)---Central Excise Act (I of 1944), S.4(2)---Determination of value for the purposes of duty---Aerated water---Chilling charges---Addition of, in cost price---Validity---Condition of aerated water when it leaves the manufacturing premises was altogether different from the one in which it became fit to be used as instant drink---Aerated water, bottles, when they leave the manufacturing facility were in a an un-chilled condition and were delivered to the distributors/retailers in the same condition---Only at the retail outlets the process of chilling was performed, whereby the product became ready for consumption i.e. to be used as instant drink---Determination of retail price with reference to the chain of activities performed by the manufacturer led to the irresistible conclusion that the manufacturer, under the law, was obliged to include only those charges in the retail price as were incurred by him up to the stage when the product was sold to the distributor / retailers---Revenue did not dispute that the manufacturer did not perform the chilling activity---Manufacturer could not be burdened or compelled to include the cost of chilling activities towards the retail price which were not undertaken by him under the provisions of S.4(2) of the Central Excise Act, 1944---Logically and legally manufacturer could not be burdened with the cost of any activity which was not performed by him---Revenue erred in modifying the retail price fixed by the manufacturer without identifying the cost of any activity which was not included by the manufacturer while determining the retail price.

Supreme Court of Pakistan decision dated 10-12-2003 and 2001 PTD 1854 rel.

2000 PTD 353; S.T.As. Nos.285 and 286/LB of 2007, dated 31-8-2009 and Civil Petition No.D/371 of 2000 ref.

(c) Federal Excise Act (VII of 2005)---

----S. 12(4)---Central Excise Act (I of 1944), S.4(2)---Determination of value for the purposes of duty---Retail price---Determination of---Determination of retail price was the sole prerogative of the manufacturer who, while determining it would strictly comply with the provisions of law---Revenue could discard or challenge the retail price so fixed by the manufacturer only if it could, with the help of credible evidence establish that the manufacturer had not accounted for in the retail price cost of any activity performed by him.

2001 PTD 1854 rel.

(d) Federal Excise Act (VII of 2005)---

----S. 12(4)---Central Excise Act (I of 1944), S.4(2)---Determination of value for the purposes of duty---Retail price---Consumer price---Chilling charges of aerated water---Concept of retail price (as increased by the sales tax), viz-a-viz aerated water was different and distinct from the consumer price---Inclusion of chilling charges in the retail price (as increased by sales tax) as fixed by the manufacturer yields the "consumer price" of aerated water---Only way of making a reference to retail price (as increased by sales tax) was deduction of chilling charges from the consumer price which the department had erroneously taken as the retail price plus sales tax.

(e) Federal Excise Act (VII of 2005)---

----S. 12(4)---Central Excise Act (I of 1944), S. 4(2)---Determination of value for the purposes of duty---Chilling charges of aerated water---Inclusion of, in retail price---Validity---Retail price as fixed by the manufacturer will not include the chilling charges simply because the chilling activity was not undertaken by the manufacturer.

(f) Federal Excise Act (VII of 2005)---

----S. 12(4)---Central Excise Act (I of 1944), S.4(2)---Determination of value for the purposes of duty---Aerated water---Chilling cost---Retail price---Determination of---Principles: Determination of retail price is the sole prerogative of the manufacturer in accordance with the provisions of S.4(2) of the Central Excise Act, 1944 read with S. 12(4) of the Federal Excise Act, 2005; parameters laid down by the provision of law were to be strictly complied with by the manufacturer while determining the retail price; Revenue could discard the retail price fixed by the manufacturer only if it identifies an activity performed by the manufacturer but related charges/cost was not included by the retail price; In view of peculiar nature of business of aerated water a distinction had to be made between the consumer price and the retail price (as increased by the Sales Tax); and aerated water could be used as an instant drink in the chilled condition; and fact that the chilling activity was performed by the retailer the manufacturer could not be burdened with the chilling cost as the same was not incurred by him.

Asim Zulfiqar Ali, F.C.A. for Appellant.

Muhammad Tahir, D.R. for Respondent.

Date of hearing: 28th April, 2011.

2012 P T D (Trib.) 312

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Judicial Member

C.I.R., ZONE-II, R.T.O., GUJRANWALA

Versus

QAMAR JAVED, PROPRIETOR, GUJRANWALA

I.T.A. No.878/LB of 2011, decided on 8th October, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111 (1) (b), 122 & 128---Unexplained income or assets---Proper service of statutory notices---Revenue contended that First Appellate Authority was not justified in treating the service of statutory notices under S.218 of the Income Tax Ordinance, 2001 as improper and annul the order passed under S.122(1) of the Income Tax Ordinance, 2001 merely on technical grounds---Taxpayer contended that notices issued were not properly served and opportunity of being heard was not provided to explain the source of investment; and taxpayer had valid source to explain the investment---Validity---First Appellate Authority had given a categorical finding that the notices issued were not properly served and the assessment had been made without providing reasonable opportunity of being heard to the taxpayer---Assessing Officer failed to serve statutory notices in accordance with law---First Appellate Authority was justified to cancel the assessment made under S.122(1) of the Income Tax Ordinance, 2001---Appeal filed by the Revenue was dismissed being devoid of any merit.

2002 PTD 541 rel.

Naeem Hassan, D.R. for Appellant.

Shoaib Ahmad Sheikh for Respondent.

Date of hearing: 27th September, 2011.

2012 P T D (Trib.) 316

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javaid Iqbal, Munsif Khan Minhas, Judicial Members and Abdul Rauf, Accountant Member

SHEIKH COMMUNICATION, Proprietor Ehsan Elahi

Versus

ADDITIONAL COMMISSIONER (AUDIT-II), R.T.O., FAISALABAD

I.T.As. Nos.612/IB and 543/IB of 2009, decided on 2nd August, 2010.

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

----Ss.233 & 122(5A)---Brokerage and commission---Upfront commission---Residual commission---Taxpayer contended that residual commission fell within the domain of subsection (1) of S.233 of the Income Tax Ordinance, 2001 and was assessable under the Presumptive Tax Regime on the basis of provisions of subsection (3) of S.233 of the Income Tax Ordinance, 2001 whereas upfront commission, being subject matter of subsection (2) of S.233 of the Income Tax Ordinance, 2001 was not assessable under Presumptive Tax Regime because S.233(3) of the Income Tax Ordinance, 2001 provided for Presumptive Taxation in respect of only those commission receipts which fell within the ambit of subsection (1) of S.233 of the Income Tax Ordinance, 2001---Validity---Entire income earned by the taxpayer whether falling within the domain of subsection (1) or subsection (2) of S.233 of the Income Tax Ordinance, 2001 was the commission income---Subsection (2) of S.233 of the Income Tax Ordinance, 2001 having treated the amount retained by the agent as commission or brokerage paid by the principal, the amount mentioned in subsection (2) of S.233 of the Income Tax Ordinance, 2001 was thus imbued with all the characteristics of the amount mentioned in subsection (1) of S.233 of the Income Tax Ordinance, 2001 and had to be treated as an integral part of the amount mentioned in subsection (1) of S.233 of the Income Tax Ordinance, 2001 for the purpose of taxation---Taxation Officer did not take cognizance of the revised assessment under S.122(3) of the Income Tax Ordinance, 2001 and on the first page of the amended assessment order referred to the assessment under S.122(3) of the Income Tax Ordinance, 2001 and held to be erroneous in so far as it was prejudicial to the interest of revenue---Contention of the taxpayer that the Taxation Officer based his proceedings entirely on the order passed under S.120(1) of the Income Tax Ordinance, 2001 was not found to be correct---Omission of subsection 233(2) in S.233(3) of the Income Tax Ordinance, 2001 did not support the case of the taxpayer because the amount falling within the domain of subsection (2) of S.233 of the Income Tax Ordinance, 2001 was also to be treated as an integral part of the amount assessable under subsection (1) of S.233 of the Income Tax Ordinance, 2001---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeal filed by the taxpayer failed.

2007 PTD 512; (1965) -- 55 ITR 741; (2009) -- 99 Tax 35; 1999 SCMR 2799; 2004 PTD 1460; 1996 SCMR 1470 and 2009 SCMR 846 ref

PLD 1985 (sic) 109 rel

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

----S.233(3)---Brokerage and commission---Final tax---Tax deducted and collected---Section 233(3) of the Income Tax Ordinance, 2001 provided that the tax collected from a person under subsection (1) of S.233 of the Income Tax Ordinance, 2001 shall be the final tax on the income of the person from whom the tax was collected---Withholding provisions of the Income Tax Ordinance, 2001 made it evident that the words "deducted" and "collected" had been used to cover two different situations in the context of the provisions of S.233 of the Income Tax Ordinance, 2001---In case of "deduction" it was the withholding agent who was the payer as well as deducting authority whereas in the other situation it was the recipient (Collector) of the amount who, acting as a withholding agent collects the amount of tax from the payer; in the first type various government authorities who, while making payments in consideration of supplies, services or execution of contracts deduct tax at the rates specified in law while in the case of "Collection" e.g. Collector of Customs who at the time of clearance of imported goods also collects income tax from the importer.

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

----S. 233---Brokerage and commission---Final discharge of tax liability---Commission or brokerage retained by the commission agent was to be treated as paid by the principal---Subsection (1) of S.233 of the Income Tax Ordinance, 2001 deals with the deduction of tax whereas subsection (2) of S.233 of the Income Tax Ordinance, 2001 pertains to the collection of tax---Taxpayer contended that sub-section (1) in subsection (3) of S.233 of the Income Tax Ordinance, 2001 made it abundantly clear that it was only the tax deducted by the principal from the amount of commission or brokerage paid to the franchise/agency holder under subsection (1) of S.233 of the Income Tax Ordinance, 2001 which could be treated as final discharge of tax liability whereas the amount of commission falling under subsection (2) of S.233 of the Income Tax Ordinance, 2001 stood excluded from the domain of Presumptive Tax Regime---Validity---Under subsection (2) of S.233 of the Income Tax Ordinance, 2001, the amount of commission or brokerage retained by the commission agent was also deemed to be a payment made by the principal who had also been made responsible for collection of tax---Nature and character of the amount mentioned in subsection (2) of S.233 of the Income Tax Ordinance, 2001, was also to be treated alike as that of the amount mentioned in subsection (1) of S.233 of the Income Tax Ordinance, 2001 i.e. it was also to be treated as paid by the principal---By fiction of law, the entire amount mentioned in subsection (2) of S.233 of the Income Tax Ordinance, 2001 became part and parcel of the amount mentioned in sub-section (1) of S.233 of the Income Tax Ordinance, 1979 and consequently taxable in the same manner as the amount mentioned in S.233(1) of the Income Tax Ordinance, 2001.

(d) Income Tax---

----Transaction---Nature---Determination of---Principles---Substance of the transaction and not the manner in which same was recorded in the accounts was significant for the purpose of determination of its nature.

PLD 1985 (sic) 109 rel

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

----S.233---Brokerage and commission---"Commission"---Connotation--Relationship which governs the conduct of business was that of the principal and agent and the amount paid by the principal to the agent in consideration of the services rendered by the later either on the basis of fixed percentage or performance was to be treated as "commission".

Shahbaz Butt and Sh. Sheraz ul Haq for Appellant.

Ziaullah Khan, D.R. and Bilal Hassan, D.R. for Respondent.

Date of hearing: 25th May, 2010.

2012 P T D (Trib.) 334

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

Messrs TIWANA ENTERPRISES, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, R.T.O., FAISALABAD

M.As. (Cond.) Nos.32/LB to 36/LB and M.As. Nos.8/LB to 12/LB of 2011, decided on 27th October, 2011.

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

----S. 46---Appeal to Appellate Tribunal---Application for recall of order---Appeals were dismissed by the Single Bench of Appellate Tribunal for non-prosecution---Miscellaneous applications were filed for recall of order stating that notice issued for hearing was neither received by the applicant nor its Authorized Representative and another miscellaneous application for condonation of delay in filing such miscellaneous applications were also filed---Validity---Appeals dismissed by the Single Bench were violative of the principle of audi alterm parterm because no notice for hearing of the case was served upon the applicant or its authorized representative---Principles of natural justice underlie every provision of law and the norms of natural justice required that nobody should be condemned unheard---Dismissal of appeals without proper service of notice was violative of the principles of natural justice---Single Bench had not touched upon the merits of the case at all and consequently the principle "that the justice should also appear to have been done" did not appear to have been adhered to---Modern trend was not to sacrifice justice at the altar of mere technical subtleties---Miscellaneous applications were allowed and order was recalled passed by the Single Bench and delay in filing the miscellaneous applications was condoned by the Appellate Tribunal---Appeals filed stood restored to their original position.

2002 PTD 506 rel.

GST 2003 CL 601 and 2011 PTD 456 ref.

(b) Administration of justice---

----Ex parte judgment---Application of correct law---Even in ex parte judgment justice should appear to have been done i.e. no body should be deprived of his valuable right of treatment in accordance with law on mere technical grounds---Even in the absence of adequate pleading the courts were obliged to apply correct law in order to dispense justice.

Khubaib Ahmad for Applicant.

Miss Sumaira Omer, D.R. for Respondent.

Date of hearing: 27th October, 2011.

2012 P T D (Trib.) 337

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shahin, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs R.J. COTTON WASTE FACTORY, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE (ZONE-III), (R.T.O.), FAISALABAD

S.T.A. No.678/LB of 2011, decided on 12th October, 2011.

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

----Ss.21(2), 10(4), 11(2) & 46---Sales Tax Rules, 2006, Rr.12 & 37---General Clauses Act (X of 1897), S.24-A---Sales Tax General Order No.3 of 2004 dated 12-6-2004---De-registration, blacklisting and suspension of registration---Claim of refund---Taxpayer was black-listed on the charges of claiming excessive and abnormal refund intending to make a loss to national exchequer---On referring the matter back for de novo proceedings by the Appellate Tribunal, adjudicating authority restored the taxpayer's registration partially w.e..f. 2-9-2010 instead of restoration from the date of registration---First Appellate Authority observed that refund claim was admissible upon validation of input tax invoices from STARR System and under the provision of S.73 of the Sales Tax Act, 1990 however, the refund could not be made at this stage in the light of fresh order and allowed the refund subject to restoration of their registration status from the date of registration---Taxpayer contended that adjudicating authority had restored the registration status w.e.f 2-9-2010 instead of from the date of their registration i.e. 14-12-2009 but on the other hand, he had himself condoned delay in making of payments beyond time-limit as specified under S.73 of the Sales Tax Act, 1990 against certain transactions pertaining to the period prior to 2-9-2010 which was an ample evidence of genuineness and veracity of such transactions vis-a-vis status of the taxpayer; and act of non-restoration of their status for the same period amounted to discrimination under the law and adjudication under S.11(2) of the Sales Tax Act, 1990 determining fate of claims of refund should have been made first to establish charges of claiming of excessive abnormal refunds which was done at later stage after black-listing order, had no legal sanctity and of no legal effect and the order of adjudicating officer was illegal, non-speaking and sketchy as he had not applied his judicial mind and was liable to be set aside---Validity---Taxpayer was black-listed solely on the ground that excessive and abnormal refunds were claimed as given in the show cause notice: "… on examination of computer profile, it was noticed that the registered person indulged in claiming excessive/abnormal refund---" and all subsequent proceedings inter alia including physical verification of unit, order of suspension of registration and ultimate order of their black-listing were initiated due to claiming of such excessive and abnormal refunds but all such act were premature, whimsical and assumptive without determining first "admissibility or inadmissibility", "legality or illegality", "genuineness or in-genuineness", "lawfulness or unlawfulness" of the taxpayers refund claims by adhering to due process of adjudication as provided under S.11(2) of the Sales Tax Act, 1990---Act, which was to be done at the first, before taking of extreme step of black-listing, had been taken at the last---Refund claims were found admissible by an independent adjudicating authority but he put a restriction on its sanctioning subject to restoration of their status from the date of registration---All the proceedings in-between cup and lips were nullity in eyes of law and whole exercise of suspension of registration became futile and ultimate order of blacklisting stood null and void in the eyes of law once it was established that refund claims were bona fide and admissible---No show cause notice was provided under S.21(2) of the Sales Tax Act, 1990, order of adjudication officer blacklisting the taxpayer without establishing the charges of claiming excessive and abnormal refunds or that of a tax fraud through proper adjudication as prescribed under S.11(2) of the Sales Tax Act, 1990 was ab-initio void, illegal and without jurisdiction---Show cause notice for black-listing was issued in absence of cogent verification of antecedents of the case and without establishing incidence of tax fraud or even without determining the fate of refunds, purportedly claimed excessively and abnormally, through proper adjudication as provided under S.11(2) of the Sales Tax Act, 1990---Show-cause notice was declared void ab inito and nullity in the eyes of law and all subsequent actions were also held to be illegal and unlawful and order of adjudicating officer for non-restoration of the registration status prior to 2-9-2010 was set aside with the direction to restore the status from the date of its registration immediately.

Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others PLD 1959 SC 272; Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others PLD 1970 SC 158 and Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and others 1984 SCMR 1014 ref.

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

----Ss.21 & 11(2)---General Clauses Act (X of 1897), S.24---Deregistration, blacklisting and suspension of registration---Black-listing---Grounds for---Black-listing as well as non restoration of registration was an extreme step having paralyzing effect on business of any commercial enterprise and on its financial reputation as well and such type of action should be taken as last resort after establishing the gross violations of main factors i.e. "(i) if registered persons was found to have committed tax fraud, (ii) evaded tax and (iii) registered person had failed to deposit the tax due on his supplies despite having recovered it from respective buyers".

(c) Administration of justice---

---No body could be convicted merely on the basis of some assumptions and presumptions and there was no room for any intendment in fiscal matters and there was no presumption as to tax.

(d) Sales Tax---

----Quasi judicial order---Tenor of the order amply manifested non-application of judicial mind and no reasons had been assigned by the adjudicating officer in coming to the conclusions---Such order was sketchy, slip-shod, devoid of reasons and non-speaking order could not be called a "quasi judicial order" within the parameters set up by law.

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

----S.24-A---Every officer, authority or a person making any order is required to give reasons and any judicial findings without discussing necessary facts and material on record is not a judicial order and consequently is not sustainable in the eyes of law---Appellate Tribunal observed that in order to maintain the sanctity of both quasi-judicial and administrative proceedings, it is necessary to maintain oversight on the performance of adjudicating officers whose orders should not be entirely dependent on opinions and comments of the reporting officers.

(f) Administration of justice---

----Quasi-judicial order must be a speaking order manifesting by itself that the authorities and Tribunal have applied its judicial mind to the issues and the points of controversy involved in the causes---When the reasons would not be forthcoming, the Appellate Court would be deprived of the views of the subordinate forum.

(g) Sales Tax---

----Order, which was not a speaking order and devoid of reasons was not sustainable in law.

Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others PLD 1959 SC 272; Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others PLD 1970 SC 158 and Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and others 1984 SCMR 1014 rel.

Abuzar Hussain and Khubaib Ahmad for Appellant.

Nayyar Mehmood, D.R. for Respondent.

Date of hearing: 12th October, 2011.

2012 P T D (Trib.) 350

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson and Sohail Afzal, Accountant Member

Messrs FAROOQ KHALID PIPE MILLS (PVT.) LIMITED, LAHORE

Versus

COMMISSIONER, INLAND REVENUE (APPEALS-II), LAHORE

S.T.A. No.226/LB of 2011, decided on 6th July, 2011.

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

----Ss.2(37), 3, 6, 7, 8(1)(ca), 8(1)(d), 8A, 14, 22, 23, 25, 26, 28, 36 & 73---Adjustment of input tax---Taxpayer contended that pre-requisite to allege the registered person that he had committed tax fraud, was that he had acted knowingly, dishonestly or fraudulently and without any lawful excuse that to refute allegation of fraud, taxpayer further pleaded that raw materials were purchased from the registered persons and invoices issued under the provisions of S.23 of the Sales Tax Act, 1990 were obtained and status of the suppliers was also checked and verified from the Website of the Federal Board of Revenue and it was reported to be active and all the payments were made after adhering the provision of S.73 of the Sales Tax Act, 1990 that suppliers were also submitted copies of their monthly sales tax returns and the summaries of the relevant period and did all the possible precautions and endeavors as well as used all the official resources to verify status and genuineness of the suppliers that all the requisite conditions as were laid down in Ss.7 and 73 of the Sales Tax Act, 1990 for claiming input tax and paid the tax to the supplier were fulfilled bonafidely; that entire liability of depositing the tax in terms of S.3(3) of the Sales Tax Act, 1990 was the exclusive responsibility of the suppliers who were duly registered at the relevant time and were regularly filing their monthly returns and summaries with sales tax department and that it was the sole duty of the Sales Tax Department to check and find out as to whether the suppliers were depositing their sales tax in government exchequer or not---Validity---Entire edifice had been built, to hold the taxpayer as fraudulent, on conjectures and surmises and whimsical inference had been drawn against the taxpayer on the so called set of facts---Record proved that there was ample justification with the taxpayer to claim adjustment of input tax---All the suppliers were registered persons and their status was active as per Federal Board of Revenue Website; and were regularly submitting their sales tax returns and summary---All payments were made in accordance with the provisions of S.73 of the Sales Tax Act, 1990---Taxpayer did not have any prior knowledge about the sales tax invoices issued by the suppliers to be fake---Department could not prove its allegation of collusion of the taxpayer with the supplier nor could bring on record any evidence that the taxpayer had done fake transaction with deliberate act---Taxpayer purchased raw material and consumed the same and supplied the manufactured goods to other verified purchasers and there was no fraud and dishonesty---Taxpayer made all payments against the purchases after fulfilling all the legal requirements of S.73 of the Sales Tax Act, 1990---Proceedings conducted in pursuance of improper show cause notice under S.36 of the Sales Tax Act, 1990 could not have any legal consequences in the eye of law---Revenue failed to prove the charges levelled in the show cause notice---Orders of the authorities below were annulled and appeal of the taxpayer was accepted by Appellate Tribunal.

2007 PTD 2265 rel.

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

----S. 2(37)---Tax fraud---Ingredients---Mandatory condition put forth for committing tax fraud was that the alleged person should have done any act knowingly, dishonestly or fraudulently and without any lawful excuse.

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

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Collusion or deliberate act---Show-cause notice could only be issued where non levy, short levy or erroneous refund had been caused by the reason of some collusion or a deliberate act.

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

----S.8A---Joint and several liability of registered persons in supply chain where tax was unpaid---Taxpayer, in the present case, under the prescribed mechanism of Value Added Tax, made payment of input tax to the suppliers and the taxpayer had no access to confirm that the supplier had made the payment in the Government treasury or not---Such this was the duty of the Revenue to check as to whether the supplier had made payment of tax due to him especially when he was filing his monthly sales tax returns and summaries with the department.

GST 2004 CL 71, GST 2003 CL 562 and GST 2004 (sic) 79 rel.

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

----S.8A---Joint and several liability of registered persons in supply chain where tax was unpaid---Evidence---Confessional statements of suppliers---Department relied upon the statements of the suppliers but none of the suppliers or member of the group stated that they issued the invoices with prior connivance with the taxpayer---Confessional statement of member of group neither confessed that he was involved issuing fake invoices nor had any connivance with the taxpayer---Department had totally misread the confessional statements and interpreted the same without application of mind---Show-cause notice was issued and order passed thereunder on the strength of concocted and fabricated facts---Such notice and the order were not sustainable in the eye of law.

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

----Ss.73 & 8A---Certain transactions not admissible---After adopting the method for making the payment as was prescribed by law, the taxpayer had discharged his onus, so no responsibility lay on the taxpayer's shoulders to haunt his suppliers for depositing his liability in the government exchequer or not.

Shoaib Ahmed Sheikh for Appellant.

Atif Bashir, D.R. for Respondent.

Date of hearing: 21st June, 2011.

2012 P T D (Trib.) 359

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs WISE COMMUNICATION SYSTEMS (PVT) LTD., ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD

S.T.A. No.107/IB of 2010, decided on 22nd June, 2011.

(a) Federal Excise Act (VII of 2005)---

----S.8(a)(b)(ca)---Sales Tax Act (VII of 1990), S.8---S.R.O. 550 (I)/2006 dated 5-6-2006---Tax Credit not allowed---Telecommunication services---PCT Heading 98.12---Audit period July-2005 to June-2009---Retrospective application of provision of S.8 of the Sales Tax Act, 1990---Taxpayer raised legal objection regarding unlawful retrospective application of ClS.(a), (b) and (ca) of S.8 of the Sales Tax Act, 1990 amended through Finance Act, 2008 and contended that words "or services" were inserted vide Finance Act, 2008 effective from 1-7-2008 and could not be made applicable to the entire period of audit i.e. July, 2005 to June, 2009---Validity---Telecommunication services were included in the S.R.O. 550(I)/2006 dated 5-6-2006 which prescribed the levy and collection of federal excise duty on services against Value Added Tax mode and did not provide the method for apportionment of tax---Said S.R.O. was effective from 5-6-2006 and the tax liability adjudged by the revenue covered the period July, 2005 to June 2009 which was not desirable---Case of the taxpayer was of excess input adjustment---Said S.R.O. had wrongly been relied upon by the Revenue so far the excess claim of input tax adjustment was concerned---Appellate Tribunal answered the question in favour of the taxpayer and against the Revenue.

1983 PTD 713 H.C. and Sales Tax Appeal No. 236/LB/2009, F-Ex-No.100/LB/2009 rel.

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

----Ss.8(2) & 41(2)---Tax Credit not allowed---Taxable and non-taxable supplies---Apportionment of tax---With all legal exceptions, if at all the apportionment of tax adjustment was to be applied by the Revenue in terms of subsection (2) of S.8 of the Sales Tax Act, 1990 its effective date was 1-7-2008 as against the tax liability created from 1-7-2005 to 30-6-2009 which was against the norms of principles of natural justice.

(c) Interpretation of statutes---

----Substantive law---Primary law---Substantive law shall always have an overriding effect over the primary law and any amendment made through subsequent legislation shall not adversely affect the rights of the taxpayer.

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

----Ss.8(2) & 41(2)---Tax Credit not allowed---Telecommunication services---Services not included till issuance of amendments made by Finance Act, 2008 had to be dealt with as if the "services" were not included in the Sales Tax Act, 1990---Finance Act, 2008 was prospective in nature.

1983 PTD 713 H.C. rel.

(e) Sales Tax Rules, 2006---

----R.25(3)---Determination of input tax---Taxable and exempt supplies---Services---Taxpayer contended that R.25(3) of the Sales Tax Rules, 2006 only dealt with taxable and exempt supplies and had no nexus whatsoever, with the services---Validity---Held, that R.25(3) of the Sales Tax Rules, 2006 dealt only with "taxable supplies" and "exempt supplies" and "services" had never been included in the said provision of law.

(f) Sales Tax Rules, 2006---

----R.25 (3)---Sales Tax Act (VII of 1990), Ss.3 , 2(41) & 8(2)---Federal Excise Act, (VII of 2005), Ss.6 & 7---S.R.O. 648(I)/2005 dated 1-7-2005---S.R.O. 550(I)/2006 dated 5-6-2006---Determination of input tax---Taxable supplies---Services---Meaning---Taxable supplies means "taxable goods" and not "services" which were never included in the definition of "taxable supplies"---Law required that tax must be levied or charged in clear, unambiguous and specific terms---Tax could not be levied on presumption or importing something which the legislature had not provided therein---Services rendered by a taxpayer in relation to telecommunication services of PCT Heading 9812.0000 were outside the scope of R.25(3) of the Sales Tax Rules, 2006---Taxpayer had rightly taken benefit of such legal lacuna and escaped from payment of due tax because apportionment of tax was contingent upon the taxable supplies of "goods" and not "services"---Order passed by both the authorities below was set aside by the Appellate Tribunal being inconsistent with law.

Hafiz Muhammad Idris for Appellant

Imran Shah, D.R. for Respondent.

Date of hearing: 22nd June, 2011.

2012 P T D (Trib.) 370

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

Messrs ZIS TEXTILE (PVT.) LTD., FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, R.T.O., FAISALABAD

M.As. (Cond.) Nos.37/LB and 29/LB of 2011, decided on 12th October, 2011.

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

----S.46---Appeal to Appellate Tribunal---Condonation of delay---Principles---Prayer for condonation of delay by registered person/citizen should be considered sympathetically, refusal is an extreme step---Technicalities should not defeat the cause of justice.

2003 PTD 1329 rel

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

----S.46---Appeal to Appellate Tribunal---Application for condonation of delay---Delay was due to unavoidable circumstances, which prevented the counsel of the registered person to file the application in time---Application was supported by an affidavit which was not rebutted by counter affidavit by the department---Averments made in the application duly supported by affidavit on solemn affirmation and not rebutted by counter-affidavit by the department, certainly carried weight---Delay in filing application was condoned by Appellate Tribunal.

2002 PTD 506 (H.C. Lah.); 2002 PTD 608 (H.C. Lah.) and Ashraf Dawakhana v. Additional Collector Sales Tax, Gujranwala GST 2003 CL 601 (H.C. Lah.) ref.

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

----S.46---Appeal to Appellate Tribunal---Application for recalling of order---Counsel for the registered person had contended that due to illness and influenza he could not represent the registered person on the date of hearing which resulted dismissal of appeal for non-prosecution; that request letter seeking adjournment was sent through fax which was not put-up before the Bench at the time of hearing that a copy of the same was attached with the application for condonation and that default of non-appearance of the registered person on the due date on which the appeal was fixed for hearing was not deliberate, wilful or intentional and the registered person had been condemned unheard on the due date, which was against the established norms of justice---Validity---Ex parte order was recalled by the Appellate Tribunal in order to provide an opportunity to the registered person to substantiate its case by following the principle of audi-alterm parterm---Assistant Registrar of the Appellate Tribunal was directed to fix the registered person's case for hearing as per roster arrangement and both the parties be informed accordingly through proper service of notice.

Khubaib Ahmad for Applicant.

Miss Samia Ijaz, D.R. for Respondent.

Date of hearing: 12th October, 2011.

2012 P T D (Trib.) 442

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs ATTOCK REFINERY LTD., RAWALPINDI

Versus

COMMISSIONER INLAND REVENUE, (AUDIT), L.T.U., ISLAMABAD and 2 others

S.T.As. Nos.41/IB and 43/IB of 2011, decided on 17th November, 2011.

Federal Excise Act (VII of 2005)---

----S.3---F.B.R. letter C.No.1(2)CEB/02 dated 15-6-2002---Duties specified in the First Schedule to be levied---Sludge---Levy of excise duty---Validity---Withdrawal of Central Excide Duty on sludge did not figure in the budget instructions issued by the Revenue Division, Central Board of Revenue---Taxpayer's reliance on a letter written to him by Superintendent of Central Excise Department advising that sludge fell under PCT Head in 2713-9000 was found to be irrelevant to the period of audit in question---Sludge had been classified under PCT heading No.2710-9900 Entry No.30 of 1st Schedule to the Federal Excise Act, 2005---Contention of taxpayer that sludge was appropriately classified under PCT heading 2713-9000 was without substance---Demand created by the department upheld by the First Appellate Authority was correct at law---If the taxpayer believed that sludge had wrongly been classified under PCT heading No.2710-9900 Entry No.30 of 1st Schedule to the Federal Excise Act, 2005, he could take up the issue with the Federal Board of Revenue for its reclassification---Taxpayer's contention of exemption was unfounded---Default surcharge and penalty imposed was set aside because, the Superintendent's letter created confusion for the taxpayer and the element of wilful default did not exist in said particular case---Appeal succeeded only to the extent of remission of default surcharge.

Syed Tauqeer Bukhari for Appellant (in S.T.A. No.41/IB of 2011)

Muhammad Imran Shah, D.R. for Respondent (in S.T.A. No.41/IB of 2011).

Muhammad Imran Shah, D.R. for Appellants (in S.T.A No.43/IB of 2001).

Syed Tauqeer Bukhari for Respondent (in S.T.A No.43/IB of 2001)

Date of hearing: 17th November, 2011.

2012 P T D (Trib.) 453

[Inland Revenue Appellate Tribunal of Pakistan]

Before M. A. Javed Shaheen, Judicial Member and Tabana Sajjad Naseer, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-III, R.T.O., FAISALABAD

Versus

Messrs KAMAL FABRICS, FAISALABAD

S.T.A. No.543/LB of 2011, decided on 1st November, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 10, 11(2), 33, 34 & 36(1)---Sales Tax Rules, 2006, R.33---Refund of input tax---Zero rated supplies of 'textile goods'---Audit staff of Directorate of Revenue Receipt Audit observed that refund was sanctioned on the basis of purchase of kerosene oil on 20-10-2010 which had supposedly been consumed on 29-10-2010 in goods exported as stocks of the said had been shown "nil" in its closing balance on the said date; and refund was sanctioned on the basis of purchase whereas it should have been processed on the basis of consumption of kerosene oil---Taxpayer contended before the First Appellate Authority that issue was misconceived and misconstrued as the provision of S.10 of the Sales Tax Act, 1990 did not provide refund on consumption basis but it was on the basis of purchases or imports; that registered person was entitled to claim refund in case input tax paid on taxable purchase made during a tax period exceeded output tax on account of zero rated local supplies or exports; that provisions of R.33 of the Sales Tax Refund Rules, 2006 were in conformity with that of the provisions of S.10 of the Sales Tax Act, 1990, since if input tax paid on purchase made during a tax period exceeded output tax on account of zero-rate local supplies or export made during that tax period; that the excess amount of input tax should be refunded to the registered person; as the registered person had made no exempt supply and alleged input tax paid goods were wholly used for the purchase of zero rate supplies or meant for exports and that input tax paid therein was available for refund to the registered person---Validity---If, the goods manufactured therefrom, were meant for export in subsequent tax period but before sanctioning refund then input tax paid thereon was admissible to be refunded on that very point of time and once it was established that export of alleged goods was made, the denial from refund of input tax incurred thereon would tantamount to tax exported goods which were otherwise chargeable to sales tax at zero percent---Appellate Tribunal rejected the appeal of the department having been filed without any merit or scope.

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

Nayyer Mehmood, D.R. for Appellant.

Khubaib Ahmed for Respondent.

Date of hearing: 1st November, 2011.

2012 P T D (Trib.) 459

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

COMMISSIONER INLAND REVENUE, ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE, (APPEALS-I), ISLAMABAD and 2 others

S.T.A. No.82/IB of 2010, decided on 26th September, 2011.

Federal Excise Act (VII of 2005)---

----S. 3A---S.R.O. No.655(I)/2007 dated 29-6-2007---F.B.R. letter No. 1(3)FED/ 2007 /111143-R dated 25-7-2009---F.B.R. letter C. No. 1(3)FED/2007 dated 22-4-2009---F.B.R. letter No.1(3)FED/07/ 3433-R dated 4-3-2009---Special Excise duty---Hotel business---Goods---Services---Duty levied in respect of "goods" vide S.R.O. 655(I)/2007 was extended to "services", which were clarified under PCT heading 98 of the First Schedule to the Customs Act, 1969---Letter relied by the Department stood infructuous when the Federal Board of Revenue circulated the Ministry of Law & Justice Division's clarification on the subject vide its later letter No.1(3)FED/2007/ 111143-R dated 25-7-2009---Special excise duty was leviable on "goods" and not "services"---Legal lacuna was noticed in the S.R.O. No.655(I)/2007 dated 29-6-2007 which did not mention the word "services" after the word "goods"---Intentional or unintentional omission provided an opportunity to taxpayer to stand clear of the tax liability arising from the S.R.O. No.655(I)/2007 dated 29-6-2007---Order passed by the First Appellate Authority on the basis of clarification of Ministry of Law & Justice Division was upheld by the Appellate Tribunal.

Imran Shah, D.R. for Appellant.

Safeer Ahmed for Respondent.

Date of hearing: 26th September, 2011.

2012 P T D (Trib.) 467

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Judicial Member

COMMISSIONER INLAND REVENUE, ZONE-II, R.T.O., GUJRANWALA

Versus

MUHAMMAD SIDDIQUE

I.T.A. No.816/LB of 2011, decided on 26th October, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 121, 116(1) & 111(1)(b)---Best judgment assessment---Service of notice---Reasonable opportunity of being heard---Categorical finding were given by the First Appellate Authority that notices issued were not properly served and the assessment had been made without providing reasonable opportunity of being heard to the tax payer---Taxation Officer failed to serve statutory notices in accordance with law---First Appellate Authority was perfectly justified to annul the assessment made under S.121 of the Income Tax Ordinance, 2001---Appeal filed by the Revenue was dismissed being devoid of any merit.

2002 PTD 541 ref.

Naeem Hussain, D.R. for Appellant.

Shoaib Ahmad Sheikh for Respondent.

Date of hearing; 29th September, 2011.

2012 P T D (Trib.) 472

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwa Judicial Member and Masood Ali Jamshed, Accountant Member

Messrs MEHAR DASTGIR LEATHER AND FOOTWEAR INDUSTRIES, MULTAN

Versus

COLLECTOR OF SALES TAX, MULTAN and others

S.T.A. No.1811/LB of 2009, decided on 10th May, 2011.

Sales Tax Act (VII of 1990)---

----Ss.45, 10(4), 11(2), 2(14), 4, 7, 8, 10, 26, 33(11)(c) & 73---Sales Tax Rules, 2006, Rs.36 & 37---S.R.O. 575(I)/2002 dated 31-8-2002---Power of adjudication---Claim of refund of input tax---Pecuniary jurisdiction---Assistant Collector (Refund) adjudicated upon the matter and refund claimed was held inadmissible---Taxpayer contended that by virtue of subsection (1) Cl.(iii) of S.33, Assistant Collector could have adjudicated upon the cases falling under subsection (2) of S.11 and S.36 of the Sales Tax Act, 1990 provided that the amount of tax involved the amount exceeding ten thousand rupees but not exceeding one million rupees and in the present case the amount involved was quite higher than the limit of the amount mentioned in the clause---Revenue contended that proceedings taken by the Assistant Collector (Refund) Sales Tax, were not adjudicated within the ambit of S.45 of the Sales Tax Act, 1990 and in these were the proceedings taken by him under Rr.30 & 37 of the Sales Tax Rules, 2006 and subject matter of the proceedings did not fall within any of the cases involving assessment of tax, charging of default surcharge, imposition of penalty and recovery amount erroneously refunded or any other contravention under the Sales Tax Act, 1990 and that rather, it related to sanction and payment or otherwise of refund claimed mentioned under R.30 of the Sales Tax Rules, 2006 and to action on inadmissible claims mentioned in R.37 of the Sales Tax Rules, 2006---Validity---Expression "assessment of tax" mentioned in subsection (1) of S.45 of the Sales Tax Act, 1990 did include the claim of input tax credit or refund which was not admissible under the Sales Tax Act, 1990, when the provisions of subsection (2) of S.11 of the Sales Tax Act, 1990 were consulted---Case of the appellant could not be excluded from the purview of the then S.45 of the Sales Tax Act, 1990 which provided pecuniary limits for various officers to make adjudication especially in the absence of any further proceedings having not been suggested by R.37 of the Sales Tax Rules, 2006 referred by the Revenue---Proceedings taken by the Assistant Collector could safely be held to have squarely fallen in and to have been made under S.45 of the Sales Tax Act, 1990 and Assistant Collector could not adjudicate upon the matter with regard to the amount exceeding one million of rupees in the face of the limits fixed for various officers---Adjudication made by the Assistant Collector was held to be illegal, void ab initio and coram non judice---Appeal was accepted by the Appellate Tribunal and orders in original and in appeal were annulled by the Appellate Tribunal.

2010 PTD (Trib.) 1636 rel.

Shoaib Ahmed Sheikh, for Appellant.

Dr. Javed Iqbal Sh., learned D.R. for Respondent.

Date of hearing: 29th April, 2011.

2012 P T D (Trib.) 478

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs PEACOCK RESTAURANT, MOTORWAY SERVICE AREA, (SOUTH), CHAKWAL

Versus

COMMISSIONER INLAND REVENUE, (APPEALS-III), ISLAMABAD and another

S.T.A. No.89/IB of 2011, decided on 1st October, 2011.

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

----S.11---F.B.R's Letter C.No.1(15) IR-JUD/2007 dated 11-11-2009---Assessment of tax---Jurisdiction---Taxpayer contended that order-in-original should have been issued by the Audit Division---Order-in-original was passed by the Deputy Commissioner, Inland Revenue, (Enforcement-III)---Order in original was supposed to be passed neither by the Enforcement nor the Audit Division, but by an officer of the Legal Division in terms of F.B.R's letter C.No.1(15)IR-JUD/2007 dated 11-11-2009----Contention of the Revenue that jurisdiction in respect of non filers was vested with the Enforcement Division was not relevant because after filing of return the jurisdiction stood vested with Legal Division and adjudicating officer lacked said jurisdiction.

2007 PTD 1780; 2010 PTD 927 and PLD 1995 Kar. 586 ref.

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

----Ss. 2(41) & 3---Qanun-e-Shahadat (10 of 1984), Art. 117---Taxable supply---Gross sales declared in income tax return---Levy of sales tax thereon---Onus of proof---Taxpayer contended that Article 117 of the Qanun-e-Shahadat, 1984 explicitly provided that the onus to prove that such amount of gross sales declared in the income tax returns represented taxable supplies, was on the Revenue which remained un-discharged---Revenue contended that onus to prove that the declared gross sales were not taxable supplies was on the taxpayer---Validity---Order passed by the adjudicating officer was not indicative of the fact finding inquiry from sellers and the demand had been created whimsically without any supporting evidence---Amount of sales tax was modified by the First Appellate Authority but order of reduction in sales tax did not explain on what basis the sales tax was reduced---Both the forums below failed to confront the taxpayer with any credible evidence of taxable supplies or apply any intelligible criteria---No tax could be charged or reduced merely on an assumption---Taxable and non-taxable supplies were not quantified by the revenue, on the basis of any undisputable evidence---Even the reduction of sales tax by the First Appellate Authority was without any understandable basis.

2004 PTD 868; GST 2003 CL 109; GST 2004 CL 117; S.T.A. No.48/LB/2004 and Awan Sports Industries (Pvt.) Ltd. Appeal No. 398/2000, dated 1-11-2001, Appeal No. 102/STB/IB/2006 and Appeal No.35/IB/99 dated 24-8-2006 ref.

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

----Ss. 2(41) & 3---Taxable supply---Scope of tax---Assessment of sales tax on the basis of income tax return alone without hearing the taxpayer---Validity---In absence of correct determination of the amount of taxable and non-taxable supplies in the gross sales declared in income tax returns it was very difficult to quantify correct amount of "taxable supply" within the meaning of S.2 (41) of the Sales Tax Act, 1990 subject to chargeability of sales tax under S.3 of the Sales Tax Act, 1990.

Messrs Sufi Restaurant, Melody Market, Civic Center, G-6, Islamabad v. The Collector of Customs, Sales Tax and Central Excise (Appeals) Islamabad 2007 PTD (Trib.) 840 not relevant.

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

----Ss.38(3) & 25---Authorized officer to have access to premises, stocks, accounts and records---Access to record, documents, etc.---Income Tax record---Section 38(3) of the Sales Tax Act, 1990 empowered the sales tax department to obtain record from other departments which could validly be used to quantify the tax liability against the tax evaders provided the taxpayer failed to furnish sales tax record requisitioned under S.25 of the Sales Tax Act, 1990.

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

----Ss. 2(41), 3, 25 & 38(3)---Taxable supply---Assessment of sales tax on the basis of income tax return---Non determination of taxable and non-taxable supplies---Validity---Revenue had not denied that the taxpayer did not provide the sales tax record to the sales tax department---Department should have established the quantum of value of taxable and non-taxable supplies made by the taxpayer which they had not---Department failed to place on record any evidence that the entire value of supply shown in the income tax returns was a "taxable supply"---Taxpayer claimed that he turned in bifurcation of taxable and non taxable supplies at both the adjudicatory forums but this fact was not reflected in the order-in-original and order-in-appeal---Side stepping the taxpayer's contention was tantamounts to mis-carriage of justice---Reduction in sales tax liability was surely the result of some reconciliation exercise conducted by sales tax functionaries in association with the taxpayer---Attributing the non production of record to the taxpayer was not fair---Department did not offer any plausible justification for ignoring the bifurcation---Bifurcation of sales declared within precincts of restaurant and sales through their outlet tuck shops duly supported with the excisable record maintained by the taxpayer was found to be credible---No sales tax could be charged on mere assumption of taxable supply---Contention of the taxpayer was accepted by the Appellate Tribunal being substantiated with documentary evidence.

2004 PTD 868; GST 2003 CL 109 and GST 2004 CL 117 rel.

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

----Ss. 21, 11 & 72---CBR letter C.No.3 (11) ST-1/L&P/2004 dated 30-6-2004---De-registration, blacklisting and suspension of registra-tion---Filing of application for de-registration---Taxpayer contended that he was legally required to be de-registered with the sales tax department which he opted timely by addressing a letter to the department and the same was duly acknowledged by the department; and by not de-registering the tax the concerned officials of the sales tax department had violated S.72 of the Sales Tax Act, 1990---Validity---Evidence showed that the taxpayer requested for his de-registration to the sales tax functionaries in terms of Board's instructions but no action was taken on his request---Taxpayer stood de-registered and as a non-registered person he was not required to observe the provisions of Sales Tax Act, 1990 and rules made thereunder---Taxpayer was entitled to be deemed as un-registered person prior to the issuance of show cause notice or initiation of quasi-judicial proceedings---Section 11 of the Sales Tax Act, 1990 deals with the "registered persons" and did not apply to the taxpayer being an "un-registered person".

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

----S. 56---Service of orders, decisions, etc.---Notices were always issued to an unconcerned registered person while the sales tax liability had been imposed on some other person---Common word in the names of said two persons created confusion and the service of notice to the taxpayer could not be effected---No proper service of notices were effected and an ex parte order passed by the department against registered person was not sustainable in the eyes of law.

Messrs Faisal Pipe (Pvt.) Ltd. v. Additional Collector, Sales Tax, Gujranwala in Appeal No.Old 3089 of 2001, New 24/2004, dated 24-4-2004; PLD 1995 Lah. 1985; 1988 CLC (Kar.) 315; 1995 MLD 2886 and 1981 PTD 210 ref.

1995 PTD (Trib.) 1159 rel.

(h) Sales Tax---

----In the absence of any effort made by the department to controvert the taxpayer's declaration of exempt supplies as well as taxable supplies, the bifurcation of such supplies declared by the taxpayer was ordered to be accepted.

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

----S.21---De-registration---Taxpayer's deregistration shall take effect from the date of the receipt of the taxpayer's application for de-registration.

Khawaja Farooq Saeed, Advocate and Abdullah Akhter Butt, ITP for Appellants.

Zia Ullah Khan, D.R. for Respondent.

Date of hearing: 1st October, 2011.

2012 P T D (Trib.) 498

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs AL-MEHDI INTERNATIONAL SHAH PLAZA, MUREE ROAD, RAWALPINDI

Versus

C.I.T.(A), RAWALPINDI

I.T.A. No.1647/IB of 2005, decided on 14th December, 2011.

Income Tax Ordinance (XXXI of 1979)---

----Ss.13(1)(aa) & 62---Income Tax Ordinance (XLIX of 2001), Ss.210, 2(13) & 2(65)---Unexplained investment etc., deemed to be income---Addition---Approval of Inspecting Additional Commissioner---Taxpayer contended that under scheme of thing's contained in Income Tax Ordinance, 2001 the income tax laws were executed through Commissioner, who held pivotal position and all the powers were vested with him; that Commissioner could exercise all or any of the powers as Commissioner or delegate all or any of his powers to the Taxation Officer under S.210 of the Income Tax Ordinance, 2001; that Taxation Officer including an Inspecting Additional Commissioner could not exercise independent jurisdiction; that definition of "Commissioner" had been provided in S.2(13) and that of "Taxation Officer" in S.2(65) of the Income Tax Ordinance, 2001; that procedure of making addition had been laid down in S.13 of the Income Tax Ordinance, 1979 which provided that approval of Inspecting Additional Commissioner was mandatory: that Commissioner had to delegate his powers under S.210 of the Income Tax Ordinance, 2001 to the Inspecting Additional Commissioner who was required to grant approval under the Income Tax Ordinance, 1979 but delegation of such powers was open to question and contrary to law and that addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 was illegal because it was made with the approval of Inspecting Additional Commissioner and such approval was not legally correct---Validity---Issue of approval for addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 had already been decided by the Appellate Tribunal in a judgment reported as 2010 PTD (Trib.) 494 and department failed to put forth any explanation to justify any deviation from the said judgment---Addition was deleted by the Appellate Tribunal being legally incorrect.

I.T.As. Nos.86-91 (PB) of 2005, dated 20-5-2006 and I.T.As. Nos. 1902, 1903 and 1910-1913(1B) of 2005 ref.

2010 PTD (Trib.) 494 rel.

Ch. Naeem-ul-Haq for Appellant.

Mohy ud Din Ismail, D.R. for Respondent.

Date of hearing: 14th December, 2011.

2012 P T D (Trib.) 507

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs HUB POWER COMPANY LTD., ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE (AUDIT), ZONE-III, LTU, ISLAMABAD

I.T.As. Nos.850/IB to 854/IB of 2011, decided on 29th November, 2011.

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

----Second Sched., Part-I, Cl.(74), Ss.120(1), 122(5A) & 122(9)---Exemption---Term deposits---Bank deposits---Taxpayer contended that tax was levied on exempt profit on debt by treating the profit attributable to call and term deposits treating the same outside the scope of exemption; and exemption under Cl.(74) of Part-1 of Second Schedule to the Income Tax Ordinance, 2001 was wide enough to include both profit on debt from bank accounts as well as from bank deposits---Revenue contended that term/call deposits were typically deposits held at a financial institution for a fixed term; and when a term deposit/call deposit was opened, the lender (customer) understands that the money could only be withdrawn after the term ended or by giving notice for a pre-determined number of days; and terms deposits/call deposits being time specific, the funds in such deposits were not utilized in the operation of the company/project and profit earned as such deposit was not entitled to exemption and claiming the entire interest income as exempt had rendered the assessments as erroneous and prejudicial to the interest of revenue---Validity---Clause (74) of Part-I of Second Schedule to the Income Tax Ordinance, 2001 did not cover "term deposits" for the purpose of exemption from income tax as the "term deposits" being time bound were not directly connected with financial transaction relating to the project operations and was ousted from the purview of Cl.(74) of Part-1 of Second Schedule to the Income Tax Ordinance, 2001---Clause (74) of Part-1 of Second Schedule to the Income Tax Ordinance, 2001 provided exemption only to "bank deposits" relating to routine business operation of the company and not either long term deposits---Exemption provisions were to be strictly construed---Had the intention of the legislature been to extend exemption to entire profit on debts and interest income, the words "bank deposits" would have not been expressly provided in Cl.(74) of Part-I of Second Schedule to the Income Tax Ordinance, 2001---Profits or interest earned on debts were covered under presumptive tax regime and there was no substance in the claim of exemption---Order of First Appellate Authority was confirmed by the Appellate Tribunal and appeal of the taxpayer was dismissed and Revenue was directed to enforce their demand along with penalties.

(b) Worker's Welfare Fund Ordinance (XXXVI of 1971)---

----S. 4---Mode of payment by, and recovery from, industrial establishment---Power company---Total income---Taxable income---Charge of Workers Welfare Fund on the total income of the Power company by extending the application of provisions of Workers Welfare Fund Ordinance, 1971---Validity---Workers Welfare Fund was chargeable on the "total income" of an industrial establishment and not on "taxable income"---Workers Welfare Fund was chargeable not only from one but all I.P.Ps, as well---Any other I.P.P. was an industrial establishment within the meaning of Workers Welfare Fund Ordinance, 1971---Contention that electricity generated by assessee or any other I.P.P. was not an "article" within the meaning of Workers Welfare Fund Ordinance, 1971 was without substance---Criteria for an industrial establishment were the use of electricity for its operation---Claim that assessee company was not an industrial establishment was baseless.

2010 PTD 704 and PLJ 2005 SC 936 (sic) ref.

(c) Words and phrases---

---'Term deposit'---Definition---Term deposit is the popular name used for a savings product throughout the world by both consumers and business to store cash for the future---Term deposits are also known as Certificates of Deposit acid Fixed Deposits in some other countries.

(d) Words and phrases----

Tank Deposits'-'Call deposit'---Connotation.

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

----Second Sched., Part-I, CI. (74)---Term deposits---Bank deposits---Exemption---Term deposits are prima facie outside the scope of business operations within the meaning of Cl. (74) of Part-I of Second Schedule to the Income Tax Ordinance; 2001 until brought back to the regular stream of business operation---Term deposits attract a higher profits compared to the "normal deposits" due to their long term removal from routine or ordinary course of company's business operations and were not entitled to the benefits of exemption under Cl. (74) of Part-I of Second Schedule to the Income Tax Ordinance, 2001 which exemption was purely restricted to the "bank deposits"---Funds deposited under a term deposit certificates could not generally be withdrawn during the time frame covered by the "term deposit" and in case of their withdrawal before the maturity date, certain penalties had to be paid---On the contrary the "bank deposits" in any saving or current account did not suffer any strings with 'regard to their withdrawal.

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

----Second Sched., Part-I, Cl. (74)---Constitution of Pakistan, Art.25---Power Company---Discriminatory exemption given to one Power company only was prima facie repugnant to Article 25 of the Constitution.

Tariq Jamil, FCA for Appellant.

Tahir Khan, D.R. for Respondent.

Date of hearing: 29th November, 2011.

2012 P T D (Trib.) 518

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs MIDAS COMMUNICATIONS CO., ISLAMABAD

Versus

C.I.R., L.T.U., ISLAMABAD

I.T.As. Nos.159/IB to 161/IB of 2011, decided on 1st December, 2011.

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

----Ss.21(c), 221 & 122(5)---Deductions not allowed---Show cause notice---Addition---Taxpayer contended that figures were below threshold of taxable limits, and tax was not liable to be deducted and in response to show cause notice such position was explained but Assessing Authority did not demand the proof of the same---Validity---When a show cause notice was issued and a particular fact was confronted to the taxpayer, it was bounden duty of the taxpayer not only to reply the fact in issue just by assertion, but also to produce relevant proof of the same---Argument of the taxpayer that after reply embodying the assertion that tax was not withheld because of being below the threshold limit, officer should have again issued a notice demanding the proof of the assertion was without any logic---Reply should be comprehensive and coupled with proof---To meet the ends of justice an opportunity was granted to the taxpayer for the production of the proof in detail embodying the name of tenant, rent agreement before the Assessing Officer to prove that such payments were below the threshold limit---Order was set aside by the Appellate Tribunal and remanded the case to Assessing Officer to afford opportunity of being heard to taxpayer and then pass the order as per law and facts of the case.

2004 PTD 452 and 2003 PTD 2683 ref.

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

----Ss.21 & 221---Deductions not allowed---Provision for doubtful debts---Taxpayer contended that Assessing Authority wrongly prorated doubtful debts between Presumptive Tax Regime and Normal Tax Regime and the same was confirmed by the First Appellate Authority on the plea that no proof of bad debts was submitted and it was also not an admissible expense being in the nature of provision---Validity---Provision for doubtful debts was inadmissible expense---Provision heading towards ultimate declaration of bad debts, when declared that related to the whole of business capital because it had to be subtracted from there---Taxpayer was not supposed to be given the choice to declare the same under Presumptive Tax Regime when it was inadmissible and to take the advantage of zero tax impact---Bad debt was to spread over whole of the business of the company and not to a particular head---Orders passed by both the officers below were upheld on this count by the Appellate Tribunal.

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

----Ss.221 & 2(38A)---Workers' Welfare Fund Ordinance (XXXVI of 1971), S. 4---Rectification of mistake, jurisdiction of---Deputy Commissioner Inland Revenue as Taxation Officer---Taxpayer contended that notice under S.221 of the Income Tax Ordinance, 2001 was issued by the Deputy Commissioner Inland Revenue, assessment was recorded by the Deputy Commissioner Inland Revenue and not by the Taxation Officer---Section 2(38A) of the Income Tax Ordinance, 2001 was inserted through Finance (Amendment) Ordinance, 2009 which expired after 4 months, as the same was approved by the National Assembly and the order recorded by the Deputy Commissioner Inland Revenue after four months was not legal and was without jurisdiction and when a statute came to an automatic end by efflux of time, no prosecution for facts done during the continuance of expired statute could commence after the date of its expiry because that would amount to enforcement of a dead statute---Validity---Order was passed on 26-3-2010---Earlier the substitution was made through Finance (Amendment) Ordinance, 2009 was re-promulgated as Finance (Amendment) Ordinance, 2010 and remained effective till 5-6-2010---Notice as well as assessment was made by Deputy Commissioner Inland Revenue whose authority did not find mention in Workers' Welfare Fund Ordinance, 1971---By amending Income Tax Ordinance, 2001, at the time of inserting S.2(38A) of the Income Tax Ordinance, 2001 through Finance (Amendment) Ordinance, 2009, Workers' Welfare Fund Ordinance, 1971 was not amended---Order passed by Deputy Commissioner Inland Revenue was without jurisdiction---Levy of Workers' Welfare Fund was held to be without jurisdiction, null and void by the Appellate Tribunal.

Sardar Shahiad Farid, FCA for Applicant.

Tahir Khan, D.R. for Respondent.

Date of hearing: 1st December, 2011.

2012 P T D (Trib.) 532

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

Messrs BLACK GOLD INDUSTRY, LAHORE

Versus

C.I.T., P.T.O., LAHORE

I.T.As. Nos.385/LB, 386/LB, 967/LB and 1005/LB of 2009, decided on 8th April, 2011.

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

----S.122---Amendment of assessment---Estimation of sales---Difference between sales declared and sales assessed was treated as suppressed gross profit and added to the income---Validity---Taxation Officer rejected the declared trading version on the ground that complete record of production had not been produced---Record showed that the taxpayer produced record of production and said fact was supported by certified copy of relevant order sheet about which the First Appellate Authority had recorded definite observation in the order---Taxpayer was also registered with Sales Tax Department and entire record of purchases and sales must be available in the form of sales tax return---Taxation Officer could have recorded a fairly sound observation about the declared sales and purchases---Revenue had candidly admitted before the First Appellate Authority that particulars of the cases on which the Taxation Officer had based his estimate of sales were never confronted to the taxpayer through notice under S. 122(9) of the Income Tax Ordinance, 2001---Order of First Appellate Authority was upheld by the Appellate Tribunal as no material had been placed before the Tribunal to controvert the findings of the First Appellate Authority regarding declared trading version.

(b) Natural Justice, principles of---

----Principles of natural justice underlie every provision of law and requirements of natural justice had to be fulfilled before saddling a subject with liability of tax.

(c) Income Tax---

----Profit and loss account---Carriage expenses---Addition of---Taxation Officer disallowed expense in toto with the observation that the expense had been claimed without any justification as entire sales had been made at the Mill---First Appellate Authority on the basis of evidence that taxpayer maintained a godown wherein the manufactured products were kept for the purpose of sale, directed to allow the carriage expense---Finding as well as direction of First Appellate Authority were in consonance with the facts of the case and did not call for any interference by the Appellate Tribunal.

(d) Income Tax---

----Profit and loss account---Mark up---Disallowance of---Mark up was disallowed on the ground that the mark up was an expense of capital nature as it related to the creation of capital assets like building and machinery---Validity---Mark up on loan utilized in the creation of capital assets could be treated as capital expense only at pre-commencement stage---Case of the taxpayer, on the contrary, was that of a running business concern---If some amount of loan, in such concern was utilized in the creation of capital assets for the purpose of expansion or modernization of existing plant and machinery the same was to be treated as revenue expense---Appellate Tribunal directed that the amount of mark up be allowed as admissible deduction.

Waseem Ahmed for Appellant (in I.T.As. Nos.385/LB and 386/LB of 2009)

Dr. Sheharyar, D.R. for Respondent (in I.T.As. Nos.385/LB and 386/LB of 2009)

Dr. Sheharyar, D.R. for Appellant (in I.T.As. Nos.967/LB and 1005/LB of 2009)

Waseem Ahmed for Respondent (in I.T.As. Nos.967/LB and 1005/LB of 2009)

Date of hearing: 8th February, 2011.

2012 P T D (Trib.) 547

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member

MUHAMMAD SAEED

Versus

C.I.R., ZONE-I, R.T.O., PESHAWAR

I.T.As. Nos. 170 to 173(PB) of 2011, decided on 28th June, 2011

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

----Ss.122C & 127---Provisional assessment---Final assessment order---Word "if" used in S.122C(2)---Significance---Procedure provided in subsection (2) of S.122C of the Income Tax Ordinance, 2001 was not mandatory but discretionary---Appeal was rejected by the First Appellate Authority on the ground that order under S.122C of the Income Tax Ordinance, 2001 was not appealable---Validity---Section 127 of the Income Tax Ordinance, 2001 deal with filing of appeal; and said section for the purpose of appeal mention S.122C of the Income Tax Ordinance, 2001 without any subsection or clause, which meant that the entire S.122C of the Income Tax Ordinance, 2001 with it all clauses or sub clauses was appealable---For vacation of provisional assessment order the procedure of filing of return, wealth statement along with its reconciliation had been prescribed, however such procedure was not mandatory but discretionary as was evident from the word "if" used in provision for filing of return in sub-section (2) of S.122C of the Income Tax Ordinance, 2001---Word "if" signifies that while reading it together with the final assessment order all provisions of Ordinance were applicable, which include the filing of appeal---For vacation of provisional assessment taxpayer had been given option either to file the return wealth statement along with it reconciliation or to seek remedy through the right of appeal---Taxpayer had been given the option against the order passed under S.122C of the Income Tax Ordinance, 2001 either to file the return accompanied with wealth statement, along with its reconciliation or to avail the right of appeal---Law did not place any restriction or bar on filing of appeal against the order under S.122(C) of the Income Tax Ordinance, 2001 up to 30th June 2010---As per Finance Act, 2010 effective from 1st July 9, 2011, bar against the right of appeal had been placed against the provisional assessment but subsection (2) of S.122C of the Income Tax Ordinance, 2001 was still there in the Ordinance, as per this subsection the provisional assessment after period of 60 days became final assessment order---Filing of appeal before expiry of 60 days was a mere irregularity and was curable, in the manner that if the period of 60 days meant for provisional assessment expired during the pending of appeal, being premature and incompetent appeal; on expiry of 60 days provisional assessment stood converted into final order and all the provisions of the Ordinance applied mutis mutandis, and then appeal became mature and competent---First Appellate Authority was unjust to term that appeal was incompetent against the order under S.122C of the Income Tax Ordinance, 2001---Even otherwise during pendency of appeal if period of provisional assessment stood converted into final assessment order, under S.122(C)(2) of the Income Tax Ordinance, 2001, same was appealable order.

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

----Ss.122C & 120(1)(b)---Provisional assessment---National Tax Number holder, a taxpayer---Provisional assessment---Validity---Taxpayer was holding National Tax Number and was regularly filing his return of income---Photocopy of return pertaining only to tax year 2009 filed electronically and acknowledged accordingly was produced---Return so filed was an assessment order under the term of S.120(1)(b) of the Income Tax Ordinance, 2001; in the presence of the same any other assessment order was nullity in the eye of law.

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

----Ss.122C & 120(1)(b)---Provisional assessment---Taxpayer, a cable operator---Service of notice had been found defective, as no personal service of notices seemed to have been effected---Ex parte assessment could not be termed best judgment because as per the information from PIMRA as recorded in the ex parte assessment order, taxpayer had PIMRA license with the capacity of 1000 connections, beyond this number taxpayer could not install extra connections, the taxation officer had taken it at 3000 connections which was not only unjust and unfair but also penalizing---When the taxpayer was National Tax Number holder; already existed on tax role, the completion of assessment at temporary tax number in the absence of personal service of the statutory notices, the passing of order under S.122(C) of the Income Tax Ordinance, 2001 at a figure which was at variance than one communicated by the PIMRA---Order passed under S.122(c) of the Income Tax Ordinance, 2001 was directed to be annulled, in circumstances.

(d) Income Tax---

----Annulment of assessment---Circumstances for annulment of assessment order were that for initiation of proceeding a notice had been issued without jurisdiction; that a notice had not been properly served; that a wrong notice had been issued; that assessment had been framed on wrong person; that assessment had been made in wrong assessment year; that assessment had been made in respect of an income, which was not income or such income was exempt from tax and that as assessment was framed, when it was barred by time.

(e) Income Tax---

----Annulment of assessment---Re-assessment---Distinction---Common misconception prevailed that once an assessment was annulled; no reassessment could be framed---Re-assessment could not be framed only in the situation where a proper notice was served on correct person by a correct officer for the correct assessment year, but the income was either not income or was held to be otherwise exempt or assessment was made when it was already barred by limitation---In all other cases reassessment could be made by issue of proper notice by the proper officer, served on proper person for the proper assessment year (as the case may be)---Limitation as provided in the Ordinance was to be taken into consideration---Annulment of order differ from the remand of case, remand of case acknowledge the period of limitation where in consequence of remand order period of limitation had separately been provided which was to be counted from the date of order of remand in the Ordinance and on annulment assessment could be framed within the period as stipulated in the Ordinance i.e. 5 years from end of the financial year in which income was first taxable.

Mushtaq Ahmad for Appellant.

Muhammad Tariq Arbab, D.R. for Respondent.

Date of hearing: 28th June, 2011.

2012 P T D (Trib.) 577

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

C.I.R., LEGAL DIVISION, REGIONAL TAX OFFICE, ISLAMABAD

Versus

Messrs T.F. PIPES (PVT.) LTD., ISLAMABAD

I.T.As. Nos.24/IB to 27/IB of 2011, decided on 10th November, 2011.

Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S. 4---Charitable Endowment Act, (VI of 1890)---S.R.O. 1194 dated 27-11-1991 and S.R.O. 1195 dated 27-11-1991---Mode of payment by, and recovery from, industrial establishment---Taxpayer was a manufacturer and seller of pipes---Workers' Welfare Fund was charged---Taxpayer contended that Pakistan Telecommunication Company Limited and Telecom Foundation owned 40% and 60% shares respectively in the company, were not liable to Workers' Welfare Fund as the Telecom Foundation Welfare Fund was established as charitable endowment fund for the benefits and welfare of existing and ex-servicemen of the Telecom Foundation and its subsidiaries---Revenue contended that nature of business of taxpayer was different from its parent company as it derive income from manufacturing and sales of pipes which fell within the purview of "manufacturer" under the definition of "industrial establishment" and mere fact that the Pakistan Telecommunication Company Limited or Telecom Foundation held some shares of the taxpayer company, did not confer any entitlement upon the taxpayer to claim immunity from payment of Workers Welfare Fund---Validity---Arguments of the taxpayer that the company being a subsidiary of a holding or parent company entitled to exemption from Workers' Welfare Fund, automatically and mutatis mutandis enjoy the same exemption status as its parent company did, was not acceptable---Taxpayer's claim of immunity from Workers' Welfare Fund was based on sole ground that its parent companies, Pakistan Telecommunication Company Limited and Telecom Foundation, who happened to hold 60 & 40% of its shareholding, were not liable to pay Workers' Welfare Fund---Such reason was without substance---Argument that taxpayer was an industrial establishment and a separate entity independent of its holding or parent company was quite persuasive and Workers' Welfare Fund was chargeable from the taxpayer---Order passed by the First Appellate Authority was vacated and orders passed by the Officer Inland Revenue stood restored by the Appellate Tribunal.

Tahir Khan D.R. for Appellant.

Altaf Muhamad Khan for Respondent.

Date of hearing: 10th November, 2011.

2012 P T D (Trib.) 581

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Muhammad Jahandar, Nazir Ahmad, Judicial Members, Abdul Rauf and Muhammad Ashraf, Accountant Members

Messrs MND EXPLORATION AND PRODUCTION LTD. and others

Versus

C.I.R., L.T.U., ISLAMABAD and others

I.T.As. Nos.433 to 436(IB), 137(IB), 440 to 443(IB) of 2008, 311, 312(IB), 297(KB), 298(IB), 115(KB), 116(KB), 117(IB), 1944(KB) of 2007 and 545(KB), 1305 to 1309(KB) of 2006, 1086(KB) of 2005, 18(KB), 19(KB) of 2011, and M.A. (A.G.) No.137 of 2009, decided on 13th June, 2011.

Per Javid Iqbal; Judicial Member; Nazir Ahmad; Judicial Member, Abdul Rauf; Accountant Member, Muhammad Ashraf, Accountant Member, agreeing---

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

----S.134---Appeal is Appellate Tribunal---Memorandum of Understanding between companies and Member, Federal Board of Revenue---Status---Matter relating to Memorandum of Understanding had neither been raised through the grounds of appeal nor it arose from the orders of the officers below, which were subject of appeal---Appellate Tribunal was not a proper forum to resolve the dispute arising out of Memorandum of Understanding---Such memorandum had no legal status as it had neither been codified as law by the legislative body nor had been notified by the subordinate legislation, rather it was a Memorandum of Understanding between the E&P Companies and Member Federal Board of Revenue.

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

-----Fifth Sched., Part-I, Rr.4 & 2(5)---Income Tax Act (XI of 1922), S.10(8) & Second Sched., R.4(1)---Regulation of Mines and Oil-Fields and Mineral Development (Government Control) Act (XXIV of 1948), Ss.4, 2(4), 3A & 3B---Petroleum Policy, 1994---FBR Circular No.5 of 2001 dated 4-7-2001---FBR Circular No.2 of 1974 dated 14-5-1974---Limitations on payment to Government and taxes---Petroleum Concession Agreement---Rate of tax---Payment and tax to the government before deduction of royalty---Exploration and Production Companies contended that Petroleum Concession Agreement was binding on the Government of Pakistan and had got sanctity under R.4 of Part-1 of Fifth Schedule to the Income Tax Ordinance, 1979; that payment to Government shall be limited to 55 percent of profit and gain; that tax rate that was provided in the respective Petroleum Concession Agreement had been applied on the profits and gains prior to deduction of payments to Government; that tax department was misapplying the provisions and principles laid down in the Petroleum Concession Agreement as Taxation Officers were reading the terms 'profit and gains' and 'profit and gains before deduction of royalty' as being synonymous which was a fundamental error on the part of department; and that words "prior to deduction of payments to Government" were not mentioned in Petroleum Concession Agreement in the sentence containing the rate---Department contended that Schedule to Mining Act, 1948 had set out upper cap at 55% and floor at 50% of the "profit or gains "before deduction of payments" to Government of Pakistan; that any limit to be set in Petroleum Concession Agreement could not be more or less than the limit provided in the Mining Act 1948, but in each case it must be before the deduction of payments to the government; that Petroleum Concession Agreement was dependent and was subject to S.4 of Mining Act, 1948; that Petroleum Concession Agreement could not be in breach of mandatory law; that Exploration and Production Companies from ambiguous wordings of Petroleum Concession Agreement had tried to introduce a new category of rate which was 55% of profit and gains (after royalty) which was not envisaged in the Mining Act, 1948; that any basis if provided in Petroleum Concession Agreement was against the mandate of law and the Mining Act, 1948 shall prevail; that if contention of the taxpayer was accepted, then the 55% "after royalty" will always be lower than 50% (before royalty); and there was no rational in stating 55% (after royalty) in Petroleum Concession Agreement; that Petroleum Concession Agreement also provided minimum rate of 50% of profit or gains (before royalty) and mathematically 55% limit (after royalty) will always be lower than 50% limit (before deduction of royalty), unless the rate of royalty was reduced from 12.5% to a lower rate, which was legally not possible as the rate of royalty at 12.5% was fixed under the law; that rate of payments and taxes as per Mining Act, 1948 range from 50% to 55% but rate shall always be based on profit and gains (before deduction of royalty); and that Petroleum Concession Agreement impliedly provided the rate of 55% of profit and gains and did not further expressly state (before deduction of royalty), which did not mean that such rate will be applied on profit and gains (after deduction of royalty)---Validity---Under S.4 of the Mining Act, 1948 no other Act or Rules could override the provision of Mining Act, 1948---Neither the Income Tax Ordinance, 1979 nor Petroleum Concession Agreement or Rule could override provision of Mining Act, 1948 if there was conflict---Royalty was chargeable at the rate of 12.5% of the well-head value and it had to form the part of the payments to the government---Controlling law unambiguously prescribed the minimum and the maximum threshold and stated that payments to government including taxes on income shall neither be more than 55% or less than 50% of the profits and gains---For the purpose of determination of aggregate sum of payments to the government and tax the profits and gains had to be taken "before the deduction of payments" to government including royalty---In each case, whether tax rate was fixed at cap or floor, the payment and tax to the government must be before deduction of royalty, the department having done so, action was approved by Appellate Tribunal.

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

----Fifth Sched., Part-I, Rr.4 & 2(5)---Regulation of Mines and Oil-Fields and Mineral Development (Government Control) Act (XXIV of 1948), Ss. 4, 2(4), 3A & 3B---Limitations on payment to Government and taxes---Petroleum Concession Agreement---Any amendment in the income tax law after effective date of Petroleum Concession Agreement was not applicable to taxation matters of that particular Petroleum Concession Agreement.

(d) Administration of justice---

----Executive order, which is repugnant to the law are not to be applied or followed.

(e) Interpretation of statutes----

----Act will always prevail over the Circulars, S.R.Os. and Notifications.

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

----Fifth Sched., Part-I, Rr.3, 2 & 6(10)---Regulation of Mines and Oil-Fields and Mineral Development (Government Control) Act (XXIV of 1948), Ss.2(4), 3A & 3B---Pakistan Petroleum Exploration and Production Rules 1986, R.2(k)---Pakistan Petroleum (Production) Rules, 1949---FBR Circular No.2 of 1974 dated 14-05-1974---Depletion allowance---Calculation of---Royalty---Taxpayer/oil companies conten-ded that calculation had to be made on gross receipts from sale of oil; that calculation of 15% had to be calculated without deduction of royalty; that depletion allowance was to be calculated on the gross receipts of the working interest owner from the sale of production , if it would have been made at well head; and that while calculating the same the amount of costs incurred from the well head value to the sale point were deducted---Validity---Royalty being the share of Government of Pakistan in the mineral resources and levy was just like sales tax and excise duty with only difference that sales tax and excise duty were recoverable from the end user and the royalty was recoverable at the time of production from the oil/gas producer---Exclusion of sales tax, excise duty from the gross receipts representing the well head value for the purpose of depletion allowance had not been disputed by the Exploration & Production Companies---Royalty being share of Government of Pakistan in minerals and also a Government levy for the purpose of depletion allowance was liable to deduction from the gross receipts representing the well head value---Royalty paid to government was an adjustable payment towards the income tax liability so opposing its deduction would be availing double benefit, something which was not provided in law---Concept of depletion allowance was unique as it was percentage of gross income---True concept and proper comprehension of the situation demanded to allow the depletion allowance of such gross receipts, which had been arrived at after the legally prescribed deduction.

2007 PTD 67; 2008 PTD 1563; 2008 PTD 1494; 2008 PTD 1693; 2008 PTD 1973; 2008 PTD 1420; 2008 PTD 1227; 2008 PTD 838; 1994 SCMR 881; PLD 1993 Lah 141; 1993 CLC 1666; PLD 1994 Azad J&K 90; 2008 PTD 202; 2010 PTD (Trib.) 635; 2009 SCMR 1279; 2002 PTD 441; 1969 PTD 1281; CIT v. Mahaliram Ramjidas AIR 1940 Privy Council 124; Mari Gas; Pirkoh Gas Company; Black's Law Dictionary 8th Edition; Oxford Dictionaries Online httpp://oxforddictinoaries.com); http://oilgasglossary.com; IRS Publica-tion 535 (http:/www.irs.gov/pub/irs-pdf/p535.pdf); Shree Sajjan Mills Ltd. v. Commissioner Income Tax, MP. Bhopal, AIR 1968 SC 484; Inland Revenue Commissioners v. McGuckian (1997) 3 All ER 817 P-824 and 2010 PTD (Trib.) 635 ref.

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

----Fifth Sched., Part-I, R.3---Depletion allowance---Calculation of---Principles---Deducting royalty from gross receipts while calculating depletion allowance was the correct treatment as reflected in the laws of a mature regime.

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

----Fifth Sched., Part-I, Rr. 4 & 2(5)---Limitation on payment to Government and taxes---Payment of royalty to government---Principles---Unlike sales tax and excise duty, royalty was not recovered on invoices from customer but was recovered by implication from gas and oil producer, who was bound to pay his share to the government against the usage of property---In fact royalty was government levy but it was paid by the Exploration and Production Companies from its revenue as charges, while in its response the government allowed Exploration and Production Companies to claim royalty as payment to government.

(i) Interpretation of statutes---

----Fiscal enactment---Type of provisions; (i) a charging provision, which relates to the levy or charge of the tax; (ii) an assessment provision, which deals with the assessment, calculation, or qualification of the tax for the purpose of determining the amount of tax due and payable and (iii) a collection provision which relates to the mode and manner of receipt or collection of tax.

2010 PTD (Trib.) 635 rel.

Per Muhammad Jahandar, Judicial Member, disagreeing with "the deletion of Depletion Allowance" [Minority view]

Income Tax Ordinance (XXXI of 1979)---

----Fifth Sched., Part-I, R.3---Depletion allowance---Royalty---Calculation of depletion allowance---Ministry of Petroleum, Government of Pakistan who was a party to the oil exploration contracts never disputed the royalty being deducted after the adjustment of Depletion Allowance from the gross receipts---As regards, the concern of department that the oil companies shall be in receipt of double advantage, it was the Ministry of Petroleum, Government of Pakistan which should worry about that and once a position had been taken by the Government which seemed to be a kind of incentive to the oil companies engaged in business of oil exploration, tax department may not pick up the said issue---Depletion allowance was to be calculated on the well-head value without first deducting the royalty.

Shahid Hamid, Sr. Advocate Supreme Court Abid Aziz, Rashid Ibrahim, F.C.A. and Mirza Taqi ud Din, A.C.A. for Appellant. (in I.T.As. Nos.433 to 436(IB) of 2008).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Respondent (in I.T.As. Nos.433 to 436(IB) of 2008).

Makhdoom Ali Khan, Sr. Advocate Supreme Court, Syed Shabbar Zaidi, F.C.A. and Qadeer Ahmad, F.C.A. for Appellants (in I.T.A. No.137(IB) of 2008 and M.A. (A.G.) No.137 (IB) of 2009).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Respondents (in M.A. (A.G.)/137 (IB) of 2009 and I.T.A. No.137(IB) of 2008).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Appellants (in I.T.As. Nos.311 and 312(IB) of 2007).

Makhdoom Ali Khan, Sr. Advocate Supreme Court Syed Shabbar Zaidi, F.C.A. and Qadeer Ahmad, F.C.A. for Respondents (in I.T.As. Nos.311 and 312(IB) of 2007).

Shahid Sadiq, F.C.A., Nadeem Ayaz Ahmad, F.C.A., Makhdoom Ali Khan Sr. Advocate Supreme Court for Appellants (in I.T.As. Nos. 440 to 443(IB) of 2008).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Respondents (in I.T.As. Nos. 440 to 443(IB) of 2008).

Shabbar Zaidi, F.C.A. Rashid Ibrahim, F.C.A., Qadeer Ahmad, F.C.A. Taqi ud Din, A.C.A. Mrs. Zareen Anwar, A.C.A. and Makhdoom Ali Khan Sr. Advocate Supreme Court for Appellants (in I.T.As. Nos.545(KB of 2006, 297(KB), 298(KB), 115(KB), 116 (KB), 117(KB) and 1944(KB) of 2007).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Respondents (in I.T.As. Nos.545(KB of 2006, 297(KB), 298(KB), 115(KB), 116 (KB), 117(KB) and 1944(KB) of 2007).

Shabbar Zaidi, F.C.A. Rashid Ibrahim, F.C.A., Qadeer Ahmad, F.C.A. Taqi ud Din, A.C.A. Mrs. Zareen Anwar, A.C.A. and Makhdoom Ali Khan Sr. Advocate Supreme Court for Appellants (in I.T.As. Nos.1305 to 1309(KB) of 2006).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Respondents (in I.T.As. Nos.1305 to 1309(KB) of 2006).

Shabbar Zaidi, F.C.A. Rashid Ibrahim, F.C.A., Qadeer Ahmad, F.C.A. Taqi ud Din, A.C.A. Mrs. Zareen Anwar, A.C.A. and Makhdoom Ali Khan Sr. Advocate Supreme Court for Appellants (in I.T.A. No.18(KB) of 2011).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Respondents (in I.T.A. No.18(KB) of 2011).

Shabbar Zaidi, F.C.A. Rashid Ibrahim, F.C.A., Qadeer Ahmad, F.C.A. Taqi ud Din, A.C.A. Mrs. Zareen Anwar, A.C.A. and Makhdoom Ali Khan Sr. Advocate Supreme Court for Appellants (in I.T.A. No.1086(KB) of 2005).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Respondents (in I.T.A. No.1086(KB) of 2005).

Makhdoom Ali Khan Sr. Advocate Supreme Court for Appellants (in I.T.A. No.19(KB) of 2011).

Dr. Tariq Masood, Yousaf Hyder Shaikh, Assistant Commissioner, Masood Akhtar, D.R., G.M. Khuhro, D.R., Tahir Khan, D.R., Sajid Ali, I.R.O., Majid Bashir and Mrs. Amber Dar, Barrister for Respondents (in I.T.A. No.19(KB) of 2011).

Date of hearing: 22nd February, 2011.

2012 P T D (Trib.) 619

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member and Tabana Sajjad Naseer, Accountant Member

COMMISSIONER OF INLAND REVENUE, ZONE-III, FAISALABAD

Versus

Messrs KAMAL FABRICS, FAISALABAD

S.T.As. Nos.541/LB of 2011 and 121/LB of 2010, decided on 22nd November, 2011.

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

----Ss.10, 11(2), 21(3), 23, 36(1) & 73---Refund of input tax---Notice for recovery of already refunded amount of sales tax sanctioned against invoices of subsequently black-listed units---Validity---Provisions of S.73 of the Sales Tax Act, 1990 for bank payments had duly been complied with by the taxpayer---Input tax credit against invoices of such black-listed persons could not be denied and sales tax refunded thereon could not be recovered after insertion of subsection (3) of S.21 of the Sales Tax Act, 1990 wherein it had categorically been laid down that input tax should be allowed if payments were made through banking channel irrespective of the fact that the suppliers units were either black-listed or their registration had been suspended---No doubt, such amendment was made in Finance Act, 2011, whereas the refund claims pertained to the periods from 2004-05 to 2008-09 but such amendment being beneficial, remedial and curative legislative amendment, was applicable in all pending cases and to the present case as well---Orders impugned by the department being well-based strictly in accordance with law and settled norms of justice did not call for any interference---Appeals filed by the revenue were dismissed being devoid of any merit.

2011 PTD (Trib.) 2619; The Commissioner of Income Tax v. Shahnawaz Ltd. 1993 SCMR 73; The Commissioner of Income Tax/Wealth Tax v. Messrs Ellcot Spinning Mills Ltd. 2008 PTD 1401; Messrs Silver Cotton Mills Ltd. v. Commissioner of Sales Tax (West), Karachi 1984 PTD 216 and Messrs Ashar International (Pvt.) Ltd. v. C.I.R., Faisalabad 2011 PTD (Trib.) 2347 rel.

Black's Law Dictionary, 8th Edition ref.

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

----Ss. 2 & 8(1)---"Fake invoice"---Meanings---Word 'fake invoice" had neither been defined through any Explanation to subsection (1) of S.8 of the Sales Tax Act, 1990 nor any definition of this expression was given in defining clauses of S.2 of the Sales Tax Act, 1990---Word "fake" (as a noun) had been defined by the Dictionary to be "something that is not what it purports to be" and word "fake" (as a verb), means "to make or construct falsely"---In the expression "fake invoices" the word "fake" had been used neither as a noun nor as a verb, rather it was an adjective, which described the quality of input tax invoices, which were either not true in any material respect or they had been falsely made or forged by the person claiming credit of input tax on its strength.

Black's Law Dictionary, 8th Edition ref.

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

----S.2 (40)---Tax invoice---Connotation---Word "invoice" had not been defined in Sales Tax Act, 1990 rather an expression "tax invoice" had been defined under subsection (40) of S.2 of the Sales Tax Act, 1990 to be "a document required to be issued under S. 23 of the Act"---Word "tax invoice" had also been used in S.23 of the Sales Tax Act, 1990---If an input tax invoice corresponds to requirements of S.23 of the Sales Tax Act, 1990, it qualified to be a "tax invoice" and if it had been issued by a "registered person" as required under subsection (2) of S.23 of the Sales Tax Act, 1990, such was a valid tax invoice and entitled the holder thereof to claim credit of input tax envisaged therein.

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

----Ss. 2(14)(a), 7, 8, 8A, 21(3) & 73---Input tax---Physical transfer of goods---Condition for "physical transfer of goods" was no where expressly provided under the Sales Tax Act, 1990 but the same had impliedly been stretched by the words "on the supply of goods received by that person" from sub-cl.(a) of cl.(14) of S.2 of the Sales Tax Act, 1990---Though such clause was a "definition clause" having no legal impact on input tax adjustment/credit under provisions of S.7 of the Sales Tax Act, 1990 vis-à-vis S.8 of the Sales Tax Act, 1990 providing mechanism for entitlement of input tax to a registered person yet said implied expression was also amended and substituted by Finance Act, 2008---Substitution of words "received by that person" by the words "to the person" had omitted the implied expression of physical transfer of goods in the definition cl. 2(14) of the Sales Tax Act, 1990---Condition of physical transfer of goods was neither specified prior to such amendment nor same was made mandatory thereafter---Inference of physical transfer of goods was available in sub-cl.(a) of cl.(14) of S.2 of the Sales Tax Act, 1990 but by virtue of amendment, such implied expression had also been omitted from the said section---Departmental plea that without any physical transfer of goods, the taxpayer was not entitled for input tax credit was no help by reading of the provisions of law---Prior to amendment through Finance Act, 2008, responsibility of supply was on the supplier only which was made several and joint by insertion of S.8A of the Sales Tax Act, 1990 where in both the buyer and supplier were held responsible for a set of transactions but currently, the buyer had been exonerated from this liability and responsibility under subsection (3) of S.21 of the Sales Tax Act, 1990, if the tax payer had made payments through banking channel as provided under S.73 of the Sales Tax Act, 1990.

(e) Interpretation of statutes---

----Curative and remedial legislation---Scope of application---Only exception to the principle that curative and remedial legislature was retrospective was that the same applies only to the pending cases---'Pending' would mean and include at any stage of the proceedings starting from Assessing Officer to Supreme Court of Pakistan which means that it would not apply on the case wherein the concerned persons had not challenged the action of the revenue authorities before any higher forum and the same was not pending adjudication.

The Commissioner of Income Tax v. Shahnawaz Ltd. 1993 SCMR 73 and The Commissioner of Income Tax/Wealth Tax v. Messrs Ellcot Spinning Mils Ltd. 2008 PTD 1401 rel.

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

----S.17---Registration of bogus, fake or non-existent parties---Consequences---If the sales tax department had acted in a negligent manner and certain omissions were committed by its functionaries by issuing registration certificates to the bogus, fake or non-existent parties, then the taxpayer should not be made to suffer for the acts or omission of the sales tax functionaries---Party should not be made to suffer on account of act/omission on the part of the court or other State functionaries.

Messrs Silver Cotton Mills Ltd. v. Commissioner of Sales Tax (West), Karachi 1984 PTD 216 rel

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

----S.24-A---Sales Tax Act (VII of 1990), Preamble---Exercise of power under enactments---Adjudication orders showed that the same were non-speaking orders, and did not conform to the mandatory requirements of S.24-A of the General Clauses Act, 1897---Any order which did not contain substantial reason and did not show that it was passed on objective consideration shall always be treated as illegal, void, arbitrary and a result of misuse of authority vested in public functionary---No room was available for such illegal, void and arbitrary orders in any system of law---If any authority, Court or Tribunal gave a finding of fact which was not based on material available on record was illegal, arbitrary without discussing and considering the material available on record it became perverse, and a perverse finding of fact which was violative of the established principles of appreciation of evidence on record was not sustainable in law---Principle that every judicial or quasi-judicial finding should be based on reasons containing the justifications for the finding in the order itself was an established principle of dispensation of justice---Adjudication orders being violation of the basic principle of the good governance and mandatory requirements of S.24A of the General Clauses Act, 1897 were not only illegal and void but also not sustainable under the law and were quashed by the Appellate Tribunal.

Messrs Ashar International (Pvt.) Ltd. v. C.I.R., Faisalabad 2011 PTD (Trib.) 2347 rel

Ijaz Ahmed, D.R. for Appellant.

Khubaib Ahmed, for Respondent.

Date of hearing: 22nd November, 2011.

2012 P T D (Trib.) 637

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain Chairman and Tabana Sajjad Naseer Accountant Member

Messrs ORIENT COATING AND FINISHING MILLS (PVT.) LTD., FAISALABAD

Versus

COLLECTOR, CUSTOMS, EXCISE AND SALES TAX (APPEALS)

S.T.A. No.994/LB of 2009, decided on 11th January, 2012.

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

----Ss. 45B, 10(4) & 11(2)---Appeal---Limitation---Claim of refund of sales incurred in connection with zero rated supplies---Rejection of---Appeal was dismissed by the First Appellate Authority being time bared by 127 days beyond statutory time limit---Validity---Appeal filed before First Appellate Authority was time barred by 127 days yet the cases should be decided on merits instead of on technical grounds and technicalities of law and facts should always be avoided and discouraged in order to do complete justice and to ensure that justice was not only done but also seen to have been done---Rules of procedure were enacted for fostering the ends of justice and preserving the rights rather than to stifle the dispensation of justice and, unless they were insurmountable; ends of justice always outweigh the manner of practice and procedure---Delay of 127 days in filing of appeal under S.45B of the Sales Tax Act, 1990 was condoned by the Appellate Tribunal by observing that treatment meted out to the taxpayer by the First Appellate Authority was somewhat harsh and unjust---Order was set aside by allowing appeal and case was remanded to the First Appellate Authority for its disposal on merits and in accordance with law.

Controller Land Acquisition v. Mst. Katija and others (1987) 56 Tax 130 (SC India) and Messrs Ashraf Dawakhana v. Additional Collector Sales Tax GST 2003 CL 601 rel

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

----S. 45B---Appeal---Limitation---Condonation of delay---By delaying an appeal, the registered person did not stand to gain anything nor a delay on his part gave rise to or created a valuable right in favour of the Revenue and the judiciary is respected not on account of its power to legalize injustice under the garb of technicalities, but because, it is capable of removing injustice and the taxpayer, being citizen of Pakistan, has a right under the Constitution to expect so.

Messrs Ashraf Dawakhana v. Additional Collector Sales Tax GST 2003 CL 601 rel

Khubaib Ahmad for Appellant.

Dr. Ishtiaq Ahmad, D.R. for Respondent.

Date of hearing: 11th January, 2012.

2012 P T D (Trib.) 641

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Member (Judicial)

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs KHALIL JUTE MILLS, FAISALABAD and others

S.T.A. No.857/LB of 2009, decided on 22nd October, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 6, 7, 22, 33, 36 & 46---Determination of tax liability---Deduction of input tax on imported raw material---Issuance of show-cause notice---Deputy Collector, issued show-cause notice to the taxpayer, with the charge of contravention of the provisions of Ss.6, 7 & 22 of the Sales Tax Act, 1990, punishable under S.33 of the Act---Deputy Collector observed that the taxpayer deducted input tax on the imported raw material and the Bills of Entries, were not in the name of taxpayer---Taxpayer preferred appeal before the Collector (Appeals) and the Collector vide order-in-appeal remanded the case by observing that examination of the records of the case had revealed that the instructions issued by the Federal Board of Revenue had not been taken care of while deciding the matter of adjustment of sales tax---Show-cause notice was issued to the taxpayer, without mentioning the section under which the Adjudicating Authority could proceed against the taxpayer---Show-cause notice, even did not make any demand for sales tax---Words "as to why the illegal adjustment of input tax amounting to Rs.476,957 be not recovered", did not appear in the show-cause notice---Input tax, claimed by the taxpayer, was covered by Federal Board of Revenue's letter---Case was remanded to the original Authority, with the direction for deciding the same afresh, after considering the letter of the Federal Board of Revenue, but the Adjudicating Authority did not take into consideration said letter---Bills of Entries were in conformity with the procedure prescribed by the Federal Board of Revenue's letters, and same were verified by Assistant Collector Customs, Central Excise and Sales Tax in terms of said letters of the Board---Taxpayer having claimed the input tax in accordance with law, there was no substance in the departmental appeal, which was dismissed.

Shahid-ul-Hassan Chatta, DR for Petitioner.

Tariq Najeeb for Respondents.

2012 P T D (Trib.) 699

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member

Messrs YASRAB CORPORATION

Versus

C.I.R./R.T.O., PESHAWAR

I.T.As. Nos. 57 to 60(PB) of 2008, decided on 1st August, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 53, 54, 55, 159, 170 & 131---Constitution of Pakistan, Art.247---Tribal areas---Exemption from tax and refund claim---Appeal to Appellate Tribunal---Assessee, who derived income as an importer and seller, did not file any returns of income and claimed that as he earned income from non-taxable area, filing of return was not required---Assessee had asked for refund of tax withheld at the import stage---Taxation Officer rejected refund claim of assessee on the point of limitation---Commissioner Income Tax (Appeals) confirmed the order of the Taxation Officer---Validity---Assessee had asked for refund of tax withheld at the import stage in his application filed in year 2007 for refund for assessment years 1999-2000 to 2002-2003, despite assessee had filed no income tax returns for any of the said years---Assessee had taken the new plea that as his income was exempt as per Art.247 of the Constitution he was not required to file any return of income---In either case whether the return had been filed voluntarily or on notice by the department for filing of return, no assessment could be framed after prescribed period of limitation, which was 5 years from end of financial year, where income was first assessable---In absence of any proceedings or any assessment order it could not be established that income had been earned by the assessee, from non-taxable area---In the present case, period of 5 years had already expired, as during prescribed period of limitation, neither the returns of income had been filed nor any proceedings for assessment had been initiated, nor any assessment had been framed or refund had been created---Taxation Officer though had rejected the application on the issue of limitation, but he had not considered the non-filing of returns by the assessee; completion of and passing of any assessment order the non-creation of refund in consequence of any assessment orders, but rejected the refund application on the issue of limitation; whereas under the law, he was supposed to have taken all the pros and cons of the matter in accordance to law---Assessee had failed to prove the fact that he had effected the sales and had earned the income from non-taxable area---Assessee, in circumstances, was not entitled to any refund---Claim of assessee was rightly rejected by authorities below, in circumstances.

1982 PTD 274; 1998 PTD 2012; 2008 PTD (Trib.) 370; PLD 2003 SC 614 = 2003 PTD 1913; 2008 PTD 169; 1993 PTD 443; 1973 PTD 530; 2000 PTD 2165 and 2000 PTD 3396 ref.

Hafiz Muhammad Idris for Appellant.

Muhammad Tariq Arbab, L/DR for Respondent.

Date of hearing: 1st August, 2009.

2012 P T D (Trib.) 704

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member

I.T.A. No. 8/KB of 2011, decided on 22nd February, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 128(5), 161, 205 & 131---Failure to pay tax and additional tax---Admission of documentary evidence by Commissioner (Appeals) not produced earlier---Authorized representative of the taxpayer filed certain details and documents before Officer Inland Revenue, which were found illegible and the Officer observing that the taxpayer had committed default in payment of tax, passed ex parte order under Ss.161 & 205 of Income Tax Ordinance, 2001---Commissioner Inland Revenue (Appeals) having set aside order of the Officer, the department had filed appeal before Appellate Tribunal---Taxpayer had produced sufficient documentary evidence which had been discarded by the Officer Inland Revenue, merely on the ground that he found documents illegible---Commissioner (Appeals) neither admitted fresh documentary evidence, which had allegedly not produced, nor adopted illegal approach, but relied upon the details of documentary evidence earlier produced before the Officer---Commissioner (Appeals) under provisions of S.128(5) of the Income Tax Ordinance, 2001, had been empowered to admit fresh evidence, if he found himself satisfied that taxpayer was prevented by sufficient cause to produce the same before the Assessing Officer---Mere technicalities should not be hindrance to do complete justice---Exercise of the discretion in law by the competent Authority, would not be opened to any exception---Grounds of appeal agitated by the department against impugned order of Commissioner (Appeals) were not tenable in law and on the facts---Impugned judicious appellate order, did not suffer from any gross irregularity, illegality and infirmity and did not warrant any interference by Appellate Tribunal.

2010 PTD (Trib.) 2463 distinguished.

PLD 1975 SC 678; (2006) 94 Tax 1451 (H.C.) (sic) and 2004 PTD 173 ref.

Rajabuddin DR for Appellant.

Syed Azhar Nawab for Respondent.

Date of hearing: 22nd February, 2011.

2012 P T D (Trib.) 713

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

I.T.As. Nos.52/IB of 2010, 49/IB to 51/IB and 53/IB of 2011, decided on 30th April, 2011.

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

----Ss. 53, 54, 55, 159 & 131, Second Sched., Part-I, Clause (131)---Exemption, claim for---Taxpayer had claimed that he fully qualified for exemption from tax under clause 131 of Part-I of Second Schedule of Income Tax Ordinance, 2001---Contract in question was a "composite contract", executed between the taxpayer and the company for carrying out "multiple Jobs", but it did not specify as to which part of the performance of the contract was to be carried out in Pakistan or outside Pakistan---Taxpayer had admitted that the receipts declared by it included the consideration of other services/works done in Pakistan---Income Tax returns, filed by the taxpayer, however, were silent with regard to the characterization of receipts from domestic and foreign sources---Statement of expenses, also omitted the identification of all expenses in account of activities, performed domestically or outside Pakistan---Taxpayer's expenses in its profit and loss account were inconsistent with the legislative intent behind the exemption in the relevant clause of the schedule---Part of the taxpayer's receipts were connected with activities performed in Pakistan, his claim that his entire receipt for the relevant year qualified under Cl.(131) of Part-I of Second Schedule of Income Tax Ordinance, 2001, could not be accepted---Income of the taxpayer earned from the sale of the design of the vehicle represented royalty of its technical and engineering services provided outside Pakistan, would meet the conditions of exemption provided in the exemption clause (131)---Said part of the income of the taxpayer, was entitled to tax exemption, provided, it was correctly reported by him and standing by test of verification by the Taxation Officer---Taxpayer's receipts representing the consideration of certain technical services rendered in Pakistan, were held to be ineligible for the benefit of exemption under exemption clause (131)---Income falling in that category needed to be clearly qualified and duly taxed---Taxpayer's claim of expenses in technical services rendered in Pakistan, could also be considered on the touchstone of reason and admissibility under the Income Tax Ordinance, 2001---Appeal filed by the taxpayer, merited partial success to the extent of acceptance of his claim of exemption in respect of its income of royalty or commission arising from sale of intellectual property in the design of the vehicle sold to a foreign entity.

2010 PTD (Trib.) 878; 2007 PTD 1651, (LHC); 2006 PTD 661 (Trib.); 2005 PTD 234; 2009 PTD 1392; 2010 PTD 355; 1966 PTD 664; PLD 1996 SC 828; 2000 PTD 2958 and 2000 PTD 497 ref.

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

----Ss. 53, 54, 55 & 153---Exemption from income tax---Criteria---Provisions granting exemption or privileges had to be construed strictly against the person the claiming the exemption or the privilege---Taxpayer was supposed to show that it was entitled to the exemption---If the rules did not refer to an item of capital, there could be no exemption with regard to it---Where an exemption from taxation was claimed, the words of the exempting clause must be strictly construed in favour of the State which was based on the theory that the obligation to pay tax was co-extensive with the protection received by the subject; and in obtaining an exemption from taxation, the particular subject was seeking relief from the obligation at the cost of other assessee---Where the words of the notification in its plain reading, would entitle to the exemption specified therein, the court could not go beyond the wordings of the clause to withhold that relief on the theory of equal obligation for equal protection; grants of tax exemption had to be narrowly construed against taxpayer---If the language of the provision was doubtful, same should be resolved in favour of assessee on the touchstone of the intention of legislature---All exemptions from taxation would increase the burden on the other members of the community, they should be deprecated, except to the extent permissible by the express language of the statute, provisions granting exemptions or privileges, had to be construed strictly against the persons claiming exemption or privilege---Onus in that connection would lay on the assessee claiming exemption to establish his plea---Exemption must be strictly construed and confined to the exemption itself, and not extended beyond that---Full effect was to be given to the provision creating exemption---Court could not supply deficiency---In matters of exemption and relief, the law was to be construed liberally and the relief was not to be denied for technical irritants---Assessee had to prove himself to be within the four corners of the exemption provisions---Particular subject which did not specifically stand exempted, could not be brought into category of exemption by stretching the rules which did not permit such interpretation---Doubt or ambiguity, if any, was always to be resolved in favour of the subject and not in favour of the State---Where two interpretations were possible, one favourable to the assessees, should be adopted.

1993 PTD 306; PLD 1966 SC 828; PLD 1966 Dacca 523; 1998 PTD 3835; 1998 PTD (Trib.) 62; 2000 PTD 497; 1973 PTD 361; 1998 PTD 3669; 1998 PTD 930; 2003 PTD 1805; 2003 PTD (Trib.) 1081; 2002 SCMR 312; 2002 PTD (Trib.) 783; 1998 SCMR 1950; 1990 PTD (Trib.) 121 and 1988 PTD (Trib.) 315 ref.

(c) Interpretation of statutes---

----Fiscal Statute---Exemption---Provisions relating to exemption to be strictly construed---Principles elucidated.

Shaukat Baloch, FCA and Ch. Naeem-ul-Haq for Appellant.

Zia Ullah Khan, DR, for Respondent.

Date of hearing: 30th April, 2011.

2012 P T D (Trib.) 734

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

C.I.T., LEGAL DIVISION, L.T.U., LAHORE

Versus

Messrs SANPAK ENGINEERING INDUSTRIES, LAHORE

I.T.As. Nos.1094/LB, 1118/LB, 1119/LB, 1216/LB, 899/LB and 1095/LB of 2008, decided on 1st December, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.21(c), 161, 6(2) (c) & 107(2)---Avoidance of Double Taxation Treaty between Pakistan and Japan, Arts. VII & VIII---Deductions not allowed---Royalty---Deletion of addition made on account of 'royalty'---Revenue contended that taxpayer was under legal obligation to deduct tax on payments made on account of royalty to non-resident company and that taxpayer company had failed to comply with the mandatory provisions of S.21(c) of the Income Tax Ordinance, 2001, addition made on account of royalty was quite justified against which, deletion order by the First Appellate Authority was not sustainable under the law---Taxpayer contended that S.107(2) of the Income Tax Ordinance, 2001, which related to implementation of agreements for Avoidance of Double Taxation, override any tax law enforceable in the country; that taxpayer company enjoyed exemption from deduction of tax on remittances on account of royalty in the light of provisions contained in Articles VII and VIII of Avoidance of Double Taxation Treaty between Pakistan and Japan as well as S.6(2)(c) of the Income Tax Ordinance, 2001; that provisions of S.152 of the Income Tax Ordinance, 2001 regarding tax deduction on payments made to a non-resident company, on account of royalty were not applicable and that Commissioner of Income Tax had himself allowed exemption from deduction of tax on payments on account of royalty---Validity---Exemption from tax should be allowable on royalties paid to the non-resident company falling under the ambit of Avoidance of Double Taxation Treaty---Agreement of Avoidance of Double Taxation Treaty was executed between the Governments of Japan and Pakistan by virtue of which, the taxpayer company was allowed exemption on the payments made on account of royalty---Payments made on account of royalty by the taxpayer company to non-resident company were exempt from taxation in Pakistan---Orders of First Appellate Authority were upheld by the Appellate Tribunal in respect of deleting addition of expense of royalty covered under the Agreement for Avoidance of Double Taxation Treaty---Departmental appeals were dismissed by the Appellate Tribunal being devoid of any merit.

2010 PTD 1159 rel.

M. Tahir, D.R. for Appellant.

M. Waseem Chaudhry for Respondent.

Date of hearing: 1st December, 2011.

2012 P T D (Trib.) 741

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ch. Munir Sadiq, Judicial Member

Messrs KHAN CNG, FILLING STATION, RAWALPINDI and others

Versus

DEPUTY COMMISSIONER INLAND REVENUE (AUDIT-II), R.T.O., RAWALPINDI and others

I.T.As. Nos.357-358/IB, 404-406/IB, 731/IB of 2011, decided on 2nd July, 2011.

Per Munsif Khan Minhas Judicial Member, Ch. Munir Sadiq Judicial Member, agreeing--

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

----Ss. 122(5A), 177(4), 174 & 176---Amendment of assessment---C.N.G. Station---Definite information---Amendment of assessment by characterization of OGRA formula as a 'definite information'---Taxpayer contended that OGRA formula was not definite as such the department opted for assessment on the basis of 4% tax formula instead of OGRA formula in most of the case; and adoption of much lesser tax showed that department was not satisfied with the OGRA formula as such made assessments on the basis of 4% tax even in some cases after the assessment on the basis of OGRA formula, the Commissioner had revised the order under S.122(5A) of the Income Tax Ordinance, 2001 and charged the tax at 4% formula and reduced the tax liability of many tax payers, as such, no reliance could be made on said OGRA formula by treating same as 'definite information'---Validity---Sales as per Gas Meter had been correctly declared---No wrong declaration or concealment of facts was noticed---Opinion of the Officer that 'definite information' had been received as it was discovered that by applying OGRA formula for converting MMBTU into KG, taxpayer had earned more profit was a different conclusion from same set of facts---Despite scientific conversion, said formula did not fulfil touchstone/yardstick of 'definite information'---Assessment could only be amended on the basis of 'definite information'---Deemed assessment had its own sanctity which was not to be disturbed unless case fell within the strict parameters of the wordings used by the legislature---Appellate Tribunal annulled the amended assessment and restored the deemed assessment under S.120(i)(b) of the Income Tax Ordinance, 2001.

2011 PTD (Trib.) 321; 2010 PTD 421; 2010 PTD (Trib.) 1733; 2010 PTD (Trib.) 1709; I.T.A. No.81 etc/B, dated 27-4-2010; 2009 PTD (Trib.) 927; 2009 PTD (Trib.) 638; PLD 1997 SC 700 = 1997 PTD 1693; 1997 SCMR 1256 and 1993 SCMR 1108 = 1993 PTD 1108 ref.

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

----S.122(5A)---Amendment of assessment---'Definite information'---Change of opinion---Term 'definite information' conveys a meaning which is not the same as change of opinion---Different interpretation of any provision of law or deriving a different conclusion from a given set of facts will not amount to 'definite information', such will be a change of opinion.

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

----S.122(5A)---Amendment of assessment---'Definite information'---Expression 'definite information', and similar other expressions used in the provisions of S.122 of the Income Tax Ordinance, 2001 or other related provisions certainly meant much more than mere material so as to cause a reasonable belief of even such evidence which might lead to a definite belief---Unless there was definite direct information and there was no further need to put the said definite information to trial by putting in further supporting material, process of self assessment could not be reopened.

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

----S.122 (5A)---Amendment of assessment---'Definite information'---Connotation---Term 'definite information' has not been defined in the Income Tax Ordinance, 1979/2001 it will be assumed that the Legislature intended to give ordinary dictionary meanings to it, whenever it is required to be dealt with---Word 'information' when it is qualified with the word 'definite', would mean that the said information in all probabilities, is correct in all respects and there is no likelihood of its being wrong or untrue and there is no necessity to conduct probe to be satisfied about its exactness/correctness and there is no chance of its being untrue.

Per Ikramullah Ghauri, Accountant Member (Minority view)

Per Ch. Munir Sadiq, Judicial Member, agreeing with Munsif Khan Minhas, Judicial Member

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

----Ss.122(5A), 177 (4), 174 & 176---Amendment of assessment---CNG Station---'Definite information'---OGRA formula for determination of sales---Amendment of assessment by characterization of OGRA formula as a 'definite information'---Validity---Scientific advancements and research methodologies should be adopted in order to progress but when a legal question was before a court or tribunal it was bound to apply the law and decide the case according to peculiar facts and circumstances of the case---OGRA provided a formula to tax authorities for determining sales per month by converting the energy units (MMBTU) into mass units (kgs) but OGRA had not associated any of the representatives of the CNG stations before making such scientific research or during such scientific research/study---Formula provided a mode of determination and assessment, but in no terms it could be treated as a 'definite information'---Despite scientific conversion said formula did not fulfil the yardstick/touchstone of 'definite information' and under the law assessment could only be amended on the basis of 'definite information'---Amended assessment was annulled and deemed assessment under S.120 of the Income Tax Ordinance, 2001 was restored by the Appellate Tribunal.

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

----Ss.122 (5A), 120, 177(4), 174 & 176---Amendment of assessment---CNG station---Definite information---Annulment of amended assessment---Contention that instead of annulment of the amended assessment, taxpayer be asked to avail the facility of concessionary payment of tax at the rate of 4% as most taxpayers had availed said facility---Validity---Judicial forums were bound to decide every case as per law and facts of the case---Taxpayer/appellant could not be forced to follow the option availed by other taxpayers because it was their inalienable right to be treated in accordance with law---Appellate Tribunal ought to protect the revenue but strictly in accordance with law---Deemed assessment under S.120 of the Income Tax Ordinance, 2001 stood restored, said issue was answered in the negative by the Appellate Tribunal.

Hafiz Muhammad Idrees for Appellants (in I. T. As. Nos.357-358/IB, 404-406/IB, 731/IB of 2011).

Zia Ullah Khan, DR for Respondents (in I.T.As. Nos.357-358/IB, 404-406/IB, 731/IB of 2011).

Date of hearing: 2nd July, 2011.

2012 P T D (Trib.) 754

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zaheer-ud-Din, Accountant Member

C.I.R. (R.T.O.), FAISALABAD

Versus

Messrs BHARARA TEXTILE, FAISALABAD

S.T.A. No.229/LB of 2010, decided on 22nd December, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 10, 7 & 36---Refund of input---Refund issued was held to be recoverable on the sole ground that supplier, who issued the invoices, was subsequently black-listed---Such black-listing order was set aside by the Appellate Tribunal---First Appellate Authority found that after order of the Appellate Tribunal, order for blacklisting ceased to have any legal effect and was no longer in the field and could not be pressed into service for disallowing the input on invoices issued by the supplier---Validity---Show cause notice started with the word "prima facie this makes reasons to believe ………..", which meant that the department itself was not sure at the time of issuing show cause notice whether tax was deposited in national exchequer or not---Department failed to show from order-in-original or show cause notice where registered person was confronted with the order of blacklisting or where any nexus between the invoices issued by the blacklisted company or reasons of blacklisting was drawn---Order of First Appellate Authority was found to be well reasoned and justified---Departmental appeal was dismissed by the Appellate Tribunal.

S.T.A. No.2292/LB/2009 dated 6-5-2010 ref.

Atif Bashir, DR (RTO) for Appellant.

Khubaib Ahmad for Respondent.

Date of hearing: 22nd December, 2011.

2012 P T D (Trib.) 757

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member

C.I.R., ZONE-II, R.T.O., GUJRANWALA

Versus

IBRAR AHMAD

I.T.A. No.1245/LB of 2011, decided on 30th November, 2011.

Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Use of National Tax Number of the taxpayer for purchase of motor vehicle by another person---Taxpayer submitted the copy of payment receipt showing that motor vehicle was registered in the name of other person; the copy of delivery letter showing that delivery of said car was made to that person; affidavit of that person wherein he had mentioned that as he did not have National Tax Number, he used the National Tax Number of the taxpayer/appellant but the same were rejected by the Taxation Officer simply describing them as an afterthought---Validity---First Appellate Authority observed that Assessing Officer should have considered the affidavit given by that person and should have conducted proper inquiry in case the Assessing Officer did not consider the contents of the affidavit to be true; no inquiry was conducted by the Assessing Officer and contention of the taxpayer was rejected arbitrarily and cancelled the assessment order---Observations made by the First Appellate Authority were justified and he had rightly cancelled the assessment order---No illegality or perversity existed in the order to warrant any interference---Appeal filed by the Revenue was dismissed being devoid of any merits.

None for Appellant.

Shoaib Ahmad Sheikh for Respondent.

Date of hearing: 30th November, 2011.

2012 P T D (Trib.) 759

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Member (Judicial) and Amjad Ikram Ali, Member (Accountant)

Messrs YOUSAF SUGAR MILLS, LAHORE

Versus

COLLECTOR OF SALES TAX AND FEDERAL EXCISE, LTU, LAHORE

S.T.A. No.1773/LB of 2009, decided on 23rd November, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 3, 6, 7, 11, 26, 34, 35, 36 & 46---Determination of tax liability---Recovery of tax not levied or short-levied or erroneously refunded---Appellant/registered person, had filed appeal against order-in-appeal passed by the Collector Customs---Difference in sale of sugar price on the same date was discovered during audit for the relevant period and Sales Tax was demanded for violation of Ss.2, 3, 6, 7, 11 & 26 of the Sales Tax Act, 1990, which was found recoverable under Ss.36(1), 34 & 35 of the Act---Departmental Representative defended the impugned order, but could not produce any justification for empowering the DRRA with the power to audit the registered person---Validity---DRRA, was coram non judice and the show-cause notice as well as order issued thereunder was without necessary legal validity---Orders as well as show-cause notice, issued by the authorities below, were set aside---Department could conduct fresh audit of the unit, if so permissible under the law---In case any contravention was detected, unit could be proceeded against in accordance with law.

2010 PTD 1355 ref.

Hussain Ahmad Sherazi for Appellant.

Karamat Ali Ch., DR. for Respondent.

2012 P T D (Trib.) 761

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javaid Masood Tahir Bhatti, Nazir Ahmad, Judicial Members Amjad Ikram Ali, Accountant Member

Messrs NEW LIGHT HOUSE (PVT.) LTD., LAHORE

Versus

C.I.T., R.T.O., LAHORE

I.T.As. Nos.806/LB of 2008, 258/LB to 261/LB of 2009, decided on 29th October, 2009.

Per Jawaid Masood Tahir Bhatti, Judicial Member and Nazir Ahmad, Judicial Member, agreeing (Majority view)--

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

----Ss. 80-C, 143-B, 50(5), 62 & 132---Income Tax Ordinance (XLIX of 2001), S.129---Tax on income of certain contractors and importers---Value of imported goods for the purposes of levy of income tax---Presumptive income against imports were finalized adopting value of imports inclusive of sales tax---Assessment was set aside by the First Appellate Authority but assessing officer had again finalized assessment by assessing imports value exclusive of sales tax---Validity---Appellate Tribunal in the previous assessment years had already held that tax liability under S.80-C of the Income Tax Ordinance, 1979 be calculated exclusive of customs duty and sales tax---Assessing Officer was directed to follow the directions made by the First Appellate Authority in accordance with the previous history of the case in accordance with the decision of Appellate Tribunal for the previous assessment year.

2003 PTD (Trib.) 735; 2005 PTD (Trib.) 280; 1994 PTD 848; 2005 PTD 194; 2006 PTD (Trib.) 2859 and I.T.A. No.1103/LB/2006, dated 1-12-2007 rel

2005 PTD 1328 distinguished.

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

----Ss.170(4) & 120---Refund---Rejection of---Taxpayer contended that Appellate Tribunal held that the duty of the Authority to refund was restricted to the extent of the cross check of the documents for calculation of amount of refund and to satisfy that no other tax was outstanding against him before issuance of refund; to check validity and legality of the various claims of the assessee in his return which practically was the deemed assessment order was not his responsibility; that he was not supposed to check the vires thereof; that process of issuance of refund was only a consequential action and the assessment and refund proceedings were two separate independent matters; that proceedings with an application filed by the assessee for refund, scrutiny of the return would amount entering into the purview of S.120 of the Income Tax Ordinance, 2001; that Refund Assessing Authority had entered into the jurisdiction which was available to the Assessing Authority and the rejection of refund application was without jurisdiction and liable to be annulled---Validity---No justification was available for rejecting the refund application---Order of First Appellate Authority was vacated and the order passed by the Taxation Officer was cancelled and Taxation Officer was directed to issue refund in accordance with law if no other liability was outstanding against the taxpayer.

2007 PTD (Trib.) 1780 rel.

Per Amjad Ikram Ali, Accountant Member [Minority view]

2003 PTD (Trib.) 725; 2006 PTD (Trib.) 2859; 2005 PTD 1328; 1994 PTD 848 and 2005 PTD 194 ref

Per Nazir Ahmad, Judicial Member; agreeing with Jawaid Masood Tahir Bhatti, Judicial Member [Majority view]

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

----S.50(5)---Deduction of tax at source---Interpretation of S.50(5), Income Tax Ordinance, 1979---Provision of S.50(5) of the Income Tax Ordinance, 1979 was a non-obstante provision of law having overriding effect over any law in force for the time being including Income Tax Ordinance, 1979---Phrase "any law for the time being in force" had been used, in contrast to the other similar provisions, the words "notwithstanding anything contained in this Ordinance" had been used---Word "any" used in phrase of the subsection (5) expands the scope of provision for the purposes of overriding effect on all the laws, whereas the other words restrict the overriding effect to the provision of Income Tax Ordinance, 1979 alone---Connotation "any" had two different colours, meaning and uses and was capable to be applied differently, but in the context of the subject and situation in which they had been used---Expression had diversity of meanings and may be employed to indicate "all" or "every" as well as "some" or "one" which follows that meaning of the words used in the statute were dependent upon the context and subject matter of the statute---Provision of S.50(5) had an overriding effect over the provisions of other laws including the Income Tax Ordinance, 1979.

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

----S.50(5)(a)---Deduction of tax at source---Method of determining value on which tax had to be collected---Sales tax whether deducted or collected did not constitute part of cost or value---In the case of end consumer alone it constitutes part of the sale in the normal parlance and understanding of costing method; but such principle of working out value or cost of a thing was not relevant for the purposes of S.50(5) of the Income Tax Ordinance, 1979---Legislature in its wisdom had determined value alone for the purposes of deduction of tax and for that reason it had specifically been stated in the said subsection that the tax had to be computed on the basis of value of such goods as increased by customs duty and sales tax, if any levied thereon at the rates specified in the First Schedule---While collecting tax the actual value as understood in the normal parlance shall be increased by the customs duty and sales tax, if any.

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

----S.50(5)---Deduction of tax at source---Word "leviable" and "levied"---Connotations---Word "leviable" was used in subsection (5) of S.50 of the Income Tax Ordinance, 1979 which was later on substituted with "levied" through Finance Act, 1995---Subsequent change in the terminology showed that prior to amendment through Finance Act, 1995 notwithstanding the tax actually levied, the increase in the value of goods so imported was subject to increase for the purposes of collection of tax---After amendment, sales tax or customs duty actually levied was taken for the purposes of increase in the value of goods imported.

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

----S.80-C---Tax on income of certain contractors and importers---Interpretation of S.80-C, Income Tax Ordinance, 1979---Provision of S.80C of the Income Tax Ordinance, 1979 was a non-obstante provision of law having an overriding effect over the other provisions of Income Tax Ordinance, 1979 for the reason that the same starts with the words "notwithstanding anything contained in this Ordinance or any other law for the time being in force" which indicate that the provision had an overriding effect not only in respect of provisions of Income Tax Ordinance, 1979 but also on any other law in force for the time being.

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

----S.80-C---Tax on income of certain contractors and importers---Fiction of law---Legality of---Provision of subsection (1) of S.80C of the Income Tax Ordinance, 1979 revealed that it creates a fiction of law by stating that whether any amount referred to in subsection (2) of S.80C of the Income Tax Ordinance, 1979 was received by or accrued or arose or was due to accrue or arose to any person, the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged at the rate specified in the First Schedule---Despite the fact that ordinarily the imported goods or value thereof could not be considered as income of a tax payer but the legislature had power to create a fiction thereby treating some transaction as income notwithstanding its meaning or understanding in the normal course of business---Legislature had intended that any amount received or accrued or arose or was deemed to arise or accrued to any person and which had been defined in subsection (2) of S.80C of the Income Tax Ordinance, 1979, the same shall be treated as income of such person---Validity of provision so challenged by the taxpayers for the reason that fiction created by law was totally against the norms of normal understanding and practice---Held, provisions of S.80C of the Income Tax Ordinance, 1979 were intra-vires and defined the legislating powers of the State.

PLD 1997 SC 582 rel.

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

----Ss.80-C (2) (a) (ii) & 50(5)---Income Tax Ordinance (XLIX of 2001), S.148---Tax on income of certain contractors and importers---Value of imported goods for the purposes of levy of income tax---Provisions of S.80C (2) (a) (ii) of the Income Tax Ordinance, 1979 provided that amount as computed for the purposes of collection of tax under S.50(5) of the Income Tax Ordinance, 1979 in respect of goods imported not being goods imported by an industrial undertaking as raw material for its own consumption---Such followed to be the amount qualifying to be a deemed income in terms of S.80C(1) of the Income Tax Ordinance, 1979 shall be the amount which had been computed by the Collector for the purposes of collection of tax under S.50(5) of the Income Tax Ordinance, 1979---In the earlier provision of S.50(5) of the Income Tax Ordinance, 1979, an amount was denoted to be a value of goods imported for the purposes of collection of tax but in S.80C(2)(a)(ii) of the Income Tax Ordinance, 1979 by fiction of law it had been provided that the value so adopted by the Collector for collection of tax under S.50(5) of the Income Tax Ordinance, 1979 shall be the amount which shall be treated to be the deemed income---Provisions of S.50(5) of the Income Tax Ordinance, 1979 provided a procedure of determination of value for the purposes of collection of tax and the sales tax so levied had to be added in the normal value for the purposes of collection---Whereas in S.80C of the Income Tax Ordinance, 1979, the same amount of value which had been computed by the Collector for collection of income viz inclusive of sales tax and customs duty had been taken to be the amount which to be subject, treated as deemed income of a person---Inclusion of sales tax and customs duty in the value shall no way change the complexion and the value of goods shall be taken as an amount of income in the manner as had been computed for the purposes of collection of tax---Amount of sales tax and customs duty shall constitute part of the total value of goods imported by a commercial importer---Provision of Income Tax Ordinance, 2001 on the issue were the same in the sense and in this context provisions of Income Tax Ordinance, 1979, except change of sections, there was no difference between the two sections, which were fully applicable in the present case---Value of goods imported shall be the value as increased by the customs duty and sales tax, if levied thereon---Question "whether for the purpose of collection of tax under S.50(5)(b) read with Explanation 1 of S.50(5) of the Income Tax Ordinance, 1979 and Ss.148(1) & 148(9) of the Income Tax Ordinance, 2001, the value of goods imported shall be the value as increased by the customs duty and sales tax if any levied thereon was answered in the positive.

2003 PTD (Trib.) 735; 2005 PTD (Trib.) 280; 1994 PTD 848 and 2005 PTD 194 distinguished.

2006 PTD (Trib.) 2859; 2005 PTD 1328; Eli Lilly Pakistan (Pvt.) Ltd., and others 2009 PTD 1392; 2006 PTD 2502 and PLD 1997 SC 582 rel.

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

----Ss.170(4), 120(1), 148 & 153---Refund---Taxpayer claimed refund on account of excess deduction of tax, which was rejected by the Taxation Officer on the ground that refund had been claimed on the basis of wrong calculation of tax by excluding the component of sales tax from the value of commercial imported goods---Validity---In case of refund application filed by the taxpayer, the Taxation Officer shall proceed to arrive at actual amount to be refunded and then issue refund without discussing nature of business of the taxpayer---Refund application was rejected on the ground that refund had been claimed on the basis of wrong calculation of tax by excluding the component of sales tax from the value of commercial imported goods---Taxation Officer had acted beyond his jurisdiction as in the presence of order under S.120(1) of the Income Tax Ordinance, 2001, he was not authorized and had got no power under the law to discuss the status of the case---On receiving refund application filed by the taxpayer, the Taxation Officer will proceed according to the provisions of sub-section (3) of S.170 of the Income Tax Ordinance, 2001 to arrive at actual amount of refund as provided in subsections (a), (b) and (c) of S.170(3) of the Income Tax Ordinance, 2001, on the basis of which he could reject or accept the refund claimed by the assessee within a stipulated period but could not discuss the nature of business to base his rejection of refund---Order passed under S.170(4) of the Income Tax Ordinance, 2001 was not sustainable under the law, being without jurisdiction and the confirmation of the same ordered by First Appellate Authority had also no legal sanctity---Question proposed "whether Taxation Officer justifiably refused to refund as there was no excess payment in terms of S.170(3) in the light of case-law discussed earlier" was answered in the negative.

2007 PTD (Trib.) 1780; (2008) 97 Tax 153 (Trib.); 2009 PTD (Trib.) 1026 and I.T.A. No. 30/LB of 2006 rel

Muhammad Hamid for Appellant.

Mrs. Fauzia Fukhar, D.R. for Respondent.

Date of hearing: 29th October, 2009.

2012 P T D (Trib.) 790

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson and Sohail Afzal, Accountant Member

Messrs SAMAD PIPE INDUSTRIES (PVT.) LIMITED

Versus

C.I.R., AUDIT 9, AUDIT DIVISION I, R.T.O.-II, LAHORE

I.T.As. Nos. 999/LB and 1106/LB of 2011, decided on 15th November, 2011.

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

----Ss. 60B, 177 & 122(9),---Workers' Participation Fund---Addition of---Taxpayer contended that accounts were prepared on accrual basis and an expense was charged as per International Accounting Standard; that S.60B of the Income Tax Ordinance, 2001 allowed Workers' Participation Fund as deduction against company's income, adding such expense in company's income was illegal which needed deletion; and that, the assessment order did not fulfill the requirement of confrontation as the Taxation Officer had made reliance on unreported judgment of the Appellate Tribunal without confronting the taxpayer through notice and merely mentioning appeal number of the said case of the Tribunal---Appellate Tribunal deleted the addition in circumstances.

2010 PTD (Trib.) 878; 2011 PTD 2158; 2011 PTD 1455 and I.T.A No.1217/LB/2008 ref

2008 PTD 647 rel.

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

----Ss. 61, 177 & 122(9)---Charitable donations---Addition on account of donations claimed as straight deduction under S.61 of the Income Tax Ordinance, 2001---Disallowance was made on the basis that claim of such expense was straight deduction which was wrong---Taxpayer explained that expense was incurred in accordance with the Injunctions of Islam not given in the section; and that the amount was made against purchase of printing & stationery, which it was duly explained before the Taxation Officer that accountant had made a mistake in cash book while typing the description---Expense was properly recorded under correct head in the books of accounts---Copies of ledger account of charity, donation, Zakat and Printing and Stationery before First Appellate Authority---Addition made by the Taxation Officer and confirmed by the First Appellate Authority by brushing aside the evidence produced before both the lower authorities, was unjustified and was deleted by the Appellate Tribunal.

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

----Ss. 111(1) (c), 177 & 122(9)---Unexplained income or assets---Addition on account of donations---Taxpayer contended that addition made was the consequence of addition made on account of Donations and Charity; that no separate notice under S.111(1)(c) of the Income Tax Ordinance, 2001 was issued; and that addition was not sustainable in the eye of law---Validity---Without issuance of separate notice no addition could be made---Addition was deleted by the Appellate Tribunal being wrongly made by the Taxation Officer.

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

----Ss.21(c), 177 & 122(9)---Addition on account of medical expense of employees---Medical expenses of employees were disallowed on the basis that the company/taxpayer never deducted tax while making payment to recipient---Validity---Expenses were of petty cash nature and the payment was made through cash---Copy of ledger was presented before the lower authorities which was not taken into account adequately which was against the principles of natural justice---Addition was deleted by the Appellate Tribunal being without justification.

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

----Ss.21(c), 177, 122(9) & Chapter X, Part-V, Div-IV---Addition on account of Salaries and Wages---Expenses were disallowed and added back with the observation that taxpayer had not deducted tax---Taxpayer contended that matter was of short deduction and not of non deduction as revealed by the assessment order as well as from the order of First Appellate Authority; that total disallowance of salaries was void ab initio and illegal; and that setting-aside of addition by the First Appellate Authority was not a proper solution, rather it was likely to drag the taxpayer in another incumbersome chain of litigation---Validity---Section 21(c) of the Income Tax Ordinance, 2001 was not applicable in the present situation---Addition made by the Taxation Officer was deleted by the Appellate Tribunal.

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

----Ss.21(c), 177 & 122(9)---Profit and Loss expenses---Clearing and forwarding; Repair and Maintenance (Electric installation); Repair and Maintenance (Building); Repair and Maintenance (Machinery); Vehicle running and maintenance; Printing and Stationery;---Addition of---Taxpayer contended that such expenses were very crucial in the business of manufacturing which had been added back on the basis that these were not supported with proper documentary evidence---Validity---Such expenses were part and parcel to run any business---No one could establish his business without said facilities---Entire add backs were deleted by the Appellate Tribunal.

2011 PTD 901 rel.

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

----Ss.174 (2), 177 & 122(9)---Professional fee---Expense was disallowed and added back on the basis that same was not supported with proper documentary evidence, whereas the same had been paid to well known law firm; that professional fee was recorded on accrual basis and paid in the next financial year; and that disallowance of expenses claimed on accrual basis was void ab initio and illegal---Validity---Add back made under said head and confirmed by the First Appellate Authority was without any justification which was deleted by the Appellate Tribunal.

2008 PTD 647 rel.

Shoaib Ahmed Sheikh for Appellant (I.T.A. No.999/LB of 2011).

M. Jamil Bhatti, D.R. for Respondent (I.T.A. No.999/LB of 2011).

M. Jamil Bhatit, D.R. for Appellant (in I.T.A No.1106/LB of 2011).

Shoaib Ahmed Sheikh for Respondent (in I.T.A. No.1106/LB of 2011).

Date of hearing: 14th November, 2011.

2012 P T D (Trib.) 801

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Javid Iqbal, Judicial Members and Amjad Ikram Ali, Accountant Member

SUI NORTHERN GAS PIPELINES LTD., LAHORE

Versus

COMMISSIONER INCOME TAX, L.T.U., LAHORE

I.T.A. No.652/LB of 2009, decided on 16th February, 2010.

Per Syed Nadeem Saqlain, Judicial Member: Javaid Iqbal Judicial Member, agreeing and Amjad Ikram Ali, Accountant Member, Contra.

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

----Ss. 21(c), 134 & 153---Failure to deduct withholding tax in respect of "gas bill collection charges"---Assessee company allegedly having failed to deduct withholding tax under S.153 of Income Tax Ordinance, 2001 in respect of 'gas bill collection charges' incurred in connection with services rendered by various institutions/banks in collecting the gas bills, Additional Commissioner, invoked provisions of S.21(c) of the Ordinance to disallow such collection charges---Validity---Representative of the company informed that similar disallowances were made in respect of tax years 2003 through 2006 in the appellant company's own case, but the Appellate Tribunal after analyzing the matter from various aspects, found that company was not obliged to withhold tax in respect of collection charges and annulled the disallowances made in the preceding years---No difference existed in facts and circumstances, as were prevailing in the preceding years as were invoked in the current year---Held, since the matter had already been decided in company's favour, disallowance on that account was deleted by following the already available decision of appellate Tribunal on the matter in question.

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

----Ss. 21(e) & 122(5-A)---Expenses on account of post retirement employee benefit---Amendment of assessment---Assessee company in its financial statements charged expenses regarding post retirement employee benefit relating to medical facility and free provision of gas---Additional Commissioner, in the amended order, disallowed both the amounts by invoking the provisions of S.21(e) of Income Tax Ordinance, 2001, holding that the accumulation of provisions under said heads tantamounted to creation of a 'fund' which not being an approved fund, attracted the mischief of said provisions of law---Reliance was placed by the Additional Commissioner on decision of Sindh High Court in case 2006 PTD 460, wherein there was issue of determination of allowability of 'provision for gratuity'---Reference to principle of 'stare decisis' being already well settled, same could not be ignored and later decision (2008 PTD 647), would certainly take precedence over the earlier judgment---Matter in the case related to claim of an ascertained liability regarding which the matter had already attained finality by virtue of decision of the apex court---Since that decision was being repeatedly followed by the High Courts, there was no room for any other law---Disallowance made by Additional Commissioner, was held to be not tenable in the eyes of law---Provision claimed by the assessee company qualified to be an admissible deduction in the light of ratio settled in case 1992 PTD 668 (SC), 2001 PTD 443 and 2008 PTD 647.

???????????

2006 PTD 460 distinguished.

???????????

1992 PTD 668; 2001 PTD 443 and 2008 PTD 647 rel.

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

----Ss. 18(1)(d) & 122(5-A)---Income from business, chargeable to income tax---Amendment in assessment---Additional Commissioner in amendment order charged to the tax the grants received by assessee company from the Federal Government by invoking the provisions of S.18(1)(d) of Income Tax Ordinance, 2001---First Appellate Authority having upheld the action of the Additional Commissioner, the company had filed appeal to Appellate Tribunal---Submissions of representative of the company was that company regularly received grants from Federal Government, in the same way it received contribution from consumers, which were solely utilized towards funding of transmission and distributing lines, which were utilized to transmit natural gas to consumer; it was explained that accounting and tax treatment of both the consumer contributions and Government grant was exactly the same in the case of the company---While in the financial statement those were recognized as 'deferred credit', in the tax computation these amounts were recorded as a reduction in written down value of the depreciable assets---Representative of the company had clarified that said treatment was consistent for the past many decades---Said matter was finally settled in favour of the company, when Appellate Tribunal in its decision, ruled out that the company correctly reduced the amount from the written down value of the depreciable assets and as such amount was not a revenue receipt---Tribunal observed that where an amount was received towards sharing the cost of service lines i.e. the amount was utilized in creation of an assets, which was a capital asset, then the receipt, being in the nature of direct recoupment or reimbursement of the capital expenditure, could not be treated as revenue/taxable receipt---Issue having already been conclusively decided, Additional Commissioner was not justified in deviating from the principles enunciated in the Appellate? Tribunal's? earlier? decisions---Amounts were illegally charged to tax, in circumstances---Impugned order passed by the Additional Commissioner and confirmed by first Appellate Authority, being liable to be struck down, were vacated.

???????????

1985 PTD 413; 2009 PTD (Trib.) 1187; 2010 PTD (Trib.) 2105; PLD 1963 SC 296; PLJ 1995 SC 423(sic); 178 ITR 548; 2006 PTD 2329; 2007 PTD 1533; 2004 PTD 62; PLD 2004 Pesh. H.C. 47; 2003 PTD 2321 and 2008 PLC (C.S.) 768 ref.

Per Amjad Ikram Ali, Accountant Member Contra.---[Minority view].

???????????

Syed Shabbar Zaidi, FCA and Asim Zulfiqar Ali, FCA for Appellant.

???????????

S. Sajjad Haider Rizvi, L.A. and Muhammad Asif, D.R. for Respondent.

???????????

Date of hearing: 16th February, 2010.

2012 P T D (Trib.) 835

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member and Shahid Naseem, Accountant Member

C.I.R., R.T.O., GUJRANWALA

Versus

Messrs USMAN RICE MILLS, GUJRANWALA

I.T.A. No.213/LB of 2011, decided on 30th January, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122---Amendment of assessment---"Definite information"---Assessment was amended by estimating husking receipts at three times of consumption of electricity, applying gross profit rate 50% and making Profit and Loss add backs---Re-assessment was annulled by the First Appellate Authority---Validity---Assessing Officer had failed to acquire any 'definite information' to make amendment of assessment and only proceeded on guess work while computing income of the taxpayer---No specific notice under S.122(9) of the Income Tax Ordinance, 2001 was ever issued which was a mandatory requirement---Order of First Appellate Authority was maintained by the Appellate Tribunal.

Mrs. Kehkashan Khan, D.R. for Appellant.

Shoaib Ahmed Sh., for Respondent.

Date of hearing: 30th January, 2012.

2012 P T D (Trib.) 839

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

C.I.R., R.T.O., ISLAMABAD

Versus

ASIF JAHANGIR

I.T.A. No.955/IB of 2010, decided on 14th December, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122C, 114(4) & 127---Provisional assessment---Tax year 2008---Taxpayer was an individual who owned a vehicle and was residing abroad---Proceedings were initiated by issuing notice under S.114(4) of the Income Tax Ordinance, 2001---Notice was not complied with by taxpayer---Taxation Officer estimated the fair market value of the vehicle and made addition---Taxpayer contended that S.122-C of the Income Tax Ordinance, 2001 was introduced through Amended Finance Ordinance dated 28-10-2009 and was applicable for the tax year 2010 and onward; and completion of assessment under S.122C of the Income Tax Ordinance, 2001 for the year under appeal was illegal, unjustified and without jurisdiction; and that Cl.(vi) of subsection (1) of S.114 of the Income Tax Ordinance, 2001 was introduced through Finance Act, 2009 was applicable for the tax year 2010 and onward so issuance of notice under S.114(4) of the Income Tax Ordinance, 2001 and subsequently completion of assessment under S.122C of the Income Tax Ordinance, 2001 for the tax year 2008 was illegal, unjustified and without jurisdiction---Validity---Taxpayer produced photocopy of passport showing that taxpayer was a U.K national; and produced bill of entry showing the booking of vehicle from Japan and consideration was transmitted to Japan from U.K---Assessment made was without jurisdiction because provision of S.122C of the Income Tax Ordinance, 2001 was introduced through Amended Finance Ordinance dated 28-10-2009 and was applicable for the tax year 2010 and onward---Assessment completed under S.122C of the Income Tax Ordinance, 2001 was without jurisdiction and not maintainable in the eye of law--- Order passed by the First Appellate Authority was not open to any exception and was upheld and maintained---Departmental appeal was dismissed by the Appellate Tribunal.

1999 PTD 4061; CIT v. Pakistan Tobacco Company Ltd. 1988 PTD 66; Rustam F Cowasjee and others v C.B.R and 2 others (1985) 52 Tax 123 (H.C. Kar.) and Harjina and Company (Pak) Ltd. v. CIT (1964) 8 Tax (H.C. Kar.) = 1963 PTD 867 = 1963 PLD 996 rel.

Ayesha Khalid, D.R. for Appellant.

Aurangzeb, ITP for Respondent.

Date of hearing: 14th December, 2010.

2012 P T D (Trib.) 843

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaista Abbas, Accountant Member

C.I.R., R.T.O., SUKKUR

Versus

Messrs STAR LINK COMMUNICATION, Proprietor M. Raheel, Sukkur

I.T.A. No.864/KB of 2011, decided on 3rd February, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(4), 221, 120, 170, 177(4), 114, 115(4) & 113A---Amendment of assessment---Commission income---Taxpayer filed return under normal law in addition to statement under S.115(4) of the Income Tax Ordinance, 2001 and claimed tax refund---Taxation Officer rectified the deemed order treating all the receipts covered under presumptive tax regime---First Appellate Authority declared the rectified order to be illegal, null and void and restored the assessment order and directed to issue refund after examining the evidence of tax withheld---Taxpayer was issued refund and then selected the case for audit and amended the order under S.122(4) of the Income Tax Ordinance, 2001 calculating the tax payable equal to the amount refunded---Validity---Doctrine of merger would be applicable as the case of the taxpayer had been selected for audit on the basis of 'definite information' but no definite information as such had been mentioned in the order passed by the Taxation Officer---First Appellate Authority had observed that on the similar facts which had already been discussed in the first round of litigation before the First Appellate Authority and the Appellate Tribunal the Taxation Officer was not justified to amend the order---First Appellate Authority had rightly annulled the order passed by the Taxation Officer---Order of First Appellate Authority was upheld and appeal filed by the department was dismissed by the Appellate Tribunal.

1992 PTD 566 (S.C. Pak); 1992 PTD 932 (S.C. Pak); 2010 PTD 1506 (H.C. ISB); 2002 PTD 212; 2008 PTD 216 (Trib.) and 2009 PTD 1536 rel

Naseer Ahmed, ACIR and Muhammad Nabeel Rana, D.R. for Appellants.

Abdul Tahir Ansari, ITP for Respondent.

Date of hearing: 3rd February, 2012.

2012 P T D (Trib.) 846

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member

Messrs ARZOO TEXTILE MILLS LIMITED, FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.1029/LB of 2009, decided on 26th August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10, 11, 36 & 46---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Order-in-original for determination and recovery of tax in question, which under the provisions of S.36(3) of Sales Tax Act, 1990 was to be passed within 90 days of issuance of notice, was passed after about 400 days of issuance of the notice---Adjudicating Authority had neither got any extention in that stipulated period from the Collector Sales Tax, nor recorded any reason for passing of order after prescribed 90 days---Even if the Collector had fixed any extended period, the order-in-original being passed after lapse of 180 days, would have become time-barred---Once limitation had started to run and had come to an end, the assessee would acquire a vested right of escapement of assessment by lapse of time---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 was deemed directory, but where a public functionary was empowered to create liability against a citizen only within the prescribed time, it was mandatory---When prescribed limit was beneficial for the citizen and restricted the executive power to touch the pocket of a taxpayer---Even if there was a good case for creation of liability, taxpayer would not be dragged in---Impugned order passed after lapse of statutory period was declared to have been made without lawful authority and was annulled---Appeal was accepted.

CBR/Sales Tax Department v. Messrs Pace International Rawalpindi PTCL 2005 CL 841; 2008 PTD 578; Messrs Super Asia Muhammad Din and Sons v. Collector of Sales Tax 2008 PTD 60; 2009 PTD 762 and Nagina Silk Mill Lyallpur v. The Income Tax Officer and the Income Tax Appellate Tribunal, Pakistan PLD 1963 SC 322 rel

Hussain Ahmad Sherazi for Appellant.

Ashfaq Ahmad D.R. for Respondent.

2012 P T D (Trib.) 851

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmed, Judicial Member and Khalid Aziz Banth, Accountant Member

AMJAD MAJEED KHAN, Proprietor Messrs Amco International, Lahore

Versus

C.I.R., R.T.O.-II, LAHORE

I.T.A. No.1511/LB of 2010, decided on 13th January, 2012.

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

----Ss.18(1), 122(9) & 177(4)---Income from business---Addition on account of gain on sale of plots---Estimated income by the Taxation Officer included estimation of receipts from embroidery business, disallowances from the profit and loss account and addition on gain on sale of plots---Taxpayer contended that taxpayer had never indulged in the business of real estate and his main business was embroidery receipts from installation of embroidery machines---Validity---Department erred in holding the taxpayer to be carrying on the business of real estate because the amended orders for tax years 2003 and 2005 revealed that no such dealings were made by the taxpayer and the Revenue also did not determine any income from said source---Department could not establish any intention on the part of taxpayer to establish that the sale and purchase of plots was indeed an adventure in the nature of trade; at the most it could be said that it was an odd transaction---Taxpayer purchased a plot, which was still owned by the taxpayer as had been contended by the taxpayer by making a statement at bar---Addition was deleted by the Appellate Tribunal---Even otherwise gain on immoveable assets was not a domain of Federal Government.

(b) Income-tax---

----Wages---Addition of---Taxpayer contended that salary register along with copies of CNICS was produced before the First Appellate Authority and without confronting him on any non-verification, addition was made---Validity---Addition was made summarily and without any basis---Addition was deleted by the Appellate Tribunal in circumstances.

Muhammad Waseem Ch. for Appellant.

Sajjad Tasleem, D.R. for Respondent.

Date of hearing: 12th January, 2012.

2012 P T D (Trib.) 854

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Muhammad Iftikhar Khan, Accountant Member

Messrs FRONTIER STEEL MILLS, GADOON AMAZAI

Versus

COLLECTOR (APPEALS) CUSTOMS, FEDERAL EXCISE AND SALES TAX, PESHAWAR

S.Ts. Nos.157/PB and 213/ATIR of 2009, decided on 29th July, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 3, 33 & 46---Short payment of Sales Tax---Report of the Audit team was to the effect that assessee did not follow the benchmark as specified by the Federal Board of Revenue, wherein 950 electric units consumed would give the production of one metric ton of steel ingots---Non-observance of the formula at the short production of steel ingots was made, out of which case was decided directing the assessee to deposit the amount of said short payments along with additional tax to be collected at the time of payment---Penalty at the rate of 3% of the amount of tax involved was also imposed under S.33 of Sales Tax Act, 1990---Representative of the assessee had contended that the levy of Sales Tax on steel ingots was cleared during July, 2000 to June, 2001, that Sales tax was paid as per S.3 of the Sales Tax Act, 1990; that on the basis of circular by the Central Board of Revenue fixing the benchmark to produce on ton of ingots against 950 units of electricity could not be applied retrospectively; that the notification of Board of Revenue was in conflict with S.3 of Sales Tax Act, 1990; that tax was to be charged and paid on taxable supplies made by a registered production on the basis of consumption of electricity, could not be presumed converted into taxable supply without clearly establishing the supply made by the authorities in excess of that recorded in the sales tax record; that the subject could not be made liable to tax unless warranted by provisions of the statute; and that tax was leviable on supply and was to be paid on the price paid for the supply---Validity---In the present case, agreement was executed between the parties, which was converted into notification by the subordinate Legislation; and it was acted upon by the assessee by way of depositing the tax for considerable period without making any contest---First Appellate Authority, in circumstances, had rightly decided the issue as there existed no reason for any interference in the impugned order, which was confirmed accordingly.

2008 PTD 103 distinguished.

Qazi Waheed-ud-Din for Appellant.

Mohsin Khan, ITO and Shuaib Sultan Senior Auditor for Respondents.

2012 P T D (Trib.) 858

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Asghar Paswal, Judicial Member and Abdul Rauf, Accountant Member

Messrs KAMAL SPINNING MILLS, FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.201/LB of 2010, decided on 19th December, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 30 & 7---S.R.O. 547(I)/2008 dated 11-6-2008---Appointment of authorities---Determination of tax liability---Claim of input relating to packing material purchased was rejected and confirmed by the First Appellate Authority---Registered person contended that appointment of sales tax officer was to be notified in the official gazette and appointment of Inland Revenue Officer who exercised powers by passing the order-in-original and order-in-appeal was never notified in the official gazette and both the officers were not competent to assume jurisdiction and exercise powers in respect of registered person---Validity---Appointment of officers in the newly created service group "Inland Revenue Service" was to be made in accordance with the procedure laid down in S.30 of the Sales Tax Act, 1990 i.e. appointment of officers was to be notified in the official gazette of Pakistan and no such notification on the pattern of S.R.O. 547(I)/2008 dated 11-6-2008 was published in the Official Gazette of Pakistan meaning thereby that the officers who continued to exercise powers under the newly created set up did so without any legal mandate or support---Although the words "by notification in the Official Gazette of Pakistan" occurring in S.30 of the Sales Tax Act, 1990 were omitted from S.30 of the Sales Tax Act, 1990 through Finance Act, 2010 (effective from 5th June, 2010), the amendment, being prospective in effect, could not cure the jurisdictional defect in the issuance of show cause notice as well as order in original which were issued much earlier on 5-1-2010 and 2-3-2010 respectively---Entire structure raised on the foundation of an unlawful show cause notice, and order-in-original passed in consequence thereof were not sustainable in the eye of law because both the show cause notice and order-in-original had been issued without lawful authority---Orders passed by the authorities below were held to be nullity in the eye of law and were vacated by the Appellate Tribunal.

Khubaib Ahmad for Appellant.

Faisal Asghar (DR) for Respondent.

Date of hearing: 19th December, 2011.

2012 P T D (Trib.) 864

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Asad Ali Jan, Accountant Member

Messrs ISLAMABAD AUTOS, RAWALPINDI

Versus

C.I.R., R.T.O., RAWALPINDI

S.T.A. No.902/IB of 2011, decided on 4th January, 2012.

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

----Ss.11(2), 7, 8(1)(ca), 21, 33(5) & 36(1)---Sales Tax Rules, 2006, R.12(5)---Assessment of tax---Input adjustment---Claimed input tax adjustment was disallowed on the strength of purchase invoices issued by suspended/black listed/blocked units and ordered to deposit inadmissible tax along with default surcharge---Tax payer contended that Assessing Officer rejected the input tax adjustment without conducting any inquiry about the black listed/suspended/blocked registered persons; and at the time of claiming input tax from units in question were functional/active; and subsequent suspension/blocking of the same could not in any way affect the statutory right of the taxpayer to claim valid lawful admissible input tax---Validity---Assessment was made ex parte, as the taxpayer did not attend the proceedings, due to non service of notices---Raising of demand under such circumstances of non-hearing, and when the issues were of such mysterious nature i.e. casting doubt and suspicions over transactions, issues of black listing and blocking, could not be decided in isolation, same had to be established on the basis of evidence, audit of record and books of accounts that the invoices were fake concluding in declaring input tax as inadmissible---In order to let due process of law unfold, it was necessary that before raising any demand interface with affected party had to be conducted, also in the present case, outreached to supplier's record had to be made so as to prove and establish the fact of fraud---Orders of the authorities below were set aside and case was remanded for re-adjudication by ensuring attendance of the taxpayer and inquiry of the suppliers and after invoking necessary provisions of the law.

2010 PTD (Trib.) 1631 and 2011 PTD (Trib.) 162 ref.

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

----S. 21--- De-registration, blacklisting and suspension of registration---Effect---Mere black listing or blocking of person could not be allowed to impinge on previous transactions prior to black listing, if the same were found to be correct and verified.

Shezad Mehmood and Fazal Butt Taxpayer.

Muhammad Jawad, DR for Department.

Date of hearing: 4th January, 2012.

2012 P T D (Trib.) 868

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Nazir Ahmad, Javed Iqbal, Judicial Members, Abdul Rauf and Muhammad Ashraf, Accountant Members

PAKISTAN TELECOMMUNICATION COMPANY, ISLAMABAD

Versus

C.I.T. (LEGAL) LARGE TAXPAYERS UNIT, ISLAMABAD

I.T.A. No.726/IB of 2009, decided on 15th February, 2011.

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

----Ss. 21(c), 152, 122(5A) & 177---Avoidance of Double Taxation Treaty between Pakistan and UK, Art.12(3)---Deduction not allowed---Taxpayer a Telecommunication company---Satellite charges---Royalty---Amount paid on account of satellite charges was treated to be paid on account of use of transponders of foreign satellite company falling within the definition of royalty in the light of provisions contained in S.2(54) of the Income Tax Ordinance, 2001 as well as Art. 12(3) of the Avoidance of Double Taxation Treaty between Pakistan and UK and added under S.21(c) of the Income Tax Ordinance, 2001---Taxpayer, Telecommunication Company contended that transponder despite of being a scientific equipment was not in its control and could not be held to be for use of or the right to use the scientific equipment and nature of contract asserted that satellite or transponder was not leased out to the taxpayer; and contract was for procuring Telecommunication services only which fell within the ambit of Art.7 of the Treaty and should have been treated as commercial profits---Validity---Telecommunication services were being received by the taxpayer from transponders and payment made to non-resident U.K based company was a consideration for the services received through the scientific equipment---Payment/consideration for such services was "royalty" and subject to withholding tax---Appeal of the taxpayer to the extent of issue of disallowance of expense under S.21(c) of the Income Tax Ordinance, 2001 was dismissed by Appellate Tribunal.

2002 PTD (Trib.) 2679 and (2001) 251 ITR 53 (Mad.) irrelevant.

I.T.A. No.1023/IB/2006 dated 30-5-2009 rel.

Webster's New World Dictionary 3rd Edition ref.

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

----S. 21(c)---Avoidance of Double Taxation Treaty between Pakistan and UK, Art.7---Deduction not allowed---Industrial and business profits---Royalty---Taxation of---Avoidance of Double Taxation Treaty was applicable to determine the allowability of expense under S.21(c) of the Income Tax Ordinance, 2001---Article 7 of the Treaty between Pakistan and U.K envisaged that "industrial and business profits" of an enterprises shall be taxable in its parent country if the enterprise did have a permanent establishment in the other contracting State---Collective reading of Art. 12 of the Treaty, allowed taxability of the "royalties" in a contracting State where it arose.

(c) Words and Phrases---

----'Use of' or 'right to use'---Use of word 'or' between the two phrases made the phrases operateable independently.

(d) Words and phrases---

----"Use"---Meanings---Dictionary meanings of the word 'use' did not suggest that the thing used should be in possession or control of the user.

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

----S. 21(c)---Avoidance of Double Taxation Treaty between Pakistan and UK, Art.7--- Deduction not allowed---Words 'right to use' and 'for the use of'---'Royalty'---Connotation and definition---In the presence of words "right to use", the user shall have exclusive right for a particular time/period of a thing/equipment being used---Phrase 'for the use of' had also been used, which was independently operateable under the definition and had wider connotation, which could include a collective use of a particular thing/equipment used---Assertion of the taxpayer that signals/transmission of telecommunication received by the taxpayer were merely services had no force as no such distinction was available in the definition of "royalty"---Definition only stipulates a payment received/paid as consideration for use of a scientific equipment---Immaterial whether use of such equipment resulted into a service in return or related to a production of tangible thing---Such conclusion was strengthened by the use of words like industrial and commercial in the same definition before the words scientific equipment meaning thereby that a consideration paid for any industrial equipment shall also fell within the definition of "royalty"---Consideration against use of commercial equipment shall also be a "royalty".

Dr. Ikram-ul-Haq, Mansoor Baig and Shaukat Amin Shah, FCA for Appellants.

Shahid Iqbal, LA for Respondent.

Date of hearing: 5th January, 2011.

2012 P T D (Trib.) 880

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Asad Ali Jan, Accountant Member

DRUGS SERVICES, RAWALPINDI

Versus

C.I.R., R.T.O., RAWALPINDI

I.T.A. No.667/IB of 2011, decided on 24th January, 2012.

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

----Ss.127 & 122-C---Appeal to Commissioner (Appeals)---Appeal was disposed of in limine, being not appealable under S.127 of the Income Tax Ordinance, 2001 by the First Appellate Authority on the ground that S.122-C of the Income Tax Ordinance, 2001 had not been specifically mentioned in S.127 of the Income Tax Ordinance, 2001---Validity---Section 127 of the Income Tax Ordinance, 2001 revealed that an order having the effect of enhancing the assessment or reducing refund or otherwise increasing the liability of the person was appealable---Order passed under S.122-C of the Income Tax Ordinance, 2001 was appealable under S.127 of the Income Tax Ordinance, 2001---After filing return there was no scope to maintain the order passed under S.122-C of the Income Tax Ordinance, 2001---Department was at liberty to scrutinize the return filed by the taxpayer and proceed in accordance with law if they desire because limitation was still available with the Department---Appeal was accepted by the Appellate Tribunal.

Messrs Pak Saudi Fertilizer Ltd. v. Federation of Pakistan 1999 PTD 4061 rel.

I.T.A. No. 401/IB/2011-T/Y 2005 dated 16-6-2011 and I.T.A. No. 955/IB/2010-T/Y 2008 dated 14-12-2010 ref.

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

----S.122-C---Provisional assessment---Tax year 2009---Provision of S.122-C of the Income Tax Ordinance, 2001 could not be applied retrospectively to the previous year.

2005 PTD 1316 rel.

Aurangzeb, ITP for Appellant.

Ziaullah Khan, D.R. for Respondent.

Date of hearing: 24th January, 2012.

2012 P T D (Trib.) 885

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson and Sohail Afzal Accountant Member

Messrs RAIN DROP, LAHORE

Versus

COMMISSIONER INLAND REVENUE (APPEALS-III), LAHORE

S.T.A. No.592/LB of 2009, decided on 9th December, 2011.

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

----S.2(37)---Tax fraud---Fake invoices---Adjustment of input tax against invoices issued by the fraudster gang---Mandatory condition precedent for tax fraud is that registered person has acted knowingly, dishonestly or fraudulently and without any lawful excuse committed tax fraud---Not an iota of evidence was available on record wherefrom it could be deduced that the registered person had intentionally, knowingly or dishonestly or fraudulently committed tax fraud by claiming in put tax adjustment against the sales tax invoices issued by the fraudster gang---Even the audit/contravention report coupled with the show-cause notice did not spell out or it could be proved by the department that the registered person had claimed illegal input tax adjustment with prior knowledge regarding fakeness of the sales tax invoices---Registered person was not intentional defaulter and was equally cheated by the fraudulent persons and fraudsters charged tax from the registered person---Revenue had wrongly invoked the provision of S.2(37) of the Sales Tax Act, 1990 in the show-cause notice which was liable to be struck down.

GST 2004 CL 102 ref.

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

----S.2 (37)---Tax fraud---Any act which had not been done knowingly, dishonestly or fraudulently did not come within the ambit of tax fraud.

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

----Ss.37 & 2(37)---Power to summon persons to give evidence and produce documents in inquiries under the Act---Tax fraud---Issuance of show cause notice based on criminal case registered by the Directorate of Intelligence and Investigation, against the fraudster gang engaged in issuance of fake/dummy sales tax invoices---Validity---Registered person was neither involved in the illegal activities nor there was any evidence or record that he was in contact with the fraudster gang regarding issuance of fake and dummy sales tax invoices---Contention of registered person was accepted by the Appellate Tribunal.

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

----Ss.23, 73, 3(3) & 2(37)---Tax invoices---Tax fraud---Registered person had purchased entire raw material from registered persons and also obtained sales tax invoices issued under S.23 of the Sales Tax Act, 1990 and the payments were made in terms of S.73 of the Sales Tax Act, 1990---Taxpayer fulfilled all the requisite conditions laid down in S.7 of the Sales Tax Act, 1990 for claiming input tax were complied and paid the sales tax to the suppliers as well---Suppliers were responsible to deposit the tax in terms of S.3(3) of the Sales Tax Act, 1990 especially when they were registered with the Sales Tax Department and were filing their monthly returns and summaries with it---Sales Tax Department was responsible and duty bound to check veracity as to whether the suppliers were depositing sales tax in the government exchequer or not---Department had failed to fulfill its official obligations and was trying to shift onus on the taxpayer's shoulders in order to burden him for depositing the Sales Tax payments twicely which act was unwarranted---Conversely, the taxpayer after verifying the status and antecedents of the suppliers from the website paid the tax and made the payment to them.

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

----Ss.8A & 8(1)(ca)---Joint and several liability of registered person in supply chain where tax unpaid---Tax period July 2005 to June 2006---Registered person contended that business activity (between July 2005 to June 2006) did not fall within the ambit of Cl.(ca) of subsection (1) of S.8 of the Sales Tax Act, 1990 under which input tax had been rejected; that S.8A of the Sales Tax Act, 1990 under which unpaid tax was demanded were inserted by Finance Act, 2006, assented on 30th June, 2006 and applicable with effect from 1st July, 2006; that taxable activity prior to 1st of July, 2006 could not be charged under said sections; that further payment of input tax was made to the suppliers after verifying its status from the website of the department and there was no other mode or source wherefrom it could be confirmed as to whether the suppliers had deposited the payment in the Government treasury or not; and that such was an obligation of the department to check veracity of the suppliers that they had made payment of tax due particularly when the registered suppliers were regularly filing their monthly sales tax returns and summaries with the department---Validity---Section 8A of the Sales Tax Act, 1990 clearly states that whenever the registered person was in the knowledge or had reasonable ground to suspect that some or all of the tax would go unpaid from the supplier's side then it would be the joint liability of such person as well as the person making the taxable supply for making payment of such unpaid amount of tax---Position in the present case, was very different because the registered person / appellant, after verifying the status and genuineness of the suppliers made the payments of input tax to the suppliers and fulfilled all the legal responsibilities on their part---Registered person was neither jointly not severally liable for making payment of such unpaid amount of tax---Department was not within the ambit of law while invoking the provision of Ss.8 and 8A of the Sales Tax Act, 1990 against the registered person---Proceedings conducted could not be held to be legal in circumstances.

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

----Ss.33 & 34---Offences and penalties---While invoking Ss.33 and 34 of the Sales Tax Act, 1990 each and every case had to be decided on its own merits as to whether evasion of payment of tax was wilfull or mala fide or not.

GST 2004 79 rel.

Shoaib Ahmed Sheikh for Appellant.

M. Farrukh Majeed D.R. for Respondent.

Date of hearing: 9th December, 2011.

2012 P T D (Trib.) 894

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

I.T.A. No.956/IB of 2010, decided on 3rd December, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 153(1)(c) & 161---Deduction of income tax from payment released to Citizen Community Boards (CCBs) for development projects---Failure to pay tax so deducted---Assessee being a withholding agent, was obliged to deduct income tax from payment released to Citizen Community Boards for development projects, but failed to discharge its statutory responsibility---Counsel for assessee had pleaded that Citizen Community Boards in respect of which demand had been created, did not relate to Tehsil Municipal Administration concerned and payment of those CCBs was made by the District Government (Zila Council); that Tehsil Municipal Administration concerned was not liable to withhold tax---Validity---After dissolution of elected Tehsil Administration, the Tehsils in Punjab were no longer separate administrative and financial entities of Tehsil Municipal Administration, headed by an Administrator appointed by the Provincial Government, was pretty much part of the District Administration and functioned under the administrative control of the DCO, any tax liability, in circumstances, was an internal affair of the District Administration of which Tehsil Municipal Administration was a component---Presently the District as well as Tehsil Municipal Administration received their respective financial allocations or funding directly from the Provincial Government---De novo initiation of the process of recovery of withholding tax from E.D.O. would be meaningless---Counsel for the assessee could not produce any evidence that Citizen Community Boards in question were registered with the District Government---At one stage the counsel for assessee even had said that the recovery of the withholding tax had already been effected from the Tehsil Municipal Administration concerned---Appeal filed by the assessee, even otherwise being barred by time was rightly dismissed by the Commissioner (Appeals), and order passed by Commissioner (Appeals) could not be interfered with.

Zia Ullah Khan D.R. for Department.

Date of hearing: 3rd December, 2010.

2012 P T D (Trib.) 911

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Muhammad Iqbal Khan, Accountant Member

I.T.As. Nos.144/KB and 162/KB of 2010, decided on 1st July, 2010.

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

----Ss. 53, 59-AA & 131, Second Schedule, Part-I, Clause 103-A---Disallowance of claim of exemption to inter-corporate dividends---Department disallowed, assessee's claim of exemption to inter corporate dividends, which assessee had received from its wholly owned subsidiary; and had claimed exemption under clause 103-A, Part-I of Second Schedule to Income Tax Ordinance, 2001---Commissioner Inland Revenue (Appeals) confirmed the departmental treatment of disallowing the assessee's claim of exemption---Commissioner Inland Revenue (Appeals) was of the view that for availing exemption under Clause 103-A, the conditions laid down in S.59-AA of Income Tax Ordinance, 2001 were to be first complied with before invoking that clause---Contention of assessee was that Commissioner Appeals had misdirected himself in ascribing meanings to the statute, which was not intended by the legislature; had the legislature intended to make compliance to the requirements of S.59-AA of Income Tax Ordinance, 2001, precondition to the availing of the benefit under Clause 103-A, it would have said it in so many words, such being not the position, the word 'entitle' would signify that any company which was entitled under S.59-AA of Income Tax Ordinance, 2001 could avail the benefit of said clause---Validity---Assessee's view held weight, especially since the stance taken by the department would essentially mean that two or more qualifying companies of group opt to file a consolidated return as one tax entity---Due to consolidated accounts, their internal transactions would become nullity since one could not trade with one's ownself---Such would lead to payment of dividend becoming an entry in the same book in which the money would move from P & L account to the retained earnings or appropriation for payment to the shareholders of the parent company; and the step of payment of dividend from subsidiary to the parent company would get simply eliminated; in such a situation there would be no need ever of applying the said Clause (103-A)---Appellate Tribunal directed that the inter-corporate dividend received by the assessee, be treated as exempt.

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

----Ss. 20, 21 & 131---Disallowance of claim of deduction on account of financial charges on borrowing for expansion of the business---Assessee, had claimed that Commissioner-Inland Revenue (Appeals) had wrongly disallowed claim of deduction on account of financial charges on borrowing meant for expansion of business---Commissioner (Appeals) had dealt with the figures of the underlying amounts in various parts of the annual statements of the assessee; on that basis Commissioner (Appeals) had concluded that allowing the long term financial expenses would tantamount to double deduction---Commissioner (Appeals) had not dwelt upon the legal basis of allowing or disallowing the said financial charges as current expenditures---Financial charges on expansion of existing business were allowable as revenue expenses, but then seemed to be some inconsistency between the figures in the computation sheet filed by assessee, with the original assessment/return and the annual accounts, which had made it difficult to determine the quantum of the allowable current expense---Assessee, in case of capitalization, would be allowed to take depreciation on those capitalized values and recover those expenses---Essence of the order of the Commissioner (Appeals) on the issue was upheld and parties were directed to draw up the tax depreciation table for the year anew and allowed admissible depreciation as per law---Earning on deposit of those funds, being income from other sources, would get taxed as a separate block and could not be let to be set off against the financial expenses, which did not relate to that head of income.

2000 PTD 2906; 1997 PTD 43 (Trib.) and 1997 PTD 1454 (Trib.) ref.

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

----Ss. 13, 21(c) & 131---Disallowance of expenses incurred on supply of gas and electricity to the on-site residential colony---Department disallowed expenses incurred on supply of gas and electricity to the on-site residential colony maintained by assessee company for its employees---Claim of assessee was that said colony was integral part of the factory set up; and if the residential colony element was taken off the organizational structure; there would hardly be any possibility of running the factory, even for a single day, since the manufacturing process was such that it had to be run round the clock; that because of production of ammonia gas during the manufacturing process, it was imperative that strict mechanical and human watch was kept to avoid any industrial accident, which could lead to catastrophic outcomes---Contention of assessee was that it had not provided electricity and gas to the employees, but to its owned, managed and maintained residential units, where employees lived as licensees only during their tenure at the factory---When verifiability of expense was not disputed, in determining that whether an underlying expense was deductible, the cardinal principle of business necessity should be applied; on that account, relatively insignificant amount of Rs.11.8 million, should have been allowed by the department, in the first place, since it was very likely that without an onsite residential colony, a chemical factory handling hazardous material would cease to do business and that similar residential colonies, were part of the factory organization---Order of two officers below were annulled and Appellate Tribunal directed that amount of Rs.11.8 million be allowed as business related on account of business expediency.

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

----Ss. 22, 24 & 131---Disallowance of initial depreciation on computer software used in the business computers---Assessee had claimed that Commissioner Inland Revenue (Appeals) had wrongly disallowed initial depreciation on software which was embodied in the hardware---Plea of the assessee was that those programs were part and parcel on the hardware and the benefit of the hardware could not be utilized without those softwares---Departmental representative had pointed out that those programs were separately purchased and that assessee, should have amonized those expenses over the useful life of the softwares which in his opinion was 10 years---Department had allowed depreciation, but not the initial allowance, which seemed incompre-hensible---No dispute about the expense being an allowable business expense---Ends of justice would be met appropriately and in conformity with Income Tax Ordinance, 2001, if the expense was amonized under S.24 with normal useful life of 3 years in case of computer softwares.

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

----Ss. 59(2)(b) & 131---Group relief---Appeal by department---Department in its appeal had two grounds; firstly that Commissioner (Appeals) had erred in deleting the disallowance and made on the adjustment of loss of the subsidiary company; secondly that Commissioner (Appeals) had erred in deleting the addition of amount made on account of catalyst depreciation---Regarding firstly, Commissioner had dealt with the issue appropriately and according to the legal principles; no interference, was warranted in the issue, since it was clear from the circumstances leading to the introduction of the Group Relief in the country---Legislature sought to introduce provisions which would allow early utilization of losses, that industrial concerns usually suffer the early years of their lives---Such would promote investment in the industrial sector; however, the legislature did not want the same facility for the trading concerns, since it would promote relatively low-risk trading and discourage investment in the industrial enterprises being relatively higher risk area---In the present case the beneficiary of the Group Relief was the loss surrendering company since it in a way sold its loss for cash and loss buying company paid exactly the same amount to the loss surrendering, as loss buying company would have paid to the tax authorities had it not offset its income against the loss of its subsidiary---Order of Commissioner (Appeals) could not be interfered with, in circumstances---Regarding secondly, departmental representative had argued that the taxpayer could not take the expense twice, one through depreciation, and again by debiting the stores and spares account---Undisputedly, the underlying expense was a business expense and must be allowed to the taxpayer either through depreciation allowance, or through direct deduction according to the law---Since the deduction was in line with the early practice of the department itself it should be allowed and be ensured that it was not allowed twice because of depreciation deduction controversy---Determination made by the Commissioner (Appeals) could not be interfered with, in circumstances.

State of Bombay v. United Motors (India) Ltd. AIR 1953 SC 252 and Ambalavana Pandara Sannathi Avergal v. Commissioner Hindu Religious and Charitable Endowments, Madras (1980) 93 LW 224 ref.

Syed Shabbar Zaidi, FCA for Appellant.

Shafquat Hussain Kehar, D.R. for Respondent.

Date of hearing: 26th May, 2010.

2012 P T D (Trib.) 925

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Judicial Member and Mian Masood Ahmad, Accountant Member

Messrs TIWANA ENTERPRISES, FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.As. Nos.2144/LB to 2148/LB of 2009, decided on 22nd February, 2012.

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

----Ss.73 & 7---Certain transactions not admissible---Input tax---Registered person, a manufacturer cum exporter of confectionary items, was charged with violation of S.73 of the Sales Tax Act, 1990 and demand was raised; and refused the claim of input tax/refund on the ground that suppliers of the registered person were either non-filers or invoice summary was not submitted---Registered person contended that charge of non-submission of invoice summary statement by the supplier unit was illegal and unlawful, since the registered person was not required to submit summary of the purchases and sales of their suppliers; that refund claim was genuine and fully backed by supporting documents; that neither the show cause notice nor the hearing notices were ever received; and that proceedings had been finalized ex parte; and charges levelled were never confronted and he was never afforded an opportunity of being heard---Registered person contended with regard to non-filer suppliers, that monthly sales tax return for the period in question stood duly filed by the supplier; and the same was produced before the appellate forum but it was simply overlooked; that rejection of refund claim on the charge of non filing ever after production of sales tax returns was highly unjustified and illegal; and that objection of "scrutiny for verification of input tax", as generated by STARR was a complaint having no legal backing---Validity---Registered person had been condemned unheard and the arguments presented for the appellant had persuasive value---Orders were vacated along with the orders in original and issue was remanded to the adjudication authorities for de novo proceedings after affording the taxpayer a fair and proper opportunity being heard.

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

----S.7---Determination of tax liability---Input tax---Rejection of excess input tax claimed on packing material---Appellate Tribunal had already held that agreement between the sales tax department and the Confectioner's Association did not have binding force because it had not been enacted as a piece of legislation and did not have the force of law and directed that the claim of input tax on packing material used in the manufacturing and export of products of the registered person be allowed---Issue of claim of input tax on packing material having already been settled by the Appellate Tribunal, appeal was allowed accordingly.

S.T.A. No.960/LB/2009 rel.

Khubaib Ahmad for Appellant.

Muhammad Farrukh Majid, D.R. for Respondent.

Date of hearing: 16th January, 2012.

2012 P T D (Trib.) 928

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Muhammad Saeed, Accountant Member

Messrs GREEN STAR MACHINE TOOLS MANUFACTURING COMPANY, KARACHI

Versus

COLLECTOR, COLLECTORATE OF CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEAL), KARACHI

S.T. No.205/KB of 2009 and Order-in-Appeal No.1079 of 2008, decided on 27th May, 2010.

Sales Tax Act (VII of 1990)---

----S.45-B(2)---Appeal---Limitation for decision---Extension of 90 days was granted on the ground that proceedings could not be finalized within the stipulated time limit due to certain unavoidable circumstances and administrative reasons---Validity---Though the First Appellate Authority had the power to grant extension but he was under legal obligation to record the reasons for the same---Collector did not gave any plausible reasons but granted the extension of 90 days on a flimsy ground "due to certain unavoidable circumstances an administrative reasons"---Case was getting time barred and Collector used clutches of S.45-B(2) of the Sales Tax Act, 1990 to resolve the problem of time limit which was being faced by the Collector---No room existed for such deviation or laxity in law---Order-in-appeal passed by the Collector was legally infirm and unsustainable in the eye of law---Order-in-appeal as well as order-in-original were set aside by the Appellate Tribunal.

Muneer Fareedi for Appellant.

Gohar Ali, D.R. for Respondent.

Date of hearing: 27th May, 2010.

2012 P T D (Trib.) 931

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmed, Judicial Member and Khalid Aziz Banth, Accountant Member

Messrs A.B.M. TEXTILE, FAISALABAD

Versus

C.I.R. (LEGAL DIVISION) R.T.O., FAISALABAD

S.T.A. No.263/LB of 2010, decided on 23rd February, 2012.

Sales Tax Act (VII of 1990)---

----Ss.4, 7, 8, 8A, 10, 22, 26, 11(2), 33, 34, 36(3) & 73---Zero rating---Refund of input tax---Supplier blacklisted---Department had contended that no physical transfer of goods took place and the registered person was charged with violation of the provisions of Sales Tax Act, 1990 read with relevant Refund Rules; and that once the supplier was blacklisted then all the invoices issued in the past were liable to be rejected and recoveries to be made from the registered persons to whom such supplies had been made---Registered person contended that post refund audit pertained to the year 2004 and supplier was blacklisted on 29-12-2007, at the relevant time the status of the said supplier was active and was regularly filing the sales tax returns; and Appellate Tribunal had already vacated the order of blacklisting of the supplier and remanded the matter; that, show cause notice was issued on 4-11-2008 and order was passed on 30-3-2010 after 147 days while adjudicating authority was under an obligation to pass the order-in-original within 120 days; and that Adjudication Authority did not seek extension of time from Collector for 60 days thus order was hit by limitation under S.36(3) of the Sales Tax Act, 1990---Validity---Status of the supplier had already been restored by the Appellate Tribunal as "active" and blacklisting orders had been vacated---Revenue could not rebut the arguments that order-in-original was hit by limitation as he could not produce an order/authority of the Collector to grant extension in the adjudicating proceedings as required under S.36 of the Sales Tax Act, 1990---Appeal of the registered person was accepted and order of the authorities below were vacated by the Appellate Tribunal.

PTCL 2005 CL 138; PTCL 2008 CL 1 and 2008 PTD 60 rel.

Khubaib Ahmad for Appellant.

Nadeem Arif, D.R. for Respondent.

Date of hearing: 23rd February, 2012.

2012 P T D (Trib.) 934

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairman and Tabbana Sajjad Naseer, Accountant Member

Messrs ALLAHDIN STEEL MILLS, S.I.E., DASKA

Versus

C.I.R., R.T.O., SIALKOT

M.A. (Say) No.97/LB of 2011 and S.T.A. No.169/LB of 2011, decided on 2nd April, 2011.

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

----Ss.45A & 45B---C.B.R. Circular C.No.1 (10)IR-Jud/2009-(A), dated 25-11-2009---C.B.R. Circular C. No.1(10)/IR-Jud/2009, dated 10-2-2010---Powers of the Federal Board of Revenue and Commissioner to call for record---Order was issued on 8-9-2010 and received by the taxpayer on 9-9-2010---Legal time to file appeal was till 8-10-2010---Taxpayer contended that provisions of S.45A of the Sales Tax Act, 1990 could not be invoked before 08-10-2010; and Commissioner (Enforcement & Collection) could not make re-assessment under S.45A of the Sales Tax Act, 1990; and by illegally invoking the provisions of S.45A the Commissioner had taken away the statutory right of the taxpayer to file appeal under S.45B of the Sales Tax Act, 1990---Validity---Commissioner (Enforcement & Collection) had illegally and unjustifiably invoked the provisions of S.45A of the Sales Tax Act, 1990, as he was not vested with any such power to act as adjudication officer---Commissioner (Enforcement & Collection) had re-assessed the case of the taxpayer whereas the Commissioner Inland Revenue (Legal Division) and Commissioner Inland Revenue (Audit Division) had to do/perform the job/duties of Adjudication under the Sales Tax Act, 1990---Commissioner (Enforcement & Collection) without any jurisdiction acted as Adjudication Officer---Commissioner (Enforcement & Collection) appointed a departmental representative and based his order upon his explanation and submissions which were also beyond the show cause notice issued for re-assessment of the case---Order in question was liable to be cancelled.

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

----S.45A---Sales Tax General Order No.3/2004 dated 12-6-2004---Powers of the Board and Commissioner to call for record---Re-opening of the case on the ground that adjudicating authority had issued show cause notice only for the months of January and March, 2010, whereas he adjudicated the period up to August, 2010---Taxpayer contended that they had worked on service basis for the months of January to August, 2010; and adjudication authority had lawfully included the period of April, 2010 to August, 2010 as was evident from the order sheet entry; and to say that adjudicating authority itself included the period January to August 2010, whereas the show cause notice was only issued for January and March, was not correct---Validity---When taxpayer took a stance before the adjudication officer that they did not make any taxable supply but rendered manufacturing services, then documentary evidences was demanded and period April to August was included in the proceedings; and such evidence was provided by the taxpayer---Adjudication Officer had rightly made part of the proceedings the period of April to August, 2010; and issue of services charges had specifically been discussed and adjudicated by the Adjudicating Authority---Taxpayer had worked on labour basis and for this purpose they had to charge sales tax to that extent only which they did---Taxpayer duly provided the relevant record before the adjudication officer who after scrutinizing the same had accepted the stance of the taxpayer---Sales Tax General Order No.3/2004 did not debar the taxpayer to charge sales tax on market value basis---Reasons for re-opening of the case were not maintainable.

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

----S.45A---Sales Tax General Order No.3/2004 dated 12-6-2004---S.R.O. 345 dated 24-5-2010---S.R.O. 346 dated 24-5-2010---Powers of the Board and Commissioner to call for records---Objection regarding non-adherence of Sales Tax General Order No.3/2004---Taxpayer contended that he worked on labour and had to charge sales tax to such extent for which the services were provided; and all the relevant record on the basis of which adjudicating authority decided the case was submitted; and Sales Tax General Order was not binding on the taxpayer as well on the adjudicating authority---Validity---Taxpayer during the relevant period worked as vendor/labour basis and S.R.Os. 345 and 346 dated 24-5-2010 not strictly pertained to such business---Taxpayer duly produced those persons to whom manufacturing services were rendered and during the course of proceedings the adjudication officer cross-examined these persons and cross checked the record produced by the taxpayer---Adjudication officer came to the conclusion that the taxpayer rendered manufacturing services on service charged basis---Adjudication Officer had rightly found that the charges levelled in show cause notice were not established---Commissioner Inland Revenue (Enforcement & Collection) had prematurely reopened the case under S.45A of the Sales Tax Act, 1990 because due to such illegal action, the Commissioner had taken away the statutory right of the taxpayer to file appeal under S.45B of the Sales Tax Act, 1990---Order suffering from grave legal as well factual infirmities, was not maintainable in the eye of law, which was set aside by the Appellate Tribunal and appeal succeeded as prayed for.

Syed Abid Raza Kazmi for Appellant.

Syed Javed Ali Shah, D.R. for Respondent.

Date of hearing: 2nd April, 2011.

2012 P T D (Trib.) 941

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member and Sohail Afzal, Accountant Member

Messrs CHENAB BOARD, FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.247/LB of 2012, decided on 15th March, 2012.

Sales Tax Act (VII of 1990)---

----S.5-B---Appeal---Application for stay---Rejection application by the First Appellate Authority---Taxpayer contended that recovery of disputed tax demand before hearing of first appeal would amount to denying the statutory recognized right of appeal; and before taking coercive measures of recovery of tax, grievance of dispute should be adjudicated by an independent forum---Validity---If the recovery of tax demand created as a consequence of order-in-original was not stayed during the pendency of the main appeal before the First Appellate Authority, same would cause irreparable loss to tax-payer and it would be expedient that the same may be stayed---Appellate Tribunal stayed the matter till the disposal of the appeal by the First Appellate Authority---First Appellate Authority was directed to dispose of the main appeal of the taxpayer within a period of 45 days.

Khubaib Ahmad and Rana M. Arshad, ITP for Appellants.

Mrs. Kehkashan Khan, D.R. for Respondent.

Date of hearing: 15th March, 2012.

2012 P T D (Trib.) 942

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Member (Judicial)

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs KHALIL JUTE MILLS, FAISALABAD and others

S.T.A. No.857/LB of 2009, decided on 22nd October, 2010.

Sales Tax Act (VII of 1990)---

----S.36---C.B.R. letter C.No.1(15)GST-I/90 dated 17-12-1990---C.B.R. letter C.No.1(5)GST-I/91 Pt. Vol II, dated 29-9-1992---Recovery of tax not levied or short levied or erroneously refunded---Setting aside of show cause notice by the First Appellate Authority on the ground that substantive provisions of law i.e. S.36 of the Sales Tax Act, 1990 was missing in the show cause notice---Validity---Show cause notice was issued without mentioning the section in which the adjudicating authority could proceed against the taxpayer---Show cause notice even did not mention any demand for sales tax---Order-in-original, showed that "the show cause notice was issued and the unit was charged with contravention of Ss.6, 7 & 22 of the Sales Tax Act, 1990 to the effect that as to why the illegal adjustment of input tax be not recovered" which amounted to misreading the contents of the show cause notice---Word "as to why the illegal adjustment of input tax amount be not recovered" did not appear in the show-cause notice---In fact, input tax claimed was covered by CBR Letter C.No.1(15)GST-I/90 dated 17-12-1990 and C.No.1(5)GST-I/91 Pt. Vol, II, dated 29-09-1992--Case was remanded to original Authority with the direction for deciding the case afresh after considering the said letters but the adjudicating authority did not take into consideration the said letters---Bills of Entries were in conformity with the procedure prescribed by the said letters and such Bills of Entries were verified by the Assistant Collector of Customs, Central Excise and Sales Tax in terms of the CBR letters--Registered person, in cirucmstances claimed the input tax in accordance with law---Departmental appeal was dismissed by the Appellate Tribunal.

C.P. 702-L/2003 not relevant.

Shahid ul Hassan Chatta, D.R. for Petitioner.

Tariq Najeeb for Respondent.

Date of hearing: 22nd October, 2010.

2012 P T D (Trib.) 946

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmed, Judicial Member and Khalid Aziz Banth, Accountant Member

Messrs Z.N. EXPORTS (PVT.) LTD., FAISALABAD

Versus

C.I.R. (LEGAL DIVISION) R.T.O., FAISALABAD

S.T.A. No.269/LB of 2010, decided on 23rd February, 2012.

Sales Tax Act (VII of 1990)---

----Ss.4, 7, 8, 8A, 10, 22, 26, 11(2), 33, 34, 36(1) & 73---Zero rating---Input tax---Supplier blacklisted---Revenue contended that once the status of blacklisted was assigned to any supplier then all the invoices issued by the blacklisted person were deemed to be void and input allowed on such invoices was recoverable from the registered person---Taxpayer contended that an ex parte order had been passed and proper opportunity had not been granted at the adjudication level; that notice was not served on the registered person or the authorized person; that the order in appeal was prejudiced and biased and First Appellate Authority discriminated against the appellant and in other appeals Authority had allowed relief on the same issue to other registered persons; that order of blacklisting of supplier was set aside by the Appellate Tribunal; and even otherwise the activity of taking input and claim refund and subsequent sanction of it related to the periods June and August, 2004 when status of the supplier was an active taxpayer and was regularly filing returns; that notifications which adversely affect the rights of the registered person could not be applied retrospectively and had to be applied prospectively; and that Refund Rules could not be applied retrospectively---Appellate Tribunal, in circumstances, vacated the order in original and order in appeal and appeal of the registered person was accepted by the Appellate Tribunal.

Khubaib Ahmad for Appellant.

Nadeem Arif, D.R. for Respondent.

Date of hearing: 23rd February, 2012.

2012 P T D (Trib.) 948

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Amjad Ikram Ali, Accountant Member

DCWT, LEGAL-02, LEGAL DIVISION, R.T.O., LAHORE

Versus

Messrs RIZWAN AMJAD, LAHORE

W.T.As. Nos.113/LB and 114/LB of 2009, decided on 8th March, 2010.

Wealth Tax Act (XV of 1963)---

----S.17B---Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order---Jurisdiction---Scope---Order passed under S.17B of the Wealth Tax Act, 1963 by the Additional Commissioner of Income Tax (Audit-IV) Audit Division was cancelled by the First Appellate Authority for the reason that Additional Commissioner of Income Tax was not legally competent to pass the wealth tax order under S.17B of the Wealth Tax Act, 1963---Validity---Revenue contended that Additional Commissioner of Income Tax was competent to pass order under Wealth Tax Act, 1963 but Revenue had neither specifically taken this ground in the memo of appeal nor annexed any document to show that Additional Commissioner of Income Tax was also appointed and authorized under S.9 of the Wealth Tax Act, 1963 to decide the cases under Wealth Tax Act, 1963---Officer who passed the original order had mentioned his designation as Additional Commissioner of Income Tax---Revenue had failed to prove that the Additional Commissioner of Income Tax was given additional authority to act as Deputy Commissioner under the Wealth Tax Act, 1963 or was ever assigned such jurisdiction prior to 1-7-2003---Present was neither a case of mere mentioning of another connotation in addition to Wealth Tax Officer or Deputy Commissioner of Wealth Tax nor misquotation of designation---Finding of First Appellate Authority was affirmed who had rightly found that additional Commissioner of Income Tax was not legally competent to pass the order under S.17B of the Wealth Tax Act, 1963---Appeals filed by the Revenue were dismissed by the Appellate Tribunal being devoid of merit.

W.T.As. Nos. 94 to 99/LB/2008 ref.

Haji Naseem ur Rehman v. CIT/WT and others 2009 PTD 164 rel.

CIT Zone-C Lahore v. Muhammad Alamgir 98 Tax 5 distinguished.

Khalid Latif, D.R. for Applicant.

Waseem Ch. for Respondent.

Date of hearing: 25th February, 2010.

2012 P T D (Trib.) 954

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Muhammad Saeed, Accountant Member

Messrs HABIB METROPOLITAN BANK, KARACHI

Versus

COLLECTOR OF SALES TAX, FEDERAL EXCISE (APPEAL), KARACHI

C.E. No.177/KB of 2009, decided on 28th May, 2010.

(a) Federal Excise Act (VI of 2005)---

----Ss.3, 4, 8 & 19---Federal Excise Rules, 2005, R.40-A (2)---Duties specified in the First Schedule to be levied---Levy of Federal Excise Duty on Miscellaneous Income Service Charges/Services & Handling Charges---Validity---Both the authorities below ignored the fact that departmental official had incorrectly extended the scope of charging provision of law without any legal support that L/C commission included all services pertaining to processing of L/C handling, renewal of L/C on account of import or export which were not liable to Federal Excise Duty---Federal Excise Duly levied on Miscellaneous Income Service Charges/Services & Handling Charges was deleted by the Appellate Tribunal being unlawful.

2007 PTD 115 (H.C.) ref.

(b) Federal Excise Act (VII of 2005)---

----S.3---Federal Excise Rules, 2005, R.40-A (2)(1)---Duties specified in the First Schedule to be levied---Exchange gain---Levy of Federal Excise Duty---Validity---Taxpayer contended that income termed as "dealing in foreign currencies" by the auditor was, in fact, an income generated during the course of trading, due to difference in the rate prevailing on the date of buying and selling (or on closing date of accounts) of foreign currency i.e. "exchange gain"; and there was no service rendered to any customer or any commission or brokerage was earned for generation of such income; and First Appellate Authority wrongly confirmed the treatment meted out by the auditor by treating the "exchange gain" on dealing in foreign currency as "commission and brokerage on foreign exchange dealings"---Validity---Assertions made by the taxpayer carried weight and auditor had wrongly treated the "exchange gain" on trading in foreign currency as "commission and brokerage on foreign exchange dealings"---Federal Excise duty levied on income from dealing in foreign currencies was deleted by the Appellate Tribunal; and as a result, levy of default surcharge was not applicable which was also deleted.

Ghulam Abbas Karjatwala, C.A. for Appellant.

None for Respondent.

Date of hearing: 28th May, 2010.

2012 P T D (Trib.) 959

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Asad Ali Jan, Accountant Member

AAMIR HUSSAIN

versus

C.I.R., R.T.O., RAWALPINDI

I.T.A. No.1/IB of 2012, decided on 7th February, 2012.

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

----S.131---Appeal to the Appellate Tribunal---Limitation---Starting point---Record of Urgent Mail Service did not show any delivery of order passed by the First Appellate Authority upon the taxpayer---Limitation, in case of non service, will start from the date of delivery of certified copy of the order passed by the First Appellate Authority.

2007 PTD 1 L.H.C. rel.

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

----Ss.111(1)(b) & 122(5)---Unexplained income or assets---Rejection of declared version---Allegation of collusiveness---Addition on the basis of estimated value of vehicle---Validity---Assessing Officer had not even preferred to deduct the declared value from the estimated value while making the addition---Addition if desired was to be made only up to the estimated value minus declared value and not of the total estimated value---When declared version was rejected, the officer was to verify the facts from the seller to prove the transaction as collusive and not being an arm's length transaction---After rejecting the declared record, again it was incumbent upon the Tax Officer to make the addition evolving a proper and reasonable basis which was found missing---When collusiveness of the transaction was not evident from the record, declared version was not to be rejected---Reasonable basis of estimation was also missing---Addition was deleted by the Appellate Tribunal and order of First Appellate Authority was confirmed.

1994 SCMR 2232; PLD 1990 SC 666; PLD 1964 SC 673; 1988 CLC 1318; 1981 CLC 909 and 1981 CLC 1654 ref.

Naeem-ul-Haq for Appellant.

Zia Ullah Khan, D.R. for Respondent.

Date of hearing: 7th February, 2012.

2012 P T D (Trib.) 1032

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson, Muhammad Nawaz Bajwa, Judicial Member and Sohail Afzal, Accountant Member

Messrs NEW DEFENCE ESTATE, 90-Y DHA, LAHORE

versus

C.I.R., AUDIT DIVISION-II, RTO, LAHORE

I.T.As. Nos.1078/LB and 1079/LB of 2010, decided on 16th March, 2012.

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

----Ss. 129, 111, 177(4) & 120---Decision in appeal---Remand/set aside of assessment order for de novo assessment---Bank credit entries---Request for adjournment was declined by the Assessing Officer and addition was made to the credit entries in the income---First Appellate Authority accepted the plea that reasonable opportunity had not been granted by the Assessing Officer and remanded the case for fresh adjudication and other jurisdictional objection regarding the foundational illegality of the assessment order was neither considered nor disposed of---Taxpayer contended that provision empowering the First Appellate Authority to set aside the assessment order with the directions to make new assessment order had been deleted through Finance Act, 2005 from S.129 of the Income Tax' Ordinance, 2001 which amendment conferred extensive powers to the First Appellate Authority to examine evidence and to undertake further enquiries to decide the case instead of remanding same for de novo assessment proceedings---Validity---Language of the amended provision empowered the First Appellate Authority to undertake further enquiries and examine the record for deciding the case by the Authority itself without sending the case back to the Assessing Officer---Opinion expressed in the judgment of Appellate Tribunal, relied upon by the First Appellate Authority, was rendered in oblivion of the language of the amendment and the unambiguous law regarding the concept of setting aside of assessment for de novo proceedings under the income tax law and judgment of Superior Courts---Appellate Tribunal followed the legal provisions and law laid down by the Superior Courts in holding that the First Appellate Authority lacked jurisdiction to remand the case to the Assessing Officer for new assessment order.

Sind Employees Social Security Institution and another v. Adamjee Cotton Mills Ltd. PLD 1975 SC 32 rel.

Federation of Pakistan v. Messrs Noorani Trading Corporation (Pvt.) Ltd. 1992 SCMR 710 ref.

I.T.As. Nos. 420 and 421/LB of 2009, dated 1-12-2009 distinguished.

(b) Income Tax Ordinance (XXXI of 1979)---, ----Ss. 111(1)(a)(b), 122(1)(5), 177(4) & 120---Unexplained income or assets---Bank credit entries---Addition of---Taxpayer contended that ' debit entries in the bank statements showed loan received from the banks while credit entries in the bank statements represented the repayment of the same loan amounts; and amendment could not be made without the availability of definite information to the effect that any income chargeable to tax had escaped assessment or resulted in other eventualities; and not to speak of availability of such definite information, Taxation Officer proceeded on misconceived premises; and provisions of S.111 of the Income Tax Ordinance, 2001 were evidently misapplied; and source of amounts alleged to be unexplained income was the bank and the nature of such amounts was loan; and only first receipt could be considered which were loan amounts while repeated withdrawals and deposits of the same amount could not be treated as income---Validity---Assessing Officer misconstrued the scope of S.111 of the Income Tax Ordinance; 2001 and such provision may be invoked in cases of unexplained income if the taxpayer was unable to explain the nature and source of the amounts in question---Bank statements manifested that the amounts represented the bank loans and not owned by the taxpayer---Nature and source of amounts were evident on the face of the documents which were made basis for action under S.111 of the Income Tax Ordinance, 2001---As the amounts were loans, not the amounts owned by the taxpayer, the invocation of S.I11 of the Income Tax Ordinance, 2001 was without application of mind---Proceedings were initiated on erroneous assumptions of law and facts instead of meeting the preconditions for action under the said provisions of law---Assessing Officer failed to apply the law to the effect that "income after the first receipt moves as money" and that the brought forward amounts repeatedly withdrawn and deposited in the bank did not become income on very repeated deposit---Orders of the authorities below were annulled by the Appellate Tribunal.

Pakistan Industrial Development Corporation v. Pakistan 1992 PTD 576 rel.

1994 SCMR 2232; 2008 PTD (Trib.) 383 and Chairman F.B.R. and others v. Messrs Idrees Traders C.A. No.1306 of 2009 ref.

Mian Ashiq Hussain for Appellant.

Yasir Pirzada, D.R. for Respondent.

Date of hearing: 15th February, 2012.

2012 P T D (Trib.) 1040

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairman and Tabana Sajjad Naseer, Accountant Member

COMMISSIONER (LEGAL DIVISION) INLAND REVENUE (RTO), FAISALABAD

versus

Messrs ZAHID JEE FABRICS (PVT.) LTD., FAISALABAD

S.T.A. No.258/LB of 2010, decided on 30th January, 2012., (a) Sales Tax Act (VII of 1990)---

,---Ss.30, 11, 36(1) & 45---S.R.O. 547(1)/2008 dated 11-6-2008---Circular C.No.1(19)IR-Jud/2007-Pt dated 11-11-2009---Appointment of authorities---Appointment of Deputy Commissioner Inland Revenue---Taxpayer contended that issuance of show cause notice and consequent adjudication order passed by the Deputy Commissioner Inland Revenue was illegal and without jurisdiction as no notification for appointment of Inland Revenue Officers was issued in the Official Gazette as required under S.30 of the Sales Tax Act, 1990---Department impliedly admitted that there was no such notification published in the official gazette on the pattern of S.R.O. 547(1)/2008 dated 11-6-2008 yet the spirit of law had been achieved by the Circular C.No.1(19)IR­Jud/2007-Pt dated 11-11-2009---Validity---Show cause notice was issued and order-in-original was passed by "Deputy Commissioner Inland Revenue" who was not duly appointed as an "Inland Revenue Officer" and was never assigned jurisdiction to the case of taxpayer through a notification published in the official gazette under S.30 of .the Sales Tax Act, 1990---Section 45 of the Sales Tax Act, 1990 providing for "Powers of Adjudication" was also omitted through Finance (Amendment) Ordinance, 2009 and "Assistant Collector or Deputy Collector" remained no more empowered to adjudicate upon cases falling under S.11 and S.36 of the Sales Tax Act, 1990---No notification or statutory regulatory order under S.30(1) of the Sales Tax Act, 1990 was published in the Official Gazette appointing Officers of Inland Revenue and assigning, them jurisdiction over the case of taxpayer on the pattern of earlier Notification No. S.R.O. 547(1)/2008 dated 11-6-2008---Act of assumption of jurisdiction by "Deputy Commissioner Inland revenue" for issuing show-cause notice and passing adjudication order was patently without jurisdiction---Lack of publication of a notification for appointment of Officers of Inland revenue Authorities in the official gazette under S.30 of the Sales Tax Act, 1990 rendered the whole exercise of adjudication in the case by the "Deputy Commissioner Inland Revenue" nullity in the eye of law---Lawful jurisdiction was the basic ingredient of any proceedings against the taxpayer and the same was to be derived from the expressed provisions of law---Provisions relating to jurisdiction were to be strictly construed as there could be no taxation on the basis of assumption and one had to be taxed as per letter of law and not spirit of law---Show cause notice and consequent adjudication order passed by the Deputy Commissioner Inland Revenue being illegal, void ab initio and without jurisdiction was set aside by the Appellate Tribunal and appeal filed by the revenue being devoid of any merit was dismissed.

Messrs Fecto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 = 2005 PTD 2286 and Commissioner of Sales tax (Central), Karachi v. Messrs Pakistan Services Ltd. Karachi PLD 1983 Kar. 297 rel.

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

----Ss.30 & 2(18)---S.R.O. 547(1)/2008 dated 11-6-2008---Appointment of authorities---Prior to amendments of provisions of S.30 of the Sales Tax Act, 1990, appointment and jurisdiction of "Sales Tax Officers" was made through notification required to be published in the official gazette and accordingly, a Notification No. S.R.O. 547(1)/2008 dated 11-6-2008 was issued appointing sales tax authorities and assigning them jurisdiction for a case or area---After amendment in S.30 of the Sales Tax Act, 1990, no such notification was issued there under and published in the official gazette for appointment of "Inland Revenue Authorities" for assigning them jurisdiction of a case or area---Since no notification was issued, nor published in the official gazette, show cause notice and consequent adjudication order was incompetently passed by the "Deputy commissioner Inland Revenue" who was not duly appointed as an "Inland Revenue Officer" and was never assigned jurisdiction to the case of taxpayer through a notification duly published in the official gazette under S.30 of the Sales Tax Act, 1990.

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

----S.30---Appointment of Authorities---Inland Revenue Officer should have been appointed by the Federal Board of Revenue through a notification published in the official Gazette but the present case was adjudicated by way of assumption of jurisdiction by "Deputy Commissioner Inland Revenue" who was never appointed as an Inland Revenue Officer to adjudicate upon the cases of assessment of tax and recovery not levied or short levied or erroneously refunded amount through a notification published in Official Gazette under S.30 of the Sales Tax Act, 1990---If the law had prescribed method for doing a thing in a particular manner, such provision of law was to be followed in letter and spirit 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---Adjudication by the Deputy Commissioner Inland Revenue on assumption of jurisdiction on its own was not backed by any legal provisions---Whole exercise of adjudication, therefore, was illegal.

2001 SCMR 838 and 2003.8CMR 1015 rel.

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

S.30---Appointment of Authorities---Prior to amendment through Finance (Amendment) Ordinance, 2009, requirement of notification under S.30 of the Sales Tax Act, 1990 published in the official gazette by issuing Notification No. S.R.O. 547(1)/2008 dated 11-6-2008 was fulfilled wherein Authorities were assigned the jurisdiction---Mandatory condition of appointment and jurisdiction of "Deputy Commissioner Inland Revenue" was not fulfilled, instead a Circular/Order C.No.1 (19) IR-Jud/2007-PT dated 11-11-2009 was issued which could neither be termed as a notification or a statutory regulatory order nor its publication was made in the official gazette under S.30 of the Sales Tax Act, 1990---Unless there was a fresh notification issued under S.30 of the Sales Tax Act, 1990 published in the official gazette, legal infirmity would prevail since the executive order dated 11-11-2009 could not be equated with the notification published in the official gazette.

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

----S.36(1)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Show cause notice issued on 6-5-2010 was barred by statutory period of limitation as the same was issued after the prescribed time limit of five years under S.36(1) of the Sales Tax Act, 1990 and the result was that like in the case of a suit for recovery of money, after lapse of time prescribed by law of limitation, the intended recovery became unenforceable---Where an executive authority exercised its jurisdiction after the expiry of period provided in a statute, such exercise of jurisdiction, without any iota of doubt was illegal and ab initio void---Phrase "shall be served with a notice, within five years of the relevant date" conveyed the intention of the legislature that show cause notice and issuance of the same within five- years, was a mandatory requirement for an action under S.36(1) of the Sales Tax Act, 1990 and the term 'shall' used in subsection (1) of S.36 of the Sales Tax Act, 1990 made the compliance of provision of law mandatory and there was no escape to it and once limitation had started to run and had come to an end, the. taxpayer had acquired a vested right of escapement of assessment by lapse of time---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 will not be dragged in the same.

Collector of Customs, Sales Tax, (West) Karachi v. Messrs K & A Industries, Karachi 2006 PTD 537 and Federation of Pakistan through Secretary, Finance, Islamabad and 4 others v. Messrs Ibrahim Textile Mills Ltd. and others 1992 SCMR 1898 rel.

Yasir Pirzada, D.R. for Appellant.

Khubaib Ahmad for Respondent.

Date of hearing: 30th January, 2012.

2012 P T D (Trib.) 1050

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member

C.I.R., R.T.O., RAWALPINDI

versus

ISLAM ELLAHI, KURRALA C/O Sohawa, Jhelum

I.T.A. No.425/IB of 2011, decided on 18th August, 2011.

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

----Ss. 127 & 122(c)---Appeal to the Commissioner (Appeals)---Phrase "order otherwise increasing the liability of the person"-Appeal-Scope---Question was whether "order passed under S.122(c) of the Income Tax Ordinance, 2001 was appealable before the First Appellate Authority in view of provisions of S.127 of the Income Tax Ordinance, 2001 "---Order having the effect of enhancing the assessment or reducing refund or otherwise increasing the liability of the person was appealable---Order passed under S.122(c) of the Income Tax Ordinance, 2001 was held to be appealable under S.127 of the Income Tax Ordinance, 2001 and finding of the First Appellate Authority on said issue was set aside.

Messrs Pak Saudi Fertilizer Ltd. v. Federation of Pakistan and 4 others 1999 PTD 4061 rel.

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

----S. 122(c)---Provisional assessment---Retrospective effect---Revenue contended that S.122(c) of the Income Tax Ordinance, 2001 could be applied retrospectively because it was a" machinery provision, procedural in nature and was also a beneficial legislation while the taxpayer contended that S.122(c) of the Income Tax Ordinance, 2001 was a substantive provision which was prospective in nature and could not be applied with retrospective effect---Validity---Section 122(c) of the Income Tax Ordinance, 2001 was introduced through Amended Finance Ordinance dated28-10-2009-Retrospective operation was not to be given to a statute so as to impair an existing right or obligation---Main and primary rule was that every statutory provision was to be deemed prospective unless by express provision or by necessary intendment it was to have retrospective effect---Taxation Officer was not correct in applying S.122(c) of the Income Tax Ordinance, 2001 retrospectively for the tax year 2008---Finding of First Appellate Authority that S.122(c) of the Income Tax Ordinance, 2001 was not applicable retrospectively, did not suffer from any illegality to warrant any interference---As the order passed by the First Appellate Authority did not suffer from any factual or legal infirmity appeal filed by the revenue was dismissed being devoid of any merits.

Honda Shahra-e-Faisal's case 2005 PTD 1316; CIT v. Elli Lili's case 2009 SCMR 1279 = 2009 PTD 1392; CIT v. Pakistan Tobaco Company Ltd. 1988 PTD 66; Rustam F. COWAS JEE and others v. C.B.R and 2 others 1985 PTD 529 and Harjina and Company Pakistan Ltd. v. CIT 1963 PTD 867 rel.

Zia Ullah Khan, D.R. for Department.

Muhammad Waseem Chaudhary for Taxpayer.

Date of hearing: 18th August, 2011.

2012 P T D (Trib.) 1055

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairman and Tabbana Sajjad Naseer, Accountant Member

BANK OF PUNJAB, LAHORE

versus

COMMISSIONER INLAND REVENUE, LTU, LAHORE

I.T.As. Nos.774/LB and 805/LB of 2011, decided on 19th December, 2011.

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

----S.121---Allegation of non-compliance of notice---Misrepresentation of facts by the authorities below---Miscarriage of justice---Scheduled bank was portrayed as a non-compliant taxpayer whereas the truth was otherwise---Federal Board of Revenue was to take notice of such lapse and take appropriate action so that in future taxpayers were not wrongly blamed for non-compliance.

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

----Ss.121, 177 & Seventh Schedule---Best judgment assessment---Allegation of non-compliance---Order passed under S.121 of the Income Tax Ordinance, 2001 was not maintainable as compliance of notice within the four corners of the Seventh Schedule to the Income Tax Ordinance, 2001 was made by the tax payer Bank---If the Deputy Commissioner Inland Revenue was not satisfied with the reply made on issues raised in the notice, amendment of assessment already in the field could have been made but there was no justification whatsoever to resort to 5.121 of the Income Tax Ordinance, 2001 which was untenable on factual matrix and there was no need to adjudicate other grounds related to assumption of jurisdiction under 5.177 of the Income Tax Ordinance, 2001 or retrospective application of S.177(10,) of the Income Tax Ordinance, 2001.

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

----S.100A & Seventh Sched: Rr.1 & 9---Special provisions relating to banking business---Tax year 2009---Computation of income of Banks and Insurance companies---Taxpayer contended that from tax year 2009 onwards, the banks were to be taxed in terms of S.100A of the Income Tax Ordinance, 2001 read with the provisions of Seventh Schedule to the Income Tax Ordinance, 2001; that assessment in the case of banks from tax year 2009 was to be made at par with insurance companies under the Fourth Schedule to the Income Tax Ordinance, 2001; that Seventh Schedule did not permit re-computation of income as done by the Deputy Commissioner in view of explicit languages of S.IOOA of the Income Tax Ordinance, 2001 read with R.1 of the Seventh Schedule to the Income Tax Ordinance, 2001; that Assessing Officer could make only permissible additions and adjustments as provided in the Seventh Schedule of the Income Tax Ordinance, 2001 itself and that the acceptance of accounts was a fait accompli for tax authorities---Revenue contended that in view of R.9 of the Seventh Schedule to the Income Tax Ordinance, 2001, all the provisions of the Income Tax Ordinance, 2001 were applicable and both the authorities below did not misinterpret the law---Validity---Undisputedly from tax year 2009, the Seventh Schedule to the Income Tax Ordinance, 2001 read with S.100A of the Income Tax Ordinance, 2001 override all other provisions as far as computation of income and tax payable in the case of banks was concerned---Such vital aspect escaped the attention of both the Assessing Officers and First Appellate Authority---Rule I of the Seventh Schedule to the Income Tax Ordinance, 2001 provided that the balance of income, from all sources before tax, disclosed in the annual accounts required to be furnished to the State Bank of Pakistan subject to adjustments permissible under Sub-R.1(a) to (h) of R.'1 of the Seventh Schedule to the Income Tax Ordinance, 2001, were to be accepted.

CIT Central Zone `A' Karachi v. Phoenix Assurance Co. Ltd. 1991 PTD 1028 ref.

(d) Interpretation of statutes---

----Special law excludes general provisions when the subject matter of both is the same.

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

----Seventh Sched., R.1 & 9 & S.100A---Rules for the computation of the profits and gains of a Banking Company and tax payable thereon---For computation of income and tax, special schedule was enacted, the provisions on the same subject provided elsewhere in the Income Tax Ordinance, 2001 were excluded and plain reading of S.100A of the Income Tax Ordinance, 2001 read with R.l of the Seventh Schedule to the Income Tax Ordinance, 2001 testified the same---Rule 9 of the Seventh Schedule to the Income Tax Ordinance, 2001 applied only to provisions that "were not specifically dealt with" in the Seventh Schedule to the Income Tax Ordinance, 2001---Since computation of income and tax payable thereon was specifically provided in the Seventh Schedule of the Income Tax Ordinance, 2001, R.9 of the Seventh Schedule could not be interpreted in a way that would defeat the very purpose of its enactment---Said Rule was not a non obstinate provision that override all other provisions of the Seventh Schedule to the Income Tax Ordinance, 2001; on the contrary, R.9 of the Seventh Schedule envisaged that if something was not provided in the Seventh Schedule then all other provisions of the Income Tax Ordinance, 2001 will apply mutatis mutandis.

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

----Seventh Sched, R.9---Rule 9 of the Seventh Schedule to the Income Tax Ordinance, 2001 applies only to provisions that "are not specifically dealt with" in the Seventh Schedule of the Income Tax Ordinance, 2001---If R.9 of the Seventh Schedule was to be applied in respect of provisions specifically enacted in the Seventh Schedule same would render the entire Schedule redundant.

2010 PTD (Trib.) 679 ref.

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

----Seventh Sched.---Rules for the computation of the profits and gains of a Banking Company and tax payable thereon---Law gives sanctity to the accounts prepared and Assessing Officer had no authority to upset the integrity of such accounts---Provisions contained in the Seventh Schedule to the Income Tax Ordinance, 2001 were non obstinate in nature which override other provisions of the Income Tax Ordinance, 2001.

EFU General Insurance Co. Ltd. v. Federation of Pakistan 1997 SCC 1174 1997 PTD 1693; Central Insurance Co. and others v. C.B.R., Islamabad and others 1993 SCMR 1232 = 1993 PTD 766; CIT Karachi v. Queens land Insurance Company Ltd. Karachi 1992 SCMR 539; CIT Central Zone 'A' Karachi v Phoenix Assurance Co Ltd. 1991 PTD 1028; Habib Insurance Co. Ltd. v. CIT .1989 SCC 736 = PLD 1990 SC 430; CIT Companies III. Karachi v. Central Insurance Companies Ltd. 2003 PTD 1321 and Home Insurance Co. Ltd v. CIT 1992 PTD 1177 rel.

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

----S.100A & Seventh Sched., Rr.l & 9---Special provisions relating to banking companies---Audited accounts---No variance in the audited accounts of bank submitted to State Bank of Pakistan could be made---Section 100A of the Income Tax Ordinance, 2001 read with R.1 of the Seventh Schedule to the Income Tax Ordinance, 2001 provide only specified adjustments/additions mentioned in R.1(a) to (h) of the Seventh Schedule to the Income Tax Ordinance, 2001 could be made---Acceptance of balance of income as per accounts was fait accompli for the Tax Department.

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

----Ss.100A, 206(2), 214(1) & Seventh Sched., Rr.1 & 9---C.B.R. Circular No.1 of 2007 dated 2-7-2007---C.B.R. Circular No.2 of 2008 dated 28-2-2008---C.B.R. Circular No.3 of 2009 dated 17-7-2009---C.B.R. Circular No.8 of 2009 dated 25-9-2009---Special provisions relating to banking business---Tax year 2009---Computation of income and tax payable by banking companies---Section 100A of the Income Tax Ordinance, 2001 read with its Seventh Schedule was a special non-obstinate provision that overrides all other provisions as far as computation of income and tax payable by the banking companies was concerned---Tax authorities were bound to accept the audited accounts from tax year 2009 in case of banks subject to specified additions and adjustments---Such position of law had also been admitted and explained by the Federal Board of Revenue in various circulars which instructions were strictly as per law having binding force for all subordinate tax officials under Ss.206(2) and 214(1) of the Income Tax Ordinance, 2001---In the presence of unambiguous position of law and legally binding instructions, the Assessing Officer was bound to accept the balance of income as per audited accounts subject to additions/adjustments mentioned in R.1(a) to (h) of the Seventh Schedule to the Income Tax Ordinance, 2001---On the basis of misinterpretation of R.9 of the Seventh Schedule to the Income Tax Ordinance, 2001, the authorities below concluded that Seventh Schedule to the Income Tax Ordinance, 2001 was not a self-contained provision as far as computation of income was concerned in the case of banking companies---For computation of income of the banking companies, the Seventh Schedule to the Income Tax Ordinance, 2001 provide rules for computation of profits and gains of a banking company and tax payable thereon---From tax year 2009 onwards, a banking company's income as disclosed in the annual accounts furnished to the State Bank of Pakistan, subject to specified adjustments, shall be taken as "Income from business "---Rule 9 of the Seventh Schedule to the Income Tax Ordinance, 2001 in no way could be interpreted to unsettle such requirement laid down by the Legislature; it .applies for things not provided for in the Seventh Schedule of the Income Tax Ordinance, 2001.

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

----Seventh Sched., R.1---Rules for the computation of the profits and gains of a Banking Company and tax payable thereon---Reversal of provision for non performing advances---Taxation of---Validity---Undisputedly claimed provision were reduced and difference representing reversals and recoveries was offered for tax---Department by disallowing total amount of claim (which included reversal ) taxed the same not only twice but thrice as department added back an amount of reversal in total income---Addition was deleted by the Appellate Tribunal being reversal and having been taxed without any justification.

I.T.A. Nd.306/LB/2009 dated 8-8-2009 rel.

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

----Seventh Sched., R.8A(3)---Transitional provisions---Unabsorbed depreciation allowance related to leased out assets claimed under R.8A(3) of the Seventh Schedule to the Income Tax Ordinance, 2001 was ordered to be accepted by the Appellate Tribunal.

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

----Seventh Sched., R.1---Rules for the computation of the profits and gains of a Banking Company and tax payable thereon---Provision against other assets---Disallowance of---Taxpayer contended that as per R.1 of the Seventh Schedule to the Income Tax Ordinance, 2001, the net profit as per audited accounts should be accepted; and First Appellate Authority was not justified in confirming such addition which was made in utter violation of law---Appellate Tribunal held that amount was allowable in view of R.1 of the Seventh Schedule to the Income Tax Ordinance, 2001 and disapproved the action of both the authorities below.

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

--Ss. 100A, 99, Fourth Sched. & Seventh Sched., Rr.1 & 9---Tax year 2009---Special provisions relating to banking business---Provision for diminution in value of investment---Disallowance of---Validity---Assessment of banks with effect from tax year 2009 had become at par with the assessments of insurance companies---Language of S.100A of the Income Tax Ordinance, 2001 read with Seventh Schedule to the Income Tax Ordinance, 2001 was exactly the same as S.99 read with the Fourth Schedule to the Income Tax Ordinance, 2001---Neither any specific provision of law had been quoted for said disallowance by the Deputy Commissioner or of the Commissioner of Appeals, nor were International Accounting Standards 30 and 40 made applicable in Pakistan during the tax year 2009---Addition was deleted by the Appellate Tribunal, in circumstances.

2010 PTD (Trib.) 679 rel.

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

----Seventh Sched., R.1---Rules for the computation of the profits an gains of a Banking Company and tax payable thereon---Provision against compensated absences---Disallowance of---Taxpayer contended that addition was against the law as R.1 of Seventh Schedule of the Income Tax Ordinance, 2001 specifically provides that in the case a banks net profit as per audited accounts was to be accepted, subject t certain adjustments mentioned in the Schedule itself; and there was nothing in the Schedule that authorised Deputy Commissioner to disallow such amount---Validity---Appellate Tribunal held that then was no justification for disallowance of the provision and it should be allowed as such.

CIT v. Oriental Dyes and Chemicals Co. Ltd. 1992 SCMR 76: and Commissioner Legal Division v. Civil Aviation Authority 2008 PTL 647 rel.

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

----S.21(e) & Seventh Sched., R.1-Deductions not allowed---Rules for the computation of the profits and gains of a Banking Company ana taxpayable thereon---Contribution to defined benefit plan---Disallowance of---Taxpayer contended that Deputy Commissioner disallowedcontribution to defined benefit plan (gratuity fund) without assigning any reason and taking into account that R.1 of the Seventh Schedule required acceptance of the net profit of the bank as per audited accounts submitted to the State Bank of Pakistan and that the fund was approved by the Commissioner---Validity---Fund was a recognized one and was not hit by S.21(e) of the Income Tax Ordinance, 2001---Commissioner himself had observed that "the Deputy Commissioner Inland Revenue has made this addition without assigning any reason "---After giving such finding, First Appellate Authority was not justified in confirming disallowance of Contribution to Defined Benefit Plan (Gratuity Fund)---Addition being without any lawful basis was deleted on merit by the Appellate Tribunal.

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

----S.67 & Seventh Sched., Rr.1, 6 & '9---Income Tax Rules, 2002, R.13---Apportionment of deductions---Rules for the computation of the profits and gains of a Banking Company and tax payable thereon---Deputy Commissioner disallowed proportionate financial and administrative expenses by allocating them to dividend and capital gain taxable at reduced rate---Taxpayer contended that R.1 of the Seventh Schedule to the Income Tax Ordinance, 2001 did not permit any such allocation: and S.67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002 had no implication because R.6 of the Seventh Schedule provided that "Income computed under this Schedule shall be chargeable to tax under the head "income from business...."; and all incomes were to be taxed under the head Income from Business' as far as Seventh Schedule was concerned; and this dismantles the very basis of addition---Revenue contended that in view of R.9 of the Seventh Schedule S.67 of the Income Tax Ordinance, 2001 was rightly invoked---Validity---Rule 6 of the Seventh Schedule specifically provided that all income should be taxed in the case of banks under the head "income from business"-In the presence of such unambiguous provision of law, resort to S.67 of the Income Tax Ordinance, 2001 read with R.9 of the Seventh Schedule of the Income Tax Ordinance, 2001 was incorrect and legally untenable---Allocation of financial expenses to dividend and capital gain taxable at reduced rate was disapproved by the Appellate Tribunal being unlawful.

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

----Seventh Sched., R.1(c)---Rules for the computation of the profits and gains of Banking Company and tax payable thereon---Provision for non performing advances etc.---Revenue contended that First Appellate Authority was not justified to allow provision for non performing advances etc. under R.1(c) of the Seventh Schedule of the Income Tax Ordinance, 2001 as no certificate from the external auditor was given---Taxpayer provided copy of the letter sent to Deputy Commissioner wherein the fact of furnishing the certificate was mentioned---Effect---First Appellate Authority was justified to allow provision for bad debt strictly as per law---Objection of revenue was against the facts---Taxpayer provide the certificate and it was unjustified on the part of Deputy Commissioner to disallowed the entire claim---Commissioner's order on this point was unexceptionable.

Dr. Ikramul Haq and Mansoor Beg for Appellants.

Raja Sikandar Khan, L.A. for Respondent.

Date of hearing: 19th December, 2011.

2012 P T D (Trib.) 1076

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member and Muhammad Iqbal Khan, Accountant Member

C.I.R., LEGAL DIVISION, R.T.O., HYDERABAD

versus

Messrs MEMON MOTORS (PVT.) LTD., HYDERABAD.T.A.

No.670/KB of 2010, decided on 3rd February, 2012.

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

----Ss. 177(4)(a)(d) & 122(1)(5)---F.B.R. Circular No.4(7S) ITP/2009 dated 9-1-2010---Audit---Tax year 2008---Selection of case for audit by the Commissioner of Income Tax (Audit) before the instructions issued vide Circular No.4 (7S) ITP/2009 dated 9-1-2010---Taxpayer contended that selection of case by the Commissioner of Income Tax (Audit) was unlawful and unwarranted as the power to select the case vested with the Federal Board of Revenue through random---First Appellate Authority held that action of the Deputy Commissioner to amend the assessment on the basis of selection of case for audit by the Commissioner of Income Tax (Audit) had been without jurisdiction, the jurisdiction lay with the Federal Board of Revenue, who select the case of Corporate and AOPS, was not legally sustainable, in the eyes of law; and amended order passed was declared to be ab initio, illegal and was annulled---Department contended that taxpayer was selected for audit on a date preceding the date on which administrative instructions were received from the Board and Commissioner was vested with jurisdiction to select the case for audit under provision of S.177(4)(1) &. (d) of the Income Tax Ordinance, 2001---Validity---Federal Board of Revenue through Circular No.4 (7S) ITP/2009 dated 9-1-2010 directed the field formation that as conveyed through the minutes of meeting dated 11-1-2010, random audit selection of cases for tax year 2008 had been held for Audit of Corporate cases and cases of AOPs, the cases of audit on any other basis for tax year 2008 may be closed and cases with proof or evidence of gross' irregularities may be intimated to the Board for guidelines as to further necessary action---Case was selected for audit on 29-1-2009 and proceedings were finalized on 28-7-2009, much before the Board Circular dated 9-1-2010 through which instructions to the field formation were conveyed that Corporate Cases and cases of AOPs were to be selected through random ballot for audit and cases of audit on any other basis may be closed---Board instructions would apply to cases of audit selected on any basis other than random ballot for tax year 2008 in which proceedings were pending on the date instruction was received from the Board---Proceedings in such cases could be closed where proceedings were pending on the date, Board Circular was received but it was not the situation in the present case because the Taxation Officer had already finalized the proceedings on 28-7-2009 before Board instructions were communicated on 9-1-2010---No provision of law authorized the Taxation Officer to close proceedings in a case that had already been finalized---Since, Taxation Officer had already conducted legal proceedings in the case, the Board was precluded specifically from giving any orders, instructions or directions so as to interfere with quasi-judicial functions of the Assessing Officer---Observation of First Appellate Authority that selection of the cases by the Commissioner of Income Tax on the given date was without jurisdiction as the jurisdiction lay with Federal Board of Revenue was not factually correct because on the date of selection of the case for audit and its finalization, there existed no instructions from Board and also on the basis of decision of Appellate Tribunal---Order of First Appellate Authority annulling the order being not sustainable in law was set aside by the Appellate Tribunal---Since First Appellate Authority had annulled the order on legal plane and had not adjudicated upon other issues involved in case put forth by the taxpayer in his grounds of appeal, the cases were remanded for adjudication on the same after affording reasonable opportunity to the taxpayer and the department.

1996 PTD (Trib.) 388 rel.

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

----S.129(4)---Decision in appeal---Limitation---Directory or manda?tory---Revenue contended that odder of First Appellate Authority was barred by limitation under S.129(4) of the Income Tax Ordinance, 1979 and the same was invalid order and not sustainable---Validity---Appeal was filed before First Appellate Authority on 15-8-2009 and decided as on 21-6-2010 which was beyond the limitation period---First Appellate Authority should have decided the appeal and pass order not later than 120 days from the date of filing of appeal or within extended period of 60 days for reasons to be recorded in writing---No such reasons was recorded by the First Appellate Authority in his order for the extended period of 60 days whereas the order had been passed late by more than 300 days---Legislature had not prescribed consequences if order was not passed by the First Appellate Authority within time prescribed in S.129(4) of the Income Tax Ordinance, 2Q01---Had it been the intention of legislature to prescribe limitation period for decision of First Appellate Authority beyond which his order would be barred by time, it would have done so by the express provision of law---

Legislature had not prescribed any consequence if the order was not passed by the First Appellate Authority within the prescribed period of filing of appeal except for provisions contained in subsection (5) read with subsection (7) of S.129 of the Income Tax Ordinance, 2001-

Provisions of subsection (5) of 5.129 of the Income Tax Ordinance, 2001 were not applicable in the case---Provisions of S.129(4) of the Income Tax Ordinance, 2001 were machinery provision in nature, and to say that order not passed by the First Appellate Authority within stipulated period of filing of appeal would become time-barred, would be against the principle of interpretation of statutes---Plea taken by the Revenue for the time barred of appeal beyond the limitation period prescribed under S.129(4) of the Income Tax Ordinance, 2001 was misdirected and not sustainable in law and was rejected by the Appellate Tribunal.

2000 PTD 2872; 2008 PTD 60; 1976 PTD 321; Deans Associates (Pvt.) Ltd. v. IAC of Income Tax 2002 PTD 441; 2002 PTD 2112 and 2010 PTD (Trib.) 1127 rel.

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

----S.129(5) & (7)---Decision in appeal---Limitation---Notice by the appellant---If First Appellate Authority fail to make the order before the expiration of 4 months from the end of the month for which the Appeal was lodged, the relief sought by the appellant in appeal shall be treated as having been given---Provisions of subsection (7) of 5.129 of the Income Tax Ordinance, 2001 stipulated that the provision of sub-section (5) of S.129 of the Income Tax Ordinance, 2001 shall not apply unless a notice by the appellant stating that no order under sub-section (I) had been made was personally served by the appellant on the Commissioner Appeals not less than 30 days before the expiration of period of four months---No such notices served by the appellant on the First Appellate Authority, were on the record, the relief provided under subsection (5) of S.129 of the Income Tax Ordinance, 2001 was not available to the appellant.

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

----S.129 (4)---Decision in appeal-Limitation-Where legislature had wanted to prescribe time-barring limitation period for any action under the provision of Income Tax Ordinance, 2001, it had done so by incorporating specific provisions.

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

----S.129(4)---Decision in appeal---Limitation---Directory or manda?tory---Since legislature had not set forth any consequences of failure to comply with provision of S.129(4) of the Income Tax Ordinance, 2001, the provisions of S.129(4) of the Income Tax Ordinance, 2001 were not mandatory but directory in nature.

2000 PTD 2872 rel.

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

.---S.129 (4)---Decision in appeal---Limitation---In the absence of any specific provision of law for consequences, if order is not passed by the First Appellate Authority, within the prescribed time under S. 129(4) of the Income Tax Ordinance, 2001, it could not be deemed that such order had become time-barred as effect of deeming provision was restricted to the section to which it was atfached and deeming provision could not be interpreted or enlarged to other provisions of the statute.

2002 PTD 2112 rel.

(g) Interpretation of Statutes---

----Deeming provision in a statute cannot spill over to other provisions in a statute and are to be construed strictly within the four corners of their objects.

2002 PTD 2112 rel.

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

----S.129 (4)---Decision in appeal--Limitation---Deeming provision---Since there was no deeming provision in S.129 (4) of the Income Tax Ordinance, 2001 for time-barring of order in case of failure of First Appellate Authority to pass orders within time limit prescribed in S.129(4) of the Income Tax Ordinance. 2001, deeming time-barring of his order will not be sustainable in law.

2010 PTD (Trib.) 1127 rel.

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

----S.129 (4)---Decision in appeal---Limitation---Reasons to be recorded in writing, if First Appellate Authority failed to pass his appellate order within the prescribed time limit---Provisions of S.129(4) of the Income Tax Ordinance, 2001, had been incorporated in the Income Tax Ordinance, 2001 for expeditious disposal of appeals filed by the taxpayer before First Appellate Authority and, negligence in this regard would be negation of the spirit of law---Law provided that First Appellate Authority shall pass the appellate order not later than 120 days from the date of filing of appeals or within extended period of 60 days, for reasons to be recorded in writing by the Commissioner (Appeals)---First Appellate Authority had been made liable to record reasons in writing if he failed to pass his appellate order within the prescribed time limit.

Dr. Naveed Hasan, D.R. for Appellant. Habibullah Ahmed for Respondent. Date of hearing: 11th January, 2012.

2012 P T D (Trib.) 1090

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and M.B. Tahir, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-II, MULTAN

versus

Messrs CHICAGO METAL WORKS, INDUSTRIAL ESTATE, MULTAN

I.T.As. Nos.1511/LB to 1514/LB of 2011, decided on 28th March, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.129 (1) (b) & 170---Workers' Welfare Fund Ordinance (XXXVI of 1971), S.4---Decision in appeal---Inherent power of setting aside an order---Refund was issued after deducting Workers' Welfare Fund without passing formal written order---First Appellate Authority set aside/remanded the order passed under 5.170 of the Income Tax Ordinance, 2001 with the direction to pass a speaking order in writing---Revenue contended that First Appellate Authority was not competent to set aside the order---Validity---Adjustment of Worker's Welfare Fund from refund claim had been made without passing the order as per requirements of S.4 of the Worker's Welfare Fund Ordinance, 1971---Taxation Officer had violated the mandatory procedure which rendered his action void---Under Cl.(b) of sub-section (9) of 5.129 of the Income Tax Ordinance, 2001, the First Appellate Authority was competent to make such order as he thought fit---Officer who was empowered to hear and decide the appeals against any order had an inherent power of setting aside the appeals if he deemed appropriate---Orders of First Appellate Authority was upheld and appeal of the Revenue was dismissed being devoid of merits.

Abid Raza Bodla, D.R. for Appellant.

Riaz Ahmad Raja, ITP for Respondent.

Date of hearing: 28th March, 2012.

2012 P T D (Trib.) 1094

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Sohail Afzal, Accountant Member

PUNJAB BEVERAGES COMPANY (PVT.) LTD., FAISALABAD

versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.214/LB of 2010, decided on 19th January, 2011.

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

----Ss. 33, 34 & 11(5)---Sales Tax General Order No.3 of 2004, dated 12-6-2004, Para 21---Sales Tax General Order No.2 of 2004 dated 27-5-2004, Para 23---Offences and penalties---Imposition of penalty and additional tax was not mandatory---Assessment of tax---Levy of minimum tax---To pay the tax demand, representation was made to the Federal Board of Revenue with the request to pay the same in instalments---Federal Board of Revenue granted the request to pay the tax in instalment--Appeals filed by the taxpayer were finally heard by the First Appellate Authority; and by that time amount actually due stood paid in installments---Registered person acknowledged that tax was actually due and submitted that the same was paid in instalments after getting approval from the Federal Board of Revenue and discharged his tax liability while the First Appellate Authority had confirmed the minimum tax liability ignoring Para 23 of Sales Tax General Order No.2 of 2004 dated 27-5-2004 which required determination of actual liability through audit; and audit of the said period was carried out and actual liability was determined which was the same figure which had already been paid---Appellate Tribunal directed that demand over and above the actual liability determined in the audit would be deleted---Similarly, additional tax and penalty was deleted as delay in the payment of tax was not wilful rather under compelling circumstances and Federal Board of Revenue had also acceded to the request of the company for payment in installments considering the circumstances of the case---Imposition of penalty and additional tax was not mandatory and there was discretion left with the authorities to allow any concession.

2004 SCMR 456 = 2004 PTD 1179 rel.

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

----Ss.30, 11, 36(1) & 45---S.R.O. 547(1)/2008 dated 11-6-2008---Circular C.No.1(19)IR-Jud/2007-Pt dated 11-11-2009---F.B.R. Order C. No.1(32)/2009-MIIA dated 24-11-2009---F.B.R. Order No.1805-M?IIA/2009 dated 25-11-2009---Federal Board of Revenue Act (IV of 2007), Ss.4(1)(h) & 5(1)(b)---Appointment of Authorities---Appointment of Deputy Commissioner Inland Revenue Officers---Taxpayer contended that order under S.11(5) of the Sales Tax Act, 1990 were to be passed by "an officer of Inland Revenue" who had been appointed through a notification in the official Gazette for the purpose of Sales Tax Act, 1990 in relation to case/area specified in the notification; and as per provisions of S.30 of the Sales Tax Act, 1990 as stood prior to amendment, the S.R.O. 547(1)/2008 dated 11-6-2008 had been issued appointing sales tax authorities and assigning them jurisdiction but after amendment of S.30 of the Sales Tax Act, 1990 and related amendments, no notification/S.R.O. was issued and published in the official Gazette appointing sales tax authorities and assigning them jurisdiction with regard to the case or area of the registered person which was a pre-requisite for any proceedings by an Officer of the Inland Revenue; and order passed against the taxpayer were without lawful authority and of no legal effect---Validity---First Appellate Authority impliedly admitted that there was no notification in the official Gazette on the pattern of earlier S.R.O. 547(1)/2008 dated 11-6-2008 yet he held that the spirit of law had been fulfilled as the orders of the Federal Board of Revenue appointing sales tax authorities and assigning them jurisdiction were issued; and reference to orders C.No.1(32)/2009-MIIA dated 24-11-2009 was made which in fact pertained to re-designation of posts made under S.4(1)(h) and S.5(1)(b) of the Federal Board of Revenue Act, 2007 and not in pursuance of S.30 of the Sales Tax Act, 1990---Reliance had also been placed upon another order No.1805-M-IIA/2009 dated 25-11-2009 which was in fact a transfer and posting order placing certain officers in the Regional Tax Office and not a statutory notification under S.30 of the Sales Tax Act, 1990---All such orders were administrative orders and there was no notification/S. R.O. published in the official Gazette on the pattern of earlier S.R.O. 547(1)/2008 dated 11-6-2008 issued in exercise of amended powers available under S.30 of the Sales Tax Act, 1990--Federal Board of Revenue's jurisdiction Order C.No.1(19)IR-Jud/ 2007-Pt dated 11-11-2009 assigning jurisdiction to Commissioners Inland Revenue was not a substitute for stipulated mandator notification published in the official Gazette appointing authorities for the purpose of Sales Tax Act, 1990 and assigning jurisdiction to them-. No notification/S. R. O. in order to amend earlier S.R.O. 547(1)/200, dated 11-6-2008 was issued and published in the official Gazette-Authority passing the order-in-original had not been appointed uncle, S.30(1) for the purposes of Sales Tax Act, 1990 and the case of the taxpayer was not assigned to him by express delegated legislation as per precedent and pattern of S.R.O. 547(1)/2008 dated 11-6-2008-Assumption of jurisdiction and passing of order-in-original was illegal, and void.

2005 PTD 2286; 1983 PTD 117; 2006 PTD 2821 and 2003 PTD 757 rel.

Shahid Pervez Jami for Appellant.

Rizwan Ahmed Urfi, D.R. for Respondent.

Date of hearing: 19th January, 2011.

2012 P T D (Trib.) 1102

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and M.B. Tahir, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-II, REGION, MULTAN

versus

Messrs CHICAGO METAL WORKS (PVT.) LTD., MULTAN

S.T.A. No.675/LB of 2011, decided on 28th March, 2012.

Sales Tax Act (VII of 1990)---

----Ss. 48, 2(2A), 45-B & 21---Recovery of arrears of tax---Notice for recovery of due amount---Notice for recovery of arrears---Registered person was forced to deposit the tax to de-block its National Tax Number---Appeal of the taxpayer was accepted by the First Appellate Authority and allowed refund of the said amount---Revenue contended that notice was issued under S.48 of the Sales Tax Act, 1990 for payment of due amount recoverable against fake and flying invoices; that appeal under S.45-B(1) of the Sales Tax Act, 1990 could not be filed. against the order passed under S,48 of the Sales Tax Act, 1990; that First Appellate Authority was not justified to give order for issuance of refund without considering the facts that input tax claimed/adjusted on the invoices issued by the blocked/black-listed suppliers; that goods on which input tax was unlawfully adjusted were imported for use in manufacturing whereas the same were sold in the market; and that no input adjustment was admissible---Registered person contended that business were closed due to blocking and they had no option except to pay the demanded amount under protest; that they were asked to deposit the amount without issuing of show-cause notice and without adjudication as per procedure prescribed under the law; and that notice under S.48 of the Sales Tax Act, 1990 could only be issued for recovery of arrears of tax---Validity---Notice under S.48 of the Sales Tax Act, 1990 was issued without application of mind and without following the requirements of law---If the taxpayer unlawfully adjusted the input tax, they should have been issued show-cause notice for violating the provision of law and the same should have been adjudicated upon---Notice under S.48 of the Sales Tax Act, 1990 was issued for the recovery of arrears as defined under S.2(2A) of the Sales Tax Act, 1990 whereas the amount under reference did not fall within the category of arrears---Department did not bother to investigate whether the suppliers had paid the sales tax on the invoices issued to the taxpayer---No exercise was undertaken to verify the same---Suppliers declared black-listed subsequently became active and there was no liability of such purchases made by the taxpayer---Action of the Revenue being contrary to provision of Sales Tax Act, 1990 could not be sustained---Appeal of the department was rejected being devoid of merits.

Abid Raza Bodla, D.R. for Appellant.

Riaz Ahmad Raja, ITP for Respondent.

Date of hearing: 28th March, 2012.

2012 P T D (Trib.) 1105

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member and Muhammad Iqbal Khan Accountant Member

COMMISSIONER INCOME TAX, (LEGAL DIVISION) R.T.O., KARACHI

versus

Messrs TEEJAYS EXCLUSIVE (PVT.) LTD., KARACHI

I.T.A. No.730/KB of 2010, decided on 26th January, 2012.

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

----Ss.39, 15(2), 122(9) & 177(4)(d)---Income from other sources--Income from property---First Appellate Authority directed that addition made be accepted as rental income as a separate block of income instead of income from other sources despite the fact that the properties were not owned by the taxpayer---Revenue contended that rental income claimed by the taxpayer from immoveable property was treated as income from other sources assessable under S.39 of the Income Tax Ordinance, 2001 because these properties were admittedly not owned by the company but the ownership was in the name of a Director of the company---Taxpayer contended that rental income had been earned from the properties which were duly reflected in the balance sheet of the taxpayer; and it will be wrong to conclude that it was not rental income of the company but income from other sources---Validity---Taxpayer did not deny that all the properties were in the name of one of the Director of the company but argued that company/taxpayer had declared all the properties as its assets duly reflected in the balance sheet, the income from such properties should be treated as rental income of the Company and not income from other sources---

Provisions of S.15(2) of the Income Tax Ordinance, 2001 provided for exclusive definition of rent which meant any amount received or receivable by owner of land or building---Income to be classified as rental income, the person receiving rent must be the owner of the land or building according to the provisions of law---Admittedly the taxpayer company was not the owner of the properties let out, the receipts from these properties would fall under `income front other source' of the taxpayer assessable under provision of S.39 of the Income Tax Ordinance, 2001.

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

----Ss.21, 174 & 122(1)---Deductions not allowed---Operating and administration expenses---Revenue contended that First Appellate Authority was not justified in deleting 50% disallowance out of operating and admin expense by observing that sub-cls. of Ss.21 and 174 of the Income Tax Ordinance, 2001 had not been mentioned whereas it had been clearly mentioned in the order under S.122(1) of the Income Tax Ordinance, 2001, that the amounts were to be added back to the income of the taxpayer in accordance with provisions of Ss.21 and 174 of the Income Tax Ordinance, 2001; and also erred in observing that the Taxation Officer had not mentioned any specific un?verifiability or inadmissibility whereas the taxpayer failed to produce requisite details/evidence before the Officer Inland Revenue in spite of ample opportunity to do so---Validity---Complaint of the Revenue was that relevant details and necessary evidence were not provided by the taxpayer in spite of sufficient opportunity---Taxpayer contended that relevant clauses of Ss.21 and 174 of the Income Tax Ordinance, 2001 had not been mentioned and instances of un-verifiability or inadmissibility had not been quoted by the Officer Inland Revenue while making additions---During proceedings both the parties agreed that case on this score may be remanded to the Taxation Officer for de novo proceedings---Orders of the two officers below on the issue were set aside by the Appellate Tribunal and remanded the case to the Taxation Officer for de novo proceedings after affording reasonable opportunity of being heard to the taxpayer.

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

----Ss.21(m), 177, 122 & 111(1)(a)---Deductions not allowed---Unexplained income or assets---Director's remuneration---Deletion of add backs---Revenue contended that add backs were deleted by accepting the contention of the taxpayer that out of Rs.960, 000, Rs. 836,164 was still payable while it was a matter of record that such an explanation did not find any mention before the Officer Inland Revenue which was the original forum of adjudication---validity---

Taxpayer had proved from statement of accounts that out of total remuneration at Rs.9, 60, 000 an amount of Rs. 8, 36,164 was payable as closing dates---Statement of accounts were shown to the Representative of the Revenue---Order of First Appellate Authority was maintained on this score by the Appellate Tribunal.

Dr. Naveed-ul-Hasan, D.R. for Appellant.

Muhammad Ameen for Respondent.

Date of hearing: 26th January, 2012.

2012 P T D (Trib.) 1113

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Yusuf Ghaffar Khan, Accountant Member

Messrs SWAT CERAMICS (PVT.) LTD., NOWSHERA

versus

ASSISTANT COMMISSIONER INLAND REVENUE AUDIT DIVISION-I, R.T.O., PESHAWAR and another

S.T.A. No.157(PB) of 2011, decided on 22nd February, 2012.

Sales Tax Act (VII of 1990)---

----Ss.3(3)(a), 11(2), 8(1)(d), 8(l)(c)(a), 21(2), 33, 34 & 36(1)---Sales Tax Rules, 2006, R.12(5)---Federal Excise Act, 2005, Ss.3A, 14 & 19--Scope of tax---Assessment of tax---During course of audit of tax record, supplier of the taxpayer was blacklisted as per Federal Board of Revenue portal system---Input tax and special excise duty involved in purchases made from said supplier were termed inadmissible on the ground that suppliers were either blacklisted or their registration was suspended and despite the fact that the suppliers were blacklisted after the supplies were effected even then the buyer was not entitled to adjustment of input tax---Validity---Taxpayer claimed adjustment of input tax credit on the basis of supplies against invoices issued by blacklisted persons and departmental view was that in such like situation the registered person was not entitled to any adjustment--Issue had been decided in favour of registered person and against the revenue wherein it had been held that the rejection of refund against invoices of blacklisted and registration suspended units was not justified---Liability to pay sales tax was on the suppliers under S.3(3)(a) of the Sales Tax Act, 1990 and it could be extended to buyer only by a notification under S.3(a) of the Sales Tax Act, 1990, which provided shifting of tax liability to the person receiving the supply of specific goods and in taxpayer's case no such notification was issued by the Federal Government as such defaulted amount should have been recovered from the defaulter instead of buyer---Order of blacklisted or suspension of registration would take effect from the date of its issuance and invoices issued by the suppliers during the intervening period were acceptable---Purchases of the taxpayer to the period when the suppliers were not included in the list of blacklisted, registration suspended units and their subsequent inclusion in the list of blacklisted units prior to blacklisted period could not operate retrospectively---Orders passed by the authorities below were vacated by the Appellate Tribunal as the suppliers at the time of supplies were neither blacklisted nor their registration were suspended.

2011 PTD (Trib.) 2090 and 2619 rel.

Danish Ali Qazi for Appellant.

Shuaib Sultan, IRAQ for Respondent.

Date of hearing: 22nd February, 2012.

2012 P T D (Trib.) 1120

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member and Sohail Afzal, Accountant Member

C.I.R. (LEGAL) R.T.O., FAISALABAD

versus

Messrs KAMAL SPINNING MILLS (PVT.) LTD., FAISALABAD

S.T.As. Nos.179/LB and 180/LB of 2010, decided on 5th April, 2012.

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

----Ss.10, 21, 36 & 46---Refund of input tax---Rejection of refund---Order was set aside by the First Appellate Authority by holding that name of supplier had been cleared from the objection of scrutiny for verification of input tax and Sales Tax Automated Refund Repository system had validated the invoices issued by supplier of the taxpayer in some other cases---Revenue contended that supplier of the taxpayer had been declared a black-listed person, no refund could be allowed against his invoices---Taxpayer contended that neither such objection of black-listed unit was primarily levelled in the show-cause notice nor the same was confronted and adjudicated in adjudication order as well as in the first appellate order; and raising of such objection for the first time by the department in the grounds of appeal rendered same as not only illegal but also beyond the scope and contents of the show-cause notice---Validity---Admittedly, Sales Tax Automated Refund Repository system had already cleared the name of the supplier of the taxpayer from the objection of scrutiny for verification of input tax and the •revenue had also allowed refund against his invoices to other taxpayers and the taxpayer could not be denied the same treatment---Charge of "black-listing" was not levelled in the show-cause notice nor the same was adjudicated by the adjudicating authority or by the First Appellate Authority and refund could not be rejected merely on the charge of black-listing---Any objection which had not been levelled and confronted in the show-cause notice and not adjudicated in the adjudication order could not be levelled for the first time before the Appellate Tribunal and appeals filed by the revenue on the issue needed no consideration---No intervention was warranted by the Appellate Tribunal in the orders of First Appellate Authority which were maintained and departmental appeals were dismissed being devoid of any force.

1987 SCMR 1840 rel.

(b) Sales Tax---

----Show-cause notice---Objection/charge-sheet which was not made a part of allegations contained in the show-cause notice and never adjudged in adjudication order and even in the appellate order could not be raised for the first time in grounds of appeal taken for the Appellate Tribunal.

1987 SCMR 1840 rel.

Mrs. Fouzia Fakhar D.R. for Appellant.

Khubaib Ahmad for Respondent.

Date of hearing: 29th March, 2012.

2012 P T D (Trib.) 1123

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member and Sohail Afzal Accountant Member

Messrs ZAHID JEE TEXTILE MILLS LTD., FAISALABAD

versus

COMMISSIONER (APPEALS) INLAND REVENUE (R.T.O.), FAISALABAD

M.A. (AG) No.15/LB of 2012 and S.T.A. No.247/LB of 2010, decided on 20th March, 2012.

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

----Ss.30, 36(3), 11(5), 2(18) & 33(13)-S.R.O. 547(I)/2008 dated 11-6-2008---F.B.R. Circular Order C. No.1 (19) IR-Jud/2007-Ot dated 11-11-2009---Appointment of Authorities---Show cause notice was issued by the Deputy Commissioner Inland Revenue as to why amou=nt of tax refunded may not be recovered due to black-listing of suppliers along with hundred percent penalty and upheld the charges levelled against the registered person and passed sales tax order-in-original---Taxpayer contended that Deputy Commissioner Inland Revenue at the relevant time was not legally competent to issue show-cause notice and to pass adjudication order as no notification was published for appointment of Inland Revenue Officers in the Official Gazette under S.30 of the Sales Tax Act, 1990; that proceedings initiated was without lawful authority and ab initio void; that imposition of hundred percent penalty was illegal because amount of penalty was not confronted in the show-cause notice; and that mere citation of S.33(13) of the Sales Tax Act, '1990 did not warrant hundred percent penalty---Revenue admitted that there was no such notification issued and published in the official gazette on the pattern of S.R.O. 547(1)/2008 dated 11-6-2008 but there was a Circular Order bearing C.No.l (19) IR-Jud/2007-Ot dated 11-11-2009 in lieu of a statutory regulatory order---Validity---Prior to amendments, the appointment and jurisdiction of "Sales Tax Officers" was made through a notification No. S.R.O. 547(1)/2008 dated 11-6-2008 appointing sales tax authorities and assigning them jurisdiction for a case or area which was duly published in the official gazette but after amendment in S.30 of the Sales Tax Act, 1990, and other amendments, no notification was issued and published in the official gazette for appointment of "Inland Revenue Authorities" to assign them jurisdiction of a case or area---Since, teither any notification was issued for appointment of Inland Revenue Officers nor the same was published in the official gazette, the show-cause notice and adjudication order passed by the Deputy Commissioner Inland Revenue was illegal and unlawful being without assigning the jurisdiction of the case under S.30 of the Sales Tax Act, 1990---Provision of S.30 of the Sales Tax Act, 1990 clearly revealed that Inland Revenue Officers should have been appointed by the Federal Board of Revenue through a notification published in the official Gazette but neither any notification appointing Inland Revenue Officers was issued nor the same was published in the official gazette; exercise of adjudication by the Deputy Commissioner Inland Revenue being non-existent at the relevant time was illegal and without jurisdiction---Show cause notice as well as subsequent adjudication order passed by the Deputy Commissioner Inland Revenue, who was non-existent authority at the relevant time, were declared to be illegal, void ab initio and without jurisdiction---Appeal was allowed by the Appellate Tribunal.

Khalid Saeed v. Shamim Rizwan and others 2003 SCMR 1505; Messrs Facto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 = 2005 PTD 2286; Commissioner of Sales Tax (Central), Karachi v. Messrs Pakistan Services Ltd. Karachi PLD 1983 Kar. 297 and S.T.As. Nos.212-213/LB of 2010 rel.

(b) Sales Tax---

----Appeal---Additional legal grounds---Acceptance of---Principles---Additional grounds filed by the registered person being legal could be taken and raised even if the same were not agitated before the authorities below and even not raised in the grounds of appeal filed before the First Appellate Authority---Under the principles of natural justice and fair-play, the legal grounds could not be denied and avoided by the Appellate Tribunal---Additional grounds which went to the route of the case could be raised at any stage of the proceedings---Grounds being purely legal in nature could be raised at any stage and in order to dispense with justice, courts had to allow the same to decide the controversy once for all touching the merits of the case from its all angels---Permission was granted to argue and elaborate additional grounds.

Haji Mehr Din v. Commissioner of Income Tax (Zone-A), Lahore 2002 PTD 541 rel.

(c) Administration of justice---

----If something is stated to be done in a particular manner same had to be'done in that manner only, otherwise, any deviation in this regard would vitiate the whole proceedings.

Khalid Saeed v. Shamim Rizwan and others 2003 SCMR 1505 rel.????? .

(d) Administration of justice---

----If law had prescribed method for doing of a thing in a particular manner, such provision of law is to be followed in letter and spirit 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.

Khalid Saeed v. Shamim Rizwan and others 2003 SCMR 1505; Messrs Facto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 = 2005 PTD 2286 and Commissioner of Sales Tax (Central), Karachi v. Messrs Pakistan Services Ltd. Karachi" PLD 1983 Kar. 297 rel.

(e) Precedent---

----Judgments---Binding effect---One Division Bench of Appellate Tribunal was bound by the judgment of another Division Bench passed by the same Tribunal until; it was reversed by the High Court.

S.T.As. Nos.212-213/LB of 2010 rel.

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

----S.33 (13)---Offences and penalties---Amount of penalty---Mention of said amount in the show-cause notice---Penalties specified in taxing statues are imposed in lieu of any term for imprisonment and these proceedings are criminal in nature; It was mandatory for the revenue-department to specify the amount of penalty in show-cause notice, mere invoking of provisions of S.33 (13) of the Sales Tax Act, 1990 in show-cause notice did not warrant hundred percent penalty---Revenue was under a statutory and legal obligation to mention the amount of penalty in the show-cause notice which was being levelled against the taxpayer and also proved that a mala fide or wilful default had been attributed on the part of the taxpayer and he had acted deliberately in defiance of law and was guilty of conduct contumacious or dishonest or acted in conscious disregard of his obligation-In absence of such ingredients in the show-cause notice, hundred percent penalty imposed against the taxpayer was held to be illegal and unlawful.

AIR 1962 Madras 366 rel.

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

----S. 47---Reference to High Court---Request by the Revenue before Appellate Tribunal that appeal case should be kept pending till final decision by the High Court but question as to place any stay or suspension order against such decisions was not replied---Validity---No provision in Sales Tax Act, 1990 existed which granted automatic stay during pendency of litigation without seeking any order for suspension/stay from the High Court against the orders of Appellate Tribunal which was still legal and binding---In absence of any stay order by the High Court and unless, earlier judgments of Appellate Tribunal on a point were finally set aside by the High Court, they held the field to be acted upon by the sales tax department in letter and spirit.

Khubaib Ahmad for Appellant.

Mrs. Fouzia Adil, D.R. for Respondent.

Date of hearing: 15th February, 2012.

2012 P T D (Trib.) 1133

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and M.B. Tahir, Accountant Member

Messrs CHICAGO METAL WORKS, INDUSTRIAL ESTATE, MULTAN

versus

COMMISSIONER INLAND REVENUE, MULTAN

I.T.A. No.233/LB of 2012, decided on 29th March, 2012. Income Tax

Income Tax Ordinance (XLIX of 2001)---

----Ss.177 (1), 174, 122(5), 122(9), 111(1) & 67---Audit---Taxpayer was selected for audit on the basis of variations in sales shown in income tax return and sales shown in sales tax record and variations in purchases indicted in income tax return and in sales tax profile; and further, verification of manufacturing and trading expenses, profit and loss expenses and applicability of S.67 of the Income Tax Ordinance, 2001 was also required to be ascertained---Show cause notice was issued and explanation submitted by the taxpayer was found unsatisfactory; and addition was made---Taxpayer contended that sales and purchases profile of the registered unit which was doing business of tractor parts had been used which had no relevance as NTN of their unit in appeal had been newly allotted with another sales tax number and filed income tax return accordingly; and from March to June, sales tax return was filed with new name and NTN but with old Sales Tax Registration; and such facts had neither been taken into considerations by the Taxation Officer nor by the First Appellate Authority; and applied sales and purchase figure of totally different company which had no standing---Validity---Whole case had been framed on the basis of sales and purchase profile of another company with a separate NTN and registration number under Sales Tax Act, 1990 having a different line of business---Basic facts had neither been thrashed out by the Adjudication Officer nor by the First Appellate Authority despite repeated pointations---Sales and purchase date of a company with a different NTN and Sales Tax Registration numbers could not be made the basis for working out liability against the taxpayer having a different National Tax Number and Sales Tax Registration numbers and production line---Order was set aside by the Appellate Tribunal and case was remanded to the Adjudication Officer for a fresh decision after hearing the taxpayer, verifying the facts and reconciliation of the facts on grounds from the record and passing a speaking order.

Riaz Ahmad Raja, ITP for Appellant.

Asif Rasool, D.R. for Respondent.

Date of hearing: 29th March, 2012.

2012 P T D (Trib.) 1139

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Javed Iqbal, Munir Sadiq, Judicial Members, Abdul Rauf and Ikram Uljah Ghauri, Accountant Members

C.I.T., L.T.U., LAHORE and others

versus

ALLIED BANK OF PAKISTAN LIMITED, KARACHI (NTN-07-11-1710523) and others

I.T.As. Nos.4063/LB, 4064/LB 997/IB, 6023/LB, 6024/LB, 6106/LB of 2004, 6022/LB of 2003, 6029/LB, 5005/LB, 5006/LB, 4997/LB, 5000/LB to 5002/LB, 7141/LB, 7142/LB of 2005, 1146/LB, 1294/LB, 1209/LB, 1292/LB, 471//IB, 81/IB, 82/IB, 472/IB, 1067/IB, 1127/IB, 883/LB, 800/LB, of 2006, 654/LB of 2007, 651/LB, 710/LB, 439/IB, 424/IB to 427/IB, 367/IB, 368/IB of 2008, 305/LB, 914/LB to 916/LB of 2009, decided on 10th February, 2011.

Per Khawaja Farooq Saeed, Chairperson, Javed Iqbal, Munir Sadiq Judicial Members and Abdul Rauf Accountant Member agreeing.

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

----S.23(I)(x)---Income Tax Act (XI of 1922) S.10(2)(xi)---Deductions---Bad debt---Bank and Money lending institution---Condition laid down for allowability of bad debt as deduction in the case of banks and other money lending institutions were the same as envisaged in S.10(2)(xi) of Income Tax Act, 1922 and S.23(I)(x) of Income Tax Ordinance, 1979.

2006 PTD (Trib.) 2784 rel.

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

----S. 23(I) (x)---Deductions---Bad debt---Doubtful debts---Bad debts and doubtful debts were not two different kinds of debts, the Legislature in the Income Tax Ordinance, 1979 used the word `bad debt' which could not be interpreted to mean not to include doubtful debts.

2006 PTD (Trib.) 2784 and Hong Kong and Shanghai Banking -Corporation v. CIT (1955) 28 ITR 199 rel.

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

---S. 23(1) (x)---Deductions---Provision for bad debts---Title of account "provision for bad debts" did not make it provision of for bad debt; it was in substance a charge to Profit & Loss account---In revenue matters the substance and not the form of transaction decide the taxability and/or deduction or otherwise---Title provision for bad debts' was due to format prescribed by the State Bank of Pakistan or Securities and Exchange Commission of Pakistan for presenting of accounts; in substance, this wasloan irrecoverable account'---In the case of financial institutions engaged in money-lending business, money was their stock-in-trade and any irrecoverable loan constituted an allowable deduction--- "Irrecoverability" did not mean absolute irrecoverability.

(1966) 14 Tax 304 (H.C. Kar:); Aranchalam Chettiar v. CIT 4 ITR 173 at 183 (P.C.) and 1990 PTD 731 rel.

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

----S.29---Income Tax Ordinance (XXXI of 1979), S.23(I)(x)---Income Tax Act, (XI of 1922), S.10(2)(xi)---Bad debts---Word "provision" was never used in S.23 (I)(x) of the Income Tax Ordinance, 1979 or even in the parallel provision of Income Tax Act, 1922---Said word did not appear in S.29 of the Income Tax Ordinance, 2001.

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

----S.29---Bad debts---Determination of irrecoverability of bad debts---Scope---Allowance of bad debts was necessarily based upon a mere estimate, ultimately, a larger or smaller portion of the debt or loan may be recovered than was estimated as recoverable at the time of making the allowance under the relevant clause, in such a case the excess would be taxed as profit of the year in which it was realized, to make up for the excessive allowance in an earlier year; that taxation officer erred in holding that the respondent's entries about its bad debts "show that the debts had been written off in the accounts provisionally" and that argument that unless all the measures to recover the debts were exhausted the claim was not admissible was rejected.

CIT v. National Bank of Pakistan 1976 PTD 237; CIT v. Grindlays Bank Ltd. 1991 PTD 569 and Aranachalam Chettiar v. CIT 4 ITR 173 at 183 (P.C.) rel.

CIT v. Agricultural Development Bank of Pakistan 1992 PTD 39 ref.

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

----S.29---Income Tax Ordinance (XXXI of 1979), S.23(I)(x)---Income Tax Act, (XI of 1922) S.10(2)(xi)---C.B.R. Circular No.13(26)-IT/I/74 dated 2-7-1975---Prudential Banking Regulations of the State Bank of Pakistan---International accounting systems---Bank---Bad debts---Disallowance of---Receivable amount was written off by debiting it in the Profit & Loss account as expenditure with the nomenclature 'provision for bad debts'---Validity---No reason existed for disallowance of claim of bad debt for the "banks---Only criteria was adoption of rules fixed by the State Bank---If there was no deviation of the Prudential Bank Regulation, the claim of bad debts could not be disallowed---Since it was not the case of the Department that there was deviation, the claim of bad debt of the banks were allowed in full by the Appellate Tribunal.

2006 PTD (Trib.) 1784; 2006 PTD 1400; 1982 PTD 20; Dawji Dada Bhai and Lo. v. The Commissioner of Income Tax (West) Karachi (1985) 55 ITR 707 (S.C. of India); Hong Kong and Shanghai Banking Corporation v. CIT (1955) 28 ITR 199; Trustees of the Port of Karachi v. Muhammad Saleem 1994 SCMR 2213; Shahtaj Sugar Mills Ltd. through Chief Executive v. G.A. Jahangir and 2 others 2004 PTD 1621; CIT v. National Bank of Pakistan 1976 PTD 237; CIT v. Grindlays Bank Ltd. 1991 PTD 569; CIT v. Agricultural Development Bank of Pakistan 1992 PTD 39; PLD 1995 SC 423; CIT v. Security Leasing Corporation Ltd. ITRA 219 of 2008; Commissioner of Income Tax (Central Zone) Karachi v. Pakistan Security Printing Press Corporation Ltd. Karachi 1985 PTD 413; (1966) 14 Tax 304 (H.C. Kar.); Aranachalam Chettiar v. C.I.T. 4 ITR 173 at 183 (PC); 1990 PTD 731 and CIT v. Veerabhadra Rao 102 ITR 604 ref.

I.T.A. No.565 of 2000, decided on 1-3-2006 distinguished.

Standard Chartered Bank Ltd.'s case (I.T.As. Nos.1302 to 1304, 1595 to 1598/KB/2003; I.T.A. No.131/KB/2005 dated 14-1-2009); Jahangir Siddiqui Investment Bank Ltd.'s case (I.T.As. Nos.861 and 862/KB/2009 dated 2-6-2010 and Bank Al-Falah Ltd.'s case (I.T.As. Nos.502 to 506/KB of 2009 dated 1-7-2010) per incuriam.

Per Ikram Ullah Ghauri Accountant Member [Minority View]

Income Tax Ordinance (XLIX of 2001)---

----Ss.29 & 20---Bad debts---Banking company---Non-banking company---Fundamental difference between the debt written off by a non banking company and banking company explained.

Income Tax Ordinance (XLIX of 2001)---

----S.29---Bad debts---Elements in the concept of bad or doubtful debt which qualified for deduction under S.29 of the Income Tax Ordinance, 2001.

Income Tax Ordinance (XLIX of 2001)---

----S.29---Bad debts---Bad debt expenses--Meanings.

Income Tax Ordinance (XLIX of 2001)---

----S.29---Bad debts---Allowa,tces for doubtful accounts---Meanings.

Income Tax Ordinance (XLIX of 2001)---

----S.29---Bad debts--Allowance on account of debt written off---Elements to be satisfied.

Income Tax Ordinance (XLIX of 2001)---

----S.29---Bad debts---Bad debt when becomes bad for the purposes of deduction.

Income Tax Ordinance (XLIX of 2001)---

----Ss.29 & 20---Bad debts---Prudential Banking---Operations in different fields explained.

Thammayys v. Rajah Tyada Pasupati AIR 1930 Mad 96; Smt. Tarulata Shyam and others v. CIT. 108 ITR 345 (SC); CWT v. K.S. Vaidhyanathan 153 ITR II (Mad); Padma Sundra Rao (Deed) and others v. State of Tamil Nadu 255 ITR 147 (SC); ACIT v. Vellappa Textile Ltd. 263 ITR 550 (SC) and Prakashnath Khanna v. CIT, 266 ITR I (SC) rel.

Income Tax Ordinance (XLIX of 2001)---

----S.29---Bad debts---Determination of bad debt---Essential requirements.

Income Tax Ordinance (XLIX of 2001)---

----Ss.29& 20---Bad debts---Bad debts could not be claimed as an expense by placing them in the Profit & Loss Account which was purely a subject matter of balance sheet.

Income Tax Ordinance (XLIX of 2001)---

----S. '29---Bad debts---Efforts for recovery of debts explained.

Shahid Iqbal, L.A. for Appellants (in I.T.As. Nos.4063/LB, 4064/LB of 2004, 6029/LB of 2005, 6022/LB of 2003, 1146/LB of 2006 and 651/LB of 2008).

Dr. Ikram-ul-Haq and Mansoor Baig for Respondents (in I.T.As. Nos.4063/LB, 4064/LB of 2004, 6029/LB of 2005, 6022/LB of 2003, 1146/LB of 2006 and 651/LB of 2008).

Dr. Ikram-ul-Haq and Mansoor Baig for Appellants (I.T.A. No.305/LB of 2009).

Shahid Iqbal, L.A. for Respondents (I.T.A. No.305/LB of 2009).

Shahid Iqbal, L.A. for Appellants (I.T.As Nos. 5005/LB, 5006/LB of 2005 and 1294/LB of 2006).

Dr. Ikram-ul-Haq and Mansoor Baig for Respondents (I.T.As. Nos. 5005/LB, 5006/LB of 2005 and 1294/LB of 2006).

Dr. Ikram-ul-Haq for Appellants (in I.T.A. No.710/LB of 2008).

Shahid Iqbal, L.A. for Respondents (in I.T.A. No.710/LB of 2008).

Shahid Iqbal, L.A. for Appellants (in I.T.As. Nos. 4997/LB, 5000/LB of 2005 and 1209/LB of 2006).

Dr. Ikram-ul-Haq and Mansoor Baig for Respondents (in I.T.As. Nos. 4997/LB, 5000/LB of 2005 and 1209/LB of 2006).

Shahid Iqbal, L.A. for Appellants (in I.T.As. Nos. 5001/LB, 5002/LB of 2005 and 1292/LB of 2006).

Dr. Ikram-ul-Haq for Respondents (in I.T.As. Nos. 5001/LB, 5002/LB of 2005 and 1292/LB of 2006).

Shahid Iqbal, L.A. for Appellants (in I.T.A. No.654/LB of 2007).

Dr. Ikram-ul-Haq for Respondents (in I.T.A. No.654/LB of 2007).

Naveed A. Andrabi for Appellants (in I.T.As. Nos. 997/IB of 2004, 471/IB, 81/IB, 82/1B, 472/IB, 1067/IB of 2006 and 439/IB of 2008) .

Shahid Iqbal, L.A. for Respondents (in I.T.As. Nos. 997/IB of 2004, 471/IB, 81/IB, 82/IB, 472/IB, 1067/IB of 2006 and 439/IB of 2008).

Shahid Iqbal, L.A. for Appellants (in I.T.As. Nos. 1127/IB of 2006, 424/IB to 427/IB of 2008).

Naveed A. Andrabi for Respondents (in I.T.As. Nos. 1127/IB of 2006, 424/IB to 427/IB of 2008).

Mian Ashiq Hussain for Appellants (in I.T.As. Nos. 6023/LB, 6024/LB of 2004 and 883/LB of 2006).

Shahid Iqbal, L.A. for Respondents (in I.T.As. Nos. 6023/LB, 6024/LB of 2004 and 883/LB of 2006).

Shahid Iqbal, L.A. for Appellants (in I.T.As. Nos. 800/LB of 2006 and 6106/LB of 2004).

Mian Ashiq Hussain for Respondents (in I.T.As. Nos. 800/LB of 2006 and 6106/LB of 2004).

Anjum Atta Sheikh, FCA for Appellants (in I.T.As. Nos. 367/IB to 368IB of 2008).

Shahid Iqbal, L.A. and Babar Bilal, L.As. for Respondents (in I.T.As. Nos. 367/IB to 368/IB of 2008).

Dr. Ikram-ul-Haq for Appellants (I.T.As. Nos.914/LB to 916/LB of 2009).

Shahid Iqbal, L.A. for Respondents (I.T.As. Nos.914/LB to 916/LB of 2009).

Shahid Iqbal, L.A. for Appellants (in I.T.As. Nos. 7141/LB and 7142/LB of 2005).

Dr. Ikram-ul-Haq for Respondents (in I.T.As. Nos. 7141 /LB and 7142/LB of 2005).

Date of hearing: 7th January, 2011.

2012 P T D (Trib.) 1184

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Matti, Judicial Member and M.B. Tahir, Accountant Member

C.I.R., ZONE-lI, R.T.O., MULTAN

versus

Messrs PATWAL COLD STORAGE AND CNG STATION, SAHIWAL

I.T.A. No.1435/LB of 2011, decided on 2nd April, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5)(9), 177, 175, 120 & 182---FBR letter C.No.7(5)S.Asstt/ 2008 dated 16-8-2008---Amendment of assessment---CNG Station---Audit---Open ended assessment---Case was selected for audit---During the proceedings, books of accounts and other supporting documents as per Taxation Officer were not provided except filing certain documents---Penalty was imposed---Subsequently, after issuance of notice under S.122 (9) of the Income Tax Ordinance, 2001, the Taxation Officer obtaining authority under S.17S of the Income Tax Ordinance, 2001 made local as well as spot enquiries through Inspector---Taxpayer was confronted regarding enquiry report who filed explanation but Taxation Officer being dis-satisfied with the explanation amended the deemed order, creating tax liability---Order was annulled by the First Appellate Authority---Validity---Order under 5.122 of the Income Tax Ordinance, 2001 had been passed without mentioning relevant subsection---If the amended order passed was treated to be under S. 122(5) of the Income Tax Ordinance, 2001 then the condition of "definite information" was to be fulfilled which was lacking---Revenue should have strength end its data bank and enforced documentation, as without the proper documentation of the economy, the tax collection could not be properly stream lined---Federal Board of Revenue specifically directed to tax CNG station at the rate of 4% of the raw material---Instructions by Federal Board of Revenue were binding on tax authorities and there was no justification to by-pass such instructions---Taxation Officer made additions regarding CNG conversion kits, tyre shop and tuck shop without considering the fact that no such facility was available at the material time and additions had been made on the basis of presumptions without bringing on record any basis or material evidence of corroborative nature; and similar was the position from the income of cold storage---Enquiry through inspector was also on a very belated stage and was not relevant to the period under consideration and had rightly been held to be not reliable by the First Appellate Authority---Taxation Officer misdirected himself by making an open ended assessment through estimation of receipts/ income and lumpsum additions by invoking S.122(1) of the Income Tax Ordinance, 2001 without having any definite information in terms of S.122(8) of the Income Tax Ordinance, 2001, the order passed under S.122(1) of the Income Tax Ordinance, 2001 had rightly been annulled by the First Appellate Authority which required no interference---Departmental appeal was dismissed by the Appellate Tribunal.

2010 PTD 1506; I.T.A. No.222/LB of 2011; 1995 PTD 749; 2002 PTD 63; 2001 PTD (Trib) 3369; 2002 PTD (Trib) 1009; 2007 PTD (Trib) 2069 and 2003 PTD (Trib) 2157 rel.

Abid Raza Bodla, D.R. for Appellant.

?Zaka Ullah for Respondent.

Date of hearing: 26th March, 2012.

2012 P T D (Trib.) 1189

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and M.B. Tahir, Accountant Member

C.I.R., ZONE-II, R.T.O., MULTAN

versus

Messrs ARAIN FIBERS LTD., MULTAN

I.T.As. Nos.1426/LB to 1429/LB of 2011, decided on 2nd April, 2012.

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

----Ss. 161(IB) & 151(1)(d)---Failure to pay tax collected or deducted---Profit on debt---Taxpayer paid mark up to its associated company---Taxation Officer found that taxpayer should have deducted tax at the rate of 10% at the time of making payments of mark-up and had charged the same by treating the taxpayer as taxpayer in default---Validity---Taxpayer was not hit by any of sub-clauses of S.151 of the Income Tax Ordinance, 2001---Only sub-clause wherein companies had been made responsible to deduct tax was cl. (d) of S.151 of the Income Tax Ordinance, 2001 which related to payments made in respect of profits of any bond, certificate, debenture, security or instrument of any kind---Taxation Officer failed to point out as to which of the said five items the case of the taxpayer was involved on which profit was paid by the taxpayer attracting cl.(d) of S.151(1) of the Income Tax Ordinance, 2001---No loan documents/instruments were available in writing and there was no decision of Board of Directors to pay mark-up on the equity of the associated companies---Mark-up was not paid through some instrument of loan on the basis of which S.151(1)(d) of the Income Tax Ordinance, 2001 could be invoked---Profit paid to the recipients who had not even been identified by the Taxation Officer must have now been offered for taxation and were taxable at normal rate being income from other sources---Revenue failed to establish that tax in that regard had not been paid---Provisions of S.161(1B) of the Income Tax Ordinance, 2001 came into play by excluding the clauses (a) and (b) of S.161(1B) of the Ordinance---Where at the time of recovery of tax, it was established that the tax which was to be deducted from the payment made to a person or collected from a person had meanwhile been paid by that person, no recovery shall be made from the person who had failed to collect or deduct the tax but the said person shall be liable to pay default surcharge at the rate of eighteen percent per annum from the date he failed to collect or deduct the tax to the date the tax was paid---Provision of S.161 of the Income Tax Ordinance, 2001 was ;rot a charging provision as the amount deducted from this mode was an adjustment against the demand of the recipient of the money---First Appellate Authority had rightly annulled the orders passed by the Taxation Officer under S.161 of the Income Tax Ordinance, 2001---Orders of the First Appellate Authority were upheld by the Appellate Tribunal and appeals filed by the department were dismissed.

2008 PTD (Trio.) 1683 and 2003 PTD 1167 rel.

?(b) Income-tax---

----Burden of proof---Whenever department has to burden a taxpayer with any charge, the onus squarely lies upon it to levy the same as per clear and unambiguous letter of the law.

Asif Rasool, D.R. for Appellant.

M. Zafar Manager Tax for Respondent.

Date of hearing: 2nd April, 2012.

2012 P T D (Trib:) 1198

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs ENGINEERING TECHNOLOGY INTERNATIONAL (PVT.) LTD., RAWALPINDI

versus

ADDITIONAL COMMISSIONER, INLAND REVENUE (AUDIT-I) and 2 others

Income Tax Appeals Nos.52/IB of 2010, 49/IB to 53/IB of 2011, decided on 30th April, 2011.

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

----Second Sched., Part-1, Cl. (131), Ss. 122(3), 122(5A), 201(1A) & 114(6)---Qanun-e-Shahadat (10 of 1984), Art.177---Exemption---Engineering and technical services to a Turkish company under an agreement---Taxable income---Exempt income---Taxpayer contended that entire receipts were in US dollars and were received in bank account in Pakistan; and were exempt from tax; and software of PRAL was unable to segregate the income from non-taxable income due to certain problems; and return of taxable income and exempt income was correctly revised manually---Revenue contended that services rendered or provided outside Pakistan were exempt from tax subject to receipt of payments through banking channels, whereas services provided by the taxpayer to foreign client includes jobs undertaken in Pakistan; and claiming different expenses which had no nexus with the principal business activity had proved that receipts declared were not representing and restricting itself to the consideration of services rendered and provided outside Pakistan; and similarly provision of services/expenses on account of Air fuller repairs, Customs clearance and trials of truck/vehicles, repair and maintenance of vehicle sold to Pak Army/Air Force etc. and receipts other than from their Principal i.e. foreign entity were not covered under exemption Cl. (131) of the Income Tax Ordinance, 2001---Validity---Receipts declared include the consideration of other services/works done in Pakistan---Returns were silent with regard to the characterization of receipts from domestic and foreign sources---Statement of expenses also omitted the identification of all expenses in account of activities performed domestic or outside Pakistan---Agreement between the taxpayer and the foreign enterprise was silent with regard to fee rates/schedule for technical services and did not cover the treatment to be extended to any service/work done to be performed in Pakistan---Admittedly consideration for services rendered by the taxpayer in Pakistan such as maintenance and repair during the warranty period of vehicle sold by foreign entity to Pak Military or Air Force included expenses incurred by the taxpayer on trial of truck, air fuller repair, customs duties on imports of machinery or spare parts---Blanket deduction of said expenses from the gross receipts had created unnecessary complexity; it was not explained as to why the taxpayer considered it necessary to report its income and expenses in that way---All the taxpayer explained was that the gross receipts were according to his contract with its client---Contract was a "composite contract" executed for carrying out "multiple jobs" but it did not specify as to which part of the performance of the contract was to be carried out in Pakistan or outside Pakistan---Originally, net profit was declared after deducting expenses out of total gross receipts---Entire receipts were booked from foreign entity on account of its execution of multiple jobs including the jobs performed in Pakistan, claiming exemption in respect of whole gross receipts and had claimed deduction of expenses at the same time---Expenses in profit and loss account were inconsistent with the legislative intent behind the exemption clause---Since part of the receipts were connected with activities performed in Pakistan, the claim that entire receipt qualify under Cl. (131) of Part-I of Second Schedule of Income Tax Ordinance, 2001 could not be accepted---Income earned from sale of design of vehicle represented royalty of its technical and engineering services provided outside Pakistan and met the conditions of exemption provided in exemption clause---Such part of income was exempt provided, it was correctly reported and stood by the test of verification by the Taxation Officer---Receipts representing consideration of certain technical services rendered in Pakistan were held to be ineligible for benefit of exemption---Income falling in this category needed to be clearly quantified and duly taxed---Claim of expenses in technical services rendered in Pakistan were to be considered on the touchstone of reasons and admissibility under the Income Tax Ordinance, 2001---Onus to prove the rationale and admissibility of such expenses was on the taxpayer---Appeal partially succeeded to the extent of acceptance of claim of exemption in respect of income of royalty or commission arising from sale of intellectual property in the design of vehicle sold to foreign entity---Taxation Officer may revisit the tax demand of taxpayer in accordance with the principles laid down by the Appellate Tribunal and recover the due amount of tax on income arising from services rendered in Pakistan.

2010 PTD (Trib.) 878; 2007 PTD 1651; 2006 PTD 661 (Trib.); 2005 PTD 234 (Trib.); Eli Lilly Pakistan's case 2009 PTD 1392 and 2010 PTD 355 Irrelevant.

1966 PTD 664; PLD 1996 SC 828; 2000 PTD 2958 and 2000 PTD 497 ref.

1993 PTD 306; PLD 1966 SC 828; PLD 1966 Dacca 523; 1998 PTD 3835; 1998 PTD (Trib.) 62; 2000 PTD 497; 1973 PTD 361; 1998 PTD 3669; 1998 PTD 930; 2003 PTD 1805; 2003 PTD (Trib.) 1081; 2002 SCMR 312; 2002 PTD (Trib.) 783; 1998 SCMR 1950; 1990 PTD (Trib.) 121 and 1988 PTD (Trib.) 315 rel.

(b) Income Tax---

----Exemption---Criteria for exemption---Summary of reported case-law detailed.

1993 PTD 306; PLD 1966 SC 828; PLD 1966 Dacca 523; 1998 PTD 3835; 1998 PTD (Trib.) 62;.2000 PTD 497; 1973 PTD 361; 1998 PTD 3669; 1998 PTD 930; 2003 PTD 1805; 2003 PTD (Trib.) 1081; 2002 SCMR 312; 2002 PTD (Trib.) 783; 1998 SCMR 1950; 1990 PTD (Trib.) 121 and 1988 PTD (Trib.) 315 rel.

Shaukat Baloch, F.C.A. and Ch. Naeem-ul-Haq for Appellant.

Zia Ullah Khan, D.R. for Respondents.

Date of hearing: 30th April, 2011.

2012 P T D (Trib.) 1243

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Muhammad Iftikhar Khan, Accountant Member

Messrs MAKK BEVERAGES AND MINERAL WATERS (PVT.) LTD. PESHAWAR

versus

COLLECTOR (APPEAL) CUSTOMS, SALES TAX AND FEDERAL EXCISE, PESHAWAR and another

F.E. No.272(PB) of 2009 and F.E.6/ATIR of 2009, decided on 16th June, 2010.

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

----Ss.3-D & 4(2)---Federal Excise Act (VII of 2005), S.11---Central Excise Rules, 1944, R.11---Central Excise General Order 14 of 1969---Collection of excise duty etc.---Determination of value for the purposes of duty---Period July, 1994 to October, 2003---Refund of Central Excise Duty was claimed by stating that the same was recovered in excess to what was due to be paid by placing reliance on the judgment of Supreme Court; that excise duty recovered for the second time was not passed on to the consumer as alleged in the orders because declared price as embossed on the container was not challenged; that the same price inclusive of Central Excise Duty also advertised in the newspaper; and S.3(D) of the Central Excise Act, 1944 on the subject of passing incidence could be invoked under the mis-apprehension of the provision of the Act; that retail price for each bottle was legibly and prominently indicated which price the consumer was supposed to pay; and that incidence of excess payment was not passed on to the consumer; and bar of limitation under R.11 of Central Excise Rules, 1944 was not applicable because the excess duty was collected by the department illegally and the payment was made not by inadvertence, error or misconstruction but because of the fact that Revenue was made to make the payment---Revenue contended that duty as collected by the department had ultimately been passed on to the consumers; that onus to prove that incidence of Central Excise Duty had not been passed on to consumers lay on the taxpayer as required under subsection (3) of S.3D of the Central Excise Act, 1944; that taxpayer was under obligation to have brought on record the very label put on the bottles regarding price declared as embossed on it; and that taxpayer's contention that provisions could only be invoked where duty had been collected under misapprehension of the provisions of the Act was totally misconceived---Validity---Claim of the taxpayer was purely based on the idea of an afterthought because the duty was regularly paid by the taxpayer in accordance with the Central Excise General Order No.14 of 1969 during the said period whereas admittedly claim for refund was filed after the judgment of Supreme Court---Taxpayer were required to have protested against the deposit of Central Excise Duty at that time by approaching proper forum or court of law or should have deposited the same under protest which transpired that they were not aggrieved by depositing of Central Excise Duty and even did not file any representation to the collecting agency or any case before a court of law---Taxpayer even failed to declare the amount of its claim as a refund in their annual accounts which was a statutory document---Since payment by the taxpayer would have been against the normal scheme of indirect taxes wherein burden was passed on to the consumers by making the levy a part of the total sale consideration received from customers, as per standard accounting practices and the fact that the recovery was illegal should have been reflected as such from day one---Taxpayer had neither attempted to declare the same as receivable nor shown in the cash flow statement which was admission of the fact that it was passed on to the consumers---Taxpayer had in no way filed any representation to any forum and any court of law against such collection of duty by the department and to call for such remedy in his favour---Equity aids the vigilant and not the indolent---Taxpayer's claim was manifestly time barred under R.11 of the Central Excise Rules, 1944 or S.44(1) of the Federal Excise Act, 2005---Specific period of one year had been provided for claiming the refund under R.11 of the Central Excise Rules, 1944---Taxpayer after expiry of the said period must not be entitled to claim of refund---Judgment and law would be retrospectively effective, only if these had not been finally disposed off by the authority and were pending before it, by not doing so subsequently relying on the judgments of the Supreme Court the claimant was estopped from the claim of refund---Taxpayer who paid the levy from the years 1994 to 2003 could have asked for his claim within the period of one year but had asked for refund in the year 2007 which had become past and closed transaction, and the claimant was not entitled to any refund.

Shahtaj Sugar Mills Ltd. v. Additional Secretary Govt. of Pakistan 2009 PTD 1544 rel.

Civil Appeals Nos.1368 to 1389 of 2002, dated 15-2-2007; 2002 YLR 3498; 1994 CLC 994; PTCL 2005 CL 193; Messrs Fector Belarus Tractor v. Federation of Pakistan 2005 PTD 2286 and Messrs Illahi Cotton Mills and others v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 ref.

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

----S.3D---Federal Excise Act (VII of 2005), S.11---Collection of excise duty etc.---Misapprehension of law---Provisions of S.3D of the Central Excise Act, 1944 was attracted only when duty had been overpaid due to any misapprehension of law---Validity---Wordings of S.3D of the Central Excise Act, 1944 covered all other possibilities of payment of excess excise duty including payment by wrong interpretation of law, illegal recovery etc. it covered all other situations, and even the situation of collection of duty under the correct apprehension of law which was subsequently declared by the courts to be an incorrect interpretation---Such was the sole reason that "or otherwise" had been used in contradiction to the word misapprehension and covers all foreseeable situations other than misapprehension---Building on said concept to forestall unjust enrichment, the legislature had used the words "for any reason whatsoever" in the Federal Excise Act, 2005 to make sure that the principle of unjust enrichment was not violated by any queer interpretation of law---Principle of passing on burden of indirect tax had nexus with the doctrine of unjust enrichment, according to which windfalls were prohibited to a person in respect of amount which was not owned by the taxpayer or it had sustained any loss in respect thereof.

Messrs Fector Belarus Tractor v. Federation of Pakistan 2005 PTD 2286 rel.

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

----S.3D---Incidence of excess payment not passing on to the consumer---Cash flow statement---Had the taxpayer made payments out of own funds/income, it would have been an act against the overall scheme of indirect taxes---Such payment would then have taken the shape of direct tax, its burden would be on the taxpayer rather than on the consumers---Payment would have been reflected in the cash flow statement and being against the normal scheme of indirect taxes from day one, if it would have been a payment out of own funds---Accounts reflected such state of affairs---Entire excise duty had been included in the gross figures of sales and while calculating net sales, the same would have been subtracted, thus expressly indicating that the excise duty formed part of sales and was recovered from the consumers which had not been declared done---Had it been paid out of taxpayer's own funds, same would have taken the color for direct tax like income tax and should have been reflected in the cash flow statement.

(d) Taxation---

----Direct and indirect taxes---Distinction.

Messrs Illahi Cotton Mills and other v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 rel.

Qazi Waheeduddin for Appellant.

2012 P T D (Trib.) 1252

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

AIZAD BEVERAGE INDUSTRIES (PVT.) LTD. SUMUNDARI ROAD, FAISALABAD

versus

ADDITIONAL COLLECTOR EXCISE, FAISALABAD

F.E.A. No.8/LB of 2009, decided on 2nd November, 2011.

Central Excise Act (I of 1944)---

----S. 4(2)---Charge of duty on the retail price fixed by the manufacturer---Federal Board of Revenue, in consultation with the Pakistan Beverage Manufacturers' Association, notified the consumer retail price of 250 ML Bottle at Rs.4.50, inclusive of central excise duty and sales tax---On the basis of said notified price, the retail price for the purpose of levy of excise duty worked out to be Rs.3.193 per bottle---Registered person/manufacturer who had paid the excise duty on the basis of Rs.3.83 per bottle for relevant period, objected to the levy of excise duty and sales tax on the basis of agreement between the Central Board of Revenue and the Beverages Manufacturer Association---Under provisions of S.4(2) of Central Excise Act, 1944, fixation of price was the sole prerogative of the manufacturer---One must be aware of the distinction between the consumer price and retail price in case of aerated water---Such distinction of pivotal importance between the controversy leading to the litigation between the taxpayer and the department, stemed from the failure to realize the same in the context of aerated water---Distinction, was attributable to the fact that the condition of aerated water, when it left the manufacturing premises was altogether different from the one in which it was used as an instant drink---Bottles of aerated water, when left the manufacturing premises, were unchilled and were delivered to the retailers in the same condition and it was only at the retail outlets that the process of chilling was performed, whereby the product became ready for consumption i.e. to be used as instant drink---Manufacturer, under the law, was obliged to include only those charges in the retail price as were incurred by him up to the stage when the product was sold to the retailer---Manufacturer could not be compelled to include the cost of those activities in the retail price as were not undertaken by him---Both logically and legally the manufacturer could not be compelled to include cost of an activity which was not performed by him at all---Determination of retail price, was not only the sole prerogative of the manufacturer, and the said retail price would include the cost of all the process and activities which were undertaken or performed by him---Department could discard or interfere with the declared price of the registered person, only if it had evidence to assert that some of the expenses/cost incurred in connection with the manufacturing of aerated water had not been accounted for in the determination of retail price---Tribunal declared that retail price Rs.3.83 per 250 ML bottle as declared by the registered person/manufacturer, be accepted for the purpose of price charging sales and excise duty, in circumstances.

1996 SCMR 700 and 2001 PTD 1854 rel.

Asif-ur-Rehman for Appellant

Miss Saadia Gillani, D.R. for Respondent.

2012 P T D (Trib.) 1257

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Muhammad Iftikhar Khan, Accountant Member

Messrs NORTHERN BOTTLING CO., PESHAWAR

versus

ASSISTANT COLLECTOR SALES TAX AND FEDERAL EXCISE, RTO, PESHAWAR

C.Es. Nos.128/PB of 2002 and 09/ATIR of 2009, decided on 12th March, 2011.

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

----S.3D---Qanun-e-Shahadat (10 of 1984), Arts.117 & 118---Collection of excise duty etc.---Tax period August, 1999 to May, 2000---Aerated Water---Chilling charges---Levy of Federal Excise Duty---Duty was paid under protest---Refund of such duty was refused---Validity---Refund had been claimed on account of Federal Excise Duty on account of chilling charges component of retail price of aerated water under Central Board of Revenue's Circular dated 12-6-1999, whereby it had been declared, that retail price of aerated water assessment means the price at which retailer sold chilled bottles to consumers---Federal Board of Revenue had no power/right to fix retail price and that admittedly, chilling activity was done by the retailer and not by the manufacturer---Excise duty was to be levied and collected on the retail price fixed by the manufacturer under S.4(2) of the Central Excise Act, 1944---First Appellate Authority rejected the refund claim on the ground that incidence of duty had been passed on to the consumer/customer---First Appellate Authority relied upon only on the Account Current Ledger and ARI taking these as relevant and sufficient evidence to prove that incidence stood passed to the consumer---Account Current Ledger was a register entry of "excise duty" paying manufacturer was required to maintain in his premises; and was required to pay lump sum amount of excise duty in advance of taking any production of excisable goods out of the factory and to enter the said payment in the register and when any goods were to be removed from the factory, he was required to first make assessment of excise duty on such quantity of goods, get the assessment approved/endorsed by resident Inspector of Central Excise and then adjust that assessed amount of excise duty against the amount of deposit already entered in the Account Current Ledger---Two documents showed the record of duty assessment and payment on the goods which were intended to be taken out of the factory---None of these two documents was the proof that taxpayer had actually sold goods to any customer charging the full amount of excise duty which appeared in the assessment documents---Such fact indicated that adjudication was based on mere presumption of fact which was not sustainable under Art. 117 read with Art. 118 of Qanun-e-Shahadat, 1984---Taxpayer continued selling its product in accordance with the scheme of retail price fixed by it but it was paying the duty on the retail price of a chilled bottle that was charged by retailer from customers---Taxpayer was paying marginally a higher amount as excise duty into the exchequer but collecting a lower amount from customer which was not passing on incidence---When Revenue collected Central Excise Duty, and also sales tax on retail price inclusive of chilling charges and taxpayer paid the same, it was not due to misapprehension of any of the provisions of Sales Tax Act or otherwise---Criteria of incidence of tax having passed on to the consumers applies only to that tax/charge which was collected, due to misapprehension of any provisions of Sales Tax Act or otherwise, but the tax/charge was otherwise not payable or which was paid in excess than actually payable---Criteria of incidence of tax having been passed on to the consumer did not apply in the present case---Collection of central excise duty and dependent thereon the sales tax on the retail price inclusive of chilling charges was perfectly legal w.e.f. 12-6-1999 till the time it was declared unlawful by the Superior Courts---Provisions of S.3B of the Sales Tax Act, 1990 could not be invoked in the present case---Orders of the authorities below were set aside and the appeal was accepted---Assessing authority was directed to finalize the refund claim of the taxpayer within forty five days from the date of issuance of present order, if complete refund documents had already been submitted---If any document was still wanted, the Collector shall ask for the same from the taxpayer within fifteen days from the issuance of present order and taxpayer shall supply the said document immediately to enable the Collector to decide the case within the given time.

Collector of Customs and Central Excise Hyderabad v. Bawany Sugar Mills 2000 SCMR 1266 rel.

Collector v. Riaz Bottles 2001 PTD 1854; Collector, of Customs and Federal Excise v. Bawany Sugar Mills 2000 SCMR 1266; M. Yaqoob v. The State 1992 SCMR 1983; Abdul Aziz v. Assistant Collector PLD 1990 Kar. 378; Shaukat Ali v. The State PLD 1968 Lah. 1183; S.A. Haroon v. Collector PLD 1959 SC (Pak) 177; Eastern Syndicate v. CBR PLD 1959 SC (Pak) 364; Sadaqat v. Collector PLD 2010 SC 878; Ghulam Muhammad Lah. v. Imtiaz PLD 2006 Lah. 661; The State v. Umar Hayat PLD 1992 SC 393; Nambahar v. Collector, Lahore S.T.A. No. 1644/LB of 2004 dated 16-6-2004; Coca Cola v. Collector Lahore, App. Nos. 757, 758/LB/2006 dated 2-6-2007; Haideri Beverages v. Addl. Collector Rawalpindi Appeal No. 584 of 2001 dated 20-11-2001; General Clauses Act section 24A and commentary; National Bottles v. GOP/FBR 1994 CLC 2181; Pfizer Labs v. Federation PLD 1999 SC 64 and Nishat Mills v. Subdtt. PLD 1989 SC 222 ref.

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

----S.3D---Collection of excise duty etc.---Aerated water---Passing on of incidence of duty to consumer---Evidence---ARI was not evidence of passing on of incidence of duty to consumer---RTI was a monthly report which was required to make to Collector/CBR summarizing total production, total removal of product from factory, its value, duty amount paid and did not show as to what amount of excise duty had been collected from customers in the reporting month or what quantity had been sold to customers and what sale value had been invoiced and received from the customer---RTI was also no evidence to prove that taxpayer had passed on incidence of excise duty which it had paid into the exchequer under Federal Board of Revenue's illegal Circular of the chilling component of retail price.

Mumtaz Ali Khan for Appellant.

2012 P T D (Trib.) 1268

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Muhammad Iqbal Khan, Accountant Member

I.T.As. Nos.723/KB of 2008 and 260/KB of 2010, decided on 1st July, 2010.

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

----Ss.59B, 177 & 122(1)---Group relief---Tax year 2007---Applicability of law---Group relief was disallowed by applying the amended law which took effect on 1-7-2007---Taxpayer contended that law which was in force up to 30-6-2007 was applicable since the underlying assessment related to tax year 2007, while the Assessing Officer applied the amended law which took effect on 1-7-2007 and was applicable to tax year 2008 and years thereafter; and under current legal framework a legal provision was applicable to a tax year if it came into force some time during the tax year to which the accounting period related; and tax year 2007 closed on 30-6-2007 and any law coming into force after closure would not be applicable to said tax year---Revenue contended that provisions becoming applicable from 1st July shall be applicable to the returns filed after those provisions coming into effect---Validity---Requirement under the law before the substitution through Finance Act, 2007 and after the substitution were substantially different---Authorities were supposed to first decide as to whether the law before the substitution was applicable or the law as substituted was to be applied---After deciding such basic issue they should have in their respective spheres applied the objective test of meeting one requirement after the other and on the outcome of those tests should have decided that whether the tax payer qualified for the relief under the law or not---No adjudication took place on this issue in the appellate order despite the fact that taxpayer's arguments before First Appellate Authority had been reproduced in the body of the order---Taxation Officer though had dealt at length with the issue on the fulfillment of requirements of S.59B of the Income Tax Ordinance, 2001 as it stood after the 2007 substitution, but had failed to adjudicate as to which provision of law would be applicable---Law as it stood on 30-6-2007 and not the law that came into force on 1-7-2007 was applicable---Provisions of S.59B of the Income Tax Ordinance, 2001 would be applicable in the case before amendment through Finance Act, 2007---Question "whether taxpayer company had met all other legal requirements was a matter of fact which required documentary evidence and verifications but Appellate Tribunal could not fully ascertain such facts---Order of the First Appellate Authority was annulled by the Appellate Tribunal on the issue with the direction to determine whether requirements of relevant law as it existed on the close of tax year 30-6-2007 had been met or otherwise and the issue be decided as per that law after affording reasonable opportunity of being heard to the taxpayer.

Messrs Royal Exchange Assurance Karachi v. The DCIT, Circle A-I, Karachi I.T.A. No.833/KB of 2000-2001 not applicable.

1998 PTD 2769; I.T.O. Investigation Circle and others v. Suleman Bhai Jiwa and others 1970 PTD 127 and Nagina Silk Mills v. I.T.O. 7 Tax 442 (S.C. Pak) rel.

(b) Interpretation of statutes---

----Amendment in law---Any right or vested interest accrued to a party under a law cannot be snatched away or curtailed by any subsequent amendment in law.

1998 PTD 2769 rel.

(c) Income tax---

----Share of company---Purchase price---Determination of---Face value---Break up value---Taxpayer company purchased shares at face value while Taxation Officer estimated value based on breakup value of the shares on the close of the accounting year of the company---Taxpayer contended that share sale-purchase was an arm's length agreement between two non-related parties from two different countries, the value shown was fair and appropriate; and as part of the deal the dividend accruing to the acquired shares here was to be paid to the seller and the sale was ex-dividend value---Appellate Tribunal observed that such basis had been not fully adhered to if the taxpayer's contention that the transaction value was essentially ex-dividend---Order of First Appellate Authority was annulled by the Appellate Tribunal on the issues and remanded the issue back to the Taxation Officer with direction to adopt the break-up value taking into account the payment of dividend to the seller.

(d) Income tax---

----Sale of vehicles to company officials---Valuation---Value adopted by the Taxation Officer and First Appellate Authority was confirmed by the Appellate Tribunal on the ground that since it was undeniable fact that sales of vehicles to the company officials was usually on below fair market value---Contention that disposal values were fair, could was repelled.

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

----Ss.67 & 122(5A)---Income Tax Rules, 2002, R.13---Apportionment of deductions---Profit and Loss expenses were prorated by the Taxation Officer between manufacturing business, trading of goods business, and the revenues from non-core activities such as earnings from dividend from the associated companies and investments part of which was exempt while dividend were taxable on a fixed rate; and since all the expenses were debited against the normal income therefore the amendment order of Taxation Officer was erroneous to the extent that proportionate financial and administrative expenses were not allocated; and prorated financial and administrative charges against dividend, trading and exempt income from investments---Taxpayer contended that basic requirements of S.67 of the Income Tax Ordinance, 2001 and R.13 of the Income Tax Rules, 2002 were that "the expenditure shall be apportioned on any reasonable basis taking into account the relative nature and size of the activities to which the amount relates" while the department had apportioned the expenses merely on the basis of turnover of the different streams of revenue, which was not reasonable in view of the nature and size of the activities---Revenue contended that since there was no bifurcation of expenses under income from different sources the only reasonable way left with the Department was to apportion the expenses on turnover basis---Validity---Balance of reasonableness and regard to the nature and size of the activities, apportionment of the administrative expenses on the basis of turnover would be harsh and unrealistic---Apportionment of the financial expenses on the basis of turnover was upheld by the Appellate Tribunal and directed the Additional Commissioner to re-examine the quantum of involvement of the administrative machinery in earning income from dividend and investment that had led to the apportionment---Order of First Appellate Authority was annulled and the case was remanded to the Additional Commissioner on the issue for de novo proceedings after affording reasonable opportunity of being heard to the taxpayer.

Syed Shabbar Zaidi, FCA and Aziz Nishtar for Appellant.

Shafquat Hussain Kehar, D.R. and Ghulam Mustafa Rahu D.R. for Respondent.

2012 P T D (Trib.) 1287

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Muhammad Iftikhar Khan, Accountant Member

Messrs AGRO PAK (PVT.) LTD., PESHAWAR

versus

ASSISTANT COLLECTOR (REFUND), SALES TAX AND FEDERAL EXICSE, PESHAWAR and another

S.T. Nos.89-113/PB of 2008 and 157-181/IRAT of 2009, decided on 13th March, 2010.

Sales Tax Act (VII of 1990)---

----Ss.10, 4, 66 & 72---Customs Rules, 2001, Rr.253 & 247(c)---S.R.O. 536(I)/2005 dated 6-6-2005---S.R.O. 190/2002 dated 2-4-2002---S.R.O. 450(I)/2001 dated 18-6-2001---S.R.O. 555(I)/2006 dated 5-6-2006---Refund of input tax---Tax period 5/2005 to 5/2007---Claim of sales tax refund---Claim pertained to input tax paid on electricity charges and packing materials purchased locally and used for the export of goods manufactured---Show-cause notice in term of S.4 read with S.R.O. 190(I)/2002 dated 2-4-2002 of the Sales Tax Act, 1990 and prevailing export policy to Afghanistan and Central Asia were issued---Taxpayer contended that he was manufacturer of plastic shopping bags and was licensed under the Rules; that he was entitled to the claim of refund of input tax, the duty drawback and import of the goods without payment of duties and taxes subject to condition and limitation as prescribed; that electricity and packing material etc. could not be imported; that he was under obligation to purchase the said material against tax invoices which was refundable in terms of R.247(c) of the Customs Rules, 2001 (which was re-numbered as 352) and that show-cause notice was issued under the misconception of law---Validity---Taxpayer made claim under R.247(c) of the Customs Rules, 2001---Rule 247(c) Customs Rules, 2001 was issued vide S.R.O. No.450(I)/2001 dated 18-6-2001, while the S.R.O. No.190(I)/2002 was issued on 2-4-2002 which was subsequent in time---Authorities below recorded the fact that vide S.R.O. No.190(I)/2002 R.247(c) of the Customs Rules, 2001 was omitted on 6-6-2005 while taxpayer stated that the said rule was not omitted, but its sequence was changed and it was renumbered as R.352 of the Customs Rules, 2001 and the matter should be dealt with under the said Rule---Sub-rule (5) of R.352 of Customs Rules, 2001 which had escaped the intention of the authorities below as well as the authorized representative of the parties---Claim of the taxpayer was not admissible under said rule---Appeal instituted on behalf of the claimant was rejected by the Appellate Tribunal.

Appeal No.77/PB of 2006 not relevant.

Ishtiaq Ahmad for Appellant.

2012 P T D (Trib.) 1301

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member

COMMISSIONER OF INLAND REVENUE (LEGAL) R.T.O., PESHAWAR

versus

Haji MASOOD-UR-REHMAN

I.T.A. No.210(PB) of 2010, decided on 17th February, 2011.

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

----Ss. 41, 120(1)(B), 122(5) & 122(9)---Khyber Pakhtunkhwa Land Tax and Agricultural Income Tax Ordinance, 2000, Second Sched.---Agricultural income---Definite information---Payment of agricultural income tax---Agricultural income was imputed on the basis of such paid tax---Validity---Information obtained from District Officer Revenue and Estate, about payment of agricultural income tax was definite---Under the obligation of Khyber Pakhtunkhwa Agricultural Income Tax Ordinance, 2000, taxpayer had paid tax of Rs.10,800 against which imputable agricultural income came to Rs.23,000, whereas it had been declared at Rs.1,800,000 which suggested the avoidance of taxation under the Income Tax Ordinance, 2001---Taxpayer could get the credit of imputable agricultural income under the Income Tax Ordinance, 2001; it stood proved that Taxation Officer had taken the action and had amended the order on the basis of "definite information" and for the reason of under assessment, which could not be disproved---Declaration of agricultural income over and above Rs.223,000 under the Income Tax Ordinance, 2001 i.e. at Rs.1,800,000 was inflated and was liable to addition toward the income of the taxpayer, which had rightly been subjected to addition by the Taxation Officer---No iota or any doubt existed to the effect that First Appellate Authority had committed a grave mistake by vacating the order of the Taxation Officer---Order of First Appellate Authority was set aside, which resulted in restoration of the amended order passed by the Taxation Officer.

2003 PTD (Trib.) 2287; 2000 PTD (Trib.) 2905; 2000 PTD (Trib.) 2531; 2004 PTD (Trib.) 983; 1993 SCMR 1232 = 1993 PTD 766; 2006 PTD 2275; 2000 PTD 359; 2007 PTD (Trib.) 954 and 2005 PTD (Trib) 2229 ref.

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

----S. 41--- Khyber Pakhtunkhwa, Land Tax and Agricultural Income Tax Ordinance, 2000 Second Sched.---Agricultural income---Jurisdiction of Taxation Officer---No doubt, the actual agricultural income was exempt from federal taxation under S.41 of the Income Tax Ordinance, 2001, but it did not mean that the taxpayer was scotfree to declare such income at his sweet will---Taxation Officer was vested with the jurisdiction to check the veracity and quantum of correct income as exemption from income tax was provided only on true and correct agricultural income---Taxation Officer for the purpose could lend support from the Provincial statute of Land Tax and Agricultural Income Tax Ordinance, 2000---Any income which did not come under the provincial statute of agricultural income taxation could not be considered or accepted as agricultural income under any other law---Computation and payment of Government taxes under the two statutes and Government agencies could not be at variance with each other---Income Tax Ordinance, 2001 which was a Federal Statute of taxation was dependent upon the provincial legislation for assessment of true and correct amount of agricultural income which suffered the agricultural income tax---Taxpayer could not be allowed to misclassify his taxable income of federal legislation as being exempt from taxation under the garb of agricultural income thereby to avoid payment of lawful tax---If it was proven fact that the income declared was not the agricultural income then such income was taxable under provision of Income Tax Ordinance, 2001---Declaring agricultural income different under one legislation than other legislation was against the ethics and was violation of income tax law as embodied in Income Tax Ordinance, 2001---If the income declared was found under-assessed or it was inflated and the element of avoidance was involved then the Taxation Officer was well within the authorization to add such income towards the taxable income of the taxpayer.

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

----S. 41---Agricultural income---Declaration of agricultural income---Objection regarding declaration of agricultural income per history did not carry weight because at the relevant period there was no Provincial Agricultural and Land Income Tax Ordinance, 2000 in the field---First time provincial tax law had been promulgated in the year 2000, while each tax year was independent year and it should be dealt with in accordance to its own fact and law---If something had been overlooked, in the history, it should be cured in future---If it was overlooked that would amount to grant of amnesty for wrong doing, one could not be left at his sweet will to misclassify, or to make mis-declaration, which was not the mandate of law, whereas the mandate of law was that the Income Tax Ordinance, 2001 gave the jurisdiction and authority to the Taxation Officer to investigate and probe the correct income.

Ghulam Shoib Jally for Appellant.

2012 P T D (Trib.) 1316

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson and Sohail Afzal, Accountant Member

Messrs PAK ARAB FERTILIZERS LTD., LAHORE

versus

C.I.R., ZONE-II, R.T.O., MULTAN

S.T.A. No.186/LB and FEA No.1/LB of 2012, decided on 5th April, 2012.

Sales Tax Act (VII of 1990)---

----S. 8(1)(a)---S.R.O. No. 535(I)/2008, dated 11-6-2008---Federal Excise Act (VII of 2005), S. 3---Self-consumed in house manufactured ammonia and nitric acid for producing "Urea", "Calcium Ammonium Nitrate" (CAN) & "Nitro Phosphate" (NP)---Levy of sales tax and excise duty by authority on such self-consumed ammonia and nitric acid treating same to be a "supply"---Validity---Mechanical transformation of raw material and continuous/stage-by-stage conversion thereof to manufacture an end-product would not constitute a supply to attract levy of tax---Basic raw material for manufacturing such three types of fertilizers was "natural gas"---For manufacturing "Urea", first raw natural gas would be fed into Ammonia Plant for producing ammonia, which then within system would stand transferred automatically to Urea Plant, which by chemical process would manufacture marketable end-product---For manufacturing Calcium Amonium Nitrate first raw natural gas would be fed into Ammonia Plant for producing ammonia, which then within system would stand transferred automatically to Nitric Acid Plant, which by chemical process would produce nitric acid, then both ammonia and nitric acid would be diverted to Calcium Amonium Nitrate Plant, wherein by taking place of a chemical reaction would produce marketable end product of Calcium Amonium Nitrate---For manufacturing Nitro Phosphoate first raw natural gas would be fed into Ammonia Plant for producing ammonia, which within system would stand transferred automatically to Nitric Acid Plant, which by chemical process would produce nitric acid, then both ammonia and nitric acid within system would stand diverted to Nitric Acid Plant, wherein by taking place of a chemical reaction, marketable end product of Nitro Phosphate would be produced---Both ammonia and nitric acid for being stage-by-stage conversions of basic natural gas in a continuous chemical process would not constitute a supply under law---Ammonia and nitric acid, if separated from such process on account of being surplus or otherwise and sold in market, then same would attract levy of tax---Ammonia and nitric acid, if remained within such continuous chemical process and get assimilated in production of marketable end product of fertilizer, then they did not remain independently identifiable/ marketable products, thus, their such consumption would not constitute supply leviable to tax---Such fertilizer products during relevant period were exempt from levy of sales tax vide S.R.O. 535(I)/2008, dated 11-6-2008---Tribunal set aside impugned levy for being illegal.

2002 PTD (Trib.) 475; 2004 PTD (Trib.) 681; 2008 PTD (Trib.) 261 and 2010 PTD (Trib.) 2144 rel.

2007 PTD 2410 (S.C.); GST 2006 CL. 49 (S.C.)/2006 PTD 730 (S.C.); 2007 PTD 2537; 2003 GST 263 (H.C. Lah.); 2007 PTD 2410; Sheikhoo Sugar Mills Ltd.'s case 2001 SCMR 1376/2001 PTD 2097 rel.

Asim Zulfiqar Ali, FCA for Appellant.

Yasir Pirzada, D.R. for Respondent.

2012 P T D (Trib.) 1335

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member and Tabbana Sajjad Naseer, Accountant Member

Messrs NASEEM PLASTIC HOUSE, FAISALABAD

versus

C.I.R., R.T.O., FAISALABAD

M.A. (AG) No.78/LB of 2011 and S.T.As. Nos.220/LB and 261/LB of 2010, decided on 15th May, 2012.

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

----S.46---Appeal to appellate Tribunal---Legal grounds, raising of---Scope---Any legal point can be raised at any stage of adjudication of the case and the appellant has all the rights to raise any new or additional legal point for the first time before the Appellate Tribunal even though not set forth in memorandum of appeal filed before the Appellate Tribunal or even if it had not been raised before the original stage of adjudication or at the time of first appeal before the First Appellate Authority.

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

----Ss.30, 11, 36, & 45---S.R.O. 547(I)/2008 dated 11-6-2008---Appointment of authorities---Taxpayer contended that order passed by the Additional Commissioner Inland Revenue was illegal and without jurisdiction because he was never appointed as an Inland Revenue Officer through a notification published in the official gazette as required under S.30 of the Sales Tax Act, 1990 and was a non-existent authority at that material time; and order was also hit by time limitation under S.36 of the Sales Tax Act, 1990---Validity---New service Group namely "Inland Revenue Service" was created through Finance Amendment Ordinance w.e.f. 28-10-2009 and as a result, the jurisdiction exercisable under Income Tax Ordinance, 2001, Sales Tax Act, 1990, and Federal Excise Act, 2005 were consolidated---By creation of a new cadre, a number of provisions including provisions of S.11 and S.36 of the Sales Tax Act, 1990 were also amended and the provisions of S.45 of the Sales Tax Act, 1990 for powers of adjudication were also omitted through Finance Amendment Ordinance 2009 applicable w.e.f. 28-10-2009 and an "Assistant Collector or a Deputy Collector or Additional Collector" were no more empowered to adjudicate upon cases falling under Ss.11 & 36 of the Sales Tax Act, 1990---Amendments were made in Ss.11(5) and 36(3) of the Sales Tax Act, 1990 whereby the word "Collector" was substituted by the word "Commissioner" and the words "Sales Tax Department or sales tax as the case may be" were substituted by the words "Inland Revenue"---Prior to inception of new tax service group namely 'Inland Revenue Service' a Notification No.S.R.O. 547(I)/2008 dated 11-6-2008 was duly issued and published in the official gazette for appointing sales tax authorities and assigning them jurisdiction and thereafter no such notification or statutory regulatory order on its pattern was neither issued nor obviously published in the official gazette for appointment of Inland Revenue Authorities to their jurisdiction which was mandatory for any proceedings carried out by an officer of Inland Revenue under S.30 of the Sales Tax Act, 1990---Order-in-original was passed by an "Additional Commissioner Inland Revenue, who was not duly appointed as "an officer of Inland Revenue" and was never assigned jurisdiction to the case of taxpayer through a notification published in official gazette under S.30 of the Sales Tax Act, 1990---Adjudication order passed by such officer was without lawful authority and of no legal effect.

Messrs Kamal Spinning Mills v. The CIR (R.T.O.), Faisalabad S.T.A. No.201/LB of 2010, dated 19-12-2011 rel.

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

----S.30---Appointment of authorities---Mandatory conditions for appointment of an officer---Two mandatory conditions for appointment of any officer as enlisted in S.30 of the Sales Tax Act, 1990, first being that, a notification or statutory regulatory order for appointment and jurisdiction of Officers of Inland Revenue specifying a case or area was required to be issued by Federal Board of Revenue was necessary condition while second was that, the publication of notification or statutory regulatory order in the Official Gazette of Pakistan was a sufficient condition---If either of the two conditions was missing, the act of any authority appointed in whatsoever manner shall be an act done by any of the ordinary citizen of the State.

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

----Ss. 36 (3) & 74---FBR letter C. No. 4(12)/S(Legal-ID)/2010 dated 3-1-2010---Recovery of tax not levied or short levied or erroneously refunded---Time barred show-cause notice---Taxpayer contended that show-cause notice was issued on 17-8-2009 and order-in-original was passed on 10-5-2010 after about 265 days instead it should have been passed within original time limit of one hundred and twenty days from issuance of show-cause notice or/and within such extended period as the Commissioner 'for reasons' to be recorded in writing provided that the extension period in no case shall exceed 60 days; and that original time limit of 120 days for adjudication was completed on 14-12-2009 and extended period of further 60 days also expired on 12-2-2010; and adjudication was time barred by 85 days under subsection (3) of S.36 of the Sales Tax Act, 1990---Revenue contended that upon expiry of original time limit as well as extended time limit, the Federal Board of Revenue under S.74 of the Sales Tax Act, 1990 had further extended time limit for decision vide its letter C.No.4(12)/S(Legal-ID)/2010 dated 3-1-2010, the order was passed within time limit---Validity---Federal Board of Revenue was not legally empowered to extend the time limit beyond 180 days in any case nor the adjudicating authority was legally competent to adjudicate the present case after expiry of original period of 120 days and extended period of 60 days and in no case beyond 180 days altogether---Miscellaneous application as well as appeal filed by the taxpayer were allowed whereas appeal filed at the behest of revenue being devoid of merits was rejected by the Appellate Tribunal on the strength of vital legal issues.

Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762 rel.

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

----Ss. 36(3) & 74---FBR Letter C.No.4(12)/S(Legal-ID)/2010 dated 3-1-2010---Recovery of tax not levied or short levied or erroneously refunded---Limitation---Extension of period by the Federal Board of Revenue---Scope---Phrase "such extended period shall in no case exceed sixty days" conveys the intention of the legislature that the extension in any case could not be given more than 60 days---Term "shall" used in the proviso to subsection (3) of S.36 of the Sales Tax Act, 1990 made the compliance of provision of law mandatory and there was no escape from the same---When a period was provided by a special statute, then any proceedings or action taken under the provisions of special statue had to be taken within such stipulated time otherwise, any action or proceeding taken beyond that very period shall render the whole exercise illegal and without jurisdiction---No doubt the Federal Board of Revenue could extend time limit generally in any case under S.74 of the Sales Tax Act, 1990 but the extended time limitation already specified under special provisions consciously enacted by the legislation in S.36 of the Sales Tax Act, 1990 could not be further extended under S.74 of the Sales Tax Act, 1990 through a notification/executive order by changing the Act of Parliament---Exercise of delegated authority by the Federal Board of Revenue through subordinate legislation, such as, through a notification or statutory regulatory order or any other order was permissible only so long as it did not conflict with the parent statute---Where a situation was specifically dealt with by a provision of law then any general provision relating to the same subject would not be attracted in cases specifically catered for.

Khubaib Ahmad for Appellant .

Mrs. Nabila Iqbal, D.R. for Respondent (in M.A. (AG) No.78/LB of 2011 and S.T.A. No.220/LB of 2010).

Nabila Iqbal D.R. for Appellant (in S.T.A. No.261/LB of 2010).

Khubaib Ahmad for Respondent (in S.T.A. No.261/LB of 2010).

2012 P T D (Trib.) 1385

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shahin, Judicial Member and Tabana Sajjad Naseer, Accountant Member

COMMISSIONER INLAND REVENUE, LTU, LAHORE and another

versus

Messrs MILLAT TRACTORS LTD., LAHORE and another

I.T.As. Nos.1399/LB, 1340/LB, 1374/LB and 1375/LB of 2010, decided on 13th October, 2011.

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

----S. 34(3)---Companies Ordinance (XLVII of 1984), S.234---Inter-national Accounting Standard 37 & 19---Accrual basis accounting---Addition on account of compensated absence---Deletion---Revenue contended that subsection (3) of S.34 of the Income Tax Ordinance, 1979 indicates that an amount shall be payable by person when all the events that determine liability had occurred and the amount of the liability could be determined with reasonable accuracy---Taxpayer contended that being a listed entity the taxpayer company had to follow International Accounting standards under the directions of Companies Ordinance, 1984 as notified under S.234 of the Companies Ordinance, 1984; and International Accounting Standard 19 specifically deals with the accounting of compensated absence which the taxpayer company had duly complied with---Validity---Claim of provision was based upon actuarial valuation by the actuaries---Liability had been created on the basis of actuarial valuation and after satisfying the conditions laid down in S.34 of the Income Tax Ordinance, 2001---Liability already accrued thought to be discharged at a future date would be a proper deduction was applicable to the present case---Event had already occurred, wherein the employee had rendered his services to the company and the amount of liability determined with the reasonable accuracy in the form of Actuarial Valuer's Report, the preconditions of S.34(3) of the Income Tax Ordinance, 2001 were met with---Liability on account of compensated absence as a statutory obligation was to be paid in phases to the employees as per terms of contract---Liability was worked out by actuaries as provided in International Accounting Standard 19---Expenditure was of statutory nature and accrues on account of services received from the employees by the employer---Actual salary expenditure were accrued although not paid immediately---Liability already accrued thought to be discharged at a future date would be a proper deduction while working out the profits and gains of business under the accepted principles of commercial practice and accountancy and that it was not necessary that the amount actually be expended or paid---Deletion by the First Appellate Authority was confirmed by the Appellate Tribunal.

2001 PTD 1427; 1992 SCMR 763; 2009 PTD (Trib.) 1559; 2008 PTD 647; 1992 SCMR 763; 2006 PTD (Trib.) 1800 and 1985 PTD 413 rel.

(b) Income Tax---

----Rented building---Depreciation allowance---Taxpayer rented out small portion of its building---Depreciation had been claimed for the entire building---Claim was curtailed by 5% for the reason that this portion was not being used for the purposes of business---Taxpayer contended that rental income was not the primary business of the company, and that it had taken the said rental income as other income and had not claimed any statutory repair allowance, except depreciation @ 5%---Addition was confirmed by the Appellate Tribunal and order of First Appellate Authority was not interfered.

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

----S.67---Income Tax Rules 2002, R.13 (3)---Apportionment of deductions---Add back expenses attributable to dividend income---Addition was made by allocating expenses on dividend income by prorating the same---First Appellate Authority upheld the proration of financial expenses and curtailed the proration of other expenses only to the extent of expenses claimed under the head 'salary' in administrative expenses---Taxpayer contended that dividend income was distinctively maintained as separate head of income; and since company was not incurring any expense incidental to the income from dividend, the question of proportionate expense in this activity did not arise; and investment had not been made out of borrowed capital and there was no borrowing of the company from where this investment was made to earn the dividends; and no expenditure was to be allocated as no expenses were allocated to dividend Income in the financial statements; and company had regularly been employing the same method for accounting for over 30 years; and that allocation on this score and matter was not subjudice, having attained finality---Revenue contended that no income could be earned without expenses, therefore expenses must be allocated to the dividend income under S.67 of the Income Tax Ordinance, 2001---Validity---No exercise had been taken by Taxation Officer to allocate the expenditure specifically, whereas a general proration was made on the basis of turnover---Selling expenses had no concern with the earning of dividend income---Since no borrowed funds were utilized towards purchase of shares and no exercise was carried out by the Taxation Officer to establish the same, the proration on this account was deleted---No income could be earned without incurring any expense, however, allocation of expenses under the head "salaries" by the First Appellate Authority was excessive since all the employees were not working towards earning the income from dividend---Only the management was involved in the decision making of carrying on the investments in shares of the companies to earn dividend income---Salaries of Directors and CEO of the company were to be apportioned to the head 'dividend' income.

2005 PTD (Trib.) 1208; 2009 PTD (Trib.) 1559 and 2009 PTD (Trib.) 869 rel.

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

----Ss.21(k) & 12(2)(d)---Deductions not allowed---Re-imbursement---Addition on account of perquisites to directors which were more than 50% of their salaries---First Appellate Authority confirmed the addition on the finding that nothing had been submitted to controvert the findings of the Taxation Officer---Taxpayer contended that such reimbursements were not part of salaries expenses, but were debited to actual heads of expense verified by independent professional auditors---Validity---No exercise was made by the Taxation Officer to determine the exact amount or nature of perquisites rather addition was made on half reliance on S.12(2)(d) of the Income Tax Ordinance, 2001 without appreciating that reimbursements were not perquisites---Addition was deleted by the Appellate Tribunal.

1981 SCMR 1029; 2009 PTD (Trib.) 1559 and 2007 PTD (Trib.) 1055 rel.

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

----Ss.75 & 22(8)(b)---Disposal and acquisition of assets---Deprecia-tion---Addition on account of disposed of assets---Assets were sold out of written off assets and balance amount was claimed as expenses which were not allowed and the addition was confirmed by the First Appellate Authority---Taxpayer contended that being a listed company, as a matter of statutory measures, the company got its Fixed Assets physically verified from independent professionals once in five years; and company was statedly carrying on this treatment for the last 20 years and this written off amount had never been subjected to addition on account of assets disposed off---Revenue contended that gain on loss could only be claimed within the meaning of S.22(8) of the Income Tax Ordinance, 2001; and that when depreciation was allowed under S.22 of the Income Tax Ordinance, 2001, then gain on loss could be claimed or allowed only according to the provisions of S.22(8) of the Income Tax Ordinance, 2001---Validity---Taxpayer had rightly claimed the disposal of assets as written off as per its own history and had rightly claimed the disposal under S.75 of the Income Tax Ordinance, 2001---Even S.22(8)(b) of the Income Tax Ordinance, 2001 supported the taxpayer in the sense that when the consideration received was less than the written down value, the same was allowed as a deduction---When no sale proceeds were received in writing off the asset, the consideration received was treated as NIL and any written down value of redeemed assets was allowable under S.22(8)(b) read with S.75 of the Income Tax Ordinance, 2001---Addition was deleted by the Appellate Tribunal.

Atta Husain Ltd. v. CIT East Dhaka 1969 PTD 679 and 2009 PTD (Trib.) 1559 ref.

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

----S.20(1)---Deductions in computing income chargeable under the head "Income from business"---Depreciation of vehicle---Company had provided more than one vehicle to certain directors of the company---Addition was made on account of depreciation claimed for such vehicles---Addition was deleted by the First Appellate Authority---Revenue contended that company had provided more than one vehicle to certain directors of company which should be considered as second car given to directors and could not be held as business expenses within the meanings of S.20(1) of the Income Tax Ordinance, 2001; and second car was obviously used for the purposes other than business---Taxpayer contended that there was no bar on providing vehicles to the company executives; and addition had rightly been deleted by the First Appellate Authority---Validity---No justification was available for curtailment of depreciation claim on account of conveyance provided by the employer---Somebody other than assessee benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction---Expenses must be adjudged from the point of view of business and not of the department---Finding of First Appellate Authority was upheld by the Appellate Tribunal.

2005 PTD (Trib.) 2041 and 2007 PTD (Trib.) 2583 rel.

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

----S.34(1)---Accrual basis accounting---International Accounting Standards-18---Receipt from customers against warranty and free services---Out of such receipts some receipt were offered for tax and balance remained untaxed, had been shown as balance for deferred revenue---Taxation Officer did not accept the treatment and made an addition of such deferred revenue---First Appellate Authority deleted the addition---Revenue contended that such receipts should be taxed in a year as the company had received such amounts during the year---First Appellate Authority found that "keeping in view the situation, I think it fit to tax the same which had actually been accrued and accept the balance amount as deferred advance; and assessment had also been finalized under S.122(5A) of the Income Tax Ordinance, 2001 and no such addition had been made by the Taxation Officer; and addition was deleted"---Appellate Tribunal in circumstances, concurred with the findings of First Appellate Authority and no interference was warranted.

Sibih-ur-Aiyaz, D.R. for Appellants (in I.T.As. Nos. 1399/LB and 1340/LB of 2010).

Irfan Ilyas, FCA for Respondents (in I.T.As. Nos.1399/LB and 1340/LB of 2010).

Irfas Ilyas, FCA for Appellants (in I.T.As. No. 1374/LB and 1375/LB of 2010).

Sibih-ur-Aiyaz, D.R. for Respondents (in I.T.As. No. 1374/LB and 1375/LB of 2010).

2012 P T D (Trib.) 1416

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

S.T.A. No.1140/LB of 2009, decided on 13th March, 2011.

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

----Ss.38, 40 & 40A---Constitution of Pakistan, Art.4(1)---Authorised officers to have access to premises, stocks, accounts and records---Scope---Search and seizure---Provision of S.38 of the Sales Tax Act, 1990 is mere enabling provisions and had nothing to do with regular search or seizure which could only be done in accordance with the provisions of S.40 and in emergent cases under S.40-A of the Sales Tax Act, 1990---General provision of S.38 of the Sales Tax Act, 1990 could not be made to circumvent or over-ride the constitutional guarantees of an individual, particularly those ensured to a person under Art. 4(1) of the Constitution---No one could input motive to legislature but the amendments made in the provisions did allow extraordinary powers to the Sales Tax Officers which were however, definitely subject to constitutional guarantees and their interpretation must conform to the limits prescribed therein.

(b) Interpretation of statutes---

----Where general and a specific provision on a particular subject was available then resort to general provision could not be made to do or sustain the act.

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

----Ss.38, 40 & 40A---Authorised officers to have access to premises, stocks, accounts and records---Search and seizure---Provision of S.38 of the Sales Tax Act, 1990 is not by itself search and seizure provision and therefore, must give way to the specific provisions of Ss.40 & 40-A of the Sales Tax Act, 1990.

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

----Ss.38, 40 & 40A---Authorised officers to have access to premises, stocks, accounts and records---Search and seizure---"Free access"---Connotation---"Free access" to any property of the citizen did not mean search and seizure for the purpose of collecting evidence against him---Such object could only be achieved on observing the codal formalities under Ss.40 & 40-A of the Sales Tax Act, 1990 which ensure respect for the rights of the subject---Search and seizure by state functionaries was the hardest hit on the person, property and self respect of a citizen which could not be assessed to have been granted as a matter of course---Mere allegation of some tax evasion, here and there could not be allowed to be extended to justify a "storming" of business houses and factories---Free access contemplated in S.38 on the Sales Tax Act, 1990, did not mean a storming on the part of an unexpecting enemy to pill and plunder at the fancy of the victorious prince overjoyed with the satisfaction of his having trampled the enemy---Visit by a State functionary to the person or property of a citizen should not have the colour and countenance of the royal wrath against of defiant adversary.

(e) Interpretation of statutes---

----Acts deeds and things required to be done should be done in accordance with law or should not be done at all.

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

----Ss.38, 40 & 40A---Collection of evidence by illegal means---Effect---Every evidence collected through an illegal means, howsoever incriminating, partakes the colour of a confession extracted through torture which was not admissible in evidence in any legal tradition/jurisdiction of the world---Such evidence needs to be discarded through and through.

(g) Interpretation of Statutes---

----Application of one provision of law in isolation from the other provision---Legality---Every word used by the Legislature must be given its true meaning and the provisions construed together in a harmonious manner and it would not be legal and proper to apply one provision of law in isolation from the other provision as no surplusages or redundancy can be attributed to the legislative organ of the State.

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

----Ss.38, 40 & 40A---Authorised officers to have access to premises, stocks, accounts and records---Search and seizure without authorization by the Collector or Federal Board of Revenue and also without obtaining warrant---Validity---Department officials had conducted raid, carried out search and made seizure of record and other articles without fulfilling the mandatory requirements of law---Evidence was not produced that raiding party was authorized by the Collector or Federal Board of Revenue nor any search warrant for carrying out search of the business premises was obtained---Raid conducted by the departmental official was without any justification, in clear violation of the relevant provisions of law---Search and seizure of record from the premises were illegal and without lawful authority and of no legal effect whatsoever; consequently, subsequent proceedings were also illegal including the order-in-original---Adjudicating authority without keeping in view the fact that case had been made on the basis of illegal raid under Ss.38/40-A of the Sales Tax Act, 1990 had passed the order---Show-cause notice was issued on the basis of record and documents taken into possession during illegal raid---No other basis had been mentioned in the show-cause notice despite the fact that not only the raid conducted was illegal being made without authorization from Collector or Federal Board of Revenue but Additional Commissioner had already disposed of and closed the case---Show-cause notice was replied on each and every issue and there was no justification for further proceedings but adjudication authority had also passed order on the basis of illegal raid---Search having conducted and documents, record and other articles taken into possession in clear violation of the provisions of Sales Tax Act, 1990, the proceedings of raid and search and seizure of record from premises were illegal, without lawful authority and of no legal effect whatsoever and subsequent proceedings including the orders made in that respect being illegal had no value---Department was directed to immediately return the said record and other articles taken into possession---Documents or copies of such documents shall not be used against the taxpayer in any proceedings---Order-in-original was set aside and appeal was allowed by the Appellate Tribunal.

Collector of Customs (Preventive) and 2 others v. Muhammad Mehfooz PLD 1991 SC 630; Messrs Ehsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan through Ministry of Finance Islamabad and 4 others 2003 PTD 2037; Messrs Food Consults (Pvt.) Ltd. Lahore and another v. Collector Excise and Sales Tax Lahore and 2 others 2004 PTD 1731; Writ Petition No.12309 of 2003 and Federation of Pakistan through Secretary Ministry of Finance Islamabad and 4 others v. Master Enterprises (Pvt.) Ltd. 2003 PTD 1034 ref.

N.P. Water Proof Textile (Pvt.) Ltd. v. Federation of Pakistan and others 2004 PTD 2952; Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. v. Assistnat Commissioner in Writ Petition No.19482 of 2002 order dated 21-5-2003 GST 2003 CL 338; Messrs Zikaria Enterprises v. Muhammad Musharaf and others 2005 PTD 1200 and Collector of Sales Tax v. Messrs Mega Tech (Pvt.) Ltd. 2005 SCMR 1166 rel.

Arif Amin for Appellant.

Riaz Ahmed, D.R. for Respondent.

2012 P T D (Trib.) 1444

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Khalid Aziz Banth, Accountant Member

Messrs QUALITY HOME (PVT.) LTD., LAHORE

versus

COMMISSIONER OF INLAND REVENUE, R.T.O., LAHORE

I.T.A. No.104/LB of 2011, decided on 30th April, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.21(i), 111(1)(b), 122(1) & 177---Deductions not allowed---Cost of sale of plot / purchase---Taxpayer, a company deriving income from business of real estate, claimed cost of sale of plot, which was purchased on cash basis---Order was amended by making addition under S.21(i) of the Income Tax Ordinance, 2001---Taxpayer contended that Taxation Officer had grossly erred by invoking provisions of S.21(i) of the Income Tax Ordinance, 2001 as the same dealt with the expenses made in Profit & Loss account; and since issue pertained to cost of sale of plot, which was made on cash basis, addition in that regard could only be made by resorting to provisions of S.111(1)(b) of the Income Tax Ordinance, 2001---Validity---Section 21(i) of the Income Tax Ordinance, 2001 could only deal with the expenses debitable to Profit & Loss account whereas collective provisions of S.21 of the Income Tax Ordinance, 2001 transpired that the same dealt with the expenses debitable to profit and loss account and even if it was to cover trading account then it will deal with only the deductions like rent, wages, fuel, commission, interest, salary (relating to manufacturing cum trading account); and purchases, without any shadow of doubt, could not be termed as deductions---Provisions of S.21(i) of the Income Tax Ordinance, 2001 were only applicable to the expenses made in profit and loss account and that the same could not be invoked for the purpose of making addition on account of purchases---Since, addition had been made by resorting to irrelevant provisions of S.21(i) of the Income Tax Ordinance, 2001 on account of purchase of plot on cash basis, the same was ordered to be deleted.

Messrs Farhan Food Industries's case I.T.A. No.468/KB of 2010 rel.

Irfan Ilyas, FCA for Appellant.

Mrs. Humaira Maryum, D.R. for Respondent.

2012 P T D (Trib.) 1478

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs HOME DELIVERY SERVICES (PVT.) LIMITED, KARACHI

Versus

COMMISSIONER INLAND REVENUE, LEGAL DIVISION, R.T.O., KARACHI

I.T.As. Nos.429/KB to 433/KB of 2010, decided on 31st March, 2011.

(a) Income Tax---

----Commission---Fixed percentage---First Appellate Authority held that fixed percentage tantamount to commission---Taxpayer contended that in cases of sugar manufacturers, grain sellers, persons engaged in market for such transactions and real estate agents engaged in real estate business fix amount was not charged, rather their commission varies on the transaction and circumstances of each case---Validity---Fix percentage could not be made sole ground for treating the normal business activities into presumptive activities as there were other instances of commission income involved in the sale/purchase of sugar, grain and other commodities exchanged/sold through the commission agents who do not earn commission on a fixed basis, rather the rate was variable, negotiable and arguable---Real estate agent also did not earn a fixed commission it was mutually decided with the parties involved in selling or buying the properties.

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

----Ss.122 (5A), 169, 147, 120 & 32---Amendment of assessment---Tax collected or deducted as final tax---Income from sale of newspapers and periodicals---Discount/ commission income---Taxpayer declared receipts as commission for the last 11 years and started claim his receipts as discount since 2001-02- to tax year 2008---Assessment was amended on the ground that taxpayer had failed to produce any material to support the change in the nature and nomenclature of business transactions; and all assessments deemed to have been made under S.120 of the Income Tax Ordinance, 2001 were considered erroneous in so far prejudicial to interest of revenue, the "discount income" was converted to "commission income" covered under presumptive tax regime for the last five years---Validity---Nature of business i.e. "discount income" from sales of newspapers and periodicals fell under the normal tax regime and not presumptive tax regime for the reason that there had been purchase and sale of newspapers and periodicals for which a large infrastructure and manpower had been employed---Nature of business where commission income was involved needed such activities and for that reason the deduction of income tax had been prescribed @ 10% instead of 6% for services rendered and 3.5% for sale and supplies---Intention of the legislature prescribing different rates for different categories could not be ignored---No deduction of income tax was involved, rather taxpayer had paid advance tax under S. 147 of the Income Tax Ordinance, 2001 against the future income of the respective tax year and since no deduction of income tax had been effected by the payer , the provisions contained in S.169 of the Income Tax Ordinance, 2001 were not attracted---Transactions of taxpayer fell under normal tax regime and not under presumptive tax regime---Order deemed to have been made under S.120 of the Income Tax Ordinance, 2001 were found neither erroneous nor prejudicial to the interest of revenue---Order of First Appellate Authority was vacated and the original orders for all the five years were restored---Facts remained that without vacating the proceedings initiated for tax year 2006 under S.177 of the Income Tax Ordinance, 2001 initiating the proceedings under S.122(5A) of the Income Tax Ordinance, 2001 were not lawful, rather were void and without lawful effect---All the five orders were cancelled by the Appellate Tribunal and appeals filed by the taxpayer were allowed.

Black Law Dictionary; Oxford Dictionary; Legal Terms and Phrases; Central Excise and Salt Act, Pakistan v. P. Tobacco Co. PLD 1961 SC 66 and PLR 1959 (2) 1050 ref.

2005 PTD 1157 and 2010 PTD (Trib.) 1209 rel.

Muhammad Aleem for Appellant.

None for Respondent.

Date of hearing: 31st March, 2011.

2012 P T D (Trib.) 1535

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaista Abbas, Accountant Member

COMMISSIONER OF INLAND REVENUE, ZONE-IV, LTU

Versus

Messrs PHARMEVO (PVT.) LTD., KARACHI

I.T.A. No.1046/KB of 2011, decided on 29th February, 2012.

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

----Ss. 21(c) & 13(7)---Deductions not allowed---Interest free loan disbursed to employees---Addition---Addition was deleted by the First Appellate Authority---Revenue contended that under S.13(7) of the Income Tax Ordinance, 2001 the deference of benchmark rate as profit on any interest free loans provided to the employees was perquisite and taxpayer had paid interest free loans to the employees which were recoverable in installments and, as such, the profit on loan as computed at the benchmark rate of 8% being a perquisite of the employees was taxable under S.13(7) of the Income Tax Ordinance, 2001; that taxpayer had failed to furnish evidence in respect of inclusion of such amount of perquisite in the salaries of employees and that the Taxation Officer had rightly made the addition in this respect, the amount of loans being inadmissible expense in terms of the provisions of S.21(c) of the Income Tax Ordinance, 2001---Taxpayer contended that since interest free loan had been provided to the employees which were in the shape of perquisites, which otherwise, after inclusion benchmark interest @ 8%, the salaries remained below the threshold of taxable limit; that there was no obligation to deduct tax thereon; and that there was no justification for the disallowances made by the Taxation Officer invoking Cl.(c) of S.21 of the Income Tax Ordinance, 2001 which had rightly been deleted by the First Appellate Authority---Validity---Interest free loan had admittedly been provided by the taxpayer which constituted perquisite in terms of subsection (7) of S.13 of the Income Tax Ordinance, 2001 which, was admittedly taxable but the Taxation Officer without establishing the fact that after inclusion of interest, the salaries of the employees were above threshold of the taxable limit, had made addition in that respect---Salaries of the employees remained below the threshold of taxable limit and therefore the taxpayer company was not under obligation to deduct tax thereon---First Appellate Authority rightly deleted the addition.

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

----S. 21(1)---Deductions not allowed---Disallowance on account of expenditure---Cash transactions---Expenses for business purposes---Department contended that transactions of amount to Rs.1,9633,929 were made in cash in respect of expenses, which had been disallowed but First Appellate Authority without any justification had restricted disallowance to Rs.816,956----Taxpayer contended that all the amounts paid were below the threshold limit of Rs.10,000 but these amounts were paid through single voucher; and admittedly the payments made were below the threshold of taxable limit which fulfilled the conditions laid down by law; that Taxation Officer had not denied that these expenses related to the business purposes; and that instead of deleting the addition, First Appellate Authority had only restricted the addition at 50% of the claim---Validity---Taxation Officer had nowhere observed that expenses claimed were not related to the business purposes---Most of the expenses were below taxable limit and paid for the purpose of factory petty cash electricity account etc.---Taxation Officer had failed to confront the taxpayer specifically regarding the claim of the amount exceeding the taxable limit---First Appellate Authority had rightly restricted the disallowance to the 50% of the claim---Order of First Appellate Authority was not interfered by Appellate Tribunal.

I.T.A. No.44/KB of 2010 ref.

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

----S. 21(1)---Deductions not allowed---Profit and loss expenses---Disallowance of---Revenue contended that vouchers regarding the payments were not furnished and taxpayer failed to furnish the supporting evidence in respect of such amounts of expenses and expenses in this regard were treated to be not genuine and were disallowed---Deletion of add backs made out of profit and loss expenses were supported by the taxpayer by books of accounts, vouchers and other relevant documents were provided and there was no justification for such add backs; and Taxation Officer had made the lump sum addition using of stock phrases without considering the fact that most of the expenses so claimed, were made through cross cheques---Validity---Admittedly, taxpayer provided books of accounts, vouchers and other relevant documents but Taxation Officer had made lump sum addition using stock phrases without pointing out the specific heads---First Appellate Authority had rightly knocked off addition which required no interference.

(d) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S.4---Constitution of Pakistan, Art. 70---Mode of payment by, and recovery from, industrial establishment---Taxable income---Accounting profit for the year---Deletion of levy of Workers Welfare Fund---Revenue contended that First Appellate Authority had deleted the levy without any justification and without considering the fact that the position of law had been substantially changed after the decision of High Court and after amendment in the Workers' Welfare Fund Ordinance, 1971 vide Finance Act, 2006 and Finance Act, 2008---Workers' Welfare Fund was to be charged on higher side of taxable income or the accounting profit for the year---Taxpayer contended that amendments in the Workers' Welfare Fund Ordinance, 1971, had been made through Finance Act, 2006 and Finance Act, 2008, but the case of the assessee was for the tax year 2006 and the amendments were not applicable---Validity---First Appellate Authority deleted the charge in this respect for the reason that admittedly the taxpayers' amended income had been determined after setting off the brought forward losses and the Workers' Welfare Fund charged on amended income could not be endorsed---Amendment in Workers' Welfare Fund Ordinance, 1971 were brought through Finance Act, 2006 and Finance Act, 2008 while the case of the taxpayer was of tax year 2006, and these amendment will not be applicable in the case of taxpayer---Even otherwise Workers' Welfare Fund being a fee could not be amended, altered or modified through a money bill but required regular legislative procedure under Art. 70 of the Constitution.

2002 PTD 14 (H.C. Kar.) rel.

I.T.A. No.44/KB/2010 ref.

Ghulam Murtaza Khoro, D.R. for Appellant.

Sayed Muhammad Maraj for Respondent.

Date of hearing: 29th February, 2012.

2012 P T D (Trib.) 1544

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and arina N., Zaidi Accountant Member

Messrs MASHREQ BANK, PSC, KARACHI

Versus

COMMISSIONER OF INLAND REVENUE, (LEGAL DIVISION), RTO, KARACHI

I.T.As. Nos.783/KB and 798 of 2006, decided on 19th July, 2011.

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

----Ss. 75(1) (a), 2(1A), 22, 57A, 177, 120 & 122(9)---Merger/ amalgamation of Bank---Disposal and acquisition of assets---Surplus on revaluation of assets---Taxation of---Taxpayer contended that in case of merger/amalgamation, no gain/(loss) arose to the amalgamating companies and the action of Taxation Officer was not valid in law---First Appellate Authority deleted the addition on account of tax gain on revaluation of the building---Validity---When the merger/amalgamation took place there was no specific provision available in the scheme of Income Tax Ordinance, 2001 relating to tax issues and implications connected with merger of two or more companies except S.2(1A) that defines the meaning of the term "amalgamation" and S.57A that speaks about the setting off of business losses consequent to amalgamation---Merger of two or more companies was essentially a process of corporate reconstruction whereby assets of the merging companies were either clubbed or brought together in the surviving or the new company---Proprietary rights of assets remain intact---No financial transaction could be said to have taken place between the merging companies---In the scheme of merger arrangement no sale took place disposition, exchange or relinquishment or extinguishment of any right on the part of the amalgamating companies that gave rise to any income or gain resulting in a taxable event---Repositioning of the amalgamating companies through a due process of law resulting in the emergence of an amalgamated company only gave rise to one thing i.e. the shareholders of the merging companies eventually became the shareholders of the amalgamated company---Ultimate interest and ownership of shareholders of a merging company remained unchanged based on appropriate share swap ratio forming part of the scheme of arrangement under which the merger was ultimately sanctioned by the State Bank of Pakistan or the Court of law as the case may be---Shareholder's intrinsic right/interest remained the same as was prior to the merger---Net assets of the merging companies remained unaltered as also the proprietary interest of the shareholders in the amalgamated company remained the same---Corporate merger did not give rise to any taxable event---Order of First Appellate Authority was upheld by the Appellate Tribunal by holding that the estimation of tax gain of taxpayer properties (pursuant to merger/amalgamation duly approved by the State Bank of Pakistan) was not in accordance with law due to the effect of merger/amalgamation---Appeal filed by the department was dismissed.

Commissioner Income Tax, Delhi (Central) v. Bharat Development (Pvt.) Ltd. 135 ITR 456; CIT v. Gammon Pak. Ltd. (1966) 14 Tax 304; Sir Kikabhai Premchand v. CIT (Central), Bombay (1953) 24 ITR 506; CIT, West Bengal v. India Discount Co. Ltd. 1970 ITR 191 (SC Ind.); CIT v. Shoorji Vallabhadas and Co. (1962) 46 ITR 144 (S.C. Ind.); 1997 PTD 1370; Sutlej Cotton Mills Ltd. v. CIT West Bengal (1979) 116 ITR 1 and 2007 PTD (Trib.) 1885 rel.

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

----S.21---Deductions not allowed---Bad debts---Merger/amalgamation of Bank---Claim of bad debts was disallowed by observing that the claim was premature and once the taxpayer had transferred the rights of its recovery to the successor company in which the taxpayer with all of its assets and liabilities had been merged, the claim of bad-debts on provisional basis was legally valid---First Appellate Authority upheld the disallowance of the claim of bad-debts by holding the action of the Taxation Officer to be valid in law---Validity---Action of Taxation Officer in disallowing bad debts which was confirmed by the First Appellate Authority was upheld by the Appellate Tribunal for the reason that after merger/amalgamation the right to recover the bad-debts rested with the new company formed as a result of the merger---Appeal of the taxpayer was dismissed by the Appellate Tribunal.

(c) Income Tax---

----Merger/amalgamation of Bank---Valuation of building---Taxation Officer showed his satisfaction on the valuation of buildings, which were carried out by two independent valuators the reports of which were duly submitted to the Taxation Officer---Once it had been accepted that the Bank had amalgamated/merged and the scheme of amalgamation had also been approved by the State Bank of Pakistan, there was no reason to cast any doubt thereon.

(d) Income Tax---

----Amalgamation---Effects of amalgamation---Explanation of.

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

----S.2 (1A)---Amalgamation of Bank---Notional surplus on revaluation of buildings---Taxation of---Taxation Officer had no right to tax such surplus on revaluation for the simple reason that the company had not yielded any actual gain on such revaluation---Revaluation of buildings had been made strictly following certain legal requirements as laid down in the scheme of merger and as per S.2(1A) of the Income Tax Ordinance, 2001---Unrealized amount on revaluation of buildings was not taxable---In case of merger/amalgamation, the amalgamated company charges depreciation on assets so transferred after amalgamation on the basis of tax written down value of the assets instead of their book value at which the assets were transferred---Taxation Officer had completely ignored said aspect and unreasonably taxed the notional gain without going into the depth of the subject transaction which was not legal.

(f) Income Tax--

----Amalgamation of Bank---Gain on revaluation of buildings could not be treated as income/revenue chargeable to tax since it did not represent receipt arising out of any business or commercial activity---Such gain could only be regarded as a unrealized receipt not being real income, which could not be brought into the ambit of taxation---In order to bring an amount in the ambit of taxation, the form of the transaction may not be given preference over the substance.

CIT v. Gammon Pak. Ltd. (1966) 14 Tax 304 and Sir Kikabhai Premchand v. CIT (Central), Bombay (1953) 24 ITR 506 rel.

(g) Income Tax---

----Transaction---Substance or form---In revenue cases regard must be have to the substance of the transaction rather than its mere form.

Sir Kikabhai Premchand v. CIT (Central), Bombay (1953) 24 ITR 506 rel.

(h) Income Tax---

----Profit or loss---Determination of---Mere book entries were not determinative of the question whether the taxpayer had earned any profit or incurred a loss, and that a receipt, which in law could not be regarded as income, could not become so, merely because the taxpayer credited same in the profit & loss account.

CIT West Bengal v. India Discount Co. Ltd. 1970 ITR 191 (S.C.) Ind) rel.

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

----Ss.2(1A) & 57A---Amalgamation of Bank---Income Tax Ordinance, 2001 by virtue of Ss.2(1A) & 57A recognizes the concept of merger which was apparent from the fact that a number of amendments had been introduced in the Income Tax Ordinance, 2001 dealing with the subject of merger and the related tax benefits---Concept of merger was a recognized concept not only in view of specific provisions introduced in the Income Tax Ordinance, 2001 but also under the erstwhile Income Tax Act, 1922 and Income Tax Ordinance, 1979.

(j) Income Tax---

----Amalgamation/merger of Bank---Financial transaction---Scope---Merger did not give rise to any financial transaction which became a taxable event and there was no cash payment involved in any manner---Amalgamation did not involve any sale or purchase and any surplus of value of shares issued by the amalgamated company over the value of one asset transferred did not result in any taxable gain.

(k) Income Tax---

----Real income---Notional income---Taxation of---Under the income tax law, only real income accrued or received by a taxpayer could be brought into the ambit of taxation---Hypothetical entries resulting in accretion to notional income or in the value of assets did not, in any manner, give rise to a taxable event.

2007 PTD (Trib.) 1885 rel.

Hassan Naeem for Appellant (in I.T.A. No.783/KB of 2006).

Faisal Rauf Memon, D.R. for Respondent (in I.T.A. No.783/KB of 2006).

Faisal Rauf Memon, D.R. for Appellant (in I.T.A. No.798/KB of 2006).

Hassan Naeem for Respondent (in I.T.A. No.798/KB of 2006).

Date of hearing: 19th July, 2011.

2012 P T D (Trib.) 1559

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, S. Hasan Imam, Judicial Members and Chaudhary Nazir Ahmed, Accountant Member

Messrs G.S.A. HOUSE (PVT.) LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX, CIRCLE-10, COS. I, KARACHI

M.As. (Rect) Nos.368/KB to 371/KB of 2005 in I.T.As. Nos.973/KB to 976/KB of 2002, decided on 30th June, 2007.

Per S. Hasan Iman, Judicial Member

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

----S.221---Income Tax Ordinance (XXXI of 1979), Ss.65, 66A, 62, 19(2)(b) & 19(3)---Rectification of mistake---Definite information---Change of opinion---Rent free tenancy---Information of---Assessee submitted that tenant was their sister company having same directors and had been rent free tenant of the assessee company since the very beginning, in lieu of the loan extended to assessee to construct the entire building---Assessee was confronted with a show cause notice under S.65 of the Income Tax Ordinance, 1979 with the approval of Inspecting Additional Commissioner---Assessing Officer did not agree with the assessee's explanation that it was change of opinion and that it was not definite information for the purpose of S.65 of the Income Tax Ordinance, 1979---Assessing Officer computed rental income of the ground floor occupied by the tenant under S.19(2)(b) of the Income Tax Ordinance, 1979 and finalized the assessment under Ss.62/65 of the Income Tax Ordinance, 1979---Appeals were dismissed by the First Appellate Authority as well as by the Appellate Tribunal---Taxpayer contended that information regarding "ground floor of the building" was already in possession the Department right from the beginning particularly at the time of original assessment and that this argument was never agitated by the assessee; and that right from the beginning it was established that the rent was not being declared for the ground floor and this information was definite information for the purpose of assessment---Validity---Neither assessee declared the rent for the ground floor nor the sister concern at any time in his return stated that rent had been paid to the assessee by the sister concern---In case rent was not declared the Assessing Officer was under legal obligation to confirm from the sister concern as to whether rent had been paid---In case rent was not paid for whatsoever reason, the Taxation Officer could not add the proposed rent as income of the assessee---Only two options were left with the Assessing Officer (i) to prove that rent had been paid and received and (ii) to make out a case that the rent was being paid but collusion with the sister concern it had not been declared---For both the reasons the Taxation Officer had taken no pains at all to make out a case that it was collusive arrangement to avoid the fact that rent had been paid---Assessing Officer was further required to prove that rent had been paid as existence of the ground floor of the building could not be denied, the ground floor related rent appeared to have been ignored, instead there was complete knowledge and information in this regard---During assessment proceedings of assessment year 1995-1996 a letter was submitted to the fact that the sister concern did not occupy any rent free area, so at that particular time the Assessing Officer was legally bound to ask for complete information that business premises was occupied by assessee itself or by some other person---Having complete knowledge of the ground floor premises, mere presumption that the business premises was self occupied was of no consequence, besides it referred to a fact that the dispute regarding the ground floor area was completely within the knowledge of the Assessing Officer during the assessment year 1995-1996 and thereafter, no new information had come into the possession of the Assessing Officer whereas S.65(2) of the Income Tax Ordinance, 1979 provided that an assessment could be re-opened only when definite information comes to possession of the Assessing Officer---Information, in the present case, was not a definite information said to have come into possession of the income tax officer---Definite information on the basis of which assessments had been re-opened did not come into the possession of the Department during the assessment proceedings for 2000-2001 as it was available at that moment when original assessments were framed under S.62 of the Income Tax Ordinance, 1979---When for the first time during the assessment proceedings under S.62 of the Income Tax Ordinance, 1979 the Department collected information about the said portion of the building, the assessee at that particular time replied to a query that the sister concern of the assessee did not occupy any rent free area, that was a proper time for legal action for a false statement if any, and to collect evidence so as to arrive at a proper conclusion regarding occupancy of the ground floor area as the Department had information about the actual occupants of the ground floor at that very moment---If representatives of the assessee bluffed the Department, even then that was proper time for action---After expiry of six years when Taxation Officer initially had complete knowledge of the situation but failed to take an appropriate action invoking S.65 of the Income Tax Ordinance, 1979 should be beyond the spirit of S.65 of the Income Tax Ordinance, 1979 as the Department on the basis of Inspectors Report during the assessment year 2000-2001 could not invoke S.65 of the Income Tax Ordinance, 1979---Even if it was a false statement, no case was made out to invoke S.65 of the Income Tax Ordinance, 1979---Such was nothing less than the second opinion different from the finding and conclusion recorded at the time of initial assessment---Miscellaneous applications were allowed and no case appeared to have been made out to invoke S.65 of the Income Tax Ordinance, 1979---Order under S.65 stood annulled by the Appellate Tribunal in circumstances.

Per Chaudhary Nazir Ahmed, Accountant Member, ---[Minority view]

Per Jawaid Masood Tahir Bhatti, Judicial Member agreeing with S. Hassan Imam Judicial Member [Majority view]

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

----S.221---Income Tax Ordinance (XXXI of 1979), Ss.65, 66A, 62, 19(2)(b) & 19(3)---Rectification of mistake---Definite information---Change of opinion---Rent free tenancy---Information of---During the assessment proceedings under the assessment year 1996-1997 it was established that rent was never declared for the ground floor and taxpayer's contention was that this information was not a definite information for the purpose of assessing and reopening of the case under S.65 of the Income Tax Ordinance, 1979---Department might have presumed that the ground floor was occupied by the taxpayer---Rent of the ground floor was not declared in the Annual Letting Value and taxpayer's contention that it was possible to correct the mistake of law under S.66-A of the Income Tax Ordinance, 1979 but no action under S.65 of the Income Tax Ordinance, 1979 could be taken, was correct---During assessment proceedings of assessment year 1995-1996 a letter was submitted to the effect that the sister concern did not occupy any rent-free area but during that time no information in this regard was sought by the Taxation Officer from the taxpayer---Having complete knowledge of the ground floor premises, mere presumption that the business premises was self-occupied, was of no consequence, besides it referred to a fact that the dispute regarding the ground floor area was complete within the knowledge of the Assessing Officer during the assessment year 1995-1996 and thereafter which established the fact that there was no new information in possession of the Assessing Officer to reopen the case under S.65 of the Income Tax Ordinance, 1979---Miscellaneous applications were allowed and orders of both the officers below were annulled by the Appellate Tribunal.

Kashif Mumtaz for Appellant.

Mushtaq Hussain Qazi, D.R. for Respondent.

Date of hearing: 23rd June, 2007.

2012 P T D (Trib.) 1572

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N., Zaidi Accountant Member

Messrs TAWA DEVELOPMENT INC., KARACHI

Versus

DEPUTY COMMISSIONER OF INLAND REVENUE, KARACHI

I.T.A. No.756/KB of 2011, decided on 9th August , 2011.

Income Tax Ordinance (XLIX of 2001)---

----S.122(1)(5)---Customs Tariff, First Schedule, Chapter 88---Double Taxation Agreement between Islamic Republic of Pakistan and Government of Canada, Art.XII, Cl.4(a)---Amendment of assessment---Lease of Air Crafts---Dry lease charges---Royalty---Dry lease charges were treated as royalty by treating "Air Crafts" as commercial equipments---Taxpayer contended that lease charges or rental received by non-resident airlines was not taxable in Pakistan as it was taxed in their home country because they did not have any permanent establishment in Pakistan; that department had initiated proceedings in the assessment year 1994-1995 with the intention of treating lease rental as royalty for use of industrial, commercial or scientific equipment; that payment of lease rental could not be equated with royalty; that department in order to resolve the disputed issue had entered into an agreement with non-resident airlines that 4% of lease rental will be attributed as taxable receipts in Pakistan on which Income Tax at the prevailing rate on corporate cases will be applied and this was also accepted by all the non-resident airlines in Pakistan as a agreement; and that assessment for the year 1994-1995 till the tax year 2008 had been finalized on the said agreement basis---Validity---Aircraft was a collection of various components joined together and placed in a single basket for efficient operation and capable of independent use and can be described as a flying machine with wings of fixed or variable sweep angle---Aircraft was a machine capable of flight or flying and not an equipment---Aircraft had been defined and assessed as, "machine in normal flying order" in Pakistan Customs Tariff, and excludes therefrom equipment other than permanent fitted items of equipments being part of machine---For the purpose of assessment for levy of Customs duty under Customs Act, 1969, aircraft had been treated as a machine in normal flying order and not as equipment---Aircraft was an independent machine and as it was neither an industrial nor commercial equipment within the meaning of Para 4(a) of Art. XII of Double Taxation Agreement with Canada or any other country---Lease charges paid to non-resident could not be treated for the purpose of levy of tax as royalty---Tax levied by the Taxation Officer by invoking Art. XII of the Double Taxation Agreement was not applicable---No justification was available for tax levied which was deleted and orders of both the officers below were annulled by the Appellate Tribunal---Non-resident taxpayer having no permanent establishment in Pakistan, the lease charges were not taxable in Pakistan---Income tax on lease charges having been paid to non-resident by lessee in Pakistan, to this extent, income of non-resident lessor was taxable in Pakistan---Department for such reason, had correctly worked out a basis for levy of tax in Pakistan for the purpose of computing income for tax on tax basis and on such income, Income Tax @ 35% was correctly levied and paid in Pakistan---Non-resident lessor had correctly computed the tax liability which was accordingly restored---Payment of royalty was totally different and did not include lease charges paid to non-resident lessor of aircraft, the provision of Art. XII of Double Taxation Agreement with Canada was not applicable---Both the orders passed by the two officer were annulled by the Appellate Tribunal and Taxation Officer was directed to accept the Income and Tax liability as per Income Tax Return filed for the Tax Year 2009.

CIT v. Kirloskar Oil Engines (1998) 230 ITR 88 (Bom.) rel.

???????????

I.T.As.? Nos. 1232? of? 1237/KB? of? 1998-99;? High? Court? Sindh? in I.T.Cs. Nos.127 to 132 of 2005; Black's? Law? Dictionary,? Sixth? Edition;? Words and Phrases. Volume 4A;? Corpus? Juris? Secundum (Volume 30 Page 755); Muhammad Fayyaz v. Central Excise Authorities 1989 CLC 1642 and Chambers Science and Technology Dictionary ref.

???????????

Iqbal Salman Pasha and Nadeem Ahmed Dawoodi for Appellants.

???????????

Abdul Hameed Memon, D.R. for Respondent.

???????????

Date of hearing: 9th August, 2011.

2012 P T D (Trib.) 1593

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs KARACHI INSTITUTE OF INFORMATION TECHNOLOGY (PVT.) LTD., KARACHI

Versus

A.C.I.R., AUDIT-II, R.T.O., KARACHI

M.As. (A.G.) Nos.215/KB, 216/KB and I.T.As. Nos.316/KB to 319/KB of 2011, decided on 12th August, 2011.

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

----Ss. 122(5A), 122(9), 120, 113, 29, 39 & 57(1)---Amendment of assessment---Issuance of various show cause notices, investigative in nature seeking information on various points---Legality---Repeated show cause notices were issued---Initially, notices were issued based on suspicion, seeking information, examination of books of accounts, wavering/dithering from one point of view to other---Suspicion started for tax year 2007 from difference in the figures of capital, unreliability of the figures of brought forward losses and non-payment/short payment of tax---Opening para of show cause notice for tax year 2006 had mentioned that taxpayer had filed original return showing loss of Rs.7,396,894 with tax payable at Rs.41,007 under S.113 of the Income Tax Ordinance, 2001, but afterwards a revised return was filed declaring an income of Rs.5,838,241 and after setting off brought forward losses had declared taxable income at NIL however, amended order under S.122(5A) of the Income Tax Ordinance, 2001, had been passed taking the figures of loss of Rs.7,396,894 as per original return---Similarly, for tax year 2005 two letters issued were investigative in nature seeking information on various points---Assessing Officer in the letter had asked the sources of income from (i) financial assistance from Pakistani living abroad (ii) sale of scrap (iii) exchange gain (iv) prior year liability written back (v) profit on short term investment were non-recurring and casual in nature and did not have any relation with the regular business of running an educational institution; and income from such sources was assessable under S.39 of the Income Tax Ordinance, 2001 as "income from other sources" but when reply was submitted by the taxpayer, another notice under S.122(9) of the Income Tax Ordinance, 2001 was issued, seeking further information/detail supporting evidence regarding mode of receipt, terms and conditions of qarz-e-hasna, evidence of scrap sales---Regarding claim of bad debts the taxpayer was asked to provide necessary evidence to the effect that the conditions as laid down in S.29 of the Income Tax Ordinance, 2001 had been fulfilled before writing off the amount---Taxpayer was also asked to state the nature of prior year's liability written back along with documentary evidence---Nature of notices was investigative, seeking detail/documents from taxpayer---Notice for tax year 2004, was issued seeking clarification regarding the nature of receipts declared from financial assistance , sale of scrap, exchange gain and prior year's liability written back; it was also stated by the Taxation Officer that receipts from these sources were non-recurring and casual in nature having no relation with regular business of running an educational institution; and income from such sources was assessable under S.39 of the Income Tax Ordinance, 2001 as "income from other sources", since, the principal business activity was running an educational institution in the field of computer and information technology, the brought forward business for the previous years could not be adjusted against the income from other sources in view of provisions of S.57(1) of the Income Tax Ordinance, 2001 which stated that the business losses shall only be adjustable against the income from business; and taxpayer was called upon to explain their position, quoting relevant provisions of law---Annexure-X was filed with the return, tax deduction claimed against profit on debt, no profit had been declared in the return; necessary explanation along with evidence was also called for---Taxation Officer, for said reasons, observed that discrepancies in the returns called for taking cognizance of the scenario by way of recourse to S.122(5A) of the Income Tax Ordinance, 2001; and considered that since these discrepancies had rendered the assessments finalized under S.120 of the Income Tax Ordinance, 2001 erroneous, in so far as they were prejudicial to the interest of revenue; and intended to amend the orders---All these notices/letter(s) were clearly of investigative nature calling taxpayer's explanation based on supporting evidence---Such type of investigation tantamount to conjectures and surmises, and was clearly against the law for amending an order under S.122(5A) of the Income Tax Ordinance, 2001.

(b) Income Tax---

----Income from business---Company---Objectives laid down in Memorandum and Articles of Association---Scope---Income earned in consequence of the objectives laid down in Memorandum and Articles of Association was nothing but income from business.

1967 PTD 242 and 1967 PTD 286 rel.

(c) Income Tax---

----Adventure in the nature of trade---Company---Even a single transaction entered into by a company which was in accordance with its laid down objectives, constitute an adventure in the nature of trade.

1967 PTD 242 rel.

(d) Income Tax---

----Dividend income---Company---Business income---Dividends income was held as income from business and not from other sources, because such income had been earned in accordance with the company's Memorandum and Articles of Association indicating company's objectives as investment in stocks, shares etc.

1967 PTD 286 rel.

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

----Ss.56 & 122(5A)---Set off of losses---Educational institution---Financial assistance or qarz-e-hasana---Business income---Receipt disclosed as financial assistance or qarz-e-hasana from overseas Pakistani was rightly declared by the taxpayer as income from business and had correctly set off brought forward business losses, there-against---Rejection of taxpayer's contention that "even brought forward unabsorbed depreciation losses which were included in the total amount of brought forward losses; and that taxpayer had duly filed such break up before Taxation Officer as well as First Appellate Authority, could be set off against income from other sources", was held to be of no legal effect.

2003 PTD (Trib.) 1464; 1996 PTD (Trib.) 292; 2006 PTD (Trib.) 1248; 2008 PTD (Trib.) 1040 and (1964) 51 ITR 693 rel.

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

----S.122(5A)---Amendment of assessment---Fishing inquiries---Issuance of repeated notices---Validity---Appellate Tribunal annulled the amended order passed under S.122(5A) of the Income Tax Ordinance, 2001 because the Taxation Officer had issued repeated notices under S.122(9) of the Income Tax Ordinance, 2001 whereby the reasons for taking action under S.122(5A) of the Income Tax Ordinance, 2001 stated in the earlier notice(s)/letter(s) had been totally negated in the subsequent notices(s)/letter(s)---Such type of fishy inquiries were not to be made basis for invocation of S.122(5A) of the Income Tax Ordinance, 2001, as such approach, if allowed, would result in gross misuse of provisions of law and that mere suspicion could not be a basis to invoke S.122(5A) of the Income Tax Ordinance, 2001---Issuance of notices which merely pointed out certain deficiencies in the return while seeking information, explanations and evidence raising apprehensions were invalid and subsequent proceedings/orders/ and the superstructures built thereon will become void and order passed by the Taxation Officer was held to be not sustainable in the eyes of law and was annulled by the Appellate Tribunal.

2010 PTD 111 rel.

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

----S.122 (5A)---Amendment of assessment---Financial institution---Financial assistance or qarz-e-hasana was treated as "income from other sources" instead of business income---Amendment of assessment on the basis of contentious points---Validity---Taxation Officer, after examining the statements of accounts filed with the return, had entered into a futile exercise based on whims and wishful thinking, without studying the legal basis of his actions---Taxation Officer resorted to action under S.122(5A) of the Income Tax Ordinance, 2001 on the basis of contentious points; and wanted to fish out (evolve) some basis to justify his intended action; and failed to take guidance from various judgments of higher judiciary---First Appellate Authority also failed to thoroughly go through the facts and the case-law brought to his notice by the taxpayer and had passed a stereotyped order based on the wisdom of the Taxation Officer---Taxpayer for tax year 2006 had filed a revised return showing income---Although Taxation Officer had mentioned this fact in notice under S.122(9) of the Income Tax Ordinance, 2001 as well as in opening paragraph of amended order, yet he finalized the order determining loss as declared by the tax payer in his original return and First Appellate Authority had affixed stamp of his approval to such a factually mistaken order seen from whatever angle, neither the receipts categorized as "financial assistance" or 'qarz-e-hasana constituted income from other sources nor the taxpayer could be denied the benefit of set off of brought forward business loss against such income---Neither the amended order nor the order of First Appellate Authority could be approved---Notices for intimation of proceedings under S.122(5A) of the Income Tax Ordinance, 2001 for all the years were void ab-initio and of no legal effect---Proceedings initiated on the basis of illegal notices and the superstructure raised thereon was nullity in law---Order of First Appellate Authority was vacated and amended order passed by the Taxation Officer were annulled by the Appellate Tribunal.

2010 PTD 111; 2009 PTD 121; 1967 PTD 242; 1967 PTD 286; 2003 PTD (Trib.) 1464; 1996 PTD (Trib.) 292; 2006 PTD (Trib.) 1248; 2008 PTD (Trib.) 1040 and (1964) 51 ITR 693 rel.

Chaudhry Nazeer Ahmed for Applicant.

Shahid Fawad, D.R. for Respondent.

Date of hearing: 19th July, 2011.

2012 P T D (Trib.) 1628

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

COMMISSIONER OF INLAND REVENUE, LEGAL DIVISION, R.T.O.

versus

Mst. YASMEEN JAWED, KARACHI

M.A. (Rect.) No.298/KB of 2009 in I.T.As. Nos.342/KB and 323/KB of 2010, decided on 10th September, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.221, 132(3) & 111---Rectification of mistake---Miscellaneous application---Appellate Tribunal had upheld the treatment meted out by the First Appellate Authority regarding deletion of additions made under S.111 of the Income Tax Ordinance, 2001 as the additions had been made in violation of the mandatory requirements of provisions of law under S.111(2) of the Income Tax Ordinance, 2001; and assessment framed by the Taxation Officer was annulled---Revenue contended that Appellate Tribunal had exceeded its jurisdiction as neither there was any ground of appeal requesting for annulment of the assessment nor the ground in that regard was framed by the taxpayer---Validity---Subsection (3) of S.132 of the Income Tax Ordinance, 2001 provided that where the appeal related to an assessment order, the Appellate Tribunal may, without prejudice to the powers specified in subsection (2) of S.132 of the Income Tax Ordinance, 2001, pass an order to affirm, modify or annul the assessment order; or remand the case to the Commissioner or the First Appellate Authority for making such enquiry or taking such action as the Appellate Tribunal may direct---Under subsection (4) of S.132 of the Income Tax Ordinance, 2001, Appellate Tribunal shall not increase the amount of any assessment or penalty or decrease the amount of any refund unless the taxpayer had been given a reasonable opportunity of showing cause against such increase or decrease, as the case may be---Deletion of additions had been upheld being made in violation of the mandatory provision of law i.e. S.111(2) of the Income Tax Ordinance, 2001, which could not be sustained in law---Assessment being illegal had rightly been annulled which obviously did not mean that the annulment of the order of the Taxation Officer restrained him from proceeding further from possible additions in relevant tax year as per law and rule keeping in view the provisions of S.111(2) of the Income Tax Ordinance, 2001 after affording reasonable opportunity of being heard to the taxpayer---Revenue did not pointed out any mistake apparent from record---Miscellaneous application filed by the Department was dismissed by the Appellate Tribunal.

2007 PTD (Trib.) 2153 rel.

Asghar Hidayatullah, D.R. for Appellant.

Ejaz Jafri, ITP for Respondent.

Date of hearing: 10th September, 2011.

2012 P T D (Trib.) 1635

[Inland Revenue Appellate Tribunal of Pakistan]

Before Sved Nadeem Saqlain, Judicial Member and Ms. Shahnaz Rafique, Accountant Member

Messrs MILLAT TRACTORS LTD, LAHORE

Versus

ADDITIONAL COLLECTOR OF SALES TAX, LAHORE

S.T.A. No.(237)/LB of 2009, decided on 9th August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 2(46), 3, 6, 7, 11(2)(4), 26, 34 & 36(1)---Value of supply---Sale of generating set---Installation/service charges---Taxation---Taxpayer contended that full sales tax was paid on generating sets which were manufactured by the taxpayer and supplied and other accessories including noise control system, fuel tank, board/manual override system, exhaust system, silencer system radiator etc, and services like installation, commissioning and salt testing were sublet; that payment in that regard was made by the taxpayer to the sublettee to whom assignment of installation was sublet; that entire payment along with tender money was received; that sales tax was paid on receipts received on account of sale of sets for the reason that the taxpayer was manufacturer and the same was taxable supply; that difference of value was due to the fact that there was charges for the services rendered for the installation of the accessories and ancillary equipment; that payment received for installation of generators was not part of the goods sold; .and that the same was not liable to sales tax---Validity---Payment of the charges received on account of installation could not be considered to be part of value of supply or even do not fall within the ambit of definition of "taxable goods "---No dispute existed with regard to the payment of sales tax regarding the actual manufacturer's taxable supply of the taxpayer---Appeal of the taxpayer was accepted and order-in-original was set aside by the Appellate Tribunal.

2005 PTD 2582 rel.

Tariq Najib for Appellant.

M. Numan Malik, D.R. for Respondent.

2012 P T D (Trib.) 1638

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nddeem Saqlain, Chairman and Sohail Afzal, Accountant Member

COCA COLA BEVERAGES PAKISTAN LTD., GUJRANWALA

Versus

COLLECTOR OF SALES TAX, GUJRANWALA

S.T.As. Nos.2124/LB, 2127/LB and 2125/LB of 2009, decided on 8th December, 2011.

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

----S. 4---Zero rating---Export to Afghanistan---Benefit of zero-rating was disallowed on the ground that taxpayer could not made available documents which could enable the revenue to determine that goods were exported to Afghanistan and were entitled to the benefit of zero­rating---Taxpayer contended that entitlement to zero-rating was governed by Export Policy Order, 2005, whereby it was provided that for availing the benefit of zero-rating the exporter holds copy of import clearance documents by Afghan Customs Authorities and that such prescribed documents were provided during the course of hearing and non-allowance of benefit was illegal and unjr4stified---Validity--=Matter was remanded to the adjudicating officer with the directions that he should verify the documents and allow the benefit of zero-rating in case the documents were available and reasonable opportunity of being heard should be allowed to the taxpayer.

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

----Ss. 7, 8(1)(a), 3 & 2(33)---Determination of tax liability---Chilling equipment was purchased constituting deep freezers, refrigerators, visi­coolers etc. and sales tax paid on such acquisition was claimed as input tax deduction---Equipment, after procurement, was placed at various retail outlets, who were the taxpayer's customers, in which goods manufactured were placed and offered for sale to consumers; and title in those goods remained throughout with the taxpayer and equipment appeared in taxpayer's financial statement as owned' assets---Claimwas held to be inadmissible on the ground that placement of chilling equipment constitutedsupply', being a disposition of goods', and it attracted levy of sales tax; and since taxpayer did. not pay sales tax onsupply', it was not entitled to claim deduction of input tax under the law---Validity---Title of chilling equipment remained with the taxpayer and as such it was only a placement of goods at retail outlets without transferring any risks or rewards in the property---Such was not a supply' of goods there being nodisposition of goods' as, for the disposition of goods' to take place, mere transfer of custody was not enough and the same takes place only where the acquirer holds some sort of right to further dispose of the goods at his will/discretion---Retailers did not possess any right to further dispose the chilling equipment and it remained the property of the taxpayer and it was incorrectly treated to be asupply' by the department---Title in chilling. equipment was retained by the taxpayer in absolute terms and since the equipment was not allowed to be used for any other objective, there arose no question of supply' attracting the levy of output tax; and authorities below erred in concluding that there occurred somesupply' in the arrangement---Chilling equipment was not used for any purpose other than for taxable supplies made or to be made by the taxpayer---No event of supply' had occurred attracting the incidence of output tax under S.3 of the Sales Tax Act, 1990---Contention by the Revenue that where no output tax was paid, the input tax was not allowable was grossly misconceived---Revenue in fact was blowing hot and cold in the same breath by resting its case simultaneously on the provisions of Ss.2(33) and 8(1)(a) of the Sales Tax Act, 1990---Revenue, on the one hand, on the basis of provisions of S.2(33) of the Sales Tax Act, 1990, had argued that ataxable supply' took place attracting the charge of tax under S.3 of the Sales Tax Act, 1990 and on the other hand department was disallowing the input tax on the premise that placement of chilling equipment was not for the purposes of taxpayer's taxable activity---Taxpayer's claim of input tax adjustment on chilling equipment was in accordance with law---Orders of the authorities below were vacated on the point and it was held that adjustment should be allowed as per claim of the taxpayer.

S.T.A. No.340/KB of 2009, dated 23-5-2011; 2007 PTD 2391 and 2010 PTD 221.0 rel.

PTCL 2002 CL 115 per incuriam.

GST 2003 CL 512 and S,T.A. No.154/LB of 2007 ref.

(c) Sales Tax Act (VII o `' 1990)---

----S.8(1)(a)---Tax credit not allowed---Chilling equipment--Disallowance of input tax paid on such equipment---Validity---Provisions of law authorized deduction for such input tax that related to goods that contribute directly or indirectly and even remotely towards furtherance of taxable activity---Chilling equipment was being used to chill the beverage products supplied by the taxpayer and any denial of input tax adjustment was not understandable---Connection/nexus of chilling equipment with taxpayer's business was established which was admitted by the adjudication officer in order-in-original wherein it was observed that "taxpayer supplied equipments to their dealers for facilitating the sales and for publicity of their product"---In presence of such clear observation, department could not disallow the related adjustment of input tax---For all intent and purposes the goods were for the purposes of taxable supplies of the taxpayer and were not hit by the mischief of provisions of S.8(1)(a) of the Sales Tax Act, 1990---Expression purpose' had a very wide application and according to dictionary meaning the same referred to what something was supposed to be achieved---Chilling equipment was placed to achieve growth in business and fulfilled the requirement ofpurpose' as used in the relevant provisions of law.

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

----S.8(1)(a)---Tax credit not allowed---Goods lost in fire---Input tax was claimed on goods that were lost in fire---Revenue denied the input tax adjustments on the grounds that these were not eventually consumed in/formed part of taxable supplies---Conclusion drawn by the revenue was contrary to the scheme of law and implied that input tax adjustment was permissible only where the acquired goods had been further supplied; which if accepted would mean that no input tax adjustment was allowable to manufacturers even for goods like machinery that was installed for manufacture of goods and not itself supplied---Such interpretation would entail farcical consequences to which the Appellate Tribunal declined to subscribe.

PTCL 2002 CL 115 per incuriam.

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

----S. 8(1)(a)---Tax credit not allowed---Input tax on vehicles' batteries--Claim of input tax adjustment regarding batteries purchased for use in vehicles engaged in distribution of taxable goods---Disallowance---Validity---Vehicles were used for transportation of goods front manufacturing premises to retail outlets and as such by no stretch of imagination the aspect of `for the purpose of taxable supplies made or to be made' could be doubted---Claim, held, was legitimate and valid under the law.

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

----S. 8(1)(a)---S.R.O. 578(1)/1998---S.R.O. 490(1)/2004---Tax credit not allowed---Input tax on furniture/office equipment/miscellaneous items---Claim for input tax adjustment on items constituting furniture, office equipment and miscellaneous goods was disallowed---Taxpayer contended that input tax was disallowed through S.R.O. 578(1)/1998 and it was otherwise not disallowed or restricted under S.8(1)(a) of the Sales Tax Act, 1990; that with effect from 1-7-2004, such notification was substituted by S.R.O. 490(1)/2004 wherein the negative list did not include disputed items; and that since period in appeal was 2006-2007, the input tax on subject items had been wrongly disallowed---Validity---Departmental action was against the relevant .provisions of law and input tax on the said items was allowable to the taxpayer---No valid or justifiable basis to deny adjustment on these items existed with effect from 1-7-2004 and the same was directed by the Appellate Tribunal to be allowed.

Asim Zulfiqar Ali,. FCA, Shabbar Zaidi FCA and Munawar-us-Islam for Appellants.

M. Tahir, D.R. for Respondent.

2012 P T D (Trib.) 1732

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member and Sohail Afzal, Accountant Member

ISLAMABAD STEEL FURNACE, GUJRANWALA

versus

C.I.R., R.T.O., GUJRANWALA

I.T.A. No.749/LB of 2012, decided on 28th June, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161, 205 & 153(7)(h)(i)---Failure to pay tax collected or deducted---Prescribed person---Status of taxpayer---Annual turnover of the taxpayer exceeded Rs.50(M)---Association of Persons having turnover of Fifty Million rupees or above in tax year 2007 and onward fell in the definition of "prescribed person"; and taxpayer being a withholding agent was obliged to deduct tax and deposit into government exchequer which it failed to do so---Default for non-deduction of tax having been established taxpayer was treated as "taxpayer in default" for non-deduction of tax; and tax was charged under Ss.161/205 of the Income Tax Ordinance, 2001---Taxpayer contended that order passed under Ss.161/205 of the Income Tax Ordinance, 2001 was illegal as the status of the taxpayer was that of individual and not of "Association of Persons" as return available on record was filed in the status of individual and 100% shares of capital investment was shown in the return; that status in the return for the next year was indicated due to compulsion of electronic filing owing to technical reason of delay caused by the PRAL authorities regarding change in constitution and particulars of status in spite of application for which taxpayer could not be blamed to that effect; that copies of returns filed manually were produced showing status of individual as an evidence; and that copies of returns were e-filed having status of individual, dissolution deed, affidavits as well as disassociating partner who was working separately, intimation to Commissioner Inland Revenue regarding cancellation of Association of Persons and National Tax Number---Revenue contended that status of taxpayer was of Association of Persons and taxpayer changed his stance before First Appellate Authority as well as before Appellate Tribunal; and if Association of Persons was dissolved then intimation under S.117 of the Income Tax Ordinance, 2001 was mandatory within fifteen days of its dissolution and taxpayer being an Association of Persons was a prescribed person who was required to deduct tax---Taxpayer further contended that Intimation regarding closure of business under S.117 of the Income Tax Ordinance, 2001 was not necessary because said section pertained to discontinuation of business where the taxpayer's business was never discontinued rather change took place in status of taxpayer so the provisions of S.117 of the Income Tax Ordinance, 2001 were not applicable that despite such facts, the intimation was duly sent to concerned authorities for cancellation of Association of Persons' National Tax Number; and that provisions of S.153(7)(h) of the Income Tax Ordinance, 2001 were not attracted because the status was an individual not Association of Persons whereas S.153(7)(i) was inserted through Finance Act, 2010 which was applicable to individual relevant for tax year 2011---Validity---Main dispute was the determination of status of taxpayer either of individual or Association of Persons---Documents produced showed that returns filed were of that of individual and not of an Association of Persons---National Tax Number on the return manually filed as well as e-filed was entirely different with that of the one shown in orders of First Appellate Authority and Inland Revenue Officer---Contentions raised by the taxpayer carried much weight to establish his status being of an "individual"---Lower authorities had not applied their judicious mind rather they proceeded to pass an ex parte order under Ss.161/205 of the Income Tax Ordinance, 2001 in arbitrary, whimsical, and technical manner and completely brushed aside the material/evidence provided by the taxpayer for determining the status---Taxpayer was declared as an individual who was not obliged to deduct tax under S.153(7)(h) or (i) of the Income Tax Ordinance, 2001---Order of First Appellate Authority was vacated and the order passed under Ss.161/205 of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal.

Shoaib Ahmad Sh. for Appellant.

Mrs. Fouzia Fakhar, D.R. for Respondent.

Date of hearing: 28th June, 2012.

2012 P T D (Trib.) 1736

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan Judicial Member and Muhammad Zahir-ud-Din Accountant Member

C.I.R., R.T.O., FAISALABAD

versus

Messrs UMER ABDULLAH TEXTILES, FAISALABAD

S.T.A. No.226/LB of 2010, decided on 21st May, 2012.

Sales Tax Act (VII of 1990)---

----Ss.2(37), 2(14), 4, 7, 8, 8A, 10, 11(2), 21, 22, 26, 34, 36(1) & 73---Tax fraud---Refund issued was held to be recoverable on the ground that invoices were issued by the supplier who was subsequently blacklisted---First Appellate Authority observed that "order for blacklisting ceased to have any legal effect and was no longer in the field and could not be pressed into service for disallowing the input on the invoices issued by the supplier ; and invoices issued by the supplier on the basis of which refund was issued could not be assailed; and taxpayer had produced the relevant record and documentary evidence to established that the refund claim was otherwise admissible and in order"---Revenue contended that once the supplier was blacklisted then all the invoices issued in the past were liable to be rejected and recoveries made thereon from the registered persons to whom such supplies had been made---Taxpayer contended that status of supplier had already been restored by the Appellate Tribunal as active and blacklisting orders had been vacated; and also produced a copy of Audit report wherein name of supplier was recommended to be deleted from hit list of registered person where taxpayer was found abnormal---Departmental appeal having no force, order of First Appellate Authority was upheld by the Appellate Tribunal.

Sajjad Tasleem DR for Appellant.

Khubaib Ahmad for Respondent.

Date of hearing: 18th May, 2012.

2012 P T D (Trib.) 1739

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson and Sohail Afzal, Accountant Member

DEPILEX (PVT.) LIMITED, D.H.A., LAHORE

versus

ACIR, R.T.O.-II, LAHORE

I.T.As. Nos.1673/LB and 1674/LB of 2011, decided on 25th May, 2012.

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

----Ss. 122(5A), 120 & 210---Amendment of assessment---Discrepancies noticed were: that advertisement expenses needed to be amortized; that no lease assets had been declared but lease rentals were claimed and that commercialization fee paid to Development Authority was claimed as a revenue expense---Order passed under S.120(1) of the Income Tax Ordinance, 2001 was considered by the Additional Commissioner Inland Revenue to be erroneous and also prejudicial---Notice under S.122(9) read with S.122(5A) of the Income Tax Ordinance, 2001 was issued and proceeded to amend the already completed assessment by making certain additions towards the original assessed net loss---Taxpayer contended that for attracting provisions of S.122(5A) of the Income Tax Ordinance, 2001, it was the Commissioner who had to consider that the assessment order was erroneous in so far as it was prejudicial to the interest of revenue; that he intended to amend the assessment order but in no way such exercise had to be executed by the Additional Commissioner Inland Revenue; that after doing so, the Commissioner may delegate his power in writing, under S.210(1) of the Income Tax Ordinance, 2001, to any officer of Inland Revenue subordinate to the Commissioner, all or any of the powers or functions conferred upon or assigned to the Commissioner under the Income Tax Ordinance, 2001; and that as Additional Commissioner Inland Revenue and not the Commissioner had considered that the assessment order passed under S.120 of the Income Tax Ordinance, 2001 was erroneous and was also prejudicial to the interest of revenue and issued the show cause notice under S.122(9) read with S.122(5A) of the Income Tax Ordinance, 2001, such act of the Additional Commissioner Inland Revenue was not sustainable in law---Validity---Section 122(5A) of the Income Tax Ordinance, 2001 envisaged that Commissioner was under legal obligation to consider and apply his conscious mind that the assessment order passed under S.120 of the Income Tax Ordinance, 2001 was erroneous and that was also prejudicial to the interest of revenue---After having considered so, the next step was that the Commissioner may, by an order in writing, delegate his powers to the Additional Commissioner Inland Revenue, under S.210(1) of the Income Tax Ordinance, 2001, to amend the already completed assessment---Before the powers under S.122(5A) of the Income Tax Ordinance, 2001 was exercised or delegated, the Commissioner must be satisfied on the materials on record that the order being erroneous had caused prejudice to the interest of revenue or likely to cause such a prejudice---Power under S.122(5A) of the Income Tax Ordinance, 2001 fully vest with the Commissioner of Inland Revenue on the basis of his personal examination and consideration of the facts of the case by himself---Powers of Additional Commissioner Inland Revenue to invoke the provisions of S.122(5A) of the Income Tax Ordinance, 2001 were wholly, solely and exclusively revolve around the objective consideration made by the Commissioner---Proceedings to be initiated under S.122(5A) of the Income Tax Ordinance, 2001 were revisional in its character and revisional jurisdiction could not be exercised by the same person let alone by a subordinate authorities---Where a statute directed that certain acts shall be done by a specified person, their performance by any other person was impliedly prohibited---Any authority vested with the powers or discretion was duty bound to exercise the same by himself by applying his independent mind and not influenced by extraneous consideration---Evidently, Commissioner had not applied his independent consideration at any point of proceedings in order to hold that the original order was erroneous and prejudicial to the interest of revenue---Initiation of proceedings by the Additional Commissioner Inland Revenue in terms of S.122(5A) of the Income Tax Ordinance, 2001 were ab-initio illegal void.

2011 PTD (Trib.) 705; 2005 PTD (Trib.) 344; 2007 PTD (Trib.) 1226; 2009 SCMR 1279; 2001 PTD 1467 (Lah. H.C.) and 1997 SCMR 641 rel.

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

----Ss. 122(5A)(2) & 120 ---Amendment of assessment ---Limitation---Tax year 2005---Taxpayer contended that before amendment of subsection (2) of S.122(5A) of the Ordinance through Finance Act, 2009, limitation to amend the order passed under S.120 of the Income Tax Ordinance, 2001 was to expire on 31-12-2010 as the return for tax year 2005 was furnished and was taken to be the assessment order on 31-12-2005 whereas the completed assessment was amended by the Additional Commissioner Inland Revenue on 24-6-2011; and that as the limitation to amend the order passed under S.120 of the Income Tax Ordinance, 2001 for tax year 2005 had expired on 31-12-2010, the order passed by the Additional Commissioner Inland Revenue under S.122(5A) of the Income Tax Ordinance, 2001 was hit by limitation and was not tenable in law---Validity---Fist Appellate Authority reckoned the date of passing the order under S.122(5A) of the Income Tax Ordinance, 2001 from the date of issuance of show-cause notice which was dated 18-2-2010 and it was ridiculous to reckon the period of limitation from the date of issuance of show cause notice because that merely indicated the intention of the authority as to whether to proceed against the taxpayer or not and nothing more for the simple reason that if the reply furnished by the taxpayer was convincing, then the proceedings would be dropped otherwise the proceedings would take its course---First Appellate Authority had misread and misconceived the law of limitation---Period of limitation always run from the date of passing the order and not from the date of issuance of show cause notice because that only required explanation from the taxpayer---Even otherwise S.122(2) of the Income Tax Ordinance, 2001 provided that the assessment order shall only be amended under subsection (1) of S.122 of the Income Tax Ordinance, 2001 within the period of five years after the Commissioner had issued or was treated as having issued the assessment order on the taxpayer---If the period of limitation was to be reckoned in view of subsection (2) of S.122 of the Income Tax Ordinance, 2001, then the limitation to amend the order passed by the Commissioner under S.120 of the Income Tax Ordinance, 2001 expired on 31-12-2010; and order was amended by the Additional Commissioner Inland Revenue on 24-6-2011 by inviting the provisions of S.122(5A) of the Income Tax Ordinance, 2001---Amending order was patently hit by period of limitation---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 by the Additional Commissioner Inland Revenue for tax year 2005 was barred by time and was not sustainable in the eye of law.

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

----Ss. 122(5A) & 120 ---Amendment of assessment---Reasons for amendment of assessment were that advertising expenses needed to be amortized, no proof had been provided for expenses claimed in charity and donation and lease rental were claimed in absence of leased assets---Taxpayer contended that all three reasons advanced for invocation of S.122(5A) of the Income Tax Ordinance, 2001 were only tantamount to roving and fishing inquiry; that none of the reasons was definite and conclusive in its character on the basis of which the already completed assessment could be amended; that all reasons were debatable and arguable, the provisions of S.122(5A) of the Income Tax Ordinance, 2001 were unwarranted and uncalled for; and that simultaneous existence of the two conditions for invocation of S.122(5A) of the Income Tax Ordinance, 2001 were precedent and on the basis of said reasons, the order passed under S.122(5A) of the Income Tax Ordinance, 2001 could at best be held to be prejudicial to the interest of revenue but the element of erroneousness in law or fact was missing---Validity---Additional Commissioner Inland Revenue had indulged in fishing inquiries to find out some material against the taxpayer in order to invoke the provisions of S.122(5A) of the Income Tax Ordinance, 2001---For exercising revisional jurisdiction under S.122(5A) of the Income Tax Ordinance, 2001, the reasons should be definite and supportive of evidence and those should not be based on conjectures and surmises---Section 122(5A) of the Income Tax Ordinance, 2001 spelt out that the proceedings could not be initiated on gossips or rumors ---Reasons advanced were neither positive nor concrete, the truth was yet to be established and the entire edifice had been built on vague and fanciful assumptions---Additional Commissioner Inland Revenue had misdirected himself in inviting the provisions of S.122(5A) of the Income Tax Ordinance, 2001---For invoking the provisions of S.122(5A) of the Income Tax Ordinance, 2001, the two conditions were laid down thereunder, first one was that the order to be amended should be erroneous in law or fact and the second was that the same should also be prejudicial to the interest of revenue, should co-exist---Original order passed by the Commissioner may be prejudicial to the interest of revenue but the other limb of S.122(5A) of the Income Tax Ordinance, 2001 "erroneous in law or fact" was missing in the present case---Consolidated order passed by the Additional Commissioner Inland Revenue for tax years 2005 and 2006, dated 24-6-2011 was held to have been passed without lawful authority and was annulled/cancelled by the Appellate Tribunal---Order of First Appellate Authority was vacated and order originally passed by the Commissioner was restored.

Shoaib Ahmad Sheikh and Zulfeqar Khan for Appellant.

Yasir Pirzada, D.R. for Respondent.

Date of hearing: 25th May, 2012.

2012 P T D (Trib.) 1749

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

C.I.R., R.T.O., FAISALABAD

versus

Messrs KAY AND EMMS (PVT.) LTD., FAISALABAD

S.T.A. No.28/LB of 2011, decided on 21st May, 2012.

Sales Tax Act (VII of 1990)---

----S.21---Sales Tax Rules 2006, R.12(5)---De-registration, blacklisting and suspension of registration---Taxpayer was charged for receiving refund against invoices issued by suspended/black listed units---First Appellate Authority observed that "R.12(5) of the Sales Tax Rules, 2006 required that the invoices issued by a person whose registration was suspended shall not be entertained for the purposes of refund or input tax claim; and once such person was blacklisted the refund or input tax credit whether prior or after such blacklisting shall be rejected through a self-speaking appealable order and after hearing the person; thus, a self speaking appealable order had to be passed through which refund or input tax credit claimed shall be rejected and such order will be appealable order; and in the present case this rule was not applicable because in this case the demand had been created after issuance of refund ; and where the refund was issued R.12(5) of the Sales Tax Rules, 2006 will not come in to play as this was not meant for recovery of tax that had been refunded to the taxpayer"---Department was unable to find any fault with the findings of First Appellate Authority which did not appear to be suffering from any factual or legal infirmity---Order of the First Appellate Authority was confirmed by the Appellate Tribunal.

Mrs. Humaira Maryam, D.R. for Applicant.

Khubaib Ahmad for Respondent.

Date of hearing: 2nd April, 2012.

2012 P T D (Trib.) 1750

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member and M.B. Tahir, Accountant Member

MUHAMMAD IRSHAD CHEEMA

versus

C.I.R., R.T.O., GUJRANWALA

I.T.A. No.143/LB of 2012, decided on 12th April, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(1), 122(5)(i), 111(1)(b), 120, 115(4), 114 & 68---Amendment of assessment---Unexplained income or assets---Tax year 2005---Cash gift---Purchase of house---Statement of final taxation under S.115(4) of the Income Tax Ordinance, 2001 was filed declaring brokerage commission upon which tax was paid as final discharge of tax liability---Information was received by the department that taxpayer had purchased a house---Taxpayer, in the wealth statement as on 30-06-2004, declared a cash gift from wife---Assessing Officer observed that no evidence regarding the availability of fund was furnished by the taxpayer and found that taxpayer had made investment in purchase of property out of unexplained investment which was liable to be included under S.111(1)(b) as "income from other sources"---Show cause notice was issued to amend the assessment under S.122(1) read with S.122(5)(i) of the Income Tax Ordinance, 2001---Taxpayer explained that property was purchased out of past savings and cash gift from wife who was also a taxpayer---Explanation was accepted to the extent of past savings whereas the cash gift from wife was rejected; and assessment for tax year 2006 was amended under S.122(1) of the Income Tax Ordinance, 2001 and an addition was made under S.111(1)(b) of the Income Tax Ordinance, 2001---Taxpayer contended that Assessing Officer was not justified to treat the statement filed under S.115(4) of the Income Tax Ordinance, 2001 as deemed assessment under S.120 of the Income Tax Ordinance, 2001; that Assessing Officer had unjustifiably and illegally invoked the provisions of S.122(1) of the Income Tax Ordinance, 2001 as no deemed or any other assessment order was in field which could be further amended by resorting to the provisions of S.122 of the Income Tax Ordinance, 2001; that statutory notices in terms of Ss.68 and 111 of the Income Tax Ordinance, 2001 were not issued; that assessment completed was not maintainable in the eye of law; that there was sufficient sources to invest in purchase of property; and authorities below had erred in law to reject the gift received from the wife, who was also a taxpayer; and that even otherwise Assessing Officer had no jurisdiction to reject the cash gift received by the taxpayer falling in the period relevant to tax year 2004 as the same was time barred---Validity---Taxpayer was not under legal obligation to file a return of income under S.114(4) of the Income Tax Ordinance, 2001 and was only required to file statement under S.115(4) of the Income Tax Ordinance, 2001 which was merely a declaration of final taxation---Taxation Officer treated the statement as deemed order under S.120 of the Income Tax Ordinance, 2001 and amended the same under S.122 of the Income Tax Ordinance, 2001 whereas provision of S.122 of the Income Tax Ordinance, 2001 revealed that the statement filed under S.115(4) of the Income Tax Ordinance, 2001 was out of scope of S.122 of the Income Tax Ordinance, 2001---Assessing Officer had illegally and unjustifiably discarded the cash gift received by the husband from wife who was also a taxpayer---Cash gift received by the taxpayer from his wife was mentioned in the wealth statement filed for the period ended on 30-6-2004, which could not be discarded by the Assessing Officer as the same was barred by time---No justification was available to reject the cash gift received by the taxpayer from his wife---Taxpayer duly furnished wealth statement as on 30-6-2000 along with reconciliation statement as well as affidavit of his wife regarding cash gift---Submission of these documents was duly mentioned by the Assessing Officer in his order---Cash gift from wife was a valid gift for the purposes of taxation---Order passed under S.122(1) of the Income Tax Ordinance, 2001 for tax year 2006 was not maintainable in the eye of law which was annulled by the Appellate Tribunal---Order of First Appellate Authority was vacated and appeal filed by the taxpayer was accepted.

2008 PTD (Trib.) 19 rel.

Shoaib Ahmad Sh., for Appellant.

Mrs. Samia Ijaz, D.R. for Respondent.

Date of hearing: 12th April, 2012.

2012 P T D (Trib.) 1775

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Asad Ali Jan, Accountant Member

C.I.R., L.T.U., ISLAMABAD

versus

Messrs HASEEB ESTATE BUILDERS, ISLAMABAD

I.T.A. No.845/IB of 2011, decided on 27th June, 2012.

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

----Ss.111(1)(a), 122(5)(9) & 120---Unexplained income or assets---Definite information---Fishing inquiries---Bank credit transactions---Addition was made by treating the credit transaction appearing in three accounts---First Appellate Authority deleted the addition---Department contended that First Appellate Authority was not justified to admit the new evidence in terms of S.128(5) of the Income Tax Ordinance, 2001; and First Appellate Authority had not given any cogent reasons for vacating the order---Validity---Officer had taken easy approach just by making total of entries and added the amount without proving exact nexus of sale transaction---Main difference between information and definite one was that in case of definite information officer had not to probe---Taxation Officer did not need fishing inquiries that too from the taxpayer---Addition without concrete evidence of proving nexus with business receipts neither play any positive role in economy nor add into government exchequer---Result was flight of capital from country---Assessing Officer was groping/probing in the dark and fishing through issuing notices again and again and made open ended assessment by making fishing enquiries---Legal flaw in the assessment was clear and unequivocal---Assessee had explained all the deposits and so called discrepancies in its accounts to the satisfaction of First Appellate Authority against which no mentionable arguments had been advanced---Assessment was not in strict compliance of the provision and procedure provided in law---Order passed by the First Appellate Authority was not open to any exception---Deletion was unexceptional and the departmental appeal was considered of no merit by the Appellate Tribunal.

1997 SCMR 1256 = 1997 PTD 1485; 2003 PTD 1885; 1986 PTD 37; (1989) 59 Tax 112 (H.C. Lah)(sic); 1997 PTD (Trib.) 2037; (1941) 9 ITR; I.T.A. No.1210/LB/2006 and 2008 PTD (Trib.) 491 rel.

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

----S.111(1)(a)---Unexplained income or assets---Bank credit transactions---Addition---Action of Officer of Inland Revenue to make total of credit transactions as suppressed receipt on presumptive basis without any corroborative evidence---Such addition was rightly deleted by the First Appellate Authority.

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

----S.111(1)(a)---Unexplained income or assets---Addition---Burden of proof---In case of suppressed receipt, heavy burden lie upon the tax officer to point out specific facts of transaction i.e. from whom and in what connection it was received, whether it was a sale proceed.

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

----Ss.122(5) & 111(1)(a)---Amendment of assessment---Fishing enquiries were not allowed while exercising the jurisdiction under S.122(5) of the Income Tax Ordinance, 2001---Taxpayer was not to be put under fear that he had to remember scenario of each and every entry at the end of year, rather he had to work freely and concentrate upon his projects to earn money---If he will earn something, he will pay to government exchequer---Attitude of tax department to show the muscle neither serve the public exchequer nor the economy of the country.

I.T.A. No.1210/LB/2006 and 2008 PTD (Trib.) 491 rel

Tahir Khan, D.R. for Applicant.

Muhammad Hafeez, ITP for Respondent.

Date of hearing: 27th June, 2012.

2012 P T D (Trib.) 1783

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member and Qurban Ali, Accountant Member

TELENOR PAKISTAN (PRIVATE) LIMITED

versus

COMMISSIONER INLAND REVENUE, L.T.U., ISLAMABAD

I.T.A. No.321/IB of 2011, decided on 19th June, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.21(g), 20 & 122(5A)---Contract Act (IX of 1872), Preamble---Deductions not allowed---Contractual obligations---Late payment charges---Expenses claimed on account of late payment charges was disallowed and added back on the ground that contractual obligations were being discharged under the Contract Act, 1872 and violation of the contract, entered into between the parties, was violation of the Contract Act and late payment charges were paid for that contravention and expenses on account of late payment charges was in contravention of S.21(g) of the Income Tax Ordinance, 2001 being fine paid for violation of law of land i.e. Contract Act, 1872---Taxpayer contended that S.20 of the Income Tax Ordinance, 2001 stipulated that a person may be allowed a deduction for any expenditure incurred wholly and exclusively for the purpose of business unless specifically disallowed by the Income Tax Ordinance, 2001; that provisions of S.21 of the Income Tax Ordinance, 2001 envisaged disallowance of fine or penalties in violation of any law, rule or regulation; and that late payment charges were not in respect of violation any law, rule or regulation and such like expenditure was a common feature of contracts---Validity---Clause of contract providing interest on the delayed payment was one of the terms and conditions of the contract between two parties; and said clause was neither a provision of any statute/law, rule or regulation; and provisions of Cl.(g) of S.21 of the Income Tax Ordinance, 2001 disallowed a deduction for any fine or penalty paid or payable by the person for violation of any law, rule or regulation---Clause (g) of S.21 of the Income Tax Ordinance, 2001 clearly provided that the fine or penalty paid or payable by the person was for violation of any law, rule or regulation---Clause of a contract between the parties was neither law, rule or regulation---Three expressions "law", "rule" or "regulations" imply codified provisions, may it be a primary legislation by the legislature or a subordinate one by other authorities to whom legislature had delegated its power to make rules or regulations---Contract Act, 1872 had not been correctly construed by the forums below for the same regulated the relationship between a promiser and a promisee, envisaging certain conditions for execution of the contract---Contractual rights and liabilities were justiceable when the relationship came into being in accordance with the provisions of the Contract Act---No doubt it was not a statute/law providing specific penalties including fine in case of non compliance of the contractual obligations, party in default had to perform his part of contract which might be got enforced in terms of actual performance or if the same was not possible, by compensation appropriate in each case---Violation of the terms of a contract, as executed in line with the provisions of the Contract Act was not a violation of any law, rule or regulation---Late payment charges paid by the taxpayer did not fall within mischief of Cl.(g) of S.21 of the Income Tax Ordinance, 2001 and could not be disallowed---Appeal of the taxpayer was accepted by the Appellate Tribunal.

Sui Southern Gas Company Ltd. v. CIT Companies-V Karachi 2000 PTD 3741 rel.

Rashid Ibrahim, FCA and Mirza Taqiuddin, Ahmad, A.R. for Appellants

Muhammad Tahir Khan, D.R. for Respondent.

Date of hearing: 24th April, 2012.

2012 P T D (Trib.) 1889

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Asad Ali Jan, Accountant Member

C.I.R. (LEGAL DIVISION) R.T.O., RAWALPINDI

Versus

Messrs TARIQ MEHMOOD

M.A. (R) 112/IB of 2011, decided on 28th May, 2012.

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

----S.221---Rectification of mistake---Scope---During the rectification proceedings no new facts .could be entertained---Any issue which need verification, investigation or perusal of facts from record other than the record of Appellate Tribunal, like the examination of previous year record of department, verification of letters, dispatch/diary register etc. could not become subject matter for rectification.

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

----Ss.221, 121 & 111(1)(b)---Rectification of mistake---Second miscellaneous application---Finding of facts---Department contended that Appellate Tribunal was final pedestal in determination of fact finding; and what was true and actually on ground that must be determined as fact---Taxpayer contended that it was for the department to produce record in support of its version; that failure to produce record at the time of decision of appeal and first rectification application by the department had resulted into a finding which may be wrong but correct as per record available at that time, had attained finality; that second rectification application had not to change the fate of appeal; which it could only by one way that the department if preferred to go to High Court and another opportunity would have been granted for the production of evidence/record; that decision when not challenged attained the finality and equally enforceable; and that rectification could only be sought for error floating on the surface of record or in the order---Validity---At the relevant time of decision by the Appellate Tribunal, neither office note was produced by the department nor there was any mistake in the order as per evidence produced at that time---Appellate Tribunal or court had to afford equal opportunity to either of the parties to prove their version, if one of the party failed at his turn, it could not he afforded opportunity time and again through miscellaneous application for rectification---Proper remedy was to assail the order before High Court and if opportunity was granted to produce evidence which could not be produced due to any reason, then case was to be reopened in original appellate jurisdic­tion for deciding the appeal---Scope of rectification being very limited, the order could be rectified if there was any error on the face of order at the time of passing the same---At the time of passing of order, the footnote produced now, was not produced by the department which lacuna could not be cured in rectification application---Proper remedy before High Court had not been availed---Rectification should not be made in cases where reappraisal of facts or readjudication of the issue in dispute was involved---No mistake in the order as per available evidence at the time of decision was found Miscellaneous application for "rectification" was out of scope of "rectification" and was dismissed by the Appellate Tribunal.

1992 SCMR 687 = 1992 PTD 570; 2002 PTD 306; 2007 PTD 967 (S.C. Pak.); 2008 SCMR 204 = 2008 PTD 253 and CIR v. National Food Laboratories 1992 SCMR 763 rel.

Hafiz Muhammad Idrees ASC for Applicant.

Ziaullah Khan, D.R. for Respondent.

Date of hearing: 28th May, 2012.

2012 P T D (Trib.) 1897

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zaheer-ud-Din, Accountant Member

Messrs HAQ BAHOO SUGAR MILLS (PVT.) LTD., LAHORE and others

Versus

C.I.R. (APPEALS-II) R.T.O., LAHORE and others

S.T.As. Nos.229/LB, 228/LB, 202/LB and 591/LB of 2011, decided on 15th February,2012.

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

----Ss.2(37) & 8A---Tax fraud---Use of fake and flying invoices---Non-confrontation of specific allegations of tax fraud---Validity---Ingredients" of tax fraud i.e. "knowledge, dishonesty and fraud" was not specifically confronted---When negligence, as envisaged under S.8A of the Sales Tax Act, 1990 was not confronted, the taxpayer could not be absolved from the serious allegation on the basis of technicalities---Admitted fact of using fake invoices was sufficient to shift burden of proof on the taxpayer---Plea about practice of using flying invoices should not help the taxpayer---Though, tax was paid in National Exchequer against fake and flying invoices, even then same was prohibited under the law and its consequence was inadmissibility of adjusted input tax in addition to other penal consequences---Despite absence of specific allegations in terms of S.2(37) of the Sales Tax Act, 1990, there was sufficient material on record to shift burden of proof on the taxpayer.

(b) Sales Tax---

----Precondition of any adjudicating proceedings was to confront the taxpayer with specific allegations on the basis of available material---Mere mentioning of section of law in show cause notice was not sufficient.

(c) Sales Tax--

----Amount received as defaulted tax on threat of prosecution could not be termed an admission by the taxpayer.

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

----S.8A---Joint and several liability of registered persons in supply chain .where tax unpaid---Status of supplier on website of Federal Board of Revenue---Scope---Registered person receiving taxable' supplies from another registered person should be careful about genuineness of the supplier, beyond apparent indicator like status of the supplier on website of Federal Board of Revenue---Prudent businessman receiving supplies from another registered person had to keep in mind the reputation of the supplier in market and was also required to ascertain about his physical existence as registered person making bona fide business transactions, after taking such precautions, registered person could absolve himself from the statutory obligation under S.8A of the Sales Tax Act, 1990 and could prove that he had no reasonable suspicion about non-deposit of tax in national exchequer.

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

----S.8A---Joint and several liability of registered persons in supply chain where tax unpaid---To fix responsibility under S.8A of the Sales Tax Act, 1990, department had to ascertain facts, through investigative audit or otherwise, as initial proof of registered person's negligence---Such proof or contravention was required to be confronted through show cause notice.

(f) Sales Tax---

----Admission by the gang of fraudsters before the Director General of investigation and Intelligent would attain finality only after their conviction as a consequence of criminal trial.

(g) Sales Tax---

----Depositing a portion of evaded tax by the taxpayer could not be construed as admission of the taxpayer because the same was ostensibly under threat of criminal prosecution and arrest---Such mode of recovery by the department, without recourse to relevant provisions of Sales Tax Act, 1990, could only be termed as extortion.

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

----S.2(37)---Tax fraud---Department could not establish that the invoices issued by the gang of fraudsters were used knowingly and dishonestly---Answer to question "whether possibility of taxpayer being defrauded by the fraudsters' gang was ruled out completely ", was given in negative by the Department---No material was available on record that department had endeavored to consider said aspect of the matter---Principle of law that no innocent person should be penalized, was totally ignored---Adjudication made in slipshod manner, based merely on the fact that invoices issued by fraudsters gang were used by the taxpayer' and evaded tax was partially paid, could not be endorsed---Order passed by the authorities below were vacated and cases were remanded to adjudicating officers to re-adjudicate the matter.

Messrs Mi-Tech v. CIR S.T.A. No.104/LB/2011 rel.

(i) Sales Tax---

----Tax fraud---Use of flying invoices---Burden of proof---Available material was sufficient to shift burden of proof on the taxpayer---Taxpayer should be obliged to prove their innocence through evidence and in discharging the burden, the taxpayer might produce the evidence about transportation of supplies but if, the taxpayers pleaded to have used flying invoices, they will face the legal consequences as per applicable law.

Hashim Butt for Appellant.

Sajjad Tasleem, D.R. RTO along with Nayyar Shafiq, Deputy Director Intelligence and Imran Hayee Khan, Dy. CIR for Respondents.

Date of hearing: 15th February, 2012.

2012 P T D (Trib.) 1909

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member and Sohail Afzal, Accountant Member

Messrs CHISTIA SUGAR MILLS LTD., SARGODHA

Versus

COLLECTOR (ADJUDICATION) SALES TAX, R.T.O., FAISALABAD

S.T.A. No.1580/LB of 2009, decided on 16th June, 2011.

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

----Ss.3(1A) & 2(25)---Further tax---Levy of---Taxpayer contended that all the supplies were made to the registered person; that registered person meant a person, who was registered or was liable to be registered; that through an amendment a proviso was added to the definition whereby it had been added that a person was liable to be registered but was not actually registered shall remain liable to further tax as the person to whom the supply was made was a registered person and would not be liable to pay "further tax"; and that any further tax even if due should be recovered from the person who received/purchased supplies and said tax could not be recovered from the seller i.e. the taxpayer---Validity---Bare reading of the section itself makes it abundantly clear that "further tax" could only be charged and paid if it was established that taxable supply was made to an "unregistered person "---Order of the Adjudicating Officer did not show that any efforts were made to find out as if the taxable supplies were made by the wholesalers to such person who were not registered or who fell in the exceptions of the proviso to S. 3(1A) of the Act---Both the lower forum had presupposed without there being any material on record that all the retailers to whom taxable supplies were made by the wholesalers were unregistered persons-Appellate Tribunal, in circumstances, accepted the appeal of the registered person and set aside the orders of both the authorities below as well as vacated the show cause notice.

Messrs Tanveer Weaving Mills v. Deputy Collector of Sales Tax and others 2009 PTD 762; 2009 PTD (Trib.) 785; Messrs Meraj Din v. Collector Customs Lahore 2009 PTD 2004 and 2009 PTD 578 ref.

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

----S. 36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Taxpayer contended that order-in-original was void, illegal and ab initio being issued in violation of S.36(3) of the Sales Tax Act, 1990 as show cause notice had to be decided within 90 days or within a period of maximum 180 days if an extension had been granted by the Federal Board of Revenue-Validity-Order-in-original was passed after the mandatory period of 180 days and was illegal, void ab initio and could not be sustained in the eye of law---Appeals was accepted on such point alone without going into any other issue.

2009 PTD 762; 2009 PTD 1978 and 2008 PTD 578 ref.

Messrs Super Asia Muhammad Din and Sons v. Collector 2008 PTD 60 rel.

Ijaz Ahmed Awan, Nouman Mushtaq Awan and Azeem Abbas Kazmi for Appellant.

Farrukh Majeed, D.R. for Respondent.

Date of hearing: 16th March, 2011.

2012 P T D (Trib.)1936

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member and Qurban Ali, Accountant Member

Maj. Gen. (R) Dr. C.M. ANWAR

Versus

COMMISSIONER INLAND REVENUE, R.T.O., RAWALPINDI

I.T.A. No.431/IB of 2011, decided on 1st August, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(9) & 177(4)---General Clauses Act (X of 1897), S.6(c)---Amendment of assessment---Limitation---Tax year, 2004---Return was filed as on 29-9-2004---Notice under S.122(9) of the Income Tax Ordinance, 2001 was issued on 13-5-2010---Taxpayer contended that assessment stood made on the date of filing of return (29th September, 2004) and as per law prevailing at that point of time, amended assessment could only be made within five years i.e. up to 29th September, 2009 and that amendment made in subsection (2) of 5.122 of the Income Tax Ordinance, 2001 by Finance Act, 2009, whereby limitation was extended up to the expiry of five years from the end of the financial year in which the Commissioner had issued the assessment order to the taxpayer would not be applicable---Taxation Officer had held that amendment was applicable retrospectively, it did not bring about change in any substantial provision as said change had not increased tax liabilities, the tax had not been charged in respect of the tax years barred by limitation and that the amendment had been made in procedural/machinery provision within period of limitation---Validity---Right of amendment of assessment of the case up to 29th September, 2009 had accrued to the taxpayer consequent upon filing of return/deemed assessment on 29-9-2004 as per the law then prevailing---Department could complete the amendment up to 29th September, 2009 only---Proceedings for amendment of assessment under S.122 of the Income Tax Ordinance, 2001 were initiated on 13th May, 2010 by issuance of notice under S.122(9) of the Income Tax Ordinance, 2001 i.e. after lapse of limitation period and as such proceedings could not be said to be even pending on the promulgation of Finance Act, 2009 i.e. on 1-7-2009---Amendment of assessment was barred by time and void ab-initio.

Zakaria H.A. Sattar Bilwani v. IACWT/Range-II, Karachi, decided on 1-7-2002 rel.

Abdul Basit, FCA and Hafiz Muhammad Idrees for Appellant.

Zia-Ullah Khan, D.R. for Respondent.

Date of hearing: 13th June, 2012.

2012 P T D (Trib.) 1942

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member and Qurban All, Accountant Member

COMMISSIONER INLAND REVENUE, ISLAMABAD and others

Versus

Messrs PAKISTAN TELECOMMUNICATION COMPANY LIMITED, ISLAMABAD and others

I.T.As. Nos.442/IB and 463/IB of 2010, decided on 31st July, 2012.

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

----Ss.24(11), 21(c), 20, 12, 122(5A), 127(6) & 120---Companies Ordinance (XL VII of 1984), S.234 (3)---International Accounting Standard No.19, Paragraphs 133 & 137---Intangibles---Voluntary Separation Scheme---Expenses incurred on such scheme were treated as intangible asset---Taxpayer contended that such expenses fell within the definition of salary as contained in S.12 of the Income Tax Ordinance, 2001 and by no means may be treated as an intangible asset as contained in S.24(11) of the Income Tax Ordinance, 2001; that such expenditure had been incurred exclusively for the purpose of business and was allowable deduction from income under S.20 of the Income Tax Ordinance, 2001 in a single go; that the benefit of such expenditure was not available to the taxpayer company over a period of more than one year; that the salary expense could only be disallowed under S.21(c) or (m) of the Income Tax Ordinance, 2001 as not deductible; that treatment of such expenditure as intangible was based on mere presumption and that the Accounting Standards and tax laws were in complete agreement with each on the treatment of such expenditure---Department contended that such expenditure fell within the definition of intangible for the reason that the benefit of such expenditure shall extend to the company over a period of more than one year; and that the taxpayer itself stated that the benefits of Voluntary Separation Scheme shall accrue to it in the years to come, then there remained no ambiguity with regard to the fact that the benefit of Voluntary Separation Scheme expenditure shall extend to the taxpayer for a period of more than one year---Validity---Expenses under Voluntary Separation Scheme was included in the amounts, received by employee on termination of employment whether voluntary or under an agreement including any compensation under golden hand shake scheme, payments fell within the definition of the term salary, as contained in S.12(2)(e)(iii) of the Income Tax Ordinance, 2001 and such salary expense was an allowable deduction and could be disallowed only if it was hit by mischief of S.21 of the Income Tax Ordinance, 2001 viz for non-deduction of tax therefrom or its payment specified threshold---All payments made under Voluntary Separation Scheme could not be disallowed by re-characterizing it by any other title---Section 12 of the Income Tax Ordinance, 2001 exclusively dealt with salary and in its definition a compensation given at the time of termination of services was included which could not be subjected to the application of any other provision of the Income Tax Ordinance, 2001---Definition of term intangible containing certain intellectual properties named therein had to be pinpointed to justify Voluntary Separation Scheme the expense for inclusion in the term intangible for the purposes of amortization---Attempt for dragging the expense incurred in the Voluntary Separation Scheme into amortization would be a farfetched interpretation of law which could not be accepted---Forums below were not justified in treating the Voluntary Separation Scheme expense to be an intangible under S.24 of the Income Tax Ordinance, 2001---Appeal of the taxpayer was accepted and that ,of department rejected.

Messrs Zarai Taraqiati Bank Ltd., Islamabad v. CIR, LT.U., Islamabad vide order dated 9-6-2000 I.T.A. No.788/LB/2010 rel.

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

---S.24(11)---Intangibles---Expenses on Voluntary Separation Scheme---Expression "and any expenditure that provides the advantage or benefit for a period of more than one year"---Connotation---Section 24(11) of the Income Tax Ordinance, 2001 enumerated certain types of incorporeal property/intellectual property, which was followed by the expression "and any expenditure that provides the advantage or benefit for a period of more than one year" - Forums below focused on the second aspect of the definition i.e. "and any expenditure" and concluded that expense of Voluntary Separation Scheme was intangible---Conclusion was misplaced for the reason that the expression "and any expenditure" was to be read in conjunction or in the light of the first part of the definition of intangible---Legislature after having given a' delineation of certain intellectual properties used the expression "and any expenditure "---Said expression was to be interpreted or coloured in the light of enumeration of the incorporeal properties which precede; in other words, the expenditure incurred for the purchase of any of the kind of the property mentioned in the first part and had a useful life of more than one year was to be treated as intangible and the expression "and any expenditure" was not an independent part of the definition and could not be segregated from the enumeration mentioned in S.24(11) of the Income Tax Ordinance, 2001---Expenditure incurred by taxpayer in running his business may have the benefit or an advantage over a period of more than one year but it could not be said to be an intangible if it did not qualify the quality or character of an intellectual property.

Muhammad Tahir Khan, D.R. for Appellants (in I.T.A. No.442/IB of 2010).

Khalid Mehmood, FCA for Respondents (in I.T.A. No.442/IB of 2010).

Khalid Mehmood, FCA for Appellants (I.T.A. No.463/IB of 2010).

Muhammad Tahir Khan, D.R. for Respondents (in I.T.A. No.463/IB of 2010).

Date of hearing: 1st June, 2012.

2012 P T D (Trib.) 1950

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson and Sohail Afzal, Accountant Member

Messrs ADAM SUGAR MILLS LTD., BAHAWALNAGAR

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND FEDERAL EXCISE, MULTAN and others

F.E. No.24/LB of 2009, decided on 23rd May, 2012.

Central Excise Act (I of 1944)---

----Ss. 3, 9 & 18---Central Excise Rules, 1944, Rr.197, 201 & 210---Evasion of Central Excise duty---Raiding the factory premises without obtaining search warrant---Authorities on receiving information that registered person was involved in the evasion of central excise duty and other taxes, constituted a raiding party, which raided the factory premises of registered person and party searched and seized record without obtaining search warrant under S.18 of Central Excise Act, 1944---Registered person was charged with violation of Ss.3 & 9 of Central Excise Act, 1944 read with R.210 of Central Excise Rules, 1944 and was issued show-cause notice---No search warrant as required under S.18 of the Central Excise Act, 1944, was obtained by the raiding authorities---Section 165, Cr.P.C., dispensed with said condition subject to preparation of statements of grounds of belief, which was also missing in the case---Section 163 of Customs Act, 1969 and S.40-A of the Sales Act, 1990 contained similar mandatory requirements for carrying out the search without search warrant---All said provisions of law were mandatory and the requirements contained therein, were not fulfilled and complied with in the case---If the raid was declared illegal, the documents and things recovered in such action would not be used against registered person---As no search warrant was obtained as required under S.18 of the Central Excise Act, 1944, purported visit or access by the raiding party, was illegal, without lawful authority; and issuance of show-cause notice and subsequent proceedings, including impugned orders were also void ab initio and illegal, in circumstances.

Collector of Sales Tax and others v. Messrs Food Consultant (Pvt.) Ltd., and Messrs Diplex Beauty Clinic and others 2007 PTD 2356; Collector of Customs Lahore and another v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Pvt.) Ltd., 2005 PTD (SC) 1933; Chairman CBR and others v. Haq Cotton Mills (Pvt.) Ltd., 2007 PTD (SC) 1351; Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan through Ministry of Finance Islamabad and 4 others 2003 PTD 2037; Messrs Food Consultants (Pvt.) Ltd., Lahore and others v. Collector (Central Excise and Sales Tax) Lahore and 2 others 2004 PTD 1731; "N.P. Water Proof Textile Mills (Pvt.) Ltd., through Director Karachi v. Federation of Pakistan through Secretary Revenue Division/Chairman Central Board of Revenue Islamabad and another 2004 PTD 2952; Messrs Zakeria Enterprises v. Muhammad Musharfa and 7 others 2005 PTD 1200 and A.R.K. Textile through Proprietor v. Federation of Pakistan through Ministry of Finance Islamabad and 4 others 2006 PTD 494 ref.

Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd.'s 2003 PTD 2037; Messrs Food Consultants (Pvt.) Ltd.'s case 2004 PTD 1731 and 2007 PTD 2356 rel.

Malik Muhammad Arshad for Appellant.

Yasir Pirzada, D.R. for Respondents.

Date of hearing: 4th May, 2012.

2012 P T D (Trib.) 1958

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member and Tabbana Sajjad Naseer, Accountant Member

LUQMAN KHALID

Versus

C.I.R., R.T.O., GUJRANWALA

I.T.As. Nos.882/LB and 883/LB of 2012, decided on 24th July, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161, 153(1)(a), 153(7)(h)(i), 205 & 117---Failure to pay tax collected or deducted---Tax year 2009-"Prescribed person "---Status of taxpayer---Association of Persons or Individual---Taxpayer was treated as taxpayer in default for non-deduction of tax under S.153 of the Income Tax Ordinance, 2001 on the ground that annual turnover of the taxpayer for the tax year 2009 exceeded Rs.50(M) and through Finance Amendment Act, 2008, Association of Persons having turnover of Fifty million rupees or above in tax year 2007 and onward fell in the definition of "Prescribed Person "; and taxpayer being a withholding agent was obliged to deduct income tax on raw material purchased and deposit same' into government exchequer as required under S.153(1)(a) of the Income Tax Ordinance, 2001---Taxpayer contended that return for tax year 2009 available on record had been filed in the status of individual and the returns of tax years 2009 and 2010 was also signed by the taxpayer as sole proprietor and was shown as owner of 100% shares of capital investment in the return and provisions of S.153(7)(h) of the Income Tax Ordinance, 2001, did not apply for tax year 2009 as well as tax year 2010, and the status in the returns for tax years 2009 and 2010 as Association of Persons was indicated due to compulsion of e -filing owing to technical reason of delay caused by the PRAL authorities regarding change in constitution and particulars of status in spite of application for which the taxpayer could not be blamed---Department contended that status of taxpayer was of AOP and before First Appellate Authority as well as the Appellate Tribunal, taxpayer changed his stance; that if the Association of Persons was dissolved then the intimation under 5.117 of the Income Tax Ordinance, 2001, was mandatory within fifteen days of its dissolution and that taxpayer being an Association of Persons was a prescribed person who was required to deduct tax under S.153(7)(h) of the Income Tax Ordinance, 2001---Validity---Returns along with other connected documents showed that the returns filed by the taxpayer for tax years 2009 and 2010 were of individual and not an Association of Persons---National Tax Number of return manually as well as e -filed was entirely different---Taxpayer used the status of Association of Persons for e -filing of return due to his compulsion because the department did not incorporate the status of individual in e-portal system till tax year 2010---Intimation regarding closure of business under S.117 of the Income Tax Ordinance, 2001, was not necessary because said section pertained to discontinuation of business whereas, in the case of taxpayer the business was never discontinued rather change took place in the constitution of business/status of taxpayer so the provisions of S.117 of the Income Tax Ordinance, 2001 were not applicable to the taxpayer---Provisions of S.153(7)(h) of the Income Tax Ordinance, 2001 were not attracted because taxpayer was an individual and not Association of Persons, whereas S.153(7)(i) of the Income Tax Ordinance, 2001 was inserted through Finance Act, 2010, which was applicable to individuals relevant for tax year 2011---Authorities below had not applied their judicious mind rather they proceeded to pass ex parte orders under Ss.161/205 of the Income Tax Ordinance, 2001, in arbitrary, whimsical and technical manner by completely brushing aside the material/evidence provided by the taxpayer for determining his status-Taxpayer was declared as "an individual" who was not obliged to deduct tax under S.153(7)(h) or (i) of the Income Tax Ordinance, 2001 for tax year 2009---Order of First Appellate Authority was vacated and orders passed under Ss.161/205 of the Income Tax Ordinance, 2001 by the Assessing authority were annulled by the Appellate Tribunal.

Shoaib Ahmed Sh. for Appellant.

Mrs. Fouzia Fakhar, D.R. for Respondent.

Date of hearing: 24th July, 2012.

2012 P T D (Trib.) 1976

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zaheer-ud-Din, Accountant Member

Messrs DAEWOO PAKISTAN MOTORWAY SERVICE LTD., LAHORE

Versus

C.I.R., ZONE-II, LAHORE

I.T.A. No.1026/LB of 2012, decided on 19th July, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.140, 137, 138 & 139---General Clauses Act (X of 1897), S.24-A---Recovery of tax from perso"s holding money on behalf of taxpayer---Recovery of demand through attachment of Bank accounts without any notice---Department was asked "whether recovery could be made without issuance of notice under Ss.138/139 of the Income Tax Ordinance, 2001 "; contention of department was that an action taken under S.140 of the Income Tax Ordinance, 2001 could not be construed as coercive measure because the department had already issued demand notice under S.137 of the Income Tax Ordinance, 2001 which was the notice to taxpayer against the action under S.140 of the Income Tax Ordinance, 2001---Validity---Practice of making recovery under S.140 of the Income Tax Ordinance, 2001 without issuance of notice could not be supported by any stretch of interpretation of the provisions of Income Tax Ordinance, 2001---Section 24-A of General Clauses Act, 1897 needed to be read as part of every Federal statute, its subsection (2) obliged an authority with a duty to give reasons and inform the person likely to effect prejudicially---Maxim; 'audi alteram partem' should be read as part of every statute---Attaching account under S.140 of the Income Tax Ordinance, 2001 was indeed a coercive measure when the Department recovered an amount from the bank of a taxpayer without his consent/permission---Department was restrained from taking any action under 5.140 of the Income Tax Ordinance, 2001 i.e. from recovering amount after attachment of account without prior notice till the decision of First Appellate Authority.

Abdul Hafeez, ITP for Appellant. Jamshed Fakhri, D.R. for Respondent. Date of hearing: 19th July, 2012.

2012 P T D (Trib.) 1978

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Abdul Rauf, Accountant Member

SHAN SHAHID

Versus

C.I.R., AUDIT DIVISION-II, R.T.O., LAHORE

I.T.A. No.1586/LB of 2010, decided on 22nd November, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111(1)(b), 122(9) & 177---Unexplained income or assets---Addition---Tax year 2007---Taxpayer contended that addition had been made in wrong tax year i.e. tax year 2007 while the addition could only be made in the tax year 2008 as the notice under S.122(9) of the Income Tax Ordinance, 2001 was issued as on 16-3-2009; and before making addition, the tax payer was also not confronted by way of issuance of notice under S.111(1)(b) of the Income Tax Ordinance, 2001---Validity---Addition was made under 5.111 of the Income Tax Ordinance, 2001 in the tax year 2007 on the basis of information, against which notice under S.122(9) of the Income Tax Ordinance, 2001 was issued to the taxpayer on 16-3-2009, which fell in the financial year 2009---Addition under S.111(1) of the Income Tax Ordinance, 2001, if any, was required to be made in tax year 2008 being immediately preceding the financial year in which it was discovered---Addition under S.111 of the Income Tax Ordinance, 2001 having been made in the tax year 2007, not being the immediately preceding tax year of the year of discovery, was not in accordance with law and merited deletion---Orders passed by both the authorities below were vacated by the Appellate Tribunal and appeal was accepted by way of deletion of addition made under S.111(1)(b) of the Income Tax Ordinance, 2001.

I.T.As. Nos. 756 and 757/LB/2009 dated 2009 rel.

Waseem Ahmad Chaudhry for Appellant.

Miss Samia Ijaz, D.R. for Respondent.

Date of hearing: 4th October, 2011.

2012 P T D (Trib.) 1981

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Asad All Jan, Accountant Member

Messrs BGP (PAKISTAN) INTERNATIONAL, ISLAMABAD

Versus

C.I.R., L.T.U., ISLAMABAD

I.T.As. Nos.957/IB, 958/IB; 515/IB, 150/IB and 151/IB of 2012, decided on 13th March, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.22 (5) (b), 23, 32, 34 & 169(2)(a)---Depreciation and initial allowance---Presumptive tax regime---Observation of Taxation Officer that "company was assessed to tax under presumptive tax regime during tax years 2003, 2004 and 2005 and it was required to deduct the amount of depreciation and initial allowance allowed during the said tax years from opening written down value for tax year 2006, resulting in reduced allowance of depreciation in subsequent tax years" was confirmed by the First Appellate Authority---Taxpayer contended that reducing depreciation and initial allowance from written down value, pertaining to period of presumptive tax regime, was not lawful and written down value at the beginning of a tax year was determined by reducing the cost by the amount of depreciation and initial allowance allowed during previous tax years in the normal tax resume; that in the present case, no depreciation was allowed during tax years 2003, 2004 and 2005 and there was no room for intendment, in the absence of any express provision of law to the contrary; and depreciation and initial allowance was allowed under the provisions of Income Tax Ordinance, 2001 on `actually allowed basis' and not under 'deemed allowed' basis---Validity---Under presumptive tax regime, a fixed amount of tax was paid in Government Exchequer---To furnish the account of income or expense was not necessary---Whatever was spent that stood allowed and it was not to be questioned by the Department---Tax paid under presumptive tax regime had to remain the same---Depreciation remained frozen while other expense did not freeze---Section 169 of the Income Tax Ordinance, 2001 dealing with presumptive tax regime cases provided that no deduction would be allowable which did not mean that depreciation shall remain frozen---No express provision in law existed for freezing of depreciation in the Income Tax Ordinance, 2001---Similarly written down value at the beginning of a tax year was determined by reducing the cost by the amount of depreciation and initial allowance allowed during the previous tax year of course, it was true but the depreciation and other expenses already stood allowed in presumptive tax regime---Presumptive tax regime was a contract inter se State and taxpayer which provid"rl him concession of lower tax rate, saving front audit scrutiny and production of accounts for purposes of amending the assessment---In such contract whatever was spent that stood allowed because there was no concept of enhancing the income---Income under presumptive tax regime was neither to be reduced nor to be enhanced---Expenses in this contract whatever might be stood allowed so these we, not allowed---Depreciation along with other expenses stood allowed and could not be considered as frozen---View of authorities below was based on just and fair treatment which was upheld by the Appellate Tribunal.

1988 PTD 734 distinguished.

Anjum Ata Sheikh, FCA for Applicant. Tahir Khan, D.R. for Respondent.

Date of hearing: 13th March, 2012.

2012 P T D 44

[Islamabad High Court]

Before Iqbal Hameed-ur-Rehman, C J and Muhammad Anwar Khan Kasi, J

FAKHAR-E-ALAM KHAN

Versus

CHAIRMAN, FEDERAL BOARD OF REVENUE, ISLAMABAD and 3 others

Custom Reference No.4 of 2011, heard on 12th October, 2011.

Customs Act (IV of 1969)---

----Ss. 168, 179 & 196---Reference to High Court----Confiscation of goods---Appeals filed by the petitioner/importer against orders of the Adjudicating Authority whereby goods of the petitioner were confiscated, having been allowed with direction to unconditional release of confiscated goods---Director General Intelligence, assailed said order by way of appeal before Customs Appellate Tribunal---Said appeal having been allowed, the petitioner/importer had filed Reference to High Court---Validity---Under S.196 of Customs Act, 1969 only question of law could be raised in the Reference to High Court and question of fact could not be agitated at all in the said proceedings---In the present case as no question of law was involved, Reference was not maintainable---No illegality or irregularity was found in the impugned judgment nor same was contrary to or in violation of any provision of Customs Act, 1969---Goods were rightly confiscated---Reference was answered in the negative.

Collector of Customs, Karachi v. Messrs Ali Enterprises, Karachi 2006 PTD 651 and Collector of Customs, Customs House, Peshawar v. Waheed Gul 2010 PTD 1781 rel.

Syed Ishfaq Hussain Naqvi for Petitioner.

Qazi Ghulam Dastgir for Respondents.

Taqi Mirza, Law Officer.

Date of hearing: 12th October, 2011.

2012 P T D 71

[Islamabad High Court]

Before Riaz Ahmad Khan, J

Messrs BUSINESS IMPEX through Proprietor

Versus

DEPUTY DIRECTOR, CUSTOMS INTELLIGENCE AND INVESTIGATION, ISLAMABAD and 2 others

Writ Petition No.112 of 2011, decided on 24th March, 2011.

Customs Act (IV of 1969)---

----Ss. 168, 179 & 193---Constitution of Pakistan, Art.199---Constitutional petition---Confiscation of goods---Petitioner imported mobile phones from china under Pak-China Free Trade Agreement---Customs Authorities refused to clear said consignment, as some discrepancies in the model/number of phones were detected---Consignment having been confiscated, petitioner filed appeal under S.193 of the Customs Act, 1969, which was accepted with order to release goods on payment of leviable duty and other taxes---Petitioner having paid requisite taxes, goods were ordered to be released---Before the goods could be removed from the Customs Warehouse, petitioner was informed that there was liability of duty and other taxes against the petitioner at Quetta Customs Collectorate and as long as said liability had not been cleared, consignment could not be released---Validity---Liability of the petitioner at Quetta, was pending adjudication before Appellate Tribunal and operation of the order had already been suspended---Petitioner having paid all the taxes and dues regarding the imported goods, at Islamabad release of said goods at Islamabad, could not be refused to him, in circumstances.

Muhammad Naeem Qazi for Petitioner.

Qazi Ghulam Dastgir for Respondent.

2012 P T D 396

[Islamabad High Court]

Before Riaz Ahmad Khan, J

OMV (PAKISTAN) EXPLORATION GmbH, ISLAMABAD

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Islamabad and 2 others

Writ Petitions Nos.2825, 2810, 2826 and 2829 to 2836 of 2011, heard on 1st November, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 131 & 132(2-A)---Constitution of Pakistan, Art.199---Constitutional petition---Disposal of appeal by Appellate Tribunal---Limitation---Rehearing of appeal---Scope---Plea raised by petitioners was that as appellate authority did not decide their appeals within six months, therefore, appeals should be reheard---Validity---Provision of S.132 (2A) of Income Tax Ordinance, 2001, was directory in nature and not mandatory---Purpose of S.132(2A) of Income Tax Ordinance, 2001, was only to secure ordinary transaction of business of Tribunal and it was for guidance of Tribunal as a check upon Tribunal to avoid delay as much as possible---If delay was caused, the same would not render the judgment as nullity in the eye of law---Not the delay itself, which would make a judgment void or illegal, rather it was the prejudice which was caused due to delay which would affect validity of judgment---If no prejudice was caused to any of the parties, then mere delay by itself would not render the judgment as illegal---Writ could not be issued on mere apprehension of the parties---Any direction to authorities pronouncing of judgment within a time frame, as provided in S.132 (2A) of Income Tax Ordinance, 2001, otherwise to rehear the case, would amount to changing the nature of S.132(2A) of Income Tax Ordinance, 2001, from directory to mandatory provision of law---Legislature itself had not provided any penalty for delay, so the same could not be provided by interpretation of law---High Court directed the authorities to decide the case within ten days---Petition was dismissed accordingly.

2007 SCMR 1587; 1996 SCMR 669; PLD 2002 SC 823; 2011 SCMR 408; 2003 CLC 1797; PLD 2009 SC 493; 2005 SCMR 1802 and 2001 SCMR 1053 ref.

Muhammad Akram Sheikh for Petitioners (in Writ Petition No.2810 of 2011)

Makhdoom Ali Khan, Khurram M. Hashmi and Sajid-ur-Rehman Mashwani for Petitioners (in Writ Petitions Nos.2825 to 2835 of 2011).

Abid Aziz Sheikh for Petitioners (in Writ Petition No.2836 of 2011)

Shafi Muhammad Chandio, D.A.-G. for Respondents

Ahmr Bilal Sofi, Ayyaz Shaukat, Usman Kareem for FBR, Muhammad Aaqil Usman, Member Legal FBR, M. Bilal and Babar Bilal for Taxation Officer, Ch. Shaukat (Registrar) and Shahid Mustafa (Assistant Registrar), Representatives of the Appellate Tribunal for Respondents.

Date of hearing: 1st November, 2011.

2012 P T D 976

[Islamabad High Court]

Before Iqbal Hameed ur Rehman, C J and Noor-ul-Haq N. Qureshi, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, ISLAMABAD

versus

Messrs DREAMLAND MOTELS (PVT.) LTD., ISLAMABAD

Tax Appeal No.128 of 2000, decided on 12th December, 2011. (a)

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

----S. 139---Appeal to High Court---Delay, condonation of---Appeal filed on 20-8-1997 against order dated 11-4-1996 alleged to be received by appellant on 24-6-1997---Validity---Appellant after receiving impugned order on 24-6-1997 sat over his own rights and did not file appeal, thus, he was not entitled to claimed relief, for which procedural law did not provide any favour---Office had initially returned appeal for removing objections within three days, but appellant had re filed the same after about 2-1/2 years of expiry of period of limitation---Appellant had mentioned in the appeal that limitation had expired on 22-8-1997, but had not filed application for condonation of delay---Such inordinate delay in filing appeal could not be condoned---High Court dismissed appeal in limine.

Lahore Development Authority v. Muhammad Rashid 1997 SCMR 1224 rel.

(b) Limitation---

----Delay, condonation of---Scope---Such delay could be sought by making an application under relevant provision of law explaining each day of delay plausibly with reason duly supported by an affidavit.

Ayyaz Shaukat for Appellant.

2012PTD992

[Islamabad High Court]

Before Iqbal Hameed-ur-Rehman, C.J. and Noor-u1-Haq'-N. Qureshi, J

COMMISSIONER OF INCOME TAX/ WEALTH TAX, ISLAMABAD

versus

RAMIZ-UL-HAQ

Tax Appeal No.122 of 2000, decided on 12th December, 2011.

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

----S. 27(1)(4)---Appeal to High Court without making application to Tribunal for referring a question of law arising out of its order-=-Validity---Question of refusal of Tribunal or its issuance of notice of refusal to make reference would not arise in absence of such application---Appellant had not adopted legal procedure to enable Tribunal for making reference to High Court---Party failing to adopt proper procedure could not seek any relief from High Court beyond boundaries sketched by law---Appellant himself sat over his rights, thus, was not entitled to claim relief, for which procedural law did not provide any favour---Court dismissed appeal in limine.

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

----S. 27---Appeal to High Court---Delay, condonation of---Appeal filed on 12-2-2000 against order dated 23-10-1999---Validity---Office had returned appeal for removing objections within three days, but appellant had re filed appeal after about twenty days of expiry of limitation period---Appellant in appeal had mentioned that limitation period had expired on 14-2-2000, but had not filed application for its condonation---Such inordinate delay could not be condoned---High Court dismissed appeal in limine.

Lahore Development Authority v. Muhammad Rashid 1997 SCMR 1224 rel.

Haifz Munawar Iqbal for Appellant.

2012 P T D 999

[Islamabad High Court]

Before Shaukat Aziz Siddiqui, J

FIVE STAR BUILDING MATERIALS AND GEN. ORDER SUPPLIERS and another

versus

FEDERATION OF PAKISTAN through Secretary, Islamabad and 6 others

Writ Petition No.1884 of 2007, decided on 13th March, 2012.

Sales Tax Act (VII of 1990)---

----Ss. 11(4), 33, 34, 36(3) & 46---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9(2)(b) & 32---Constitution of Pakistan, Art. 199---Constitutional petition---Evasion of sales tax, charge of---Issuance of show-cause notice---Passing of order-in-original by Additional Collector---Order of Appellate Authority dismissing petitioner's appeal not challenged before Appellate Tribunal---Complaint before Federal Tax Ombudsman---Order of Ombudsman accepting complaint set aside by the President in revision--Validity---Petitioner had a remedy of appeal under S. 46 of Sales Tax Act, 1990 against order of Appellate Authority---Petitioner had adopted course of filing complaint after expiry of period provided for filing such appeal---Ombudsman had no jurisdiction to entertain such complaint' due to specific bar contained in S.9(2)(b) of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Filing of complaint was tainted with mala fide, ulterior motives and result of misrepresentationHigh Court dismissed constitutional petition in circumstances.

PLD 1998 SC 64; 1999 SCMR 2744; 1999 SCMR 2189; PLD 2004 SC 99 and 2006 PTD 181 ref.

Farhat Nawaz Lodhi for Petitioners.

Moulvi Anwar-ul-Haq, Attorney -General of Pakistan for the State.

Nazir Abbassi, Standing Counsel.

Ms. Miraj Tareen for Respondent No.4.

Date of hearing: 16th February, 2012.

2012 P T D 1016

[Islamabad High Court]

Before Muhammad Anwar Khan Kasi and Shaukat Aziz Siddiqui, JJ

Messrs PAKISTAN ORDNANCE FACTORIES (POF) WAH, CANTT.

versus

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE ADJUDICATION), ISLAMABAD and others

S.T.R. No.1 of 2007, decided on 14th March, 2012.

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

----Ss.11 & 36(1)---Order-in-original passed on. 25-2-2004 after issuance of show cause on 4-12-2002---Validity---Provision bringing penal consequences must be invoked or exercised within time prescribed by statute itself---Law required passing of such order within 135 days including extended/grace period---Such order had been passed after 448 days of show-cause notice with inordinate delay of 313 days---Extension of time obtained on 20-11-2003 was patently time barred---Authority had not shown any reasonable justification for such delay---Government departments could not be put at higher pedestal in matter of limitation, rather they would be supposed to act within statutory period---Order was barred by limitation in circumstances.

2007 PTD (Trib.) 840; Adil Poplypropylene Products Ltd. and others v. The Federation of Pakistan through Secretary Finance and others 2000 SCMR 1708; 2008 PTD 2025; 2009 PTD 2004; 2010 PTD 1520; 2011 SCMR 1279 and PLD 1974 SC 134 ref.

PLD 2006 SC 209 = 2006 PTD 769 rel.

(b) Interpretation of statutes---

----Fiscal statute---Provision bringing penal consequences, invocation of---Scope---Such provision must be invoked or exercised within time prescribed by statute itself.

(c) Limitation--

----Treatment of Government departments etc., in matter of limitation--Principles stated.

Government departments cannot be put at higher pedestal when it comes to limitation. The executive functionaries, quasi and non-quasi judicial forums/tribunals are supposed to follow the mandate of law and perform their duties, exercise their jurisdiction and execute their authority within the period provided by law.

Inefficiency, slackness, incompetence and inaction on the part of executive functionaries or persons on the helm of affairs by itself is no ground to ignore the command of law of performing any act within the stipulated period.

The exception of unreasonable delay can be evaded, if statute does not prescribe the time period/limit in which act has to be performed.

Hafiz Muhammad Idrees for Petitioner.

Syed Touqeer Bukhari and Raja Karim Akhtar, Inland Revenue Officer Legal-II for Respondents.

Date of hearing: 23rd February, 2012.

2012 P T D 1136

[Islamabad High Court]

Before Iqbal Hameed ur Rehman, C.J. and Noor-ul-Haq N. Qureshi, J

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, ISLAMABAD

versus

Messrs ISLAMABAD PUBLICATIONS (PVT.) LTD.

Income Tax Appeal No.343 of 2000, dediced on 6th February, 2012.

Income Tax Ordinance (XXXI of 1979)---

----S.136---Appeal to High Court instead of Reference against order of Tribunal filed after promulgation of Finance Ordinance, 2000 which did not provide appeal but Reference to High Court---Maintainability---Impugned order dated 15-6-2000 was communicated to appellant on 31-7-2000, whereagainst he filed appeal on 28-9-2000, whereas Finance Ordinance, 2000 took effect on 1-7-2000, whereby no appeal was provided---Appellant filed appeal when neither Finance Act, 1997 nor Income Tax Ordinance, 1979 was in existence, thus, he was required to file reference provided by Finance Ordinance, 2000---High Court dismissed appeal for being not maintainable.

Mian Rafi-ud-Din and 6 others v. The Chief Settlement and Rehabilitation Commissioner and 2 others PLD 1971 SC 252 ref.

Hafiz Munawar Iqbal for Appellant.

2012 P T D 1209

[Islamabad High Court]

Before Riaz Ahmad Khan, J

Messrs OCEAN PAKISTAN LIMITED, ISLAMABAD. through Chief Executive Officer

versus

FEDERAL BOARD OF REVENUE, through Chairman and 2 others

Writ Petition No. 2958 of 2011, decided on 16th April, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S.122(SA) & (9)---Constitution of Pakistan, Art.199---Constitutional petition---Petroleum Concession Agreement between Government and petitioner containing a clause applying Income Tax Ordinance, 1979 to petitioner/company---Sale of working interest under such agreement by petitioner to a third party---Issuance of show-cause by Authority to petitioner alleging gains received from such sale to be taxable under Income Tax Ordinance, 2001---Validity---Authority having issued impugned notice could decide question as to whether sale of working interest would fall outside such agreement and petitioner would be governed by the Income Tax Ordinance, 2001---Impugned notice was neither without jurisdiction nor coram non judice nor was there any mala fide on part of authority in issuing the same---Petitioner might present his case before Authority---High Court dismissed constitutional petition, in circumstances.

Muhammad Akram Sheikh and Sajid Ijaz Hotiana for Petitioners.

M. Bilal, Babar Bilal and Hafiz Munawar Iqbal for Respondents.

Sardar Zafar, Sajid Ali and Shaukat Mahmood, representatives of Respondents.

Date of hearing: 11th April, 2012.

2012 P T D 1293

[Islamabad High Court]

Before Riaz Ahmad Khan, J

Messrs INDUS RAGS through Proprietor and 3 others

versus

GOVERNMENT OF PAKISTAN through Ministry of Finance, Islamabad and 3 others

Writ Petitions Nos.3412 3336, 2088, 2089 and 2096 of 2009, 1159, 1495, 1588, 1618, 1643, 1661, 1709, 1866, 2030, 2088, 2341, 2401, 2483, 2550, 2804, 2914, 3056, 3182, 3272, 3426 of 2011 and 26, 141, 369, 416, 543, 941, 958 of 2012, decided on 27th April, 2012.

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

----S. 18(C)(1) & (4)---Constitution of Pakistan, Arts. 77 & 199---Pak-China Free Trade Agreement (FTA), dated 24-11-2006---Constitutional petition---Increase in customs duty of goods imported from China falling in Category-V of FTA---Petitioner's plea was that according to FTA, customs duty for such goods had to remain static, which was 25% at time of execution of FTA, but same was increased to 35% illegally---Validity---FTA was neither law of Pakistan nor incorporated in any law nor had effect to alter prevailing law of Pakistan---Treaty would not enjoy status of law, thus, no writ could be issued for enforcement of right arising thereunder---Petitioner was not party to FTA and only parties thereto could agitate violation of rights thereunder, but not a third party---Federal Government had power to increase or decrease preferential rate---Petitioner in case of reduction in rate of duty could file appeal before Customs authorities, thus, writ could not be issued due to availability of such alternate and adequate remedy---High Court dismissed constitutional petition in circumstances.

PLD 1988 SC 670 and PLD 1971 SC 205 ref.

Ms. Shehla Zia and others v. WAPDA PLD 1994 SC 693 and Societe Generale De Surveillance S.A. v. Pakistan through Secretary M/O Finance Revenue Division, Islamabad 2002 SCMR 1694 rel.

(b) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction of High Court---Scope---Treaty not enjoying the status of law, no writ could be issued for enforcement of right arising thereunder.

Safqat Mahmood Chohan, Monem Sultan, Niaz Ullah Khan Niazi, Barrister Umer Riaz, Ch. Muhammad Bashir, Mirza Tazeem Baig and Danish Afzaal for Petitioners.

Dr. Rana M. Shamim, Hafiz Munawar Iqbal, Binyamin Abbasi, Riaz Hussain Azam, Mrs. Naziran Malik, Raja M. Iqbal, and Mojeeb-ur-Rehman Warriach for Respondents.

Javaid Iqbal Butt, Standing Counsel Barrister Yousaf Khosa and Barrister Saad Shoaib Wyne for Respondents (in Writ Petitions Nos.3412, 3336, 2088, 2089 and 2096 of 2009).

2012 P T D 1503

[Islamabad High Court]

Before Riaz Ahmad Khan, J

HAFEEZ IQBAL OIL AND GHEE INDUSTRIES (PVT.) LIMITED and others

Versus

GOVERNMENT OF PAKISTAN through Secretary, M/O Commerce, Islamabad and others

Writ Petitions Nos.51, 224 and 1127 of 2011, decided on 27th April, 2012.

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

----Ss. 37, 219 & Third Sched. Item-VI---Customs Rules, 2001, R.297(2)(a) [as substituted by S.R.O. 1130(I)/2010, dated 13-12-2010]--Constitution of Pakistan, Arts. 18, 18(b), 25 & 199---Constitutional petition---Prime Minister's Rehabilitation Plan and Fiscal Relief Package for industries in Khyber Pakhtunkhwa in areas most affected by terrorist activities---Issuance of S.R.O. 1130(I)/2010 by Federal Board of Revenue (FBR) in pursuance of such Plan and Package exempting ghee industries located in Province of Khyber Pakhtunkhwa except in area of Hattar allowing such industries while exporting ghee/cooking oil to receive back 100% excise duty and taxes paid on import of raw material---Petitioners' plea was that their ghee industries located in Hattar were exporting 80% of total ghee to Afghanistan, while remaining 20% of ghee was being exported by factories of private respondent located in area mentioned in impugned S.R.O.; that under S.219 of Customs Act, 1969, FBR could exempt goods from levy of tax, but could not exempt area; and that exclusion of area of Hattar from benefits provided under impugned S.R.O. was not only violative of petitioners' fundamental rights guaranteed under the Constitution, but had created monopoly of private respondent and made impossible for petitioners to compete with private respondent---Validity---FBR regarding Duty and Tax Remission for Exporters (DTRE) had power under S. 37 of Customs Act, 1969 and under S. 219 thereof could amend rules regarding DTRE---Section 219 of Customs Act, 1969 would be read with S. 37 thereof, which was only about goods and whereunder area could not be excluded---Federal Government could exclude a particular area, but exemption of goods or exclusion of area, if found to be voilative of any of the fundamental rights enshrined in the Constitution, could be struck down---Government would be bound to promulgate regulations in interest of free competition---Law disturbing free competition in market and providing an edge to one person over other would be violative of Art. 18 of the Constitution---Fiscal benefits provided to private respondents through impugned S.R.O., if allowed to continue, would create its monopoly and petitioners would not be in a position to compete with private respondent, which would be violative of Art. 18(b) of the Constitution---FBR had bifurcated areas in impugned S.R.O. without showing any reason therefore---Petitioners and private respondent were similarly placed and engaged in same business, thus, edge provided to private respondent by virtue of impugned S.R.O. would definitely disturb fair competition---Both petitioners and respondents for being engaged in same business were entitled to equal protection of law---Impugned S.R.O. in absence of reasonable classification was violative of Art. 25 of the Constitution, whereunder one could not be given an edge over the other---Impugned fiscal facility could be given by FBR, but not High Court---High Court accepted constitutional petition by observing that FBR, if deemed proper, might extend impugned fiscal benefit to area of Hattar or in alternative such facility should not be provided to any one.

PLD 2005 SC 193; PLD 1990 SC 57; PLD 1990 SC 295; PLD 1997 SC 44 and PLD 1965 SC 527 ref.

2002 SCMR 312; 1999 SCMR 709; PLD 1997 SC 342 and PLD 1997 SC 582 rel.

(b) Constitution of Pakistan---

----Art. 199---Constitutional petition involving factual controversies---Jurisdiction of High Court under Art. 199 of the Constitution---Scope---High Court could not step into such controversies as same would require recording of evidence, which was not possible in exercise of constitutional jurisdiction.

Malik Qamar Afzal for Petitioners (in Writ Petitions Nos. 51 and 224 of 2011).

Issac Ali Qazi for Petitioner (in Writ Petition No.1127 of 2011).

Muhammad Abid Raja, D.A.G. for Respondent No.1.

Rao Abdul Ghaffar, Standing Counsel.

Muhammad Nasir-ud-Din Mahboob and Ms. Farhat Zafar for Respondents Nos. 2 and 3.

Date of hearing: 17th April, 2012.

2012 P T D 1590

[Islamabad High Court]

Before Shaukat Aziz Siddiqui, J

OCEAN PAKISTAN LIMITED through Chief Executive Officer

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Law and Justice and 3 others

Writ Petition No.1703 of 2012, decided on 7th June, 2012.

Income Tax Ordinance (XLIX of 2001)---

---Ss.127 & 130(4)---Constitution of Pakistan, Art. 199, 8, 9, 10-A & 175---Constitutional petition---Maintainability---Notice for recovery of income tax---Company (petitioner) had prayed that Ss.127 and 130(4) of the Income Tax Ordinance, 2001, were ultra vires of Arts.9, 10-A and 175 of the Constitution and were liable to be struck down and declared unconstitutional; that the authorities should be restrained from recovery of tax from the company till the disputed tax liability was conclusively decided by an independent tribunal outside the tax hierarchy, and that the impugned notice should be suspended during the pendency of the present petition and authorities should be restrained from taking any coercive measures against the company---Validity---Company had failed to make out its case on the touchstone of Art. 8 of the Constitution with regard to vires of the Income Tax Ordinance, 2001---Company, by challenging the vires of the said Ordinance after about eleven (11) years of its promulgation had the object to escape from its liability of payment of income tax---High Court in its constitutional jurisdiction could not trammel the proceedings commenced on the mandate of a statute, particularly when the said statute itself provided the remedies to the aggrieved persons---Constitutional petition was dismissed, in circumstances.

Mansoor Usman Awan for Petitioner.

Bilal, (ASC) and Babar Bilal for Respondent No.4.

2012 P T D 130

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

ENGRO VOPAK TERMINAL LTD. through Manager Finance & Corporate Service, Karachi

Versus

PAKISTAN through Secretary Finance, Islamabad and another

C.Ps. Nos.D-1709 of 2008, 785 of 2006, 2490, 2491 of 2007 and 2376 to 2378 of 2008, decided on 27th September, 2011.

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

----Ss. 53, 115(4), 122(5A), 153, 169 & Second Sched., Part-IV, clause (42)---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Finality of tax---Issuance of show cause notice---Normal Tax Regime---Assessee operated as oil/bulk storage terminal, where oil and other similar types of goods were off-loaded from or on-loaded onto ships calling at port---Taxation Officer issued notice under S.122(5A) of Income Tax Ordinance, 2001, on the ground that income constituting payments received by it from operation of its oil terminal was to be brought to tax under Normal Tax Regime (NTR)---Plea raised by assessee was that payments to which it was entitled as a result of operation of its terminal were within the scope of S.153(1)(c) of Income Tax Ordinance, 2001, and thus tax deducted thereon was the final tax by reason of S.153(3) of Income Tax Ordinance, 2001---Validity---Assessee had raised important questions of law of general importance, including the question regarding conflict between S.53 of Income Tax Ordinance, 2001, and a provision contained in Second Schedule to Income Tax Ordinance, 2001---Such questions could arise at any time with reference to any taxpayer, thus constitutional petition could not be dismissed as not maintainable---Various clauses of different parts of Second Schedule to Income Tax Ordinance, 2001, were to apply for indefinite future unless otherwise amended or omitted---No conflict existed in S.53 and clause (42) of Second Sched., Part-IV, to Income Tax Ordinance, 2001, and latter provision was not to be "read down" to avoid any such conflict---Clause (42) of Second Sched., Part-IV, to Income Tax Ordinance, 2001, did not have any application with regard to assessee, therefore, S.153(3) of Income Tax Ordinance, 2001, was applicable and tax deducted on relevant payments was final tax---High Court in exercise of Constitutional jurisdiction, quashed and set aside the show cause notice and order of Income Tax Tribunal, to the extent the same sought to bring to tax payments received by assessee by way of operation of oil terminals by reference to or application of clause (42) of Second Schedule, Part-IV, to Income Tax Ordinance, 2001---Any other income could be brought to tax on any other basis, the show cause notice would be deemed to remain in field and with regard thereto, the assessee was entitled to such remedies as were available to him in accordance with law---Petition was allowed accordingly.

International Power Global Developments Ltd. v. Commissioner Income Tax 2009 PTD 50; Excise and Taxation Officer v. Burmah Shell Storage and Distribution Co. of Pakistan Ltd. and others 1993 SCMR 338; T.A. Industries v. Federation of Pakistan 2008 PTD 1563; Syed Abid Hussain Shah v. Federal Government and others 2008 PTD 1547; Premier Mercantile Services (Pvt.) Ltd. v. Commissioner Income Tax 2007 PTD 2521 and Ayrshire Employer' Mutual Insurance Co. v. IRC (1946) 27 TC 331, (1946) UKHL 3 ref.

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

----Second Schedule, Part-IV---Words and phrases used in clauses of Second Schedule, Part-IV, and sections of Income Tax Ordinance, 2001---Scope---If a word, phrase or term is used in a clause of Part-IV of Second Schedule to Income Tax Ordinance, 2001, and that word, etc. is defined in and/or for the purposes of the section being not applicable by the clause under consideration, then it should have the same meaning in the clause as the section itself, unless the clause itself contains a definition to the contrary---Each clause of Second Schedule, Part-IV of Income Tax Ordinance, 2001, applies to a particular and specified section (or part thereof) and it is specifically and intentionally targeted to not apply to a particular provision.

Dr. Farogh Naseem for Petitioners.

Jawaid Farooqui for Respondent.

Muhammad Ashraf Khan Mughal, D.A.-G.

Sadaqat Khan, Standing Counsel.

Dates of hearing: 22nd November, 2010 9th May and 19th September, 2011.

2012 P T D 302

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

SALEEM RAZA, Proprietor Ghazi and Company, Karachi

Versus

FEDERATION OF PAKISTAN through Chairman, Federal Board of Revenue, Islamabad and 2 others

Constitutional Petition No.D-2486 and Miscellaneous No. 9994 of 2010, decided on 27th September, 2010.

Customs Act (IV of 1969)---

----S. 79(1), proviso [as amended by Finance Act, 2010]---Constitution of Pakistan, Arts.25 & 199---Constitutional petition---Declaration and assessment for home consumption or ware-housing---Petitioner had impugned vires of the amended Proviso to S.79(1) of Customs Act, 1969, which existed in the Act before amendment/ substitution---Unamended Proviso had provided that if before filing a goods declaration, the owner would make a request to the officer of customs, not below the rank of Assistant Collector that he was unable for want of full information, to make a correct and complete declaration of the goods, then such officer could permit the owner to examine the goods; and thereafter make entry of goods for filing a goods declaration---Said proviso had been amended to restrict the option of applying for the first examination to importers of used goods only---Proviso had further provided that the discretion for allowing such action would be with the officer not below the rank of an Additional Collector---Main contention of the petitioner was that such restrictions had violated the provisions of equality as provided under Art.25 of the Constitution, as no rational basis had been given for differentiating between the importers of new goods and used goods---No basis for the amendment had been given, except that amendment was made to restrict the facilities of filing the goods declaration after examining the goods by the importer only in case of used goods---Validity---Held, that amendment, the vires of which had been challenged was discretionary to the extent that it had restricted the option to apply for the first examination to the importers of used goods only and was not sustainable---High Court directed that words "in case of used goods" appearing in the first line of the substituted proviso to clause 'b' of S.79(1) of Customs Act, 1969, be deleted and that the deletion would be deemed to be always there---Order accordingly.

I.A. Sharwani and others v. Government of Pakistan 1991 SCMR 1041 rel.

Saleem Raza and 31 others v. The State PLD 2007 Kar. 139; Saleem Haji Rehmatullah Dada, Karachi v. Commissioner of Income-Tax Companies-V. Karachi 2003 PTD 593 and Akhtar Hussain through Attorney v. Collector of Customs (Appraisement), Customs House, Karachi and 3 others 2003 PTD 2090 ref.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 distinguished.

Junaid Ghaffar for Petitioner.

Zain A. Jatoi for Respondents Nos. 2 and 3.

Rizwan Ali Dodani Standing Counsel for the Federation of Pakistan.

Muhammad Ilyas Ehsan, Appraising Officer.

2012 P T D 377

[Sindh High Court]

Before Faisal Arab and Aqeel Ahmed Abbasi, JJ

Messrs GOLD TRADE IMPEX through partner and another

Versus

APPELLATE TRIBUNAL OF CUSTOMS, EXCISE AND SALES TAX through Collector of Customs, and 2 others

Customs Reference Applications Nos.159 to 225 of 2010, decided on 23rd December, 2011.

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

----S. 79 [as amended by Finance Act (III of 2006)]---Automated Computerized Customs System---Object, purpose and scope---Importer and his clearing agent were duty bound to self-assess and pay liability of duty, taxes and other charges thereon through Automated Computerized Custom System (PACCS)---Under such system consignment was not physically checked by customs authorities, whereas only few consignments were examined through random selection by computer---Mechanism of PACCS on the one hand provided self-assessment without any departmental intervention or hackles of examination and assessment, whereas at the same time, also casted upon importer a responsibility to make true declaration of goods imported by making proper payment of duties and taxes payable as per law.

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

----Ss. 29, 32, 32-A, 179 & 196---Mis-declaration of goods---Wrong mentioning of HS Code of goods---Import of rubber---Concurrent findings of fact by the forums below---Authorities issued show cause notices to importers for knowingly and deliberately mentioning wrong HS Code to evade customs duty and other taxes---Validity---All details of goods imported and their respective PCT Headings including goods under dispute were available on Website and there was no scope left for importer to mis-declare particulars of goods on goods declaration---Importers were confronted through show cause notice that the goods declaration were in 360 bales [Bales were used for packing Ribbed Smoked Sheets (RSS) while latex was imported in drums or huge flexi bags], in 120 feet container which was done to hoodwink customs authorities---No plausible explanation was offered by importers in such regard---Concurrent findings of all forums below in such regard was based on proper appreciation of facts and correct application of law, therefore, authorities had rightly invoked the provision of S. 32 of Customs Act, 1969, within the prescribed period of limitation---Importers deliberately and with mala fide intention had caused loss of revenue to exchequer by mis-declaring the description, value and HS Code of goods imported through consignments in question---Authorities had rightly invoked provisions of S. 32 of Customs Act, 1969, well within the limitation, after issuing show cause notices and providing opportunity of being heard to importers---No substantial question of law, requiring opinion or interference by High Court had arisen from the order of Customs, Excise and Sales Tax Appellate Tribunal, which order was based on concurrent findings on facts---Importers failed to point out any perversity or could bring any material on record to show that such decision was based on mis-reading or non-reading of evidence---Reference was disposed of accordingly.

Messrs Haji Ismail and Company v. Customs, Excise and Sales Tax Tribunal Karachi Bench and others SBLR 2008 Sindh 1699; Messrs Muzzamal Brothers v. The Central Board of Revenue and others PLD 1997 Lah. 36 and Messrs Abbasi Enterprises v. Collector of Sales Tax 2008 PTD 2025 ref

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

----S. 196---Reference to High Court---New ground, raising of---Scope---Applicants cannot be allowed to raise new ground for the first time under reference proceedings, as proceedings under S. 196 of Customs Act, 1969, have limited scope only to the extent of response to questions of law arising from the order of Customs, Excise and Sales tax Appellate Tribunal.

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

----S. 194-B(1), proviso---Appeal, decision of---Limitation---Mandatory/ directory provision---Scope---No penal consequence have been provided in case of default in passing order within time as mentioned in proviso to S. 194-B(1) of Customs Act, 1969, therefore, the same is directory and not mandatory hence, its non-compliance do not vitiate the proceedings of the order passed by Appellate Tribunal.

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

----S. 196---Reference to High Court---Expressions "point of law" and "question of law"---Scope---Only substantial questions of law, arising out of the order of Customs, Excise and Sales tax Appellate Tribunal, can be referred for opinion of High Court through reference application---Questions of disputed facts cannot be examined by High Court under reference jurisdiction---Term "a point of law" cannot be equated with expression "question of law", whereas a question of law referred for opinion of High Court in real sense must be a disputed or disputable question of law---Questions of law referred for opinion to High Court must be formulated in such a manner that reply to such question referred may be either in affirmative or negative and it should normally settle a pattern of guidance both for the Revenue as well as the assessee---Factual controversies should not be allowed to be converted into legal issues only by employing legal language in such a manner which is usual to the forming of such questions.

Commissioner of Income Tax v. Messrs Immion Internation, Lahore 2001 PTD 900 and Japan Storage Battery Limited v. Commissioner of Income Tax 2003 PTD 2849 rel.

Ch. Ishtiaq Ahmed Khan for Applicants (in Spl. Cust. Ref. As. Nos.177 of 225 of 2010)

Ghulam Haider Sheikh for Respondents

Date of hearing: 2nd December, 2011.

2012 P T D 405

[Sindh High Court]

Before Faisal Arab and Aqeel Ahmed Abbasi, JJ

Messrs WAZIR ALI INDUSTRIES LTD.

Versus

APPELLATE TRIBUNAL INLAND REVENUE, KARACHI and 2 others

I.T.R.A. No.473 of 2010, decided on 16th December, 2011.

(a) Words and phrases---

----"Prize"---Meaning---Word 'prize' covers a reward won by chance or offered for some achievement in normal course of some good performance.

Black's Law Dictionary and Chambers Dictionary (new edition) ref

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

----Ss. 133, 156 [as amended by Finance Act (I of 2003)], 161 & 205---Term "prize offered for promotion of sale"---Scope---Withholding of tax---Plea raised by assessee was that no tax could be deducted on expenditure incurred on account of sales promotion, as sales incentive to distributor---Validity---Term "prize" did not merely refer to winning by chance but it also included regular payments either in cash or in kind to distributors on their achieving sales targets---Term "prize offered for promotion of sale" in S. 156 of Income Tax Ordinance, 2001, made the company liable to withhold tax on such payments---Such term covered free units given by assessee company to distributors on their achieving sales targets and the same were liable to withholding tax under S. 156 of Income Tax Ordinance, 2001---Recovery of such amount from assessee in terms of S. 161 of Income Tax Ordinance, 2001, as well imposition of default surcharge under S. 205 of Income Tax Ordinance, 2001, was also in accordance with law---Order passed by Income Tax Appellate Tribunal depicted correct position of law, hence required no interference by High Court---Reference was dismissed, in circumstances.

Commissioner of Income Tax/Wealth Tax v. Akhtar Munir and others 2007 PTD 1800 and Lone Cold Storage v. Revenue Officers 2010 PTD 2502 distinguished.

(c) Interpretation of statutes---

----Redundancy of provision---Harmonious construction---Scope---No redundancy can be attributed to the use of any word or phrase incorporated in any particular provisions of law by Legislature---Provision of statute would have to be construed harmoniously so as to advance the purpose of a substantive provision of law and to avoid conflict---No provision can be placed into service in order to defeat the real object of main provision---Effect must be given, if possible, to all words used in statutory provision.

Commissioner of Income Tax, Companies-I, Karachi v. Messrs Orix Leasing Pakistan Ltd., Karachi 2007 PTD 1151; Jamat-i-Islami Pakistan v. Federation of Pakistan PLD 2000 SC 111 and Messrs Bilz (Pvt.) Ltd. v. Deputy Commissioner of Income Tax, Multan and another 2002 PTD 1 (SC Pak) rel.

Abdul Rahim Lakhani for Applicant.

Jawaid Farooqi for Respondent No.3.

Date of hearing: 2nd December, 2011.

2012 P T D 428

[Sindh High Court]

Before Faisal Arab and Aqeel Ahmad Abbasi, JJ

COLLECTOR, MODEL CUSTOMS COLLECTORATE, HYDERABAD

Versus

Messrs KHUDA RAHEEM and others

Spl. Custom R.As. Nos.128, 129 and 130 of 2011, decided on 16th December, 2011.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 152(2), 168 & 187---Imports and Exports (Control) Act (XXXIX of 1950), Ss.3 (1) & 156 (1) (89)---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 120---Smuggled goods---Onus to prove---Shifting of onus---Report of laboratory---Customs authorities confiscated three oil tankers containing High Speed Diesel on the allegation of the same being smuggled---Report of Hydrocarbon Development Institute of Pakistan showed that Diesel confiscated was not of foreign origin, therefore, Appellate Authority and Customs, Excise and Sales Tax Appellate Tribunal concurrently set aside the order passed by Adjudication Officer---Validity---Both appellate forums had rightly found the documentary evidence produced by respondents to be correct and sufficient evidence to discharge burden of proving innocence by respondents whereas order-in-original had been set aside---Appellate forums had also rightly held that initiation of proceedings by department were based merely on suspicion, whereas there was no positive evidence or material available with customs authorities to establish the charge of smuggling against respondents---Both the appellate forums had further rightly held that since respondents discharged their initial burden by producing certain documents relating to lawful possession of seized oil as well as by producing laboratory report, which had nullified the allegation that seized High Speed Diesel oil was of foreign origin---Burden to prove, shifted upon the authorities to establish the charge of smuggling against respondents through positive evidence, which the authorities failed to do---Findings of Appellate authority and Tribunal were based on proper appreciation of facts and correct application of law---High Court declined to interfere in concurrent findings of fact by two forums below---Reference was dismissed, in circumstances.

Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 ref.

Mohsin Imam for Applicant.

Nawab Mirza for Respondent.

Date of hearing: 18th October, 2011.

2012 P T D 629

[Sindh High Court]

Before Faisal Arab and Aqeel Ahmad Abbasi, JJ

Haji MUHAMMAD ASLAM and another

Versus

DIRECTOR-GENERAL PAKISTAN COAST GUARDS, KARACHI and 3 others

Spl. Custom Ref. Application No.36 of 2010, decided on 23rd January, 2012.

Customs Act (IV of 1969)---

----Ss. 2(o), 3, 3A 3B, 3C, 3D, 3DD, 4, 6, 193 & 196---Pakistan Coast Guards Act (XVIII of 1973), Ss. 2(9), 3, 4 & 14---Seizure of gold by Pakistan Coast Guards---Release of seized goods to its owner ordered by Adjudicating Officer---Appeal against such order to Appellate Authority filed by Director General Pakistan Coast Guards---Dismissal of appeal for its filing by an incompetent officer---Order of Appellate Tribunal remanding case to Appellate Authority for its decision on merits---Validity---Appeal under S. 193 of Customs Act, 1969 could not be filed by officers of Customs against an order passed by officer of Customs not below the rank of Assistant Collector---Officer of Customs appointed under S. 3 of Customs Act, 1969 would exercise such powers and discharge such duties as conferred or imposed on him by or under Act, 1969 or rules made thereunder---Board of Revenue through notification under S. 6 of the Customs Act, 1969 could entrust conditionally or unconditionally any function of an officer of customs under Customs Act, 1969 to an officer of Federal/Provincial Government, State Bank of Pakistan or Scheduled Bank---Provision of S.6 of Customs Act, 1969 related only to delegation of powers to facilitate performance of functions and duties under the Act but did not provide for appointment of Customs Officer---Such powers could be delegated not necessary by reference to designation or rank of Customs Officer, but by numeration, definition or description of power itself---Functions of Pakistan Coast Guards would include prevention of smuggling as officers of Customs, if entrusted to them under the Customs Act, 1969---Officers of Pakistan Coast Guards had not been defined as officer of Customs either in the Customs Act, 1969 or Pakistan Coast Guards Act, 1973---Director General, Coast Guards being not an Officer of Customs, appeal filed by him before the Collector of Customs, (Appeals) under S.193, Customs Act, 1969 was competent in law---High Court dismissed the reference, in circumstances.

Sultan Muhammad v. Commandant Pishin Scouts, Chaman PLD 1991 Quetta 36; Haji Abdullah Jan and others v. The State 2003 SCMR 1063; Iqbal Akhtar v. Ch. Muhammad Mushtaq and 4 others PLD 1977 Lah. 1318 and Muhammad Yousuf and others v. The State 1987 PCr.LJ 722 ref

Sultan Muhammad v. Commandant Pishin Scouts, Chaman PLD 1991 Quetta 36 rel.

Nisar Ahmed Tarar for Applicant.

Ms. Firdoos Farride for Respondent No.1.

Date of hearing: 23rd November, 2011.

2012 P T D 723

[Sindh High Court]

Before Faisal Arab and Aqeel Ahmad Abbasi, JJ

PAKISTAN STEEL MILLS CORPORATION (PVT.) LTD., KARACHI

Versus

COMMISSIONER INLAND REVENUE (LEGAL DIVISION), KARACHI and another

Income Tax Reference Application No.187 of 2010, decided on 23rd January, 2012.

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

----Ss. 122(5A), 133 & 221---Amendment of assessment---Sale of extra land by Pakistan Steel Mills in shape of small plots after establishing Housing Scheme thereon---Order of Taxation Officer treating amount received from such transactions as income of assessee from business of developing Housing Scheme upheld by Appellate Tribunal---Plea that amount received from sale of subject land was capital gain and not income of assessee---Validity---No hard and fast rule could be adopted in cases of adventure in nature of trade, rather each transaction would be examined on basis of its own facts---Nothing on record to establish that subject land was part of area, which constituted such Mills or same could be treated as capital assets of assessee---Nothing on record to show that finding of facts recorded by Tribunal were based on mis-reading or non-reading of evidence---Remedy of rectification could be availed in case of error in finding of facts by Tribunal, but not reference to High Court---Assessee instead of responding to queries raised by Taxation Officer had taken an evasive plea which was not supported by any evidence---High Court could not examine or disturb finding of facts by Tribunal, unless proved to be perverse---Reference application High Court dismissed in circumstances.

Commissioner of Income Tax, Madras v. P.K.N. Co. Ltd., AIR 1966 SC 1256; Janki Ram Bahadur Ram v. Commissioner of Income Tax AIR 1965 SC 1898; Commissioner of Income Tax, Nagpur v. Sutlej Cotton Mills Supply Agency Ltd., 100 ITR/AIR 1975 SC 2106; CIT v. Mehmood Ali (Sindh High Court) 2008 PTD 82; Maj. General (Retd) Jalauddin v. ACIT (Sindh High Court) 2011 PTD 1377; International Traders Ltd. v. CIT (1967) 16 Tax 46; Soraj Kumar v. CIT West Bengal AIR 1959 SC 1252; Industrial Management v. CIT (Sindh High Court) PLD 1978 Kar. 673; Hyderi Construction Co. Ltd., Karachi v. Commissioner of Income Tax, Central Karachi 1967 PTD 242; Syed Akhtar Ali v. Commissioner of Income Tax, Hyderabad 1994 PTD 675; and Syed Akhtar Ali v. Commissioner of Income Tax, Hyderabad 1994 PTD 675 ref.

International Traders Ltd., Karachi v. Commissioner of Income Tax (1967) 16 Tax 46; Lungla (Sylhet) Tea Co. v. CIT 1970 SCMR 872; S.M. Ilyas and Sons v. Ilyas and Sons v. CIT PLD 1982 SC 259; Japan Storage v. CIT 2003 PTD 2849 and CIT v. NIT 2003 PTD 589 rel.

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

----S.133----Reference to High Court---Scope---High Court could not examine or disturb finding of facts, unless proved to be perverse.

International Traders Ltd., Karachi v. Commissioner of Income Tax (1967) 16 Tax 46; Lungla (Sylhet) Tea Co. v. CIT 1970 SCMR 872; S.M. Ilyas and Sons v. Ilyas and Sons v. CIT PLD 1982 SC 259; Japan Storage v. CIT 2003 PTD 2849 and CIT v. NIT 2003 PTD 589 rel.

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

----Ss.133 & 221---Reference to High Court---Scope---Finding of facts by Appellate Tribunal, error in, remedy against---Scope---Aggrieved party could seek rectification of such error by approaching Tribunal, but not High Court.

Aga Zafar Ahmed for Applicant.

Jawaid Farooqui for Respondent.

Date of hearing: 21st November, 2011.

2012 P T D 901

[Sindh High Court]

Before Faisal Arab and Aqeel Ahmed Abbasi, JJ

HABIB JUTE MILLS LTD.

Versus

PROVINCE OF SINDH through Secretary, Finance Department Sindh Secretariat, Karachi and another

Constitutional Petition No.D-388 of 2003, decided on 3rd February, 2012.

West Pakistan (Sindh) Finance Act (XXXIV of 1964)---

----S. 11 [as amended by Ss. 5, 6 & 7th Schedule of Sindh Finance Act (XII of 1994)]---Constitution of Pakistan, Arts. 164, 199 & 260---Constitutional petition---Double taxation---Professional tax---Establishment in more than one provinces---Petitioner company had more than one establishments in different provinces and was already paying professional tax in other province---Plea raised by petitioner was that charging of professional tax by second province was double taxation---Validity---Petitioner company could not point out any defect or legal error nor could refer to any Article of the Constitution or provision of law, which could put any restriction on any Provincial Government to impose such tax on a person---Provisions of Art. 163 of the Constitution postulated that professional tax would not be considered as a tax on income and it had authorized Provincial Government to impose professional tax on any person including any body politic or corporate as defined in Art. 260 of the Constitution---Provincial Government had the authority to impose professional tax on companies having more than one establishments or offices in more than one province, if their work was expanded from one province to another---Levy of professional tax upon petitioner did not amount to double taxation as it was not levy on income of a person---Petition was dismissed in circumstances.

Province of Punjab through Secretary, Excise and Taxation, Government of Punjab and others v. Sargodha Textile Mills Ltd., Sargodha and others PLD 2005 SC 988 and Government of Sindh v. Bank of Khyber and others Civil Appeal No.1550 of 2001 ref.

Messrs Bank Alfalah Limited, Karachi v. Excise and Taxation Officer-IV, Peshawar and 2 others 2010 PTD 1913 fol.

Adnan Iqbal Chaudhry for Petitioner.

Saifullah Khan, A.A.-G. for Respondents.

Date of hearing: 21st November, 2011.

2012PTD980

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

Messrs DAWLANCE ELECTRONICS (PVT.) LTD. through Director

versus

COLLECTOR OF CUSTOMS, COLLECTORATE OF CUSTOM, KARACHI

Special Customs Reference Applications Nos.150 of 2010 to 158 of 2010, decided on 4th June, 2011.

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

----S.81(2)---Extension of time sought through letter only signed by Collector---Validity---Nothing was written on such letter to show that Collector had approved extension sought thereby---Such extension was not in accordance with law.

PSO v. Collector of Customs 2006 SCMR 425 and Flying Board; Paper Products v. Deputy Collector of Customs 2006 SCMR 1648 and Collector of Customs v. Auto Mobile Corporation 2005 PTD 2116 ref.

Sus Motors (Pvt.) Ltd. v. Federation of Pakistan and others 2011 PTD 235 rel.

(b) Customs Act (IV of 1969)-

----Ss.81 & 196---Reference---Jurisdiction of High Court---Scope--Question as to whether order of final assessment under S.81 of Customs Act, 1969 had been passed within period of limitation for being question of law and not of fact could be decided by High Court' despite decision of three lower forums.

Najeeb Jamali for Applicants.

Raja Muhammad Iqbal for Respondent.

Dates of hearing: 18th. May and 1st June, 2011.

2012 P T D 1522

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

PAKISTAN TELECOMMUNICATION COMPANY LTD.

Versus

DEPARTMENT OF EXCISE OF TAXATION

Constitutional Petition No.604 of 2009, decided on 13th June, 2011.

(a) Discretion---

----Unfettered discretion---Scope---In law, there is no such thing known as unfettered discretion---Even if statutory powers are conferred in ostensibly unconstrained terms, exercise of such powers must be in structured and regulated manner.

(b) West Pakistan Urban Immovable Property Tax Act (V of 1958)---

----Ss.5 & 5-A---Constitution of Pakistan, Art. 199---Constitutional petition---Annual value, ascertainment of---Valuation table---Industrial establishment---Determination---Petitioner was a telecommunication service provider company and dispute was with regard to charging of property tax against its properties located in Karachi city---Petitioner company claimed that property tax was chargeable at industrial rates, whereas authorities intended to charge against commercial rates---Validity---Some additional elements must be present for technical support to amount to industrial activity---Those additional elements must be activity or action, directly in relation to petitioner's telephone exchanges (or the other devices used by it to provide telecom-munications services and must be substantially more than a mere servicing or care thereof---Petitioner did not carry out industrial activities on its properties, in which case the annual value of properties would not have to be determined on the basis that those were industrial properties---Properties of petitioner company must be brought to tax on the basis that those were commercial properties and there was nothing on record in relation to such additional activities or actions, if any---High Court directed that in respect of each property, where petitioner claimed to carry out industrial activities, would make application to authorities, giving full details of its activities---Petition was disposed of accordingly.

Pakistan Telecommunication Company Ltd. v. Government of Punjab and others 2009 PTD 1602; Trues Hotel, Islamabad and others v. Capital Development Authority and others 2006 SCMR 1738; Arabian Sea Enterprises Ltd. v. Government of Sindh and others 2007 CLC 1215; Karachi Properties Investment Co. (Pvt.) Ltd. v. Government of Sindh and others 2006 CLC 1372; Al-Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29 and Beach Luxury Hotel (Pvt.) Ltd. v. Province of Sindh and others C.P. 393-K/2007, dated 21-6-2007 ref.

Khurram Rasheed for Petitioner.

Saifullah, Assistant Advocate-General.

Dates of hearing: 28th September, 2010 and 9th May, 2011.

2012 P T D 1762

[Sindh High Court]

Before Faisal Arab and Nadeem Akhtar, JJ

Messrs FAUJI OIL TERMINAL AND DISTRIBUTION COMPANY LTD. through General Manager

versus

PAKISTAN through Secretary, Revenue Division, Islamabad and 2 others

Constitutional Petitions Nos.D-1707 to D-1711 of 2012, decided on 28th May, 2012.

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

----Ss. 11, 26, 34 & 36(1)---Constitution of Pakistan, Art. 199(4-A)---Constitutional petition---Outstanding/defaulted amounts, recovery of---Such recovery stayed by Appellate Tribunal on taxpayer's application till decision of his appeal after depositing 25% amount of impugned demands---Issuance of notice by tax authority demanding such amounts from taxpayer due to expiry of six months after passing such stay order---Validity---Authority had issued impugned notice when appeal was still pending before Tribunal for passing final decision and such stay order was operative---Provisions of Art. 199(4-A) of the Constitution would apply to a stay order passed by High Court in revenue matters, but not to an interim/stay order passed by any other forum, Tribunal or subordinate court---Authority had no power or jurisdiction to evaluate validity of stay order granted by a higher authority i.e. Appellate Tribunal---Authority was not justified to issue impugned notice before decision of taxpayer's appeal by Tribunal or seeking recall of such stay order from Tribunal---High Court accepted constitutional petition in circumstances.

Karachi Shipyard and Engineering Works Ltd. Karachi v. Additional Collector, Customs, Excise and Sales Tax (Adjudication-III), Government of Pakistan, Karachi, and 2 others 2006 PTD 2207; Messrs EVICRETE Limited through Chairman v. Customs Central Excise and Sales Tax Appellate Tribunal (Karachi Bench) and others 2002 PTD 403; SS Talleries through Proprietor v. Assistant Collector (Audit and Enforcement Division-II), Lahore and 2 others 2009 PTD 1828; Adeel Hosiery Dyeing through Proprietor Muhammad Rasheed, Faisalabad v. Assistant Collector, Collectorate of Sales Tax, Faislalabad and another 2002 PTD 1616; Messrs Wak Ltd. through Chief Executive v. Federation of Pakistan through Ministry of Finance, Islamabad and 5 others 2006 PTD 332; SS Talleries through Proprietor v. Assistant Collector (Audit and Enforcement Division-II), Sales Tax and Federal Excise and 2 others 2006 PTD 2721; Sun-Rise Bottling Company (Pvt.) Ltd. through Chief Executive v. Federation of Pakistan and 4 others 2006 PTD 535; Messrs Pearl Continental Hotel, Lahore through Director Finance and another v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and another 2005 PTD 1368; Z N Exporters (Pvt.) Ltd. v. Collector of Sales Tax 2003 PTD 1746; Messrs Dawood Textile Printing Industries (Pvt.) Ltd. Faisalabad through Chief Executive v. Federation of Pakistan through Secretary, Revenue Division, F.B.R. and 4 others 2009 PTD 1220; State v. Sir Edward Snelson K.B.E., Secretary to Government of Pakistan, Ministry of Law PLD 1961 (W.P.) Lah. 78; The Government of Pakistan v. The Judge of the High Court of West Pakistan, Lahore and Sir Edward Snelson K.B.E., Secretary to Government of Pakistan, Ministry of Law PLD 1961 SC 237; Federation of Pakistan through the Secretary, Ministry of Finance, Government of Pakistan, Islamabad and others v. United Sugar Mills Ltd. Karachi PLD 1977 SC 397; Zahur Textile Mills Ltd. v. Federation of Pakistan and others PLD 1999 SC 880 and Pakistan Lawyers Forum and others v. Federation of Pakistan and others PLD 2005 SC 719 ref.

Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and 4 others 1999 PTD 1892 and Messrs EVICRETE Ltd. through Chairman v. Customs Central Excise and Sales Tax Appellate Tribunal (Karachi Bench) and others 2002 PTD 403 rel.

(b) Taxation---

----Outstanding or defaulted amounts, recovery of---Stay order passed by an authority/forum higher than revenue collecting authorities---Exercise of powers by such authorities to recover such amounts---Scope---Such authorities could not evaluate validity of such stay order---Purpose of establishing such authorities would be for betterment of society in order to improve economic growth of country through recovery of such amounts by due process of law and not to pressurize, harass or suffocate taxpayers doing business and paying taxes to improve dilapidated economy of the country---Such authorities must exercise powers within their limits and in accordance with law, but must not indulge in aggressive practice, which would create chaos in country---Reference by such authorities to speeches of Judges of superior courts for purposes of effecting such recovery might cause embarrassment to such courts and their Judges---Principles.

(c) Administration of justice---

----Relief granted by court, interpretation of---Scope---Such interpretation should be made in context of prayer made by applicant.

(d) Constitution of Pakistan---

----Art. 199(4-A)---Provision of Art. 199(4-A) of the Constitution---Applicability---Scope---Article 199(4-A), Constitution would apply to an interim order passed by High Court in revenue matters, but not to an interim order passed by any other forum, Tribunal or subordinate court---Principles.

Messrs EVICRETE Ltd. through Chairman v. Customs Central Excise and Sales Tax Appellate Tribunal (Karachi Bench) and others 2002 PTD 403 rel.

Barrister Dr. Muhammad Farogh Naseem for Petitioner.

Siddique Mirza for Respondents.

Date of hearing: 28th May, 2012.

2012PTD 1905

[Sindh High Court]

Before Syed Muhammad Farooq Shah, J

JAVED IQBAL SIDDIQUI and another

Versus

THE STATE

Criminal Miscellaneous Application No.137 and M.A. N ).3655 of 2012, decided on 13th August, 2012.

Customs Act (IV of 1969)---

----Ss. 9, 14, 86, 90 & 156(1)---Notification S.R.O. 594(1)/2009 dated 25-6-2009---Criminal Procedure Code (V of 1898), Ss.265-K & 561-A---Alleged mis-declaration of goods---Application for quashment of proceedings, dismissal of---Exporter (accused/applicant) declared consignment in question to be Lead Concentrate while laboratory report described the same as Lead Powder, which was subject to regulatory duty---F.I.R. was lodged against exporter---Application filed by exporter under S. 265-K, Cr. P. C, was dismissed by Trial Court on grounds that it was yet to be determined whether contents of consignment were the same as declared by exporter, which controversy could only be decided after prosecution evidence was brought on record, therefore it could not be held that there was no probability of exporter being convicted---Contentions of exporter were that alleged mis-declaration was neither intentional nor deliberate but same was due to lack of knowledge and even customs authorities were not sure about the correct classification until same had been decided by Customs Tarrff Committee, and that in the charge sheet no mens rea or intention of tax evasion had been alleged, therefore, the charge was groundless---Validity---Mis-declaration had been admitted---Question as to whether mis-declaration was intentional/deliberate or in good faith was yet to be ascertained---Order of Trial Court warranted no interference in circumstances---Application was dismissed in circumstances.

Miraj Khan v. Gul Muhammad 2000 SCMR 122 and Collector of Customs v. Messrs Power Electronic Pakistan (Pvt.) Ltd. Lahore 2011 PTD 2837 distinguished.

Syed Mehmood Alam Rizvi for Applicants.

Imtiaz Ahmed, Standing Counsel.

Date of hearing: 31st July, 2012.

2012 P T D 1

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs AYESHA IMPEX

Versus

FEDERATION OF PAKISTAN

Writ Petitions Nos.8931, 17144, 10058, 10057, 10056, 10055, 7845, 7844, 17049, 9335, 10064, 10063, 10062, 10061, 10060, 10059, 18763, 78762, 10070, 10069, 10068, 10067, 10066, 10065, 12360, 12912, 5501, 15493, 14961, 14962, 16026, 16027, 17050, 17051, 17059, 17677, 15789, 18918, 18919, 18493, 25581, 23435, 25226, 25227, 24298, 27209, 18764, 19130, 20228, 21409, 23908, 23909, 23910, 23911, 24111, 26859, 26290, 23235, 26289, 3625, 3626, 22672, 22673 of 2010 and 3732, 3731, 662, 1594, 9287 and 7653 of 2011, heard on 4th May, 2011.

Customs Act (IV of 1969)---

----Ss.25, 25-A(4) [as amended by Finance Act (XVI of 2010)]---Customs Rules, 2001, Rr.107(a) & 121---Constitution of Pakistan, Art.199---Constitutional petition---Interpretation of S.25-A, Customs Act, 1969---Determination of customs value of imported goods---Valuation advice dated 23-10-2009 issued under S.25-A of Customs Act, 1969, was made applicable by Assessing Authorities to the consignments of goods imported in April, 2010 under the respective goods declaration filed by the importers---By reliance on said advice, the Assessing Authorities rejected the declared valuation of imported goods and adopted the higher valuation---Validity---Section 25-A of the Customs Act, 1969 was amended during the course of hearing of petition---Section 25-A had conferred power on the valuation authority to pre-determine the valuation of imported goods on the principles laid down in S.25 of the Customs Act, 1969---Valuation advice issued under S.25-A of Customs Act, 1969, was meant to last for 90 days or so as contemplated by provisions of S.25 of the Act and R.107 of Customs Rules, 2001---Valuation ruling must ordinarily be required as valid for a period of ninety days from the date of issuance---Section 25-A(4) had provided that a valuation ruling shall be applicable until and unless revised or rescinded by the competent Authority---Interpretation and application of said subsection (4), was that while the valuation ruling would continue to hold the field unless revised or rescinded, any aggrieved importer had the right to approach the concerned Officer after the ninety days period and he would then have give reasons as to why the ruling had not been revised or rescinded---Impugned valuation advice and other valuation advice that could have been issued, would survive and continue to have validity for 90 days from the date of their issuance; and thereafter the valuation authorities were under a duty to justify the value to issue a fresh advice; in other words to give grounds to maintain an existing valuation advice.

Sadia Jabbar v. Federation of Pakistan and others C.P. No.2673 of 2009 rel.

Mian Abdul Ghaffar and Raza Ahmad for Petitioners.

Haider Rasool Mirza and Amjad Mahmood Butt and Umar Ahmad Khan for Petitioners in connected petitions.

Sh. Izhar-ul-Haq, Ehsan Ullah Cheema for Respondents/ Directorate of Valuation.

Sarfraz Ahmad Cheema, Ch. Muhammad Zafar Iqbal, Syed Tahir Abbas Rizvi and Irteza Ali Navi for Respondents/Customs Collectorate.

Hafeez Saeed Akhtar for Respondents Nos.3 and 4 (in Writ Petition No.3732 of 2010).

Rao Naseem Hyder Khan for Respondents.

Date of hearing: 4th May, 2011.

2012 P T D 798

[Lahore High Court]

Before Umar Ata Bandial and Asad Munir, JJ

CHAUDHRY SUGAR MILLS LTD.

Versus

GOVERNMENT OF PUNJAB and others

I.C.As. Nos. 257 to 259, 266 to 268, 275, 276, 278 to 281, 287, 312 to 316, 285, 286, 273, 296, 288, 344, 345, 298 of 2011, decided on 27th June, 2011.

(a) Federal Excise Act (VII of 2005)---

----S.3A---Notification S.R.O. No.655(I)/07, dated 29-6-2007---General Order No.3, dated 30-7-2007---General Clauses Act (X of 1897), S.22---Constitution of Pakistan, Art.73---Law Reforms Ordinance (XII of 1973), S.3---Additional levy---Scope---Grievance of appellants was that levy as "special excise duty" could not be imposed by authorities on the basis of notification issued by them---Validity---On the day a Money Bill was passed, it was validly made law but one that would come into force not latter than ten days from the date of its presentation for Presidential assent---In terms of proviso to Art. 73(1) of the Constitution, Finance Bill was Money Bill that contained Annual Budget statement for that year, therefore, duly passed Finance Bill, 2007, was valid legislation which could be analogized with "passed" Act for the purposes of S. 22 of General Clauses Act, 1897---Word "additional" did not alter character of levy imposed under S. 3-A of Federal Excise Act, 2005---Nor did name of levy as "special excise duty" made it distinct from levy of "duties of excise" that Federal Government could lawfully impose under Federal Legislative List---Whether it was additional or special, levy remained the same, i.e. excise duty---Division Bench of High Court declined to interfere in the judgment passed by Single Judge of High Court---Intra Court Appeal was dismissed in circumstances.

Sohail Jute Mills' Ltd. v. Federation of Pakistan through Secretary Ministry of Finance and others PLD 1991 SC 329 rel

(b) Constitution of Pakistan---

----Art.73---Money bill---Presidential assent---Bill passed was valid legislation which could be analogized with "passed" Act for the purpose of S.22, General Clauses Act, 1897---Principles.

Ijaz Ahmed Awan, Miss Komal Malik Awan and Noman Awan for Appellants.

Muzammil Akhtar Shabbir, for Appellant.

Dr. Ilyas Zafar and Syed Nasir Ali Gillani for Appellant.

Sh. Izhar-ul-Haq and Mrs. Kausar Parveen for Respondents.

2012 PTD964

[Lahore High Court]

Before Amin-ud-Din Khan and Abdus Sattar Asghar, JJ

COMMISSIONER INLAND REVENUE, LEGAL DIVISION, BAHAWALPUR

versus

ZULFIQAR ALI

I.T.R. No.1 of 2012/BWP, heard on 1st March, 2012.

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

---Ss. 122 & 132---C.B.R. Circular No. 7(2) dated 1-2-1994---Appeal to Appellate Tribunal---Completed assessment, amendment of---Issuance of first notice to assessee on 14-4-2010 requiring its compliance on 22-4-2010 served upon him on 17-4-2010---Issuance of second notice to assessee on 24-5-2010 requiring its compliance on 31-5-2010 served upon him on 26-S-2010---Passing of amendment order on 31-5-2010 by Assessing Authority---Validity---Assessee had been provided five days time through each such notice to respond thereto---According to C.B.R. Circular No. 7(2), dated 1-2-1994, assessee was required to be provided 15 clear days for giving his explanation---Ample opportunity had not been provided to assessee to explain his position through reply to such notices, thus he could not be penalized for default on part of Assessing Authority---Assessing Authority had no valid reason to amend completed assessment---Tribunal .set aside impugned order for being violative of such Circular.

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

----S. 133(4)---Reference to High Court---Object---Such jurisdiction being purely advisory in nature could be invoked to resolve problematic and debatable legal questions instead of getting a decision for or against a party---Principles.

Jurisdiction of High Court in terms of section 133(4) of the Income Tax Ordinance, 2001 is advisory in nature, clearly distinct and distinguishable from the appellate or revisional jurisdiction. The purpose of reference, therefore, should be only to resolve problematic and debatable legal question instead of getting a decision for or against a party.

The object of the reference before High Court under section 133(4) of the Income Tax Ordinance, 2001 remains that an affirmative or negative reply to a question referred to High Court should furnish guidance to the parties for useful, comfortable and effective assessment proceedings on substantial legal issues of general interest. Certainly general practice on the part of the Department or assesses to convert the factual controversy into legal issues not falling with the purview of "question of law" cannot be approved at all.

The Lungla (Sylhet), Tea Co. Ltd. v. Commissioner of Income Tax Dacca Circle Dacca 1970 SCMR 872 and Commissioner of Income Tax/Wealth Tax, Multan Zone v. Muhammad Rafi, Medical Officer, D.H.Q. Khanewal 2007 PTD 333 rel.

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

----S. 133(4)---Reference to High Court---Question as framed in reference application appearing to be "point of law"---Validity---Such point, could not be equated with expression "question of law" as used in S.133(4) of Income Tax Ordinance, 2001---Such point was neither a question of law nor involved a substantial legal issue between the parties---High Court declined to entertain and decide such point.

Muhammad Siddique Chohan for Petitioner.

Sh. Zafar-ul-Islam and Niaz Ahmad Khan for Respondent.

Date of hearing: 1st March, 2012.

2012PTD996

[Lahore High Court]

Before Tariq Javaid, J

MAQBOOLAN BIBI and 5 others

versus

MUHAMMAD AKRAM and another

Civil Revision No.1661 of 2010, decided on 21st October, 2010.

(a) Specific Relief Act (I of 1877)---

----S. 54---Contract Act (IX of 1872), S. 51---Limitation Act (IX of 1908), Art. 115---Suit for permanent injunction-Maintainability--Concurrent dismissal of suit---Contention of the plaintiff, inter alia, was that the defendant had failed to perform their part of the agreement relating to suit land, and the plaintiff was therefore not bound to offer the right of way to the defendant under said agreement---Validity---Agreement between the parties was an admitted document---If the promise had failed to perform his part of the agreement, then the promisor, the predecessor-in-interest of the plaintiffs, was within his rights to repudiate the said agreement within the limitation period prescribed under the law---Plaintiff could not assail the breach of agreement after expiry of almost 25 years during which the suit land was used as a right of way by the defendants without any interruption---Perusal of record revealed that the said ' passage had been used by the plaintiffs for the last many years and such use was fully acknowledged by the agreement between the parties---Contention of the plaintiff that the defendant filed suit for permanent injunction without seeking declaration would have been relevant if the right of way could not be established by the defendants---Right of way was established by the defendants by reason of the agreement between the parties, hence suit for perpetual injunction was rightly held to be maintainable---Orders of courts below did not suffer from any illegality---Revision was dismissed.

(b) Contract Act (IX of 1872)---

----S.51---Limitation Act (IX of 1968), Art.115---If the promise had failed to perform his part of the agreement, then the promisor was within his rights to repudiate the said agreement within the limitation period prescribed under the law---Not open for the plaintiff to assail the breach of agreement after expiry of almost 25 years.

Mian Shah Abbas Iqbal for Petitioners.

Iftikhar Ullah Malik for Respondents.

2012 P T D 1092

[Lahore High Court]

Before Umar Ata Bandial and Muhammad Farrukh Irfan Khan, JJ COMMISSIONER INLAND REVENUE

versus

Messrs CRESENT TEXTILE MILLS and others

S.T.R. No.114 of 2011, decided on 7th December, 2011.

Sales Tax Act (VII of 1990)---

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Order passed beyond the time limit prescribed in the Sales Tax Act, 1990---Validity---Contention of the appellant (department) was that time stipulation under S.36(3) of Sales Tax Act, 1990, was not mandatory as no consequence of default is provided therein---Validity--Adjudication authority could not pass order under S.36(3) of the Sales. Tax Act, 1990, beyond the time limit prescribed under the said Act---Judgments of the High Court on the point involved were under appeal before the Supreme Court, therefore, on grounds of consistency and propriety, present case decided in. the light of the said judgments of the High Court and subject to the final ruling by the Supreme Court in the pending appeals---Reference was answered in the negative.

Messrs Meraj Din through Partner v. Collector Customs, Excise and Sales Tax (Appeals), Lahore and 2 others 2009 PTD 2004; Messrs Tanveer Weaving Mills through Director Finance v. Deputy Collector Sales Tax and 4 others 2009 PTD 762 and Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. through Chief Executive v. Collector of Sales Tax, Gujranwal and another 2008 PTD 60 ref.

Sarfraz Ahmed Cheema for Applicant.

Shoaib Ahmed Sheikh for Respondents.

2012 P T D 1220

[Lahore High Court]

Before Nasir Saeed Sheikh, J

PAKISTAN ENGINEERING CONGRESS, LAHORE through President

versus

DIRECTOR, EXCISE AND TAXATION, LAHORE

Writ Petition No.2878 of 2006, decided on 12th April, 2012.

(a) West Pakistan Urban Immovable Property Tax Act (V of 1958)---

---Ss. 3, 4(d)(f) & 24---West Pakistan Urban Immovable Property Tax Rules, 1958, R. 24---Constitution of Pakistan, Art. 199---Constitutional petition---Petitioner/Pakistan Engineering Congress (PEC)---Demand of property tax upon rental income derived by the Congress from its commercial building---Petitioner claimed exemption from such tax on ground that congress being dedicated for promotion of profession and practice of engineering was working for charitable purposes---Refusal of authority to accept such claim---Validity---Petitioner had neither obtained any certificate nor was a certified charitable institution in terms of R.24 of West Pakistan Urban Immovable Property Tax Rules, 1968-Statements of income and expenditures produced by petitioner/Congress for years 2001-2002 to 2010-2011 would show that petitioner was not an organization or society devoted to public charitable purpose exclusively nor rent being derived from its building was applied exclusively to public charitable institutions---Use of term "exclusively" in Cl. (ii) of proviso to S. 4(f) of West Pakistan Urban Immovable Property Tax Act, 1958 would not admit use of rental income for any other purpose except those mentioned therein---Nothing on record to show exclusive or sole use of income derived by petitioner from its building to public charitable institutions---Mere optional and occasional donations of some portion of rental income to flood relief fund, provincial activities of world water day, arranging of lectures for such purpose and granting of scholarships to graduate engineering students etc., and that too without reliable documentary evidence could not be considered as. a proof of exclusive spending of entire rental income by petitioner upon purposes specified in law---Petitioner had paid such tax for ninety years i.e. since 1912 till year 2001-2002 without claiming or raising plea that its rental income was exclusively used for public charitable institutions---Excise Department or Government could recover such tax from rental income not qualifying to exemption as envisaged in Cl. (ii) of Proviso-I of S. 4(d) of West Pakistan Urban Immovable Property Tax Act, 1968---Mentioning of purposes in Memorandum of Association of petitioner-company was one thing but proving case for grant of exemption as per statutory provisions of law was absolutely another thing---Petitioner was not entitled to claimed exemption---High Court dismissed constitutional petition in circumstances.

Madan Gopal and 4 others v. Maran Bepari and 3 others PLD 1969 SC 617; Keramat Ali and another v. Muhammad Yunus Haji and others PLD 1963 SC 191; Muhammad Husain Munir and others v. Sikandar and others PLD 1974 SC 139; Pakistan through the Secretary, Ministry of Defence v. Province of Punjab and others PLD 1975 SC 37; Trustees of Port of Karachi v. Secretary (Ex Officio) and Director-General, Excise and Taxation, Karachi and another .1990 CLC 92; Sheikh Sultan Trust v. Excise and Taxation Officer and others 2006 YLR 573; Muhammadi Steamship Co. Ltd. v. The Commissioner of Income Tax (Central), Karachi PLD 1966 SC 828; Lords Atkin, Thankerton, Russell of Killowen, Alness and Maugham, Maritime Eclectic Co., Ltd. v. General Dairies, Ltd. AIR 1937 Privy Council 114; Shahul Hamid v. Tahir Ali 1980 SCMR 596; 2004 SCMR 1649 and PLD 1983 SC 457 ref.

Fauji Foundation and another v. Shamimur Rehman PLD 1983 SC 457 rel.

(b) Interpretation of statutes---

----Fiscal statute---Provision of fiscal statute would be construed strictly.

Province of the Punjab through Secretary, Government of the Punjab Excise and Taxation Department and others v. Muhammad Aslam and others 2004 SCMR 1649 and Messrs Mehran Associates Limited v. The Commissioner of Income-Tax, Karachi 1993 SCMR 274 rel.

A.K. Dogar for Petitioner.

Malik Abdul Aziz Awan, A.A.-G. for Respondents.

Date of hearing: 2nd March, 2012.

2012 P T D 1361

[Lahore High Court]

Before Sh. Ahmad Farooq, J

Khawaja SHAHBAZ AHMED

versus

DEPUTY DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION, RANGE OFFICE, GUJRANWALA and another

Criminal Miscellaneous No.10333/B of 2011, decided on 27th October, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 2(37), 3, 6, 7, 22, 23, 33(2), (5), (6), (8), (11), (13) & (16), 38 & 73---Federal Excise Act (VII of 2005), S. 3A---Criminal Procedure Code (V of 1898), Ss.497 & 497(2)---Bail, grant of---Further inquiry---Bail sought on medical grounds---Accused was the sole proprietor of steel mills and allegations against him were that his steel mill supplied its products to different registered/unregistered persons without issuing sales tax invoices, causing huge loss to the public exchequer; that the steel mill made taxable supplies to registered persons but in order to understate its production and taxable supplies, said supplies were shown to have been made to unregistered persons; that taxable supplies of the steel mills were much more than what was declared to the sales tax department, and that the accused knowingly, deliberately and fraudulently understated and underpaid sales tax---Contentions of the accused were that he was suffering from acute heart disease; that he had been falsely implicated in the case due to mala fide of the authorities as the accused and other steel mill owners had been litigating against the sales tax department on different issues; that the prosecution had no incriminating material to connect the accused with the alleged commission of the offence; that alleged tax liability of the accused was yet to be determined by the adjudicating authorities and prior to that, no coercive measures, including arrest of the accused could be effected, and that the offences alleged did not fall within the prohibitory clause of S. 497, Cr.P.C---Validity---Accused was alleged to have evaded tax and excise duty to the tune of Rs.133 million but liability of said amount was yet to be determined by the competent authority---Prior to the final determination of tax liability the offence became a matter of further inquiry, entitling the accused to the concession of bail---Medical report of the accused showed that he was suffering from heart disease and two of his arteries had narrowed severely, and that he needed medicine and easy access to a hospital with treatment facilities---Further incarceration of the accused might have put his life at stake as his treatment was not possible in jail---Accused was granted bail subject to deposit of 5% of the his total alleged liability with the concerned authority/department.

The State through Collector of Sales Tax v. Muhammad Ashfaq Ahmed and others 2006 PTD 286 ref.

Kh. Adnan Ahmad for Petitioner.

2012 P T D 1447

[Lahore High Court]

Before Shujaat Ali Khan, J

Messrs NISHAT (CHUNIAN) LTD. through Chief Financial Officer

Versus

PROVINCE OF PUNJAB through Secretary Local Government Provincial Secretariat and 2 others

Writ Petition No. 177 of 2008, and C.M. No.2050 of 2012, decided on 17th May, 2012.

(a) Punjab Local Government Ordinance (XIII of 2001)---

----Sixth Sched., Para 44---Punjab Local Government (Fee for Licensing and Permits and Licensing of Professions and Vocations) Rules, 2002, R.3(iii)(f)---Constitution of Pakistan, Arts. 189 & 199---Constitutional petition---License fee, demand of---Manufacturing of textile products---Supreme Court, decision of---Judgment in rem---Petitioner was a textile manufacturing company and was aggrieved of notice of demand issued by authorities for recovery of professional fee---Plea raised by authorities was that notice was rightly issued as the matter had already been decided by Supreme Court---Validity---Business of manufacturing textile products fell within the purview of paragraph 44 of Sixth Schedule to Punjab Local Government Ordinance, 2001, read with R. 3(iii)(f) of Punjab Local Government (Fee for Licensing and Permits and Licensing of Professions and Vocations) Rules, 2002, therefore, notice for demand of licence fee was lawfully issued by authorities---Earlier petition filed by petitioner was disposed of in terms of judgment passed in main petition and the same was set aside by Supreme Court, which was judgment in rem, and binding on all in view of Art.189 of the Constitution---Non-filing of appeal in other cases was of no legal consequence---Judgment settling proposition of law and declaring legal position was binding upon petitioner company and as such demand notice was legally issued by authorities under Punjab Local Government Ordinance, 2001---Petitioner failed to make out a case for holding notice as illegal and without lawful authority---Petition was dismissed in circumstances.

Quetta Textile Mills Limited, Nadir House, G/F-I, I.I. Chundrigar Road, Karachi v. Pakistan through Secretary, Ministry of Finance, Government of Pakistan Islamabad and 2 others 2000 YLR 2683; Income-Tax Officer, Central Circle II, Karachi and another v. Cement Agencies Ltd. PLD 1969 SC 322; Mian M. Azam Chaila v. Wajid Ali Khan and others PLD 2009 Lah. 449; Koh-i-Noor Sugar Mills Limited v. Pakistan through Secretary, Ministry of Finance and 2 others 1989 SCMR 2044 and Muhammad Idrees v. Agricultural Development Bank of Pakistan and others PLD 2007 SC 681 distinguished.

(b) Constitution of Pakistan---

----Art. 199---Civil Procedure Code (V of 1908), O.XXIX, R.1---Constitutional petition---Corporation/company, locus standi---Pre-condition---Company is not competent to file Constitutional petition in absence of certified true copy of resolution and Memorandum of Articles and Association---Such deficiency is fatal and subsequent rectification cannot fill up such lacuna.

Messrs Syed Bhais (Pvt.) Ltd. through Director v. Government of Punjab through Secretary Local Government and 3 others PLD 2012 Lah. 52; Messrs Sargodha Jute Mills Limited v. Federation of Pakistan and others; Writ Petition No.13784 of 2008; Tara Chand and others v. Karachi Water and Sewerage Board, Karachi and others 2005 SCMR 499; Words and Phrases (Volume 23) published by West Publishing Co.; Justice Khurshid Anwar Bhinder and others v. Federation of Pakistan and another PLD 2010 SC 483; Trustees of the Port of Karachi v. Karachi International Container Terminal Limited 2010 CLC 1666; Messrs Sandal Dye Stuff Industries Ltd. v. Federation of Pakistan through Secretary Finance, Pakistan Secretariat, Islamabad and 5 others 2000 CLC 661 and Pir Bakhsh represented by his Legal Heirs and others v. The Chairman, Allotment Committee and others PLD 1987 SC 145 rel.

Malik Ahsan Mahmood for Petitioner.

Ch. Abrar Ahmad and Hafiz Muhammad Naeem for Respondent No.1.

Rana Shamshad Khan, A.A.-G.

2012 P T D 1471

[Lahore High Court]

Before Ayesha A Malik, J

JAMAL SALAM

Versus

DEPUTY COLLECTOR CUSTOMS and others

Writ Petition No.9895 of 2012, heard on 29th May, 2012.

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

----Ss.179, 180 & 168---Constitution of Pakistan, Art.199---Constitutional petition---Maintainability---Adequate remedy---Petitioner, who held an import authorization permit for ammunition was issued with a show cause notice stating that he had exceeded his quota and used more than one NTN to import the ammunition---On basis of said show cause notice, his import authorization permit was withheld---Case of the petitioner was that the Customs officers had exceeded their jurisdiction and were acting contrary to the law---Validity---Remedy provided under the Customs Act, 1969 was not efficacious as the Customs Officers could not decide whether they had exceeded their jurisdiction or whether the Ministry of Commerce was the competent authority to withhold the original Import Authorization Permit---Constitutional petition was maintainable, in circumstances.

PLD 2008 SC 779 and PLD 2010 SC 969 ref.

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

----Ss.168, 180, 179 & 16---Import Policy Order, 2009 (as amended up to 15th March 2011), S.8---Constitution of Pakistan, Art.199---Constitutional petition---Import Authorization Permit---Petitioner, who held an import authorization permit for ammunition was issued with a show cause notice stating that he had exceeded his quota and used more than one National Tax Number to import the ammunition---Contention of the petitioner was that any dispute in relation to the import status of any item had to be resolved by the Ministry of Commerce as per S.8 of the Import Policy Order, 2009 and no Customs Officer had the authority to withhold the Import Authorization Permit---Validity---Ministry of Commerce as per the Import Policy Order merely prescribed the quota for the import of non-prohibited bore arms and ammunition through the Import Authorization Permit---Import per se would be regulated by the Customs Authority under the Customs Act, 1969---Mere permission by the Ministry of Commerce would not divest the Customs Authority from its jurisdiction---Section 16 of the Customs Act, 1969 envisaged the role of the Federal Government which was to prohibit or restrict the bringing into or taking out of Pakistan of any goods---Any prohibition or restrictions set out by the Federal Government would fall within the scope of the Customs Authority under the Customs Act, 1969---Issuance of Import Authorization Permit by the Federal Government did not take away the jurisdiction of the Customs Authorities to investigate, inquire and adjudicate under the Customs Act, 1969 in terms of any import into Pakistan---Customs Authorities were fully authorized to withhold the original Import Authorization Permit pending an inquiry conducted under the Customs Act, 1969 and upon the conclusion of such an inquiry, they could send their recommendations to the Ministry of Commerce---Section 168(3) of the Customs Act, 1969 empowered the Customs Authorities to seize any document or thing which in their opinion would be useful evidence in any proceedings under the Act---Withholding of the Import Authorization Permit was in accordance with the powers conferred upon the Customs Officers under the law---Constitutional petition was dismissed in circumstances.

PLD 1961 SC 537; PLD 1963 SC 203; PLD 1965 SC 605; 1983 PCr.LJ 670; 1983 PCr.LJ 623; 1987 PCr.LJ 1091 and PLD 1991 Quetta 36 ref.

Adnan Ahmad Khawaja for Petitioner.

Ghulam Ali Raza with Miss Naeema Batool, Deputy Collector Custom and M. Naveed Chishti for Respondents.

Date of hearing: 29th May, 2012.

2012 P T D 1611

[Lahore High Court]

Before Ijaz ul Ahsan and Syed Mansoor Ali Shah, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE-I, LAHORE

versus

AYESHA WOOLLEN MILLS (PVT.) LIMITED, LAHORE

Income Tax Appeals Nos. 45 to 49 of 1998, decided on 9th December, 2011.

Income Tax Ordinance (XXXI of 1979)---

---Ss.32-A, 62(1) & 136---High Court Appeal---Certificate of Chartered Accountant---Scope---Distinction between falsity of accounts and method of accounting---Commissioner Income Tax assailed orders of the Income Tax Appellate Tribunal whereby assessee's appeal was allowed and it was ordered that the assessee's declared trade results be accepted---Contention of the Department was that in presence of a qualified certificate by auditor / Chartered Accountant of the assessee, and the qualification being that that they had not carried out valuation of stock and stores and verification of markup payable or examined the bills payable by verification; provided justification for rejection of trading accounts of the assessee in terms of S. 32A of the Income Tax Ordinance, 1979---Validity-In interpretation of provisions of S. 32A of the Ordinance, there was a distinction between method of accounting and falsity of accounts---Method of accounting could not be questioned in view of the fact that the Chartered Accountant of the assessee audited the accounts and certified that the balance sheet profit and loss accounts together with the notice forming part thereof, gave a true and fair view of the affairs of the assessee company and thus it could not be suggested that the method of accounting was such that income could not be deduced therefrom---Said certificate given by the Chartered Accountants was not false and no material or evidence to that effect was gathered or relied upon by the Assessing Officer or confronted to the assessee---Assessing Officer did not issue notice to assessee under S. 62(1) of the Ordinance which was a mandatory obligation and proceeded to reject the books of accounts without recording any cogent or legally sustainable reasons---Ground that the said certificate was qualified, did not furnish sufficient reason to reject the accounts altogether in absence of cogent and plausible reasons to do so---Appeal was dismissed.

CIT v. Krudd Sons Ltd. 1994 PTD 174; Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681 and Messrs Pimpa (Pvt.) Ltd., Karachi v. CIT Companies-I, Karachi 1994 PTD 123 rel.

Muhammad Ilyas Khan for Appellant.

Mian Ashiq Hussain for Respondent.

Date of hearing: 11th November, 2011.

2012 P T D 1758

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs ALAMDAR ENGINEERING (PVT.) LTD. through Chief Executive

versus

FEDERATION OF PAKISTAN through Secretary Finance, Government of Pakistan, Islamabad and 2 others

W.P. No.19300 of 2000, decided on 6th June, 2012.

Constitution of Pakistan---

----Art.199---S.R.O. 989(I)/1997 dated 15-10-1997---S.R.O.(I)/1998 dated 1-7-1998---Constitutional petition---Central Board of Revenue (CBR) notification and adjudication order of Collector of Customs---Vires of notification and adjudication order was challenged by constitutional petition before the (Lahore) High Court---Maintain-ability---Territorial jurisdiction of (Sindh) High Court---Scope---Importer (petitioner) availed exemption under S.R.O. 989(I)/1997 dated 15-10-1997 (first S.R.O.) from levy of customs duty and sales tax on machinery and equipment imported---Collector of Customs (respondent) cleared the imported consignments, but unknown to him S.R.O. 989(I)/1997 (first S.R.O.) had been rescinded with immediate effect vide S.R.O.(I)/1998 dated 1-7-1998 (second S.R.O.)---Consequently Collector of Customs sent demand notice to the importer on account of duty and tax payable as the exemption availed had actually been recalled---Said demand notice subsequently merged into an order in original, which was challenged in the present constitutional petition before (Lahore) High Court-----Collector of Customs and Central Board of Revenue (respondents) raised the contentions that present constitutional petition was not maintainable to challenge the adjudication order in original before (Lahore) High Court for lack of territorial jurisdiction; that Collector of Customs was a statutory officer performing functions at Karachi which was beyond the territorial jurisdiction of Lahore High Court---Importer contended that present constitutional petition was maintainable on the ground that Collector of Customs operated throughout Pakistan and was amenable to the jurisdiction of Lahore High Court, and that where a notification/policy decision of the Central Board of Revenue was also challenged along with an adjudication order passed beyond the territorial jurisdiction of the court then a constitutional petition was maintainable before the Lahore High Court---Validity---Where the vires of a notification by Central Board of Revenue was challenged along with an adjudication order, such a challenge to adjudication order was maintainable only before the High Court within the territorial jurisdiction of which court, such order had been passed---Such a rule was conditional and dependent upon whether or not an adjudication order had been challenged---S.R.O.(I)/1998 dated 1-7-1998 (second S.R.O.) had fructified into an adjudication order passed by Collector of Customs, who fell solely within the territorial jurisdiction of Sindh High Court---Importer could not receive any effective relief without disputing said adjudication order, therefore, present case was a case wherein a challenge to the adjudication order in original was maintainable before the Sindh High Court---Constitutional petition was dismissed accordingly.

Ahmad Abdullah Dogar for Petitioner.

Ch. Muhammad Zafar Iqbal for Respondents.

2012 P T D 1815

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

Messrs CHENONE STORES LTD. through Executive Director (Finance Accounts)

Versus

FEDERAL BOARD OF REVENUE through Chairman and 2 others

Writ Petition No.393 of 2012, heard on 10th May, 2012.

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

----Ss. 177 & 214C---Audit, selection for---Power of Commissioner (Inland Revenue) to select a taxpayer for audit---Legislative history of S.177(1) of Income Tax Ordinance, 2001 and amendments made therein recorded.

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

----Ss. 177(1) & 214C---Sales Tax Act (VII of 1990), Ss. 25(2) & 72B---Federal Excise Act (VII of 2005), Ss. 46(1) & 42B---Audit, selection for---Objective criteria---Scope---Objective criteria was a pre-condition for selection for audit.

Ch. Muhammad Hussain and others v. Commissioner of Income Tax 2005 PTD 152; Muneer Bhimjee and others v. Islamic Republic of Pakistan and 2 others 2005 PTD 1974; Messrs Bisma Textile Mills Ltd. Through Chief Executive v. Federation of Pakistan through Secretary Revenue Division/Chairman F.B.R. and 2 others 2009 PTD 41; Mohsin Raza v. Chairman Federal Board of Revenue and others 2009 PTD 1507; Messrs Sadar Anjuman-e-Ahmedia through General Attorney v. Commissioner of Income Tax (Audit Division), Faisalabad and 3 others 2010 PTD 571 and Chairman FBR and others v. Idrees Traders and others 2012 SCMR 597 = 2012 PTD 693 rel.

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

----Ss.177 (1) & 214C---Sales Tax Act (VII of 1990), Ss. 25(2) & 72B---Federal Excise Act (VII of 2005), Ss.46 (1) & 42B---Audit, selection for---Nature and purpose---Selection for audit was not an "adverse order" but a neutral function required to survey the compliance of the tax system---Selection for audit was not an investigative tool targeting a person/taxpayer on the basis of the tax return filed by him.

Ch. Muhammad Hussain and others v. Commissioner of Income Tax 2005 PTD 152; Muneer Bhimjee and others v. Islamic Republic of Pakistan and 2 others 2005 PTD 1974; Messrs Bisma Textile Mills Ltd. Through Chief Executive v. Federation of Pakistan through Secretary Revenue Division/Chairman F.B.R. and 2 others 2009 PTD 41; Mohsin Raza v. Chairman Federal Board of Revenue and others 2009 PTD 1507; Messrs Sadar Anjuman-e-Ahmedia through General Attorney v. Commissioner of Income Tax (Audit Division), Faisalabad and 3 others 2010 PTD 571 and Chairman FBR and others v. Idrees Traders and others 2012 SCMR 597= 2012 PTD 693 rel.

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

---Ss. 177(1) & 214C---Sales Tax Act (VII of 1990), Ss. 25(2) & 72B---Federal Excise Act (VII of 2005), Ss. 46(1) & 42B---Audit selection---Nature and purpose---Audit selection was non-reactive and not default driven, but a neutral process to assess the performance and efficiency of the tax system---Any taxpayer was identified and selected for audit because he fell in the objective selection criteria, which was designed to check the compliance and health of the tax system and for no other reason---Audit was rooted in impartiality, neutrality and objectivity and it was for this reason that Audit had a wide scope of inquiry and engulfed the entire "tax affairs of a person or a taxpayer."

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

---Ss. 177(1), 214C & 120(1)(b)---Sales Tax Act (VII of 1990), Ss.25(2) & 72B---Federal Excise Act (VII of 2005), Ss.46(1) & 42B---Constitution of Pakistan, Art.199---Constitutional petition---Audit, selection for---Power of Commissioner (Inland Revenue) to select any person/taxpayer for audit without an objective criteria---Legality---Section 177(1) [first proviso] of Income Tax Ordinance, 2001; S.25(2) of Sales Tax Act, 1990 and S.46(1) of Federal Excise Act, 2005--- Constitutionality---Audit, process of---Purpose---Commissioner (Inland Revenue) served petitioners with impugned notices for audit under S.177(1) of Income Tax Ordinance, 2001 and under Ss.25 and 46 of Sales Tax Act, 1990 respectively, whereby petitioners had been selected for audit of their tax affairs and were directed to furnish their records for further investigation---Contentions of petitioners were that selection of a taxpayer for audit of its tax affairs without an objective criteria offended the equality clause and thus was not permissible under the law, and that Federal Board of Revenue ("Board") was empowered to select cases for audit and the powers of the Commissioner were restricted to mere conducting of the audit of the taxpayers, after the cases had been selected by the Board---Validity---Proviso under S.177(1) of Income Tax Ordinance, 2001, had been used in the present case to proceed against specific taxpayers by carrying out a blind roving inquiry into their tax affairs with the expectation to unearth tax violation---Perusal of the impugned notices showed that nothing specific had been detected or stated in the notice against the petitioners but instead only record had been called for to carry out "verification" which clearly amounted to a sniffing expedition into the tax affairs of a person, which was not the purpose of audit---Audit function had been built to create deterrence in order to buttress voluntary compliance but its use by the tax regulator as an investigative power to hold a fishing expedition into the tax affairs of a taxpayer impaired the concept of self-assessment and morphed it into regular assessment---Concept of deemed assessment order on the filing of the return by a taxpayer was brought to a naught if the tax regulator had the power to revert to regular assessment in the garb of audit and that too after the passing of the deemed assessment order under the law---Section 177(1) [first proviso] of Income Tax Ordinance, 2001, S.25(2) of Sales Tax Act, 1990 and S.46(1) of Federal Excise Act, 2005 vested Commissioner (Inland Revenue) with uncanalized power to choose and select any person for audit of its tax affairs---Audit could not take place on the whims and caprice of the Officer of the Inland Revenue but on the basis of an objective criteria, therefore said sections were ex facie discriminatory and, therefore, unconstitutional and illegal---Said sections were read down and it was held that they provided the machinery provision to conduct audit after the taxpayer was selected for audit of its tax affairs by the Federal Board of Revenue through computer ballot which might be random or parametric---Constitutional petitions were allowed and impugned notices issued by the Commissioner (Inland Revenue) were set aside as being unconstitutional, illegal and without lawful authority.

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 PTD 37; Mohsin Raza v. Chairman, Federal Board of Revenue and others 2009 PTD 1507; Messrs Sadar Anjuman-e-Ahmedia through General Attorney v. Commissioner of Income Tax (Audit Division), Faisalabad and 3 others 2010 PTD 571; Chairman FBR and others v. Idrees Traders and others 2012 SCMR 597 = 2012 PTD 693; Padmasundara Rao (Decd.) and others v. State of Tamil Nadu and others 255 ITR 147; Kishore B. Setalvad v. Commissioner of Wealth Tax 256 ITR 637; The Punjab Province v. Malik Khizar Hayat Khan Tiwana PLD 1956 FC 200; Commissioner of Income Tax, Companies-I, Karachi v. Messrs National Investment Trust Ltd., Karachi 2003 PTD 589; Pakistan Lyallpur-Samundri Transport Co. Ltd., Lahore v. Commissioner of Income-Tax, Lahore Zone, Lahore 1980 PTD 69; Pervaiz Akhtar and another v. The Additional District Judge, Rawalpindi and 4 others PLD 1990 SC 681; State and another v. Sajjad Hussain and others 1993 SCMR 1523; Shashikant Laxman Kale and another v. Union of India and another 185 ITR 104 and Messrs Syed Bhais (Pvt.) Ltd. Through Director v. Central Board of Revenue, Islamabad through Chairman and another 2007 PTD 239 ref.

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

----S. 177(1), first proviso---Constitution of Pakistan, Arts.10A, 18, 23, 25 & 199---Constitutional petition---Audit, selection for---Powers of Commissioner (Inland Revenue) to select any taxpayer for audit without any objective criteria---Scope and legality---First proviso to S.177(1) of Income Tax Ordinance, 2001---Constitutionality---Severance from statute---Scope---Provisions of S.177(1) of Income Tax Ordinance, 2001 equipped the Commissioner to call for any record from any person or taxpayer---Said provisions were noticeably silent regarding parameters, guidelines or criteria which could form the basis for triggering the said provisions into motion---Said provisions, lacked legislative check on the exercise of power by the Commissioner, who was, therefore, free to pick and choose any person or taxpayer for audit---Legislative policy of the Income Tax Ordinance, 2001 could not equip the Commissioner with naked power to pick and choose according to his whims and wishes---Commissioner could not enjoy unguided discretion but only exercise discretion which was under a legislative guideline showing structured, uniform and transparent exercise of discretion, hence provisions of S.177(1) of Income Tax Ordinance, 2001 were ex-facie discriminatory and gave an unchecked license to the Commissioner---Any provision of law that was ex-facie discriminatory also offended the right to "due process" under Art.10A of the Constitution---Any such illegal and unconstitutional invasiveness to call for the record for verification was an extra burden on the taxpayer and unduly interfered with his business offending Arts.18 and 23 of the Constitution, hence S.177(1) of Income Tax Ordinance, 2001 and its first proviso offended Arts.10A, 18, 23 and 25 of the Constitution---Commissioner had no power to select a taxpayer for audit under the scheme of S.177 of Income Tax Ordinance, 2001 unless legislature laid down specific power to select with a pre-fixed objective criteria---First proviso to S.177(1) of the Income Tax Ordinance, 2001 could not be read down, however, it could be severed from the statute in order to protect the legislative theme behind the Income Tax Ordinance, 2001 and to maintain the constitutionality of the remaining statute---First proviso to S.177(1) of the Income Tax Ordinance, 2001 was struck down by the High Court, as being unconstitutional and illegal and with such declaration the second proviso to S.177(1) became practically redundant and ineffective.

Waris Meah v. The State and others PLD 1957 SC 157; Jibendra Kishore Achharyya Chowdhury and 59 others v. The Province of East Pakistan and others PLD 1957 SC 9; Messrs East and West Steamship Company v. Pakistan and others PLD 1958 SC 41; Inamur Rehman v. Federation of Pakistan and others 1992 SCMR 563; Shaukat Ali Mian and another v. The Federation of Pakistan 1999 CLC 607; Government of Balochistan through Additional Chief Secretary v. Azizullah Memon and 16 others PLD 1993 SC 341; Province of the Punjab through Secretary, Local Government and Rural Development Department, Civil Secretariat, Lahore and another v. Mian Manzoor Ahmad Wattoo 1998 CLC 1585 and In the matter of: Reference No.2 of 2005 by the President of Pakistan PLD 2005 SC 873 rel.

(g) Constitution of Pakistan---

----Art. 10A---Right to due process---Provision of law---Discriminatory in nature---Effect---Provision of law that was ex facie discriminatory and was also being applied discriminatorily could not pass the text of due process under Art.10A of the Constitution.

(h) Interpretation of statutes---

----Purposive/contextual construction--- Scope--- Where literal construction or plain meaning caused hardship, futility, absurdity or uncertainty, the purposive or contextual construction was preferred to arrive at a more just, reasonable and sensible result.

Interpretation of Taxing Statutes by Mittal Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Indus Jute Mills Ltd. v. Federation of Pakistan 2009 PTD 1473; Introduction to Interpretation of Statues Reprint Edition 2007 by Dr. Avtar Singh and Sunil Batra v. Delhi Administration and others (1978) 4 SCC 494 ref.

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

----Ss. 177(1) & 214C---Constitution of Pakistan, Art.199---Constitutional petition---Audit, selection for---Procedure---Section 177(1) of Income Tax Ordinance, 2001 worked in tandem with S.214C of the same Ordinance---Substantive power to select a person for audit was provided in S.214C of the Income Tax Ordinance, 2001 and the machinery provision providing procedure for conducting the audit was in S.177 of the said Ordinance---Taxpayer would first be selected for audit under S.214C of the Ordinance by the Federal Board of Revenue and only then would the Commissioner conduct its audit in accordance with procedure given in S.177 of the Ordinance.

Muhammad Umer Rathore v. Federation of Pakistan PLD 2009 Lah. 268; Federal Steam Navigation Co. Ltd. and another v. Department of Trade and Industry (1974) 2 All E R 97; Delhi Transporate Corporation v. D.T.C. Mazdoor Congress and others AIR 1991 SC 101; Sunil Batra v. Delhi Administration and others AIR 1978 SC 1675 and Jagdish Pandey v. The Chancellor, University of Bihar and others AIR 1968 SC 353 rel.

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

----Ss. 177(8) & 214C-- Constitution of Pakistan, Art.199---Constitutional petition---Audit, selection for---Procedure---Section 177(8) of Income Tax Ordinance, 2001 would come into operation after a person had been selected for audit by the Federal Board of Revenue under S.214C of the Ordinance.

(k) Federal Excise Act (VII of 2005)---

----Ss. 46(1) & 42B-- Constitution of Pakistan, Art.199---Constitutional petition---Audit, selection for---Procedure---Conjunctive reading of Ss.42B and 46(1) of Federal Excise Act, 2005 showed that the power to select for audit was with the Federal Board of Revenue and the subsequent act of conducting audit was with the Officer of the Inland Revenue---Any other interpretation, especially the one that the Officer of Inland Revenue could independently and simultaneously select a person for audit, was not tenable. [p. 1847] U

(l) Federal Excise Act (VII of 2005)---

----Ss. 46(1) & 42B---Constitution of Pakistan, Art.199---Constitutional petition---Audit, selection for---Power of Commissioner (Inland Revenue) to choose and select any person/taxpayer for audit of its tax affairs without any objective criteria---Legality---Section 46(1) of Federal Excise Act, 2005---Constitutionality---Section 46(1) of Federal Excise Act, 2005 did not provide an objective criteria laying down guidelines for selection of audit---Audit could not take place on the whims and caprice of the Officer of the Inland Revenue but on the basis of an objective criteria---Commissioner (Inland Revenue) was vested with uncanalized power to pick and choose and select any person for audit of its tax affairs---Section 46(1) of Federal Excise Act,2005 was ex facie discriminatory and, therefore, unconstitutional and illegal---In view of S.42B of Federal Excise Act, 2005, constitutionality of S.46(1) of the Act was protected and the said provision saved only if it was read down or recasted to be read in tandem with S.42B of the Act , therefore, S.46(1) would come into play to conduct the audit once the selection for audit was made by the Federal Board of Revenue in the manner provided under S.42B of Federal Excise Act, 2005.

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

----Ss. 25(1) & (2) & 72B---Constitution of Pakistan, Art.199---Constitutional petition---Audit, selection for---Power of Commissioner (Inland Revenue) to choose and select any person/taxpayer for audit without any objective criteria---Legality---Sections 25(1) & (2) of Sales Tax Act, 1990---Constitutionality---Section 25(2) of Sales Tax Act, 1990, which vested the Commissioner (Inland Revenue) with the power to pick and choose a taxpayer for audit, without any objective criteria, was ex facie discriminatory---Scope of selection for audit was further restricted, as S.25(2) of Sales Tax Act, 1990 selected the taxpayers from amongst those taxpayers whose record had been earlier called under S.25(1) of the same Act, which alone was inconsistent with the concept of audit---Section 25(2) of Sales Tax Act, 1990 provided for unguided and uncanalised power to conduct audit which, was ex facie discriminatory and hence unconstitutional and illegal---Constitutionality of S.25(1) of Sales Tax Act, 1990 could be saved if it was read down and read in tandem with S.72B of the same Act, hence, S.25(1) of the Act provided the machinery provision for conducting of audit of the tax affairs of a taxpayer, after it had been selected for audit by the Federal Board of Revenue under S.72B of Sales Tax Act, 1990.

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

----Ss. 25(1) & (2) & 72B---Audit, selection for--- Procedure--- Section 25(1) of Sales Tax Act, 1990 provided the machinery provision for conducting of audit of the tax affairs of a taxpayer, after it had been selected for audit by the Federal Board of Revenue under S.72B of the said Act.

Shahbaz Butt, Rana Muhammad Afzal, M. M. Akram, M. Iqbal Hashmi, Dr. Ilyas Zafar, Syed Ibrar Hussain Naqvi, Muhammad Naeem Shah, Mian Masood Ahmad, Javed Iqbal Qazi, Usman Javed Qazi, Ch. Anwaar-ul-Haq-I, Khawaja Farooq Saeed, Muhammad Siddique Rana, Imtiaz Rashid Siddiqui, Shaharyar Kasuri, Sajid Ijaz Hotiana, Jan Muhammad Chaudhry, Muhammad Ajmal Khan, Muhammad Farooq Sheikh, Rana Munir Hussain, Muhammad Shahid Mukhtar Chandia, Tariq Saleem Sheikh, Abdul Waheed Habib, Muhammad Younas Khalid, Mian Mahmood Rashid, Muhammad Aleem Irshad, Sami Ullah Zia, Mudassar Shujauddin, Asghar Ahmed Kharl, Muhammad Ijaz Ali Bhatti, Habib-ur-Rehman, H. M. Majid Siddiqi, Malik Ahsan Mehmood, Muhammad Javaid Iqbal Qureshi, Muhammad Mohsin Virk, Muhammad Arif Mallhi, Ch. Muhammad Aslam, Shahzad Mahmood Butt, Sohail Ibne Siraj, Muhammad Younas Khalid, Ch. Muhammad Naveed Shabbir Goraya, Zahid Ateeq Ch., Zurgham Lukhesar, Muhammad Nadeem, Muhammad Nauman Yahya, Barrister Khurram Raza, Saleem Iqbal Rathore, Agha Sarfraz Ahmad, Suhail Raza, Shahbaz Siddique, Ahsan Khan Yusufi, Nawazish Ali, Muhammad Naeem Munawar, Mian Muhammad Hussain Chotya, Hashim Aslam Butt, Ch. Muhammad Arshad, Agha Sarfraz Ahmed, Muhammad Ejaz, Ghulam Murtaza, Rasheed Ahmed Sheikh, Munawar us Salam, Mirza Anwar Baig, Malik Abdul Qadir Jsra, Ahmed Naseer Sheikh, Shahid Usman, Shakeel Ahmad Basra, M. Shahid Umar Khan, Muhammad Waseem Ch, Sayyid Ali Imran Rizvi, Ghazanfar Farookh, Shahzad Mahmood Butt, Muhammad Anwar Bhatti, Ch. Mumtaz-ul-Hassan, Muhammad Azhar Siddique, Syed Naeem-ud-Din Shah, Shoaib Ahmed Sheikh, Ch. Muhammad Ali, Muhammad Shahid Baig, Naeem Khan, Mian Abdul Ghaffar, Muhammad Ahsan Virk, Rana Muhammad Aslam, Syed Irfan Haider, Mohsin Afzaal Hashmi, M. Farooq Khokhar, Iftikhar Ahmad Khan, Abdul Qaddus Mughal, Muhammad Mansha Sukhera, Zia Shahid Waseer and Mian Faheem Bashir, Advocates for Petitioners.

Muhammad Ilyas Khan, Ch. Pervaiz Iqbal Gondal (Standing Counsel), Ehsan-ur-Rehman Sheikh, Monam Sultan, Raja Sikandar Khan, Muhammad Asif Hashimi, Sarfraz Ahmad Cheema, Ms. Kausar Parveen, Mian Yousaf Umar, Sajjad Haider Rizvi, Saeed-ur-Rahman Dogar, Mian Asghar Ali Gurdaspuri, Muhammad Yahya Johar, M. Yusuf Akram, Zaheer-ul-Hassan Zahoor, Khadim Hussain Zahid, Sohail Zahid Butt, Amjad Hussain Malik, Agha Muhammad Akmal Khan and Tariq Manzoor Sial, Advocates, Muhammad Aqil Usman, Member Legal FBR, Dr. Tariq Masood, Additional Commissioner, FBR (HQ), Karachi, Yousif Hyder Shaikh, Additional Commissioner FBR (HQ) Karachi for Respondents.

Asim Zulfiqar, Amicus Curiae.

Nadeem Ahmed Sohail Cheema, Civil Judge/Research Officer, Lahore High Court Research Centre (LHCRC).

Date of hearing: 10th May, 2012.

2012 P T D 1869

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

Messrs SETHI AND SETHI SONS through Humayun Khan

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and others

Writ Petition No.6581 of 2012, heard on 31st May, 2012.

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

----S. 37---Federal Board of Revenue Act (IV of 2007), Preamble---S.R.O. No.56(I)/2010, dated 2-2-2010---S.R.O. No.775(I)/2011, dated 19-8-2011---S.R.O. No.776(I)/2011, dated 19-8-2011---Constitution of Pakistan, Art.199---Constitutional petition---Maintainability---Federal Board of Revenue---Lahore High Court---Territorial jurisdiction---Scope---Person/body performing functions in connection with the affairs of the Federation---Delegation of power by such person/body to an officer based at Karachi with specified Provincial/territorial jurisdiction---Question, in the present case, was as to which High Court of Pakistan would have territorial jurisdiction under Art. 199 of the Constitution in relation to "acts done" or "proceedings initiated" by such an officer---Accused (businessman/petitioner) carried on business from Lahore city and was also registered at Lahore for tax purposes---Accused was alleged to have obtained inadmissible input tax on account of fake sales tax invoices issued by dummy units---Deputy Director, Directorate General of Intelligence & Investigation, Federal Board of Revenue (officer/respondent) based at Karachi , issued impugned notice to the accused under S.37 of Sales Tax Act, 1990 ---Directorate in question also lodged an FIR in Karachi against several business operating in Karachi and Lahore (present accused was excluded from the FIR)---Accused challenged before Lahore High Court under Art.199 of the Constitution assumption of jurisdiction by officer in question---Contention of Directorate was that impugned notice as well as the F.I.R. had been issued and registered at Karachi, respectively, therefore, matter fell outside the jurisdiction of Lahore High Court---Validity---Federal Board of Revenue, under the Constitution was a person "performing functions in connection with the affairs of the Federation"---Under Federal Board of Revenue Act, 2007 the jurisdiction of the Board extended to the whole of Pakistan---Any act done or proceedings initiated by Federal Board of Revenue could be challenged before any High Court in Pakistan, however, where a person performing functions in connection with the affairs of Federation, delegated his power to an officer having specified territorial jurisdiction/domain, such an officer would be considered to be performing functions within the territorial jurisdiction of the High Court within whose territorial jurisdiction of the said officer fell---Impugned notice, in the present case, had been issued by an officer of the Directorate, which was situated at Karachi---F.I.R. in question had also been registered with the said Directorate at Karachi---Said Directorate and its officers enjoyed a specific territorial jurisdiction restricted to Karachi, therefore, impugned notice (proceeding initiated) had been issued outside the territorial jurisdiction of Lahore High Court---"Dominant object "of present petition was to challenge the impugned notice issued by officer of Directorate in question, which was situated at Karachi, and to seek quashment of F.I.R. which was also registered at Karachi---Lahore High Court could not entertain both said challenges---Constitutional petition was held not to be main-tainable before Lahore High Court and was consequently dismissed.

Salahuddin and 3 others v. Frontier Sugar Mills and Distillery Ltd. Tokht Bhai and 10 others PLD 1975 SC 244; Pakistan International Airline Corporation and others v. Tanweer-ur-Rehman and others PLD 2010 SC 676; Asghar Hussain v. The Election Commission of Pakistan and others PLD 1968 SC 387; Messrs Al-Iblagh Ltd., Lahore v. The Copyright Board, Karachi and others 1985 SCMR 1758; LPG Association of Pakistan through Chairman v. Federation of Pakistan through Secretary, Ministry of Petroleum and Natural Resources, Islamabad and 8 others 2009 CLD 1498; Muhammad Idrees v. Government of Pakistan through Secretary, Establishment Division, Islamabad and 5 others 1998 PLC (CS) 239; Messrs Lucky Cement Ltd. v. The Central Board of Revenue and others PLD 2001 Pesh. 7; Khaista Gul v. Akbar Khan and 7 others PLD 1975 Pesh. 146; Trading Corporation of Pakistan (Pvt.) Ltd. v. Pakistan Agro Forestry Corporation (Pvt.) Ltd. and another 2000 SCMR 1703; Sh. Abdul Sattar Lasi v. Federation of Pakistan and 6 others 2006 CLD 18; Nawabzada Muhammad Shahabuddin v. The Chairman Federal Land Commission 1996 CLC 539 and Gulzar Ahmad Khan v. The Chief Election Commis-sioner of Pakistan, Islamabad and 7 others PLD 1997 Lah. 643 rel.

Sh. Abdul Sattar Lasi v. Federation of Pakistan through Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad and 6 others 2006 CLD 18 ref.

(b) Constitution of Pakistan---

----Art. 199---Constitutional petition---Primary object or purpose---Significance---High Court---Territorial jurisdiction ---Determination---Requirement to determine the "dominant object" or primary grievance of the petitioner or the paramount purpose of the petition was essential for the purposes of identifying the actual 'person' against whom writ was being sought, which in turn became relevant for carrying out circumferential determination whether the 'person' fell within the territorial jurisdiction of the High Court.

Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue and others PLD 1997 SC 334; Dr. Zahoor Ahmed Shah v. Pakistan Medical and Dental Council through Secretary and another 2005 MLD 718; Dr. Qaiser Rashid v. Federal Secretary, Ministry of Foreign Affairs, Government of Pakistan, Islamabad PLD 2006 Lah. 789; Amin Textile Mills (Pvt.) Ltd. v. Islamic Republic of Pakistan and 3 others, 1998 SCMR 2389; Sh. Abdul Sattar Lasi v. Federation of Pakistan and 6 others 2006 CLD 18; Sohail Jute Mills (Pvt.) Ltd. Rawalpindi through Chairman v. Central Board of Revenue, C.B.R., Islamabad through Chairman 1997 CLC 574 and LPG Association of Pakistan through Chairman v. Federation of Pakistan and 8 others 2009 CLD 1498 rel.

(c) Constitution of Pakistan---

----Art. 199---Constitutional petition---Person performing functions in connection with affairs of the Federation---Territorial jurisdiction of High Court over such person---Determination---Federal Government or any person performing functions in connection with the affairs of the Federation enjoyed ubiquitous presence everywhere across the country having territorial jurisdiction all over Pakistan or in other words, within the territorial jurisdiction of every High Court in the country---Such ubiquitous presence rendered it immaterial where the office or residence of such a person was located and in such a case it would be up to the aggrieved person to choose the High Court of his convenience.

(d) Constitution of Pakistan---

----Art. 199---Constitutional petition---Person performing functions in connection with the Province or Local Authority---Territorial jurisdiction of High Court over such person---Determination---Person performing functions in connection with the Province or Local Authority had a clearly demarcated territorial jurisdiction and for the purposes of territorial jurisdiction under Art.199 of the Constitution, the corresponding High Court in the Province assumed territorial jurisdiction.

(e) Constitution of Pakistan---

----Art. 199---Constitutional petition---Person performing functions in connection with the affairs of the Federation---Delegation of power by such person to an officer with specified territorial jurisdiction/ domain---Territorial jurisdiction of High Court over such an officer---Determination---Such an officer performed a localized function in connection with the affairs of the Federation in a particular area and would be considered to be performing functions within the territorial jurisdiction of the High Court within whose territorial jurisdiction the territorial jurisdiction of the officer fell.

(f) Constitution of Pakistan---

----Art. 199---Constitutional petition---High Court, jurisdiction of---"Act done" or "proceedings initiated" by a person performing functions in connection with the affairs of Pakistan---Territorial jurisdiction of such person---Significance---Location of effect of the act or order passed against the aggrieved person or the receipt of correspondence of any proceedings initiated against the aggrieved person was immaterial, what mattered was the territorial jurisdiction of the person and not that of the aggrieved person.

Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue and others PLD 1997 SC 334; Messrs Ibrahim Fibres Ltd. through Secretary/Director Finance v. Federation of Pakistan through Secretary/ Revenue Division and 3 others PLD 2009 Kar. 154; Sabir Din v. Government of Pakistan through Secretary, Ministry of Defence and others 1979 SCMR 555; Zulfikar Ali Bhutto v. The Federation of Pakistan through the Secretary, Ministry of Interior, Government of Pakistan Islamabad and 4 others PLD 1980 Kar. 113; Sh. Abdul Sattar Lasi v. Federation of Pakistan through Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad and 6 others 2006 CLD 18; Muhammad Shoaib v. Project Director, National ICT Scholarship Program, Ministry of Information Technology, Islamabad and another, 2011 CLD 23; Sohail Jute Mills (Pvt.) Ltd. Rawalpindi through Chairman v. Central Board of Revenue, C.B.R., Islamabad through Chairman 1997 CLC 574; Amin Textile Mills (Pvt.) Ltd. v. Islamic Republic of Pakistan and 3 others 1988 SCMR 2389 and A. R. Khan and Sons (Pvt.) Ltd. v. Federation of Pakistan though Secretary, Ministry of Commerce, Islamabad and 3 others 2010 CLD 1648 rel.

(g) Constitution of Pakistan---

----Art. 199---Constitutional petition---Person performing functions in connection with the affairs of Pakistan with limited territorial jurisdiction---Performing act or passing order or initiating proceedings outside his legally marked territorial jurisdiction---Territorial jurisdiction of High Court over such person---Determination---In the case of such a person, the High Court within whose territorial jurisdiction such an act was done or order passed or proceedings initiated would assume jurisdiction under Article 199 of the Constitution.

Muhammad Ajmal Khan, Ali Sibtain Fazli, Nasar Ahmad, Hasham Ahmad Khan, Ahmad Sibtain Fazli, Omer Gill, Muhammad Raza, Rana Muhammad Afzal, Mian Abdul Ghaffar, Mian Masood Ahmad, Ch. Zahid Attique, Rana Hamad Aslm, Ch. Abdul Razzaque, Khurram Shahbaz Butt, Abdul Samil Qureshi, Muhammad Farooq Sheikh, M.M. Akram, Ch. Ishtiaq Ahmad, Hashim Aslam Butt, Shahbaz Siddique, Muhammad Mohsin Virk, Ikram-ul-Haq Sheikh, Muhammad Ejaz and Shahbaz Siddique for Petitioners.

Dr. Rana M. Shamim, Sarfraz Ahmad Cheema, Ch. Zafar Iqbal, Kausar Parveen, Ch. Imtiaz Elahi, Mian Yusuf Umar, Tahir Zia Mahar, Sajjad H. Rizvi, Ehsan-ur-Rehman Sheikh and Saeed-ur-Rehman Dogar, Legal Advisor-FBR for Respondents.

Dr. Ikram ul Haq and Mansoor Usman Awan, Amici Curiae.

Nadeem Ahmad Sohail Cheema, Research Associate/Civil Judge, LHCRC.

Date of hearing: 31st May, 2012.

2012 P T D 1883

[Lahore High Court]

Before Ayesha A. Malik, J

WA SEEM YAQOOB

Versus

CHIEF COMMISSIONER, INCOME TAX, LAHORE and 2 others

Writ Petition No.18046 of 2012, decided on 16th August, 2012.

(a) Companies Ordinance (XLVII of 1984)--

----Ss.76, 155 & 156---Form-A filed by company for relevant year not reflecting name of petitioner as shareholder of company---Effect---Company could not register a transfer of shares or debentures without proper instrument of transfer duly stamped and executed by transferor and transferee and delivered to company along with scrips---Provision of S.76 of Companies Ordinance, 1984 being mandatory in nature, but default in compliance therewith, if any, would be a matter inter se between company and Security Exchange Commission, which could take its cognizance---Such Form-A would be prima facie evidence of matters contained therein, which could not be denied or refuted without cogent evidence---Petitioner for not being named in such Form-A ceased to be shareholder of company in relevant year---Principles.

Shahana Parvez and 2 others v. Messrs Goodluck Trade Impex (Pvt.) Ltd. Lahore and 6 others 1998 CLC 1157 ref.

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

---Ss.2(66), 91, 138(1) & 139---Income Tax Rules, 2002, R. 186---Constitution of Pakistan, Art.199---Constitutional petition---Failure of petitioner after attaining majority to pay tax due from him for assessment years during his minority as shareholder of company--Issuance of warrants of detention of petitioner under R.186 of Income Tax Rules, 2t102 and demand notice under S.138(1) of Income Tax, Ordinance, 2001---Petitioner's plea that for being minor during disputed tax years, he was not a tax-payer, thus, could not be made liable to pay such tax of company---Validity---No person could be made liable for tax of company for assessment years during which he either ceased to be its shareholder or was a minor---Record, in the present case, showed that petitioner was a minor during disputed years, thus, he could not be made liable for total income tax of company for such years---High Court set aside impugned order of detention while declaring same to be illegal in circumstances.

Shafqat Mahmood Chohan, Mian Muhammad Athar and Abdul Qaddus Mughal for Petitioner.

Asjad Yaqub, Advocate with Zain-ul-Abadin Addl. Commissioner and Shahid Sattar, Deputy Commissioner, Inland Revenue for Respondents.

Date of hearing: 10th August, 2012.

2012 P T D 275

[Peshawar High Court]

Before Mazhar Alam Khan and Azmatullah Malik, JJ

FAZAL-UR-REHMAN

Versus

APPELLATE TRIBUNAL CUSTOMS, CENTRAL EXCISE AND SALES TAX, PESHAWAR and 3 others

Customs Reference No.1 of 2010, decided on 18th October, 2011.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(1)(8)(89), 168(i) & 196---Imports and Exports (Control) Act (XXXIX of 1950), S.31---Smuggling---Confiscation of vehicle---Reference to High Court---Vehicle alleged to be the smuggled one was confiscated---Vehicle in question when seized was found with tampered chassis number---Petitioner had failed to produce any valid document regarding import of said vehicle, by him or by any other person---Petitioner had failed to prove his ownership or import and Appellate Tribunal, after considering all aspects, had rightly dismissed appeal by the petitioner---Reference to High Court was filed against judgment of Appellate Tribunal after about 10 months of impugned order which was time-barred and petitioner could not offer any plausible explanation for such delay in filing reference; reference was not entertainable on that score alone---No case for interference with the impugned order having been made out, Reference was dismissed, in circumstances.

Nemo for Petitioner.

Muhammad Ali for Respondents.

Date of hearing: 18th October, 2011.

2012 P T D 645

[Peshawar High Court]

Before Syed Sajjad Hussain Shah and Waqar Ahmad Seth, JJ

FAZAL WAHAB

Versus

COMMISSIONER OF INCOME TAX, PESHAWAR

Tax Reference No.15 of 2005, decided on 11th October, 2011.

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

----S.12(18)---Amount received as loan by assessee---Exclusion of such loan from total income---Scope---Such loan must be advanced through cross-cheque---Object of enacting S.12(18) of Income Tax Ordinance, 1979 being to prevent evasion of tax through dubious/fictitious transactions---Principles.

(b) Interpretation of statutes---

----Nothing would be imported in a provision giving clear meaning.

(c) Evidence---

----Documentary evidence---Beneficiary of a document would be bound to prove same through cogent evidence beyond shadow of doubt.

Abdur Rauf Rohaila for Petitioner.

Eid Muhammad Khattak for Respondent.

Date of hearing; 11th October, 2011.

2012 P T D 708

[Peshawar High Court]

Before Ejaz Afzal Khan, C J and Mazhar Alam Khan, J

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, PESHAWAR

Versus

Messrs LUCKY CEMENT LIMITED, PESHAWAR

F.A.O. No.82 and S.A.O. No.26 of 2001, decided on 12th October, 2011.

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

----S. 4(1)(2)---Central Excise Rules, 1944, R. 43---Levy of duty on cement---Determination of retail price of cement---Proof---Manufacturer had to prove that price charged was legibly, prominently and indelibly printed or embossed on the container---Decrease in strength of cement calling for decrease in price must be printed on container---Scheme of Central Excise Act, 1944, provided that such acts must be done under gaze of public at large, but not in secrecy of office---Principles.

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

----S. 35-C---Jurisdiction of Appellate Tribunal---Scope---Duty of highest forum would be to correct wrong done by forum of a lowest level---Tribunal being a final court of fact would decide lis with due application of mind instead of blindly following track chosen by Additional Collector---Only the law, but not the opinion of an officer would determine course of action---Principles.

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

----Ss. 35-C & 36-C---Appeal to High Court---Questions arising in case not appreciated in their correct perspective and decided with due application mind by the Appellate Tribunal---Effect---Such finding could not be maintained---High Court remanded case to the Tribunal for its decision afresh in accordance with law.

Pakistan through Secretary, Finance and another v. Kohat Cement Company and others PLD 1995 SC 659 and Deputy Collector of Central Excise and Land Customs, Peshawar and 2 others v. Premier Tobacco Industries Ltd. Peshawar 1993 SCMR 447 distinguished.

Abdus Rauf Rohaila for Appellant.

Alha Minallah for Respondent.

Date of hearing: 12th October, 2011.

2012 P T D 785

[Peshawar High Court]

Before Ejaz Afzal Khan, C J and Mazhar Alam Khan, J

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, PESHAWAR

Versus

SHARIK INTERNATIONAL (PVT.) LTD., HATTAR

Tax Reference No.151 of 2003, decided on 9th December, 2010.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(11)(29), 14(1), 22, 30 & 136---Reference to High Court---Question involved in the case was, whether interest earned by assessee company on deposits in the bank, was a "business income" or could be termed as 'income from other sources', liable to tax---Contention of counsel for department was that when the assessee company was engaged in manufacture and sale of textile products and detonators, any interest earned by the assessee through an investment made in bank or financial institution, would be 'income from other sources', which was liable to tax---Contention of counsel for the assessee, on the other hand, was that any interest accruing on a deposit, earned out of the business income, would be 'income from business', within the terms of S.22 of Income Tax Ordinance, 1979, and in circumstances, was not liable to income tax---Validity---Interest earned on such deposits, would essentially be 'income from other sources'---Section 30 of Income Tax Ordinance, 1979, nowhere made any distinction whether investment in a bank or financial institution was made out of an income earned through business or any other source---Such income by no canons of interpretation, could be termed as 'income from business', especially when accrual of interest had no nexus with manufacture or sale of textile products and detonators---Such income in circumstances, was 'income from other sources', liable to be taxed.

Commissioner of Income Tax East Pakistan Dacca v. The Liquidator, Khulna Bagerhat Railway Company Ltd., Ahmadabad PLD 1962 SC 128 and Messrs Lakki Cement Ltd., v. Commissioner Income Tax, Tax Reference No. 117 of 2003, decided on 22-11-2005 rel.

The Commissioner of Income Tax, Sales Tax, North Zone (West Pakistan) Lahore v. Messrs Agha Textile Mills, Gujranwala PLD 1962 (W.P) Lahore 816 and The Commissioner of Income Tax, East Pakistan v. Messrs Ayurvedic Pharmacy (Dacca), Ltd. PLD 1970 SC 93 distinguished.

Eid Muhammad Khattak for Applicant.

Amir Javed and Astaghfirullah for Respondent.

Date of hearing: 9th December, 2010.

2012 P T D 1116

[Peshawar High Court]

Before Miftah ud Din Khan and Mian Fasih ul Mulk, JJ SARTAJ

versus

THE STATE through Deputy Attorney General, N.-W.F.P., Peshawar and 3 others

Writ Petition No.672 of 2001, decided on 9th February, 2012.

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

----Ss.156(1)(89), 159(9) & 2(s)(a)---Constitution of Pakistan, Art.199-- , Constitutional petition-"Smuggling"---Petitioner was convicted for smuggling, possession and transportation of charas and said conviction was upheld by Appellate Court---Validity---Excise and Taxation staff had recovered charas weighing 5780 kilograms beneath the sugar ,cane loaded in a truck and the petitioner was allegedly arrested ----Only 4 grams from such a huge quantity was sent to the laboratory for examination, without obtaining samplhs from each and every packet which allegedly contained charas---Prosecution could ,not produce any evidence to the effect that the alleged contraband charas was of foreign origin when the same was specifically mentioned in the charge against the petitioner at the Trial Court---Petitioner was neither the owner of the truck nor it could be proved as to in which capacity the petitioner was present in the truck---Guilty intention was necessary ingredient of the offence under S. 156(1)(89), Customs Act, 1969 which was required to be proved by the conduct of the accused---Guilt of the petitioner had not been established by the prosecution in accordance with the requirements of the law---Mere importation or exportation of certain goods being prohibited by law did not amount to `smuggling' because goods in order to be 'smuggled must be either specified in clause 9 of 5.156 of the Customs Act,1969 or notified by the Federal Government under S. 2(s)(a) of the Customs Act, 1969---Conviction of the petitioner was set aside and he was acquitted from the charges---Constitutional petition was allowed accordingly.

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

----Ss.185 & 185F---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Orders of Special Appellate Court (Customs) and Special Judge (Customs), Taxation and Anti Smuggling---Scope---Special Court or a Tribunal created under an Act and presided over by a serving Judge of the High Court, while hearing a case, exercises the same powers as were available to a High Court under procedural laws, but such exercise, would not make that Court a `High Court' for such reason---Constitutional petition against order of said court was maintainable.

Asghar Ali and another v. The State 1999 SCMR 654 and 2001 SCMR 338 rel.

M. Asif Khan for Appellant.

Muzamil Khan DAG for Respondent.

Date of hearing: 9th February, 2012.

2012 P T D 1279

[Peshawar High Court]

Before Khalid Mahmood, J

SAJJAD ALI and others

versus

SECRETARY (WITHHOLDING TAX), ISLAMABAD and 6 others

Writ Petition No.252 of 2011, decided on 29th March, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 12, 53 & Second Sched., Part-I, Cl. 39---Constitution of Pakistan, Art. 199---Constitutional petition---Engineers of Tarbela Dam Power Station---Special allowance in shape of generation allowance granted to such Engineers by Wapda due to hard work and risk job thereof---Deduction of income tax on such allowance by authority treating same to be part and parcel of petitioners' salary---Validity---Special allowance would mean unusual and extraordinary allowance extended by Government from time to time in view of rendering of such services by particular employees---Special allowance and benefit would not be extended in ordinary course of time, but would be extended normally in rare cases in consideration of critical and arduous nature of duties of employees of a particular department or institution to which legislature itself had rightly extended exemption---Special allowance or benefit or other perquisite within meaning of S.12 of Income Tax Ordinance, 2001 was completely exempted from tax deduction---No tax could be levied on special allowance or benefit in view of Cl. 39, Part-I of Second Sched. of Income Tax Ordinance, 2001---Petitioners had been deprived of statutory exemption from income tax against such allowance, which was being enjoyed by other similar employees---Question of discrimination and interpretation of law was involved in the present case, thus, High Court could Judicially review impugned order of deduction---High Court accepted constitutional petition in circumstances.

Commissioner Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 ref.

Zulfiqar Ali Khalil for Petitioners.

Fazal-i-Gul along with Ashraf Ali Marwat Deputy Commissioner Legal Income Tax for Respondents.

2012 P T D 1329

[Peshawar High Court]

Before Attaullah Khan and Waqar Ahmad Seth, JJ

Dr. ASHFAQ AHMAD KHAN

versus

DEPUTY COMMISSIONER OF INCOME TAX, PESHAWAR and 3 others

Tax Reference No.29 of 2009, decided on 22nd February, 2012.

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

----Ss. 177, 122(8) 122(9) & 133---Reference to High Court-----Selection of case for audit---Taxpayer assailed selection of his case for audit on the grounds that no notice prior to and during the proceedings was issued to him and he had been condemned unheard---Validity-----Commissioner Income Tax was empowered to select any case for audit on the basis of any matter which he considered relevant---While invoking powers under Ss. 122(8), 122(9) and 177 of the Income Tax Ordinance, 2001; the Commissioner Income Tax was required not only to mention reasons and justifications (definite information) for such selection, but was also required to give the taxpayer an opportunity of an hearing and prior notice must also have been given to the taxpayer---Law regarding giving notice to the concerned person before proceeding against him was settled and under the principles of natural justice no one was to be condemned unheard---Provision of notice to a person who was to be proceeded against, had to be read in every statute, irrespective of the fact whether or not such provision was incorporated therein---Commissioner Income Tax was bound to issue notice to the assesse/taxpayer, before exercising his powers under Ss.122 & 177 of the Ordinance---Selection of the case of taxpayer for audit was defective and all subsequent orders against taxpayer were illegal as the same lacked the essentials required by law and were an abuse of exercise of vested discretion and therefore, were not sustainable in law---High Court declared the taxpayer's selection for audit as illegal, void and non-existent and observed that fresh proceedings against the taxpayer be initiated strictly in accordance with law---Tax reference was answered accordingly.

PLD 2002 SC 408; 1981 SCMR 1061 and 2001 SCMR 838 rel.

(b) Administration of justice---

----Provision of notice to a person who is to be proceeded against, had to be read in every statute, irrespective of the fact whether or not such provision was incorporated therein.

PLD 2002 SC 408 and 1981 SCMR 1061 rel.

Syed Arshad Ali for Petitioner.

Rehmanullah Khan for Respondents.

2012 P T D 1516

[Peshawar High Court]

Before Khalid Mahmood, J

JOHAR ALI (RAKI) and another

Versus

DISTRICT CO-ORDINATION OFFICER (D.C.O.) and 9 others

Writ Petition No.214 of 2011, decided on 22nd May, 2012.

Khyber Pakhtunkhwa Local Government Ordinance (XIV of 2001)---

----S.116 [as amended by North-West Frontier Province Local Govern-ment (Amendment) Ordinance (II of 2005)] & S.127---Constitution of Pakistan, Art. 199---Constitutional petition---Taxes to be levied---Imposition of local tax---Petitioners were importers of goods from China through dry port Sust Gilgit---Grievance of petitioners was that local government was not entitled to recover Kohistan Development Fee-Cess---Validity---Collection of tax under S.127 of Khyber Pakhtunkhwa Local Government Ordinance, 2005, was meant for Provincial tax levied by Provincial Government---No publication before levying of tax had been produced vide which objections from public were invited nor any legal procedure for imposition of disputed tax had been brought on record---Government had abolished Octroi/Zilla tax on transportation of articles so transported within the country from one district to another---High Court in exercise of Constitutional jurisdiction declared Kohistan Development Fee-Cess, illegal and void---Petition was allowed in circumstances.

Ch. M. Ashraf Gujjar for Petitioner.

Muhammad Nawaz Khan Sindhu, A.A.-G. along with Abdul Qayyum for Respondents.

Date of hearing: 22nd May, 2012.

2012 P T D 28

[Balochistan High Court]

Before Jamal Khan Mandokhail and Abdul Qadir Mengal, JJ

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE, BALOCHISTAN

Versus

Messrs ABDUL SATTAR and another

Custom Reference No.7 of 2011, decided on 14th September, 2011.

Customs Act (IV of 1969)---

----Ss. 157(2) & 187---Smuggling of goods---Onus to prove---Principle of shifting of onus---Applicability---Authorities confiscated goods on the ground that the same were smuggled but respondent contended that the goods were purchased from the auction by contractor of Meerani Dam Project---Customs, Excise and Sales Tax Appellate Tribunal allowed the appeal filed by respondent and directed to release the goods and refund the fine---Validity---Held, Customs, Excise and Sales Tax Appellate Tribunal had taken a right view in respect of seized goods---Initial burden, under S.187 of Customs Act, 1969, was on the respondent to show a lawful authority or permit or document in respect of the possession of foreign origin goods---Respondent had successfully discharged his burden by producing documents proving purchase of goods through a lawful auction from the Engineering company working on the Dam---After reasonable explanation offered by respondent, responsibility shifted upon Customs Authorities to show that goods were smuggled by respondent but no evidence or material was produced by Customs Authorities---Customs, Excise and Sales Tax Appellate Tribunal did not commit any error, nor any law point requiring interpretation was pointed by authorities---High Court declined to interfere in the order passed by Customs, Excise and Sales Tax Appellate Tribunal---Reference was dismissed in circumstances.

Ch. Mumtaz Yousaf for Appellant.

Sadbar Jan for Respondent No.1.

Date of hearing: 5th September, 2011.

2012 P T D 90

[Supreme Court of Pakistan]

Present: Anwar Zaheer Jamali and Ghulam Rabbani, JJ

FEDERATION OF PAKISTAN through Director-General of Intelligence and Investigation F.B.R., Karachi

Versus

MUHAMMAD JAMAL RIZVI and others

Civil Petition No. 805-K of 2010, decided on 5th July, 2011.

(On appeal from the Judgment dated 13-10-2010 in C.P. No.D-2280 of 2010 passed by the High Court of Sindh Karachi).

Customs Act (IV of 1969)---

----S.171---Constitution of Pakistan, Art. 185(3)---Smuggled vehicle---Proof---Authorities detained vehicle of respondent on the plea of it being smuggled one---High Court in exercise of constitutional jurisdiction set aside the detention order---Validity---Vehicle in question was imported by Consulate of a foreign country and the same was subsequently sold to a company in Pakistan---Permission of sale of the vehicle was accorded by Government of Pakistan and in pursuance thereof, a sale certificate was also issued by the Consulate in favour of purchaser company---Customs authorities also issued "No Objection Certificate" for sale of vehicle in question and purchaser company deposited in year, 1998, all taxes etc. with Excise and Taxation department---Purchaser company sold the vehicle which having changed different names finally came to the lot of respondent, who got it transferred in his name---In the "No Objection Certificate" issued by Customs authorities, it was stated that the vehicle in question was used in Pakistan for over five years as such no customs duty, sales tax and other surcharge were leviable in respect thereof---Supreme Court declined to interfere in the judgment passed by High Court---Leave to appeal was refused.

Akhtar Ali Mehmoodi, Advocate Supreme Court and K.A. Wahab, Advocate-on-Record for Petitioner.

Nemo for Respondents.

Date of hearing: 5th July, 2011.

2012 P T D 420

[Supreme Court of Pakistan]

Present: Mian Shakirullah Jan, Jawwad S. Khawaja and Anwar Zaheer Jamali, JJ

Messrs SANA INDUSTRIES LIMITED

Versus

GOVERNMENT OF PAKISTAN and another

Civil Appeal No. 1106 of 2005, decided on 21st October, 2011.

(Against the judgment dated 14-12-2004 passed the High Court of Sindh, Karachi in Constitutional Petition No. 920 of 1995).

Companies Profits (Workers' Participation) Act (XII of 1968)---

----S.3 & Sched.---Workers' Participation Fund---5% profits of company for financial year 1-10-1991 to 30-9-1992 paid into such fund on 16-1-1993---Interest on such profit from 1-10-1991 till its payment on 16-1-1993 claimed by such Fund---Company's plea that no interest was payable on such profit paid during grace period of nine months after end of a financial year---Validity---According to provisions of S.3(2) of Companies Profits (Workers' Participation) Act, 1968, such profit payable by company stood allocated to and vested in such Fund on first day of the following financial year i.e. 1-10-1992---No legal nexus existed between such grace period and liability of a company to pay interest on delayed payment of such profit---According to scheme given in Schedule of the Act, interest to such Fund would accrue on and from first day of year next succeeding the year in which scheme became applicable to the company---Such scheme became applicable to company on 1-10-1992, thus, company was liable to pay claimed interest.

Dilshad Hussain and another v. Islamic Republic of Pakistan through Secretary, Ministry of Labour, Manpower and Overseas Pakistanis, Islamabad and another 2005 SCMR 530 distinguished.

M. Humayoon, Advocate Supreme Court for Appellant.

Respondents Ex parte.

Date of hearing: 18th October, 2011.

2012 P T D 501

[Supreme Court of Pakistan]

Present: Sarmad Jalal Osmany and Amir Hani Muslim, JJ

COMMISSIONER OF INCOME TAX and another

Versus

Messrs PAKISTAN PETROLEUM LTD. and 2 others

Civil Petitions Nos. 340-K, 385-K to 389-K, 520-K of 2009, 392-K to 394-K and 627-K to 630-K of 2011, decided on 19th December, 2011.

(a) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S. 2(f)(vi)---Income Tax Ordinance (XXXI of 1979), S. 156---Income Tax Ordinance (XLIX of 2001), S. 221---Constitution of Pakistan, Arts. 4 & 185(3)---Contribution under Workers' Welfare Fund Ordinance, 1971 paid by respondent corporation voluntarily and its reflection in assessment order by Assessing Officer---Assessment order challenged in appeal by respondent without claiming exemption from payment of such contribution---Rectification application by respondent claiming exemption by alleging such contribution made due to an inadvertent and bona fide mistake---Order of Assessing Officer dismissing such application upheld upto High Court---Validity---Under S. 156 of Income Tax Ordinance, 1979, Revenue had power to correct a mistake in tax calculation resulting in a short levy after terming such mistake to be apparent on face of record---When a mistake resulting in a short levy could be termed as one apparent on face of record and rectifiable, then a mistake resulting in excess payment on part of taxpayer could be similarly treated, otherwise its denial would violate Art.4 of the Constitution guaranteeing everyone equality before law---Respondent was admittedly a corporation in which majority shares were owned by Government, thus, same was covered by S. 2(f) of Workers' Welfare Fund Ordinance, 1971---Supreme Court refused to grant leave to appeal in circumstances.

Commissioner of Income-Tax Company's-II, Karachi v. Messrs National Food Laboratories 1992 SCMR 687; Pak-Arab Fertilizers (Pvt.) Limited v. Income Tax Appellate Tribunal of Pakistan and others 2006 PTD 42; Commissioner of Income Tax, Peshawar v. Messrs Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd. and 6 others 2008 PTD 169 and Sindh High Court Bar Association through Secretary and another v. Federation of Pakistan through Secretary, Ministry of Law and Justice, Islamabad and others PLD 2009 SC 789 ref.

Commissioner of Income Tax, Karachi v. Abdul Ghani 2007 PTD 967 distinguished.

(b) Words and phrases---

----"Corporation" and "company"---Definition.

Akhtar Ali Mehmood, Advocate Supreme Court and A.S.K. Ghori, Advocate-on-Record for Petitioners (in C.Ps. Nos. 340-K, 385-K to 389-K and 520-K of 2009)

Nasrullah Awan, Advocate Supreme Court/Advocate-on-Record for Petitioners (in C.Ps. Nos. 392-K to 394-K and 627-K to 630-K of 2011)

Makhdoom Ali Khan, Senior Advocate Supreme Court for Respondents (in C.Ps. Nos. 340-K, 385-K to 389-K of 2009 and 627-K to 630-K of 2011)

Salman Pasha, Advocate Supreme Court and K.A. Wahab, Advocate-on-Record for Respondents (in C.Ps. Nos. 392-K to 394-K and 627-K to 630-K of 2011)

Date of hearing: 19th December, 2011.

2012 P T D 516

[Supreme Court of Pakistan]

Present: Javed Iqbal, Asif Saeed Khan Khosa and Amir Hani Muslim, JJ

COLLECTOR OF CUSTOMS and another

Versus

Messrs FATIMA ENTERPRISES LTD. and others

Civil Appeals Nos.231, 232 of 2004 and 949 of 2007, decided on 5th April, 2011.

(On appeal from judgment dated 16-7-2003 of the High Court of Sindh, Karachi, passed in C.Ps. Nos. 350 and 351-D of 1995 and judgment dated 16-2-2006 passed in Spl. Customs Reference Application No.174 of 2005).

Customs Act (IV of1969)---

----Ss.80 & 193---Refund claim---Such claim was refused by the Authority, but accepted by High Court---Plea of Revenue was that demand raised under S.80 of Customs Act, 1969 was appealable under S.193 thereof against imposition of enhanced customs duty and that High Court could not set aside demand/order of Authority for payment of customs duty from petitioner, when alternate remedy was available to him---Validity---High Court while passing impugned judgment had encroached upon jurisdiction of Collector (Appeals)---High Court could not have decided such factual controversy---Supreme Court set aside impugned judgment of High Court in circumstances.

Raja Muhammad Iqbal, Advocate Supreme Court for Appellants.

Nemo for Respondent No.1

Maulvi Anwar-ul-Haq, Attorney General for Pakistan for Respondents Nos. 2 and 3

Shaiq Usmani, Sr. Advocate Supreme Court for Respondent No.4.

Date of hearing: 5th April, 2011.

2012 P T D 541

[Supreme Court of Pakistan]

Present: Tassaduq Hussain Jillani, Mian Saqib Nisar and Ejaz Afzal Khan, JJ

COLLECTOR OF CUSTOMS and another

Versus

MAPLE LEAF CEMENT FACTORY LTD. and others

Civil Appeals Nos.1946, 1258 of 2000, 1307 of 2001 and 1802 of 2005, decided on 21st December, 2011.

Customs Act (IV of 1969)---

----Ss.19 & 193---Machinery for Cement Plant imported pursuant to S.R.O. No.484(I)/94, dated 14-5-1992 exempting same from customs duty for not being locally manufactured---Show-cause notice issued by Authority demanding customs duty on such machinery alleging the same being manufactured locally---Revenue's plea before Supreme Court was that if respondent was prepared to file reply to such notice by raising pleas available to him under law, Authority would have decided same accordingly---Supreme Court set aside impugned judgment of the High Court and directed the appellant to file reply to such notice within specified time, and in case of failure to do so, Authority would proceed against him in accordance with law.

Izharul Haq, Sr. Advocate Supreme Court for Appellants (in C.As. 1946 of 2000 and 1307 of 2001).

Raja Muhammad Iqbal, Advocate Supreme Court for Appellants (in C.As. 1258 of 2000 and 1307 of 2001).

M. Bilal, Sr. Advocate Supreme Court for Appellants (in C.As. 1258 of 2000 and 1307of 2001).

Ch. Aitzaz Ahsan, Sr. Advocate Supreme Court for Appellants (in C.A. 1802 of 2005).

Mehmood A. Sheikh, Advocate-on-Record for Appellants (in C.A. 1946 of 2000)

Gohar Ali Khan, Advocate Supreme Court for Appellants (in C.A. 1802 of 2005).

Salman Akram Raja, Advocate Supreme Court for Respondent (in C.A. 1946 of 2000).

Khawaja Muhammad Farooq, Sr. Advocate Supreme Court for Respondents (in C.A. 1258 of 2000).

Salman Aslam Butt, Advocate Supreme Court for Respondents (in C.A. 1307 of 2001)

Raja Muhammad Iqbal, Advocate Supreme Court for Respondents (in C.A. 1802 of 2005).

Akhtar Ali Mahmud, Advocate Supreme Court for Respondents (in C.A. 1802 of 2005).

Sharif-ud-Din Pirzada, Advocate Supreme Court for Respondents (in C.A. 1307 of 2001)

Date of hearing: 21st December, 2011.

2012 P T D 561

[Supreme Court of Pakistan]

Present: Tassaduq Hussain Jillani, Mahmood Akhtar Shahid Siddiqui and Rahmat Hussain Jafferi, JJ

PAKISTAN STATE OIL COMPANY LIMITED

Versus

COLLECTOR OF CUSTOMS, EXCISE AND SALES TAX and others

Civil Appeals Nos.1965 to 1970 of 2007, decided on 29th October, 2009.

(On appeal against the judgment dated 20-3-2007 passed by High Court of Sindh at Karachi in Customs Appeals Nos.201 to 206 of 2006).

Customs Act (IV of 1969)---

----Ss.32 & 106---Constitution of Pakistan, Art. 185(3)---Mis-declaration of petroleum products to be duty free provisions and stores under S.106 of Customs Act, 1969---Charging of customs duty etc., from Pakistan Navy on supply of such products by the company---Notice under S.32 of Customs Act, 1969 issued to company for having evaded customs duty on such supply---Validity---Supreme Court granted leave to appeal to consider question whether non-payment of customs duty on such supply was intentional, lawful or same was an innocent act on account of long standing practice whereby oil supply was exempted from payment of customs duty.

Sajid Zahid Advocate Supreme Court and M.S. Khattak Advocate-on-Record for Appellants

Raja Muhammad Iqbal, Advocate Supreme Court for Respondents.

Date of hearing: 29th October, 2009.

2012 P T D 683

[Supreme Court of Pakistan]

Before Ejaz Afzal Khan and Ijaz Ahmed Chaudhry, JJ

A.P. MOLLER through Maersk Pakistan (Pvt.) Ltd.

Versus

COMMISSIONER OF INCOME TAX, ZONE-I, KARACHI and another

Civil Petition No.553 of 2011, decided on 24th January, 2012.

(On appeal from the judgment dated 27-1-2011 of the High Court of Sindh, Karachi passed in ITRA No.205 of 2007).

Income Tax Ordinance (XLIX of 2001)---

----Ss. 7(1)(b), 101, 107(2) & 239(10)---Profits earned by non-resident shipping carrier on in-bound cargo on account of freight received in Pakistan---Taxability of such profits as earned from sources within Pakistan---Scope---Pak-Danish Double Taxation Agreement (DTA) did not contain express renunciation of taxing right by Pakistan in relation of profits earned there from ships operated in international traffic---In case of possibility of two reasonable interpretations of DTA or doubt or ambiguity in its interpretation especially in relation to expression "profits derived from sources within the Contracting State" as used therein, same would be resolved in favour of Pakistan having taxing right---"Sources State" would be regarded such State in which payment was made and would be entitled to tax such payments---Carrier would be entitled to freight charges only if cargo was actually carried to port of destination---Port of destination in the present case was a Port of Pakistan---Both terminus of event by which carrier earned income i.e. carriage of goods and actual payment, were within Pakistan---Payment in the present case was made by a Pakistan buyer, thus, same being profits derived by such carrier from sources within Pakistan could be reasonably regarded as within taxing right of Pakistan---Principles.

Dr. Ikram ul Haq, Advocate Supreme Court for Petitioner.

Nemo. for Respondents.

Date of hearing: 23rd January, 2012.

2012 P T D 693

[Supreme Court of Pakistan]

Before Iftikhar Muhammad Chaudhry, C J, Muhammad Sair Ali and Ghulam Rabbani, JJ

CHAIRMAN, F.B.R. and others

Versus

IDREES TRADERS and others

Civil Appeals Nos. 1306 to 1327, 1426 to 1480 of 2009, 204, 1068 to 1101 of 2010, 1105, 1108 to 1112 to 1119 to 1124, 1132 to 1140, 1147 to 1148, 1207 to 1224, 1226 to 1228 and Civil Appeals Nos. 1102 to 1104, 1106 to 1107, 1113 to 1118 of 2010, 1125 to 1131, 1141 to 1146, 1225 and 1229 of 2010, decided on 24-2-2011.

(On appeal from the judgments dated 14-7-2009, 17-7-2009, 27-7-2009, 28-7-2009, 19-10-2006, 15-10-2009, 12-10-2009, 29-10-2009, 19-10-2009, 26-10-2009, 29-10-2009, 2-11-2009, 9-10-2009, 29-10-2009, 4-11-2009, 5-11-2009, 7-10-2009, 19-10-2009, 7-10-2009, 16-10-2009, 12-10-2009, 15-10-2009, 16-10-2009, 20-10-2009, 21-10-2009, 29-10-2009, 10-11-2009, 16-10-2009, 12-10-2009, 15-10-2009, 20-10-2009, 26-10-2009, 4-11-2009, 11-11-2009, 17-11-2009, 23-11-2009, 11-11-2009, 20-11-2009, 20-11-2009, 23-11-2009, 20-10-2009, 19-11-2009, 23-11-2009, 23-11-2009, 26-11-2009, 24-11-2009, 1-12-2009, 7-12-2009, 16-12-2009, 12-10-2009, 20-11-2009, 1-12-2009, 11-12-2009, 14-12-2009, 14-12-2009, 14-12-2009, 13-10-2009, 10-11-2009, 11-12-2009, 17-12-2009, 23-12-2009, 11-1-2010, 11-1-2010, 17-7-2009, 16-2-2010, 17-7-2009, 12-4-2010, 16-4-2010, 10-11-2009, 7-12-2009, 7-12-2009, 7-12-2009, 2-3-2010, 16-3-2010, 5752, 6143, 6769, 6783, 6384, 6385, 6386, 6387, 6389, 7499, 14849, 14850, 14940, 14942, 14943, 14946, 14947, 15044, 145044, 15046/09, 4673/08, 6127, 4398, 4810, 4811, 5073, 5192, 5216, 5537, 5583, 5825, 5946, 5947, 6004, 6030, 6333, 6037, 6038, 6127, 6129, 6157, 6175, 6241, 6334, 6521, 6666, 6667, 6694, 6771, 6779, 6780, 6781, 6931, 6816, 6948, 6953, 7101, 7398, 7423, 7425, 7443, 7505, 7550, 7551, 7664, 6128, 6290, 6390, 9270, 7093, 8454, 8892, 8893, 10090, 11097/2009, 10069/2006, 20218/2009, 19859/2009, 21295/2009, 20439, 20440, 20442/2009, 20986/2009, 21291/2009, 21510, 21508, 21509/2009, 19642/2009, 21308/2009, 21662/2009, 21791/2009, 19429/2009, 20441/2009, 19416, 19428/2009, 20339, 20340/2009, 19893/2009, 20208/2009, 20306, 20573/2009, 20670/2009; 21292/2009, 21971, 21972/2009, 20303/2009, 19886/2009, 20207, 20211/2009, 20571/2009, 20693, 20978/2009, 21700/2009, 22068/2009, 22467/2009, 22847/2009, 22067/2009, 22731/2009, 22732/2009, 22858/2009, 22859/2009, 20570/2009, 22601/2009, 22844/2009, 22845, 22846/2009, 23086/2009, 22923/2009, 23165, 23164/2009, 23402/2009, 24027/2009, 19820/2009, 22729/2009, 23166/2009, 23750/2009, 23830/2009, 23831/2009, 23875/2009, 29681/2009, 21993/2009, 23717/2009, 24160/2009, 24577/2009, 103/2010, 104, 153, 200/2010, 8896/2009, 2920/2010, 10322/2009, 7640/2010, 7640/2010, 22010/2009, 13534/2009, 21542/2009, 12100/2009, 14147/2009, 17064/2009, 17067/2009, 14399, 22245, 8535, 12478, 17063, 17068, 20446, 12475, 12130, 18334, 12125, 9148/2009, 21486/2010 and 2505 of 2010).

Income Tax Ordinance (XLIX of 2001)---

----S. 177(4)---Constitution of Pakistan, Art. 199---Conduct of audit---Letters issued to appoint or authorize auditors---High Court by two orders, directed to issue letters for appointment of auditors---Validity---Supreme Court set aside the order of the High Court and observed that without availing departmental remedies, filing of constitutional petition was not appreciable; and if the letters had not been withdrawn, reasons should be assigned; and after providing opportunity to the taxpayers, it be clearly pointed out to them that their cases were not covered under the Policy; and they could apply afresh, if need be---If the department intended to proceed, then sufficient opportunity be given to the taxpayers to put up pleas so that no prejudice could cause to them in any manner---Said conclusion having been conceded to by all the counsel, appeals were disposed of accordingly.

Commission of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd., 2009 PTD 1392 rel

Syed Arshad Hussain. Shah, Advocate Supreme Court, M.A. Zaidi, Advocate-on-Record (in C.As. Nos. 1306-1327 of 2009), Muhammad Ilyas Khan, Sr. Advocate Supreme Court, (in C.As. Nos.1427-1480/09, 1068-1088/10, 1097-1101, 1124, 1132-1135, 1141-1146/10, 1113-1118, 1126-1131/10, 1102-1104, 1106, 1107 of 2010), Sirajuddin Khalid, Advocate Supreme Court, Faiz-ur-Rehman, Advocate-on-Record (in C.As. 1426/09, 204/10, 1208-09/10, 1222/10, 1474 of 2009), Mian Yousaf Umar Advocate Supreme Court (in C.As. Nos.1108-1112/10, 1119-1123/10, 1136 1140/10, 1147-1148/10, 1069, 1090-1096 of 2010), for the Appellants

Faiz-ur-Rehman, Advocate Supreme Court, (in C.As. 1307/09, 1309-1316 of 2009), Asghar Kharal, Advocate Supreme Court (in C.As. Nos. 1428-1429/10, 1432/10, 1220 of 2010); Mian Ashiq Hussain, Advocate Supreme Court, Faiz-ur-Rehman, Advocate-on-Record (in C.As. Nos. 1430/09, 1480 of 2009), M.A. Zaidi, Advocate-on-Record, (in C.As. Nos. 1439-41/09, 1134 of 2010), Sirajuddin Khalid, Advocate Supreme Court, Faiz-ur-Rehman, Advocate-on-Record, (in C.As. Nos.1451, 1456, 1459, 1473 of 2009), Rana Muhammad Afzal, Advocate Supreme Court, (in C.A. No. 1460 of 2009), M. Ilyas Khan, Sr. Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record (in C.As. Nos. 204, 1212-1213 of 2010), Iqbal Hashmi, Advocate Supreme Court, (in C.As. Nos. 1071-1074, 1084; 1105, 1124, 1132, 1139 of 2010), Sh. Khizar Hayat, Sr. Advocate Supreme Court, (in C.As. Nos. 1135 of 2010), Malik Shakeel-ur-Rehman, Advocate Supreme Court, Arshad Ali Chaudhry Advocate-on-Record, (in C.As. Nos. 1209, 1210, 1227 of 2010), Mukhtar Ahmad Chaudhry, Advocate Supreme Court, (in C.A. No.1097 of 2010), Amjad Hameed Ghori Advocate Supreme Court, (in C.A. No.1131 of 2010), for the Respondents

Date of hearing: 24th February, 2011.

2012 P T D 898

[Supreme Court of Pakistan]

Present: Ejaz Afzal Khan and Ijaz Ahmed Chaudhry, JJ

SADIA JABBAR and 3 others

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Islamabad and others

Civil Petitions Nos.813 to 816 of 2011, decided on 24th January, 2012.

(On appeal from the judgment dated 28-2-2011 in Constitutional Petitions Nos. D-2673 of 2009, D-707, 1101 and 1269 of 2010 passed by the High Court of Sindh, Karachi)

Customs Act (IV of 1969)---

----Ss. 18, 25 & 25A---Constitution of Pakistan, Art. 185(3)---Goods dutiable, determination of customs value of goods, powers to determine the customs value---Contention of petitioners that when S.25 of Customs Act, 1969 exhaustively provided the modes for determination of value, resorting to S. 25A of the Act without any convincing reason was uncalled for, and that S.18 of Customs Act, 1969 dealt with determination of the value of the goods imported, which could not be stretched to include the goods to be imported---Validity---Case had been sent back to department (Director Evaluation) for determination of value afresh which was not in any way detrimental to the petitioners---Impugned judgment of the High Court contained nothing which could show that any of the provisions of the Customs Act, 1969 in general or S.18 thereof in particular had been overstretched against its letter and spirit---Apprehension of petitioners in circumstances appeared to be conjectural---Petitions were time barred by four days and no plausible explanation had been offered for the delay---No adverse decision had been passed against the petitioners---Petition for leave to appeal was dismissed accordingly.

Shehzada Mazhar, Advocate Supreme Court for Petitioners (in all cases).

Raja Muhammad Iqbal, Advocate Supreme Court for Respondent No.4.

Date of hearing: 24th January, 2012.

2012PTD969

[Supreme Court of Pakistan]

Present; Iftikhar Muhammad Chaudhry, C.J.,Khilji Arif Hussain and Tariq Parvez, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, Peshawar and another

Versus

Messrs SHAHZAD GHEE MILLS (PVT.) LTD. and 4. Others

Civil Appeals Nos. 831, 832, 1216, 1217, 1441 of 2007 and 410 of 2010, decided on 18th October, 2011.

(Against the judgments dated 14-9-2006 of the Peshawar High Court, Peshawar passed in T.Rs. Nos.81, 82 and dated 19-12-2006 in T.Rs. Nos.110, 112, 113 and 2-4-2009 in T.R. No.81 of 2007).

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

80-DD-Constitution of Pakistan, Art. 185(3)---Leave to appeal was granted by Supreme Court to consider whether while introducing S.80-DD in the Income Tax Ordinance, 1979, Legislature was presumed to be fully aware of existing law and prima facie no new tax liability was created by insertion of said new section and it seemed that only recovery process of tax was accelerated.

Ellahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 ref.

(b) Words and phrases----

---"For the time being"---Defined.

Words and Phrases; Legally Defined (Second Edition) at page 267; Advanced Law Lexicon, 3rd Edition 2005 at page 1877; Cambridge Dictionary of American Idioms; Farlex clipart collection. © 2003-2008 Princeton University and Cambridge Idioms Dictionary, 2nd Ed. ref.

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

----Ss.14(2), 50(5), 80-DD & Second Schedule, clause 118C---Economic Reforms Act (XII of 1992), S.6---Notification No. S. R. O. 1283(1)/90, dated 30-12-1990---Assessment---Exemption, grant of---Deduction of tax at source, on import of edible oil, was treated as final liability under S.80-DD of Income Tax Ordinance, 1979 and tax short deducted was recovered through separate order passed under S.52-A of Income Tax Ordinance, 1979---Rectifications filed by assessees were declined by assessment officer but Commissioner Income Tax (Appeals) accepted appeals and declared that assessees were entitled to exemptions under clause 118C of Second Schedule to Income Tax Ordinance, 1979---Income Tax Appellate Tribunal and High Court maintained the judgment passed by Commissioner Income Tax (Appeals)---Validity---According to Notification No.S.R.O. 1283(1)/90, dated 30-12-1990, exemption" under clause 118C of Second Schedule of Income Tax Ordinance, 1979, was applicable to profits and gains derived by assessee from industrial undertaking set up between I-12-1990 and 13-6-1995, both days inclusive for a period of 8 years beginning with the month in which undertaking was set up or commercial production was commenced, which ever was later--Assessees was to substantiate that industry was established during such period---No evidence had come on record, inasmuch as, income tax authorities, including Commissioner Income Tax (Appeals) and Income Tax Appellate 'Tribunal seized with the matter did not pass speaking order with reference to questions involved in the matter---Claim of exemption was only available in terms of S.50(5) read with S. 80-DD of Income Tax Ordinance, 1979, if assessee would succeed in establishing that after promulgation of Economic Reforms Act, 1992, whenever fresh tax was imposed, might be under newly enacted provision, the exemption was to continue but such protection was prima facie not available to the assessees---To ascertain factual aspect of case and to provide opportunity to parties to establish their respective claims, Supreme Court set aside judgments passed by High Court, Income Tax Appellate Tribunal and Commissioner Income Tax (Appeals) and remanded appeals of assessees to the Commissioner for disposing of the same keeping in view observations made by Supreme Court---Appeal was allowed.

Collector of Customs v. Ravi Spinning Ltd. 1999 SCMR 412 rel.

Raja Abdul Ghafoor, Advocate-on-Record/Advocate Supreme Court for Appellants (in Civil Appeals Nos. 831, 832, 1216, 1217 and 1441 of 2007).

Farhat Nawaz Lodhi, Advocate Supreme Court for Appellants (in Civil Appeal No. 410 of 2010).

Abdul Raul' Rohaila, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Respondents (in Civil Appeals Nos. 831 to 832 and 1441 of 2007).

Sh. Iftikhar Ahmed, Advocate Supreme Court for Respondents (in Civil Appeal No. 1216 of 2007).

M. Ilyas Mian, Advocate Supreme Court for Respondents (in Civil Appeal No. 1217 of 2007).

M. Munir Peracha, Advocate Supreme Court and M. Habib Qureshi, Advocate Supreme Court for Respondents (in Civil Appeal No.

410 of 2010).

Date of hearing: 18th October, 2011.

2012 P T D 1003

[Supreme Court of Pakistan]

Present: Mian Shakirullah Jan, Nasir-ul-Mulk and Ejaz Afzal Khan, JJ

Messrs LAHORE POLYPROPYLENE INDUSTRIES (PVT.) LTD. and others

versus

FEDERATION OF PAKISTAN and others

Civil Appeals Nos. 152 to 190, 1156 to 1162, 1165 to 1169, 1174, 1176, 1177, 1181 and 1182 of 2010, decided on 13th March, 2012.

(On appeal against the judgment dated 24-12-2009 passed by the Lahore High Court, Lahore, in I.C.A. No.462/2009 in W.Ps. Nos.13145/2008 and 10144/2008, I.C.A. No.363/2009 in W.P. No.1849/2009, I.C.A. No.362/2009 in W.P. No.12196/2008, I.C.A. No.463/2009 in W.P. No.13828/2008, I.C.A. No.464/2009 in W.P. No.13825/2008, I.C.A. No.465/2009 in W.P. No.13827/2009, I.C.A. No.354/2009 in W.P. No.13715/2008, I.C.A. No.405/2009 in W.P. No.14063/2008, I.C.A. No.392/2009 in W.P. No.802/2008, I.C.A. No.395/2009 in W.P. No.14592/2008, I.C.A. No.393/2009 in W.P. No.4976/2008 and W.P. No.13770/2008, I.C.A. No.371/2009 in W.P. No.16500/2008, I.C.A. No.667/2009 in W.P. No.14592/2008, I.C.A. No.443/2009, I.C.A. No.635/2009 in W.P. No.8872/2008, I.C.A.. No.488/2009 in W.P. No.14592/2008, I.C.A. No.563/2009 in W.P. No.18407/2009, I.C.A. No.370/2009 in W.P. No.12214/2008, I.C.A. No.443/2009 in W.P. No.13997/2008, I.C.A. No.397/2009 in W.P. No.13874/2008, I.C.A. No.442/2009, I.C.A. No.697/2009, I.C.A'. No.445/2009 in W.P. No.3225/2008, I.C.A. No.322/2009, I.C.A. No.472/2009, I.C.A. No.328/2009, I.C.A. No.331/2009 in W.P. No.15352/2008, I.C.A. No.384/2009 in W.P. No.16594/2008, . I.C.A. No.385/2009 in W.P. No.15695/2008, I.C.A. No.387/2009 in W.P. No.15353/2008, I.C.A. No.352/2009, I.C.A. No.386/2009 in W.P. No.16595/2008, I.C.A. No.484/2009 in W.P. No.18645/2008, I.C.A. No.938/2009 in W.P. No.8872/2008, I.C.A. No.613/2009 in -W.P. No.1284/2009, I.C.A. No.448/2009).

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

----Ss. 147 & 235---Constitution of Pakistan, Arts. 2-A, 3, 4, 77, 185(3) & 142(c) & Federal Legislative List, Entry No. 47---Advance tax with increase in its percentage imposed through Finance Act, 2008 on amount of electricity bills of a commercial/industrial consumer---Validity---Supreme Court granted leave to appeal to consider, inter alia, questions as to whether such tax could be levied pursuant to provision of S. 235 of Income Tax Ordinance, 2001 and in. view of categorical bar imposed under Art.142(c) of the Constitution; whether such levy was covered up under Entry 47 of Federal Legislative List; whether apparent distinction between provisions of Ss. 147 & 235 of Income Tax Ordinance, 2001 had been taken care of; whether such levy could be imposed without their being any corresponding income on subjects falling under Provincial fiscal domain; and whether such levy was violative of `Arts.2-A, 3, 4 & 77 of the Constitution.

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

----Ss. 147 & 235---Constitution of Pakistan, Art. 142(c) & Federal Legislative List, Entry No. 47---Advance tax with increase on its percentage imposed on amount of electricity bills of a commercial/industrial consumer---Validity---Income of such consumer would ultimately constitute decisive factor and would be taxed, but not its expenditure---Such tax could not be treated as tax on expenditure---Principles.

Messrs Sh. Abdur Rahim, Allah Ditta v. Federation of Pakistan PLD 1988 SC 670; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan and 6 others PLD 1997 SC 582; Pakistan Tobacco Company Ltd. and another v. Federation of Pakistan and 3 others 1999 SCMR 382; Pakistan Industrial Development Corporation v. Pakistan through Ministry of Finance 1992 PTD 576; Reference under the Government of Ireland Act, 1920 (Privy Council) 1936; Buxa Dooars Tea Company Ltd. and others v. State of West Bengal and others (1989) 3 Supreme Court cases 211; State and another v. Sajjad Hussain and others 1993 SCMR 1523; Azizur Rehman v. the State (Cr. A. No.17(S)/1990 - SCMR Vol.XXVI); Call Tell (Pvt.) Ltd. v. Federation of Pakistan 2004 PTD 3032; Government of Pakistan and others v. Muhammad Ashraf and others PLD 1993 SC 176; Messrs Hoechst Pharmaceuticals Ltd. and another v. State of Bihar AIR 1983 SC 1019; Messrs Geeta Enterprises and others v. State of U.P. and others (AIR 1983 SC 1098), The Elel Hotels and Investment Ltd. v. Union of India AIR 1990 SC 1664; Federation of Pakistan v. Muhammad Sadiq 2007 PTD 57; Riaz Bottlers Pvt. Ltd. v. Lahore Electric Supply Co. 2010 PTD 1295 and Aized Hussain v. Motor Registration Authority PLD 2010 SC 983 ref.

Mudassar Khalid Abbasi, A.A.-G., Punjab, Lal Jan Khattak, Additional A.-G. KPK and Qasim Mirjat, Additional A.-G. Sindh on Court Notice on behalf of Provinces.

Mian Ashiq Hussain, Advocate Supreme Court and Arshad Ali Ch. Advocate-on-Record for Appellants (in C.As. Nos.152 to 177, 1174, 1176 of 2010).

Nemo for Appellants (in C.As. Nos.178, 188 to 190 of 2010).

Nemo for Appellants (in C.As. Nos.179 to 187 of 2010).

Nemo for Appellants (in C.As. Nos.1156 to 1162, 1165 to 1169

of 2010).

Nemo for Appellants (in C.A. No.1177 of 2010).

Nemo for Appellants (in C.As. Nos.1181 to 1182 of 2010).

Respondent No.3 (in C.As. Nos.152 to 158, 160 to 168, 170 to 177, 1158, 1174, 1176 and 1181 of 2010).

M. Ilyas Khan, Senior Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Respondent No.4 (in C.As. Nos.1159, 1160 and 1162 of 2010).

M. Ramzan Ch., Senior Advocate Supreme Court for Respondent No.3 on behalf of LESCO (in C.A. No.1168 of 2010) for Respondent No.4 on behalf of LESCO (in C.As. Nos.152 to 178, 180 to 183, 185 to 190, 1156 to 1158, 1161, 1174, 1177, 1181 and 1182 of 2010) and for Respondent No.5 on behalf of LESCO (in C.As. Nos.165, 1159, 1160, 1162, 1165, 1166 and 1167 of 2010).

Syed Arshad Hussain Shah, Advocate Supreme Court for Respondent No.1 on behalf of LESCO (in C.As. Nos.159 to 190 of 2010) and for Respondent No.2 on behalf of LESCO (in C.As. Nos.152 to 158 of 2010).

Mian M. Javed, Advocate Supreme Court for Respondent No.6 on behalf of FESCO (in C.As. Nos. 161 to 163, 169 to 177, 180, 187 and 189 of 2010).

Nemo for other Respondents on behalfof FESCO (in all cases).

Dates of hearing: 12th and 13th March, 2012.

2012 P T D 1374

[Supreme Court of Pakistan]

Before Mian Shakirullah Jan and Tariq Parvez, JJ

Messrs OCEAN PAKISTAN LTD.

versus

FEDERAL BOARD OF REVENUE, ISLAMABAD and others

Civil Petition No.773 of 2012, decided on 23rd May, 2012.

(On appeal from the judgment/order dated 16-4-2012 passed by Islamabad High Court Islamabad in Writ Petition No.2959 of 2011).

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120 & 122(5A), (9)---Constitution of Pakistan, Art. 185(3)---Sale of working interest by Oil Exploring Company---Issuance of show-cause notice by Authority proposing to re-open finalized assessment of petitioner for not having offered itself for tax liability on gain earned from such sale---Dismissal of constitutional petition by High Court---Validity---Petitioner had submitted reply to impugned notice raising therein all objections raised in constitutional petition---Findings on any such objections, if given by Supreme Court, would prejudice petitioner's case before Income Tax hierarchy---Authority would yet decide whether such sale fell outside domain of agreement and applicable law---Petitioner could raise all possible factual and legal objections before competent authority, which had sought its explanation by issuing impugned notice---Supreme Court declined to grant leave to appeal in circumstances.

Al-Ahram Builders v. Income Tax Appellate Tribunal 1993 SCMR 29; Deputy Commissioner of Income Tax/Wealth Tax v. Punjab Beverage Co. (Pvt.) Ltd. 2007 PTD 1347; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279; Commissioner of Income Tax v. Hamdard Dawakhana (Waqf) PLD 1992 SC 847; Edulji Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399 and Commissioner Income Tax v. Shaw Wallace and Co. AIR 1932 Privy Council 138 ref.

M. Akram Sheikh, Sr. Advocate Supreme Court and Mehmood A. Sheikh, Advocate-on-Record for Petitioners.

M. Bilal, Sr. Advocate Supreme Court and Baber Bilal, Advocate Supreme Court for Respondents Nos.2.

Not represented for Respondents Nos. 1 and 3.

2012 P T D 1867

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Ijaz Ahmed Chaudhry and Sh. Azmat Saeed, JJ

COLLECTOR OF CUSTOMS, LAHORE and others

versus

Mrs. SHAHIDA ANWAR

Civil Petition No.1555-L of 2009, decided on 20th June, 2012.

(On appeal from the order dated 17-4-2009 of the Lahore High Court, Lahore passed in W.P. No.18251 of 2005).

Import Policy Order 2005-2006---

----Personal Baggage, Transfer of Residence and Gift Schemes (Import of Vehicles) Rules, 2005, R. 3(1)---Import Policy Order 2004-2005---Personal Baggage, Transfer of Residence and Gift Schemes (Import of Vehicles) Rules, 2004, R. 3(1)---Constitution of Pakistan, Art.185(3)---Retrospective effect of Rule 3(1) of Personal Baggage, Transfer of Residence and Gift Schemes (Import of Vehicles) Rules, 2005---Scope---Beneficial interpretation, principle of---Scope---Import of vehicle under the gift scheme---Import Policy Order 2004-2005, envisaged that vehicle to be imported under the gift scheme should be of a model which was not more than 2 years old, prior to the import, whereas subsequent Import Policy Order of 2005-2006, increased the said period to 3 years---Custom authorities (petitioner) confiscated the vehicle of the importer (respondent) on the basis that its model was 3 years old at the time of import whereas Import Policy Order of 2004-2005 provided a period of 2 years---Vehicle was released after payment of fine and the importer filed constitutional petition before the High Court, which was allowed on the grounds that subsequent Import Policy Order of 2005-2006, provided a period of 3 years to avail the gift scheme and the vehicle in question pertained to that period, therefore Import Policy of 2005-2006 would have retrospective effect and confiscation order was not legally tenable---Contentions of Custom authorities (petitioners) were that both the Import Policy Orders were independent and covered different periods; that there was no reference in the Import Policy Order of 2005-2006 that it had any nexus with or impact or effect on the earlier Import Policy Order of 2004-2005, therefore, principle of beneficial interpretation qua retrospectively would be inapplicable---Validity---Before any action was initiated by the Custom authorities against the importer, a new Import Policy Order of 2005-2006 had come into force, in which the period of import of a vehicle was increased from 2 years to 3 years---Subsequent Import Policy Order of 2005-2006, in circumstances of the present case, could be given beneficial interpretation and retrospective effect accordingly, which was exactly what had been done by the High Court---Petition for leave to appeal was dismissed, in circumstances.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 and Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 rel.

Izhar-ul-Haque, Advocate Supreme Court for Petitioners.

Nemo for Respondent.

Date of hearing: 20th June, 2012.